AACE agroprocessing locally sourced foods, Nigeria
AACE Foods is a Nigerian start-up company with a strong vision of delivering social and development benefits to Nigerian small-scale farmers and food producers. AACE currently processes, packages and distributes foods products such as jams, spreads and spices for commercial and retail customers in Nigeria.
The inclusive business initiative
AACE buys its raw material from the wholesale market in Lagos which results in lack of quality control, inconsistent supply volumes, lack of traceability, and an indirect and unclear benefit to smallholder farmers. Given these challenges, one option for companies is to simply import raw materials and/or processed food products from other countries. However, this is not in line with AACE’s vision. AACE, therefore, aims to develop a value chain for locally sourced, processed and distributed foods for business-to-business and business-to-consumer sales. The company seeks to demonstrate the commercial viability of sourcing raw materials locally and creating an innovative supply chain with positive developmental benefits for various stakeholders along the value chain such as direct employees as well as suppliers (smallholder farmers and cooperative groups), distributors (SMEs/retailers) and consumers.
Optimising quality control and security of supply are the main commercial drivers for AACE, achieved by building sustainable, robust systems for sourcing from local suppliers.
Additional returns will come from being an integrated and inclusive business in the Nigerian food processing and branded foods market. The emphasis on local sourcing, processing, and distribution, combined with local sales at affordable prices for the mass market, provides AACE opportunities for competitive differentiation in a retail sector that is currently dominated by imported food products and raw materials. Branding with ‘Produced in Nigeria’ will also help build customer loyalty. A further driver is the potential to stimulate demand for other related products offered by the business.
By developing a supply chain that directly sources produce from smallholder farmers and cooperative groups in rural communities across Nigeria, and processing and distributing products in and for the Nigerian market, AACE aims to generate multiple income-earning opportunities.
Not only is AACE likely to directly employ at least 65 full time employees over the next five years, it also aims to provide improved opportunities and security for 1,000 farmers. The current agricultural supply system is not only inefficient for AACE but results in insecurity and loss of income for farmers. A considerable proportion of produce may simply rot, without being sold or during transport to market. AACE inclusive business model enables farmers to obtain predictability of sales and incremental income from AACE purchases. Partnership with local NGOs intends to help build farmer capacity and productivity. It is estimated, that over three years approximately 1,000 farmers will be involved in the supply chain (either directly or through farming cooperatives and rural microfinance associations).
AACE provides opportunities for micro-entrepreneurs as well by working via local representatives to sort and grade produce, and through third-party transporters to convey the produce to its factory in Lagos State. AACE also engages distributors for its finished products, printers and packaging manufacturers. There is thus growing scope for micro-entrepreneurs and small enterprises to engage in the expanding value chain.
In addition to these gains for producers, there is potential for a positive impact on nutrition through the introduction of nutritious foods for children – and on the environment. AACE already uses re-used glass jars, and offers its commercial clients rebates for returning plastic containers for re-use. It aims to develop environmental best practices in its manufacturing operations, minimising waste, using low-energy devices, and recycling water it is using.
Innovation and scale
AACE’s inclusive business model can be considered innovative within the Nigerian context in two key areas. Firstly, the company plans to demonstrate the viability of sourcing raw materials locally and creating new supply and distribution chains. Secondly, AACE offers innovative products at affordable prices to the mass market, thus reducing dependency of retailers and consumers on foreign imports of jams, spices, spreads and complementary food for babies and toddlers.
Objectives of Facility engagement
In order to build an integrated value chain for fruits and vegetables, support from the Business Innovation Facility focuses on three key areas:
- Access to technical expertise in the area of food production and innovations in food processing to design and implement an efficient production system.
- Assistance in developing a robust supply chain strategy for local sourcing - i.e. identifying clusters of small holder farmers, assessing the existing production capacity, and developing a strategy for reliable smallholder production capacity and sales.
- Support to design and launch a marketing and branding strategy in order to effectively introduce its products to the consumer mass market. This type of support is needed as local consumers tend to show some resistance/concerns about buying Nigerian products instead of imported ones.
Since launching in 2010, AACE Foods has consistently increased production and sales volumes of its spices. Support from the Business Innovation Facility included a supply chain study which helped to develop strong ties with cooperatives and smallholder groups in Northern Nigeria. Ginger and chilli pepper are now sourced locally which in turn has reduced purchasing costs per kg by 20-30%. In order to accommodate the anticipated growth over the next few years the company has acquired a new permanent factory site just outside Lagos state.