One year after it opened its factory in Agbara, Ogun State, P&G has opted to close the factory and shift operations to its Ibadan factory.
P&G (Procter & Gamble) has decided to close its new factory in the 650 hectare Agbara Industrial Estate, which manufactured the Always and Pampers brands. Nigerian media has consistently reported the factory as having costed $300m, which seems eye wateringly expensive, if true. In an official statement the company has said the decision has been taken in order to deliver a more effective business operation and strengthen operations in its Ibadan plant.
Agbara is home to a number of multinational FMCG company factories. Among them are Unilever Nigeria, which opened a $12m factory for its Blue Band margarine brand in Agbara in December 2017. Nestlé Nigeria has had a factory in Agbara since 1978, and manufactures its Maggi stock cubes, Milo and Cerelac brands on the site. GSK’s main manufacturing site in Nigeria is in Agbara. One of the main attractions of Agbara, is that it is close to Lagos, and therefore close to the largest single point of consumption in Nigeria.
P&G’s hints both at considerable operational challenges and a continued harsh business environment. One theory is that P&G’s sanitary products have proven uncompetitive against market leader Hayat Kimya Group’s Molfix brand. A second theory is that P&G has suffered from the cost of importing raw materials. There have been rumours that the factory has only been producing soap, has been operating under capacity and largely used as a warehouse.
None of this makes complete sense: all manufacturers who import raw materials have suffered rising costs that have come from the fall of the Naira against the dollar. That situation is slowly improving, and many large FMCG companies have reacted strategically by seeking to improve domestic sourcing. At any rate, moving a plant to Ibadan doesn’t change import costs.
If the problem is a lack of demand, it signals a fairly catastrophic and uncharacteristic failure on P&G’s side to forecast demand. Our issue with this analysis is that we know demand is surging in many FMCG sectors after a torrid three years. As such, the timing of the P&G announcement is curious. The Agbara plant is reportedly 42 hectares, which is a lot of real estate to invest in and immediately divest from. We wonder how much more of this story there is to play out.
