DAKAR, SENEGAL — Growth of Senegal’s animal feed market recently received a major boost with the completion of the acquisition of the country’s second biggest poultry feed maker Avisen SARL by Olam Agri, an international company focused on the food, feed and fiber business in emerging markets.

Olam Agri, which is 64.5% owned by Singapore-based Olam Group, paid €17 million ($18.4 million) for Avisen on a willing-buyer, willing-seller basis, “taking into account the business performance and prospects of Avisen, and the capabilities and synergies between Olam Agri and Avisen.”

Avisen is a 24-year-old company that was launched by two veterinarians and has since grown to become one of Senegal’s major suppliers of animal feed. The acquired company operates a feed manufacturing facility in Rufisque with an annual production capacity of more than 100,000 tonnes. 

Olam Agri’s interest in expanding its footprint in Senegal is partly due to the fast-growing poultry industry in the country, a trend that emerged in 2005 when Senegal ended the importation of poultry products and the country’s private sector became more dynamic and improved production models, according to a study on Senegal’s poultry value chain commissioned by the Netherlands Enterprise Agency (NEA).

Senegal’s modern poultry sector achieved substantial growth between 2015 and 2019 “characterized by an increase in all product segments of the commercial sector.” This growth, which included more than a 40% increase in production of broilers and laying chicks for the five years, is a catalyst for the expansion of feed milling in Senegal.

The NEA estimates broiler chicks to have increased from 35 million to 51.4 million while laying chicks surged from 2.6 million in 2015 to 3.4 million in 2019.

 In fact, the report noted that for the five years ending in 2019, poultry feed production in Senegal showed “positive development” increasing the output volumes by 7.92% with the value of traded feed increasing to $127.3 million from $108.3 million.

“The dependence of commercial poultry farming on imported maize is one of the main obstacles to the competitiveness of commercial poultry farming as the local maize market is not very well connected to the demand for poultry because the maize production areas in Senegal are far from the poultry production areas,” the study said.

Eight companies dominate sector

Senegal’s feed milling is dominated by eight major companies that produce an estimated 50 to 800 tonnes of poultry feed daily. Sedima, Olam, NMA Sanders and FKS Mills account for the bulk of the market, estimated at 300,000 tonnes per year, according to the Forum for Agricultural Research in Africa (FARA).

“Avisen has earned an excellent reputation in Senegal thanks to the high quality of its products, efficient distribution network and field teams providing technical advice to poultry growers,” said Sharad Gupta, president of Olam Agri’s Integrated Feed & Protein business. 

“Combining Olam Agri’s global commodity sourcing networks, and strong manufacturing and formulation expertise with Avisen’s local market knowledge will enable us to further improve the quality and cost efficiency of feed in the Senegalese market,” he added. 

Apart from the new investment in Senegal’s poultry feed market through the acquisition of Avisen, Olam Agri, which operates in 60 countries and supplies food and industrial raw materials to over 20,900 customers worldwide, has been active for several years in Senegal’s milling sector, where the company recently launched an expansion pilot of the longstanding Making African Mothers Independent Entrepreneurs program.

The program, Olam Agri said, entails training a group of female bakers in Senegal on literacy, numeracy and fundamental business skills, including pastry making.

Olam Agri, which also has operations in Nigeria, Ghana and Cameroon with a focus on flour and pasta, has been active in Senegal through Olam Agri Senegal SA, focused mainly on the sourcing, processing, packaging and merchandising of agricultural products and inputs, including wheat milling. Avisen is Senegal’s second largest poultry feed producer after Nouvelle Minoterie Africaine (NMA). 

The company is pushing ahead with an investment strategy in West Africa focusing on strengthening and expanding the company’s animal feed and protein capabilities in the region and “to invest in proven businesses having strong market positions.” 

“This acquisition aligns with Olam Agri’s strategy to strengthen and expand its animal feed and protein capabilities and to invest in proven businesses having strong market positions,” Olam Agri said.

Credit: ©OLAM

Persistent challenges

Its expansion of operations in Senegal coincides with a period when the West Africa animal feed market is dealing with a persistent shortage of quality feed and trade barriers hampering livestock farmers from accessing feed across borders.

A recent study by the University of Edinburg showed the region still faces a widening gap in the manufacture and supply of animal feed that is attributed to an increase in livestock population triggering a surge in commercial feed market purchases.

The acquisition of Avisen is seen as one of the latest attempts by a major livestock value chain player in West Africa to address the animal feed shortage and access. Other attempts have included creating programs with the support of development partners such as the launch by Nigeria of a multistakeholder platform to help address issues in feed and fodder sector. Olam Agri has invested in the country’s grains sector, operating as Crown Flour Mills, one of the largest wheat millers in the region.

In May, Nigeria became the fourth country to launch the multistakeholder platform (MSP) that will serve “as a collaborative mechanism to unite these diverse stakeholders to address challenges, foster joint commitments, and facilitate coordinated action towards sustainable development in the feed and fodder sector,” according to the African Union-InterAfrican Bureau for Animal Resources (AU-IBAR).

The primary objective of the MSP is to collectively transform the feed and fodder sector in Nigeria, it said. 

“By bringing together diverse stakeholders, the MSP can create a unified front to tackle the multifaceted challenges facing the sector and drive meaningful progress,” the AU-IBAR report said.

Across the West African livestock industry, feed formulators and manufacturers have received investment support from lenders and development partners such as International Finance Corp., which is financing the four-year Livestock and Micro Reforms in Agribusiness program in Nigeria. 

The program was meant to help Nigeria introduce harmonized and simplified regulations related to animal feed among other livestock industry inputs. Nigeria also has been implementing regulatory and institutional reforms targeting the country’s agribusiness sector.

Olam Agri’s acquisition of Avisen is a boost to Nigeria’s mergers and acquisitions market with analysts predicting “a significant increase in transaction value” beyond $198.5 million for 2024, according to Statista, a German-based online platform that specializes in data gathering and visualization.

“Mergers and acquisitions activity in Nigeria is on the rise, driven by the country’s growing economy and favorable investment climate,” it said.

Olam’s strategy in Africa

Olam Agri said Africa is one of the regional markets where it is committed to “execute its strategy of scaling up its global origination and trading operations while investing in value-added destination processing across Africa and Asia” with eyes on profitable growth and superior returns. 

Earlier, Olam, which is also active in Côte d’Ivoire, Ghana and South Africa, said the company’s invested capital declined by 4.8% to $2.2 billion in 2023 “due to the reduced working capital utilization from lower input prices, particularly for wheat milling. As a result, EBIT/IC for the segment reached 26.3% in 2023, up from 19.3% the previous year.”

The company’s investment in expansion of its Senegal operations came soon after it reported “a volatile wheat market and currency headwinds in Ghana and Nigeria.”

Despite this performance, Olam Agri said the company’s wheat milling and pasta business “performed strongly, recording one of the best years in our history.”

“We continued to benefit from improved operating leverage and lower input prices as wheat prices receded from highs in 2022, with higher margins year-on-year,” Olam said in its 2023 annual report.

One of Olam Agri’s recent investments in West Africa includes the ongoing construction of a soybean crush processing facility in Kwara State, Nigeria. The company expects the 250,000-tonne plant to come online in the second half of 2024 and be integrated with Olam’s existing animal feed operations to boost “the development of the local soybean value chain to enhance productivity of local farmers.”

Going forward, Olam Agri is expected to leverage the strong growth of Senegal’s poultry sector to produce and supply high quality feeds, Gupta said, noting that the company will “make necessary investments to grow our feed volumes.”