JSE-listed Pioneer Foods will obtain the majority shareholding in Food Concepts Pioneer Limited (FCPL), for $7-million, allowing the food company to leverage FCPL’s existing infrastructure and brand recognition as a lower risk, route-to-market opportunity to expand its basket.

Under the terms of the agreement, Pioneer Foods would hold 50.1% of the shares in FCPL, which owns Nigerian baked goods business Butterfield Bakeries, a specialist in bread and sausage roll production. The current Nigerian food company Food Concepts shareholders interest would be diluted to 49.9%.

“Pioneer Foods already has a significant export footprint in a number of African countries and with the conclusion of this partnership with Food Concepts, creates an in-market presence for Pioneer Foods in Nigeria [using] a low-risk entry strategy,” Pioneer explained in a statement on Tuesday.

The approach, which was focused on branded packaged goods, was predicated on finding smaller operations that were scalable within the categories that met Pioneer’s competencies.

Food Concepts was founded by Nigerian businessman Deji Akinyanju whose “entrepreneurial reputation and local market knowledge forges a mutually beneficial partnership with Pioneer’s technical expertise and know-how in the bakery category”, noted Pioneer.

FCPL, with its well-established Butterfield bread brand, originally established in South Africa in 1996, had bakery operations in Abuja, Ibadan, Lagos and Benin City. Food Concepts had acquired a master franchise licence for West Africa, which included the option to evolve the brand from a retail to wholesale bakery concept.

Pioneer Foods would implement key operational changes to the Butterfield bakery to increase its efficiency, expecting the current modest operations to scale up over time to meet the growth expectations commensurate with the prevailing macroeconomic opportunities.

Bread consumption per capita in Nigeria at 7.5 kg was relatively low compared with South Africa at 40.2 kg, while sausage rolls, such as FCPL’s Yum Yum brand, had shown strong growth during the early stages of its market launch. 

“FCPL provides an ideal opportunity to leverage our expertise to grow the bread category and to establish a national bread brand over time in a gradual low risk manner,” said Pioneer Foods CEO Phil Roux, adding that the “fairly-priced” asset had good upside potential. 

Pioneer Foods aimed to be a leading fast-moving consumer goods (FMCG) company in Africa with globally trusted brands and Nigeria was a key market for any food company in search of growth, added Roux. 

Akinyanju believed the partnership would benefit from the combination of the companies’ respective strengths, which would be used to tap into the vast opportunities in the Nigerian FMCG sector.

Other shareholders in Food Concepts included World Bank member the International Finance Corporation and the Development Partners International, a UK-based private equity firm focused on African investments.