The recent tussle between Aliko Dangote, the richest man in Africa and Abdul Rabiu, the sixth richest man in Africa over compliance concerns relating to the backward integration policy of the Nigerian sugar industry has been trending over the weekend as both business tycoons battle over market share for sugar business in Nigeria.
Aliko Dangote, Chairman of Dangote Sugar Refinery Plc, had told the Minister of Industry, Trade and Investment, that the establishment of a sugar plant by BUA International Limited, owned by Mr Rabiu in the Port Harcourt free trade zone was out of tune with export laws.
National Sugar Development Council, after reviewing the matter concluded that – BUA has not substantively invested in local production of sugar, rather they intend only on importing and refining raw sugar whilst claiming to be investing in developing sugar plantations in order to qualify for quotas to import raw sugar.
It is obvious that that Dangote Sugar will lose part of its market share to the BUA Group should their sugar be successfully launched into the market.
BUA Group has a channel for cement and there is every tendency that most of the people that are selling cement for them also deal in sugar. The people that are dealing for BUA may not be selling Dangote Sugar; at that, it is easy to talk to people like that within their line of product.
BUA may bring down the price of sugar at market entry level. The competition will ultimately bring down the price of sugar. For instance, If a bag of sugar was selling at N50,000, BUA may bring theirs to N30,000. They may be making losses at short term just to gain that market share before they begin to adjust.
There is no gain saying about the fact that the entrance of BUA sugar will reduce the market share of Dangote Sugar. For instance, if Dangote Sugar has 40% of the market share, the entrance of BUA sugar in the market can reduce the market share to 30%.
The implication of reduction in the market share of Dangote Sugar is reduction in their turnover and this will consequently affect their bottom line. If however they are able to control their cost of operations in consonance with the reduction in their market share, then they will be able to maintain their bottom line. That is, if their market share is reduced by 50% and they are able to control their operating expenses by same 50%, then they can maintain their bottom line.