No retreat, no surrender

Michael Potella, chief executive officer at the National Flour Mills (NFM), said his company is not going to surrender any market share to newcomer Nutrimix without a fight.

NFM, he said, is as solid as ever. "We are not prepared to allow any new entrant, particularly neophytes in the business to just wrest the market share away from us. Cockroach ent have no business in fowl party. "We are here to stay."

Even with a price war, NFM, he said, could not lose. "To engage in price war, it could have damaging effects. If we engage in a price war somebody would die and it wouldn’t be NFM."

He said too that the company is reviewing all its various lines of business and is taking steps to improve its efficiency. His comments come in the wake of Nutrimix lowering its prices on its flour, "Country Pride" by some 20 percent.

While NFM has reduced most of its products by 20 percent as well, it has maintained a premium over the competition in terms of the Ibis, Lotus and Good n’ Natural brands.

The Hibiscus brand, however, is 50 cents lower than Country Pride Flour.

"We have been operating with a consciousness that the environment has been changing and facing competition from imports. We knew from the new entrant coming on the market that we had to take steps to secure our market position.

"We have been strengthening our distribution capability, we’ve been supporting our brands, we’ve also included (an) advance sales system three years ago to service those areas where we have not previously penetrated and where we were weak. We’ve now reached peripheral areas and we down-traded most of our products," Potella said.

To cope with the competition, he said a new mill will come into operation during the last quarter of this year.

However, he acknowledged that jobs could be lost. "There will be a ‘fallout’ when the new mill becomes operational, since technology requires significantly less manpower," he said. He said management is now ‘fine-tuning’ the issue.

He stated that when NFM found out that Nutrimix was entering the market and coming with lower prices, the company had to look internally to see where it could effect savings and also review its grain procurement arrangement.

"We’ve been taking steps to better service our consumer base while ensuring that we maintain high quality of our products," he said.

"We will do what is necessary to secure our position without being reckless, without compromising ourselves and at the same time satisfying the marketplace and trying to balance between shareholders and employees. As part of our overall corporate strategy we intend to maintain our dominant position in the marketplace."

He spelt out NFM’s attributes, saying that its products are known internationally with brand equity and brand strength. "We send samples for regular sampling for international testing, we have a cadre of well-trained personnel and technical team. All this to let you know that we were gearing ourselves for competition."

On hedging, Potella said this was not a panacea for avoiding sharp increases. "It just protects you from the extreme volatility," he said, noting that last year the conditions were different.

"If the market trend is bullish, we can just use instruments or technique that could ensure stability in the pricing so that we wouldn’t have the peaks and valleys," he said.

Asked if the price of rice and other NFM products may soon come down, Potella said NFM was going to assess the situation and the market conditions to make sure that its prices are fair and that it gets a fair return. He added: "Once we are not competitive, the market will deal with us."

On Nutrimix relying on its low wage bill and their state-of-the-art equipment to drive prices down, Potella said while wages are important, it is not the most significant factor.

"NFM is not only about flour," he said: "We have oil, rice, a feed mill, we have a diverse set of operations. But the flour business, which is our core business, we know that very well."