HomeNewsLong-term funding critical for Olivine

Long-term funding critical for Olivine

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Olivine Industries has been in operation for over 80 years and its products have become part and parcel of most Zimbabwean homes.

It has, however, not been spared by the myriad challenges most companies face in the manufacturing sector.

NewsDay (ND) Business Reporter Tarisai Tahungai spoke to Olivine managing director Jonas Mushangare (JM) about the company’s prospects.

Below are excerpts:

ND: We understand for some time now Olivine has been operating below capacity, what is the major contributor towards your underperformance?

JM: Since dollarisation, Olivine Industries has endeavoured to increase its capacity. This has happened steadily over the last two years in various product categories the company operates in.

As a measure of this growth, over the last year, Olivine Industries has re-introduced some of its iconic brands as well as introducing some new lines.

This has contributed to boosting production levels. Some of the brands that have been re-introduced include, Jade soap, Daily soap and Panol cooking oil. In terms of new brands Buttercup Light was introduced in the spreads category and this has been very well received by the market.

These initiatives have seen, for example, Buttercup margarine market share, growing to levels of over 40%.

ND: Most companies have been crying foul over the unavailability of long-term credit on the market. How has Olivine dealt with this challenge?
JM: Like all businesses in Zimbabwe, Olivine Industries has been hamstrung by short-term expensive money.

The availability of cheaper, long-term credit will go a long way in making Olivine Industries more competitive. Our shareholders have made an injection into the business which has gone a long way in improving operations.

ND: Players in the manufacturing sector have been advocating for removal of duty on inputs as a way assisting the local industry to recover and be able to compete with imported products. How have imports affected your operations?
JM: Competition from duty-free imported products has affected business. Pricing of local products depends on a variety of factors.

Olivine tries as much as possible to source raw materials locally, but where supply on the local market is inadequate, the company has to supplement with imports.

Duty on raw materials has also increased the cost of importations. The costs of production are significantly lower for foreign competitors than they are locally, which results in high-production costs for local products.

Various issues have to be taken into account when looking at this issue. Most of the international companies Olivine Industries competes with are able to secure long-term, cheap finance.

Allied to this is the fact they do not suffer from erratic supply of utilities such as water and power. This erratic supply means Olivine experiences extensive down-time and all this adds to costs.

The proliferation of imported brands in the Zimbabwean market has created intense competition.

The weakening of the rand has also served to make imports from South Africa very competitive. In certain instances, the quality of these imports is questionable.

To further improve Olivine Industries’ performance, the availability of cheaper and long-term funding is critical. It is also imperative the supply side in terms of both soya beans and cotton seed improves.

An improvement in the supply of both power and water will see production runs improving and we will benefit from economies of scale.

The erratic supply of these disrupts production and creates waste. Product development and innovation will also serve to improve margins and the bottom line.

ND: For many years Olivine has not been producing some of its well-known brands such as Jade bath soap, Panol cooking oil, Dolphin laundry soap, Buttercup margarine. What has happened to these?

JM: The products you have highlighted are all being produced and sold. They are among the nation’s favourites and most trusted. Despite a prolonged absence from the shelves, consumers have gladly welcomed them back.

The company has learnt some lessons from the last couple of years and has re-introduced Buttercup in its original form. The Buttercup brand is now available in tub form for convenience as well as in a spread variety which is geared towards health-conscious consumers.

ND: Apart from the old products the market is used to, are there an efforts to launch new products anytime soon?

JM: Continuous innovation and product development are key tenets of Olivine Industries strategy. In line with this, the company introduced Buttercup Light Spread in August 2011, a medium-fat spread.

In the toilet soap category, Daily soap was re-introduced with a new fragrance. As consumer tastes continue to evolve, Olivine Industries will produce and market brands in keeping with customer tastes.

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