Take a moment to think about a Harvard MBA graduate. Traditionally speaking, they probably end up working at McKinsey, Goldman Sachs, or Google. Now think about tomato paste. The two topics couldn’t have anything in relation, right? Wrong. Mira Mehta, a recent HBS graduate, is taking her degree to the tomato farms of Nigeria to innovate the tomato paste industry with her new company, Tomato Jos. The crazy thing is, her and co-founder, Shane Kiernan are entering into an incredibly large and untapped industry.
Nigeria has the largest economy in Africa and it is growing at about a 7% rate for real GDP. Oil and gas are the main sources driving the Nigerian economy but agriculture is also impactful. In 2013, 16 billion naira (about $97,358,665 U.S. dollars) was spent by Nigeria to import tomato paste. It is a staple in nearly all Nigerian dishes. Nigeria is the 13th largest producer of tomatoes in the world, harvesting about 1.7 million tons each year. About 50% of that production is wasted because of lack of processing, storage facilities, and poorly developed marketing channels.
A SEED PLANTED
The dream began years ago for Mehta when she worked with HIV drug supply chain management in northern Nigeria. During her time of helping small communities get access to HIV drugs, Mehta noticed miles and miles of tomato fields. She also noticed hundreds of tomatoes rotting. Everywhere. Mehta soon learned about the amount of tomatoes produced in Nigeria, the amount wasted, and the amount of money spent by Nigerians each year to get a product from China they could easily produce within the country.
The light bulb went off and her idea to produce tomato paste within Nigeria ended up on one of Mehta’s HBS admissions essays. “In one of the last classes at Harvard, they asked us to raise our hands if we were actually planning on doing what we wrote about on our application essays,” says Mehta. “I think I was the only one who raised my hand.”
During her second year she met Shane Kiernan, a student at the Harvard School of Public Health. He had a similar dream of developing Nigeria’s tomato industry but also diverting the country away from primarily oil and gas production. The two decided it was time to pursue their analogous dream.
Mehta and Kiernan began extensive research and put a team together for the Social Enterprise Track at the HBS New Venture Competition. The team placed second, securing a $25,000 award to create the business. Since then, it has been a whirlwind of research, securing land, establishing incorporation status in the U.S. and Nigeria, and creating an aggressive business model. After extensive research and an examination of 16 different farming areas, Mehta and Kiernan decided on some land near Keffi, Nigeria.
HOW IT WORKS
The fragility of tomatoes coupled with rural conditions and poor transportation infrastructure in Nigeria, lead to a minimal lifespan for Nigerian tomatoes. It is a localized crop. Additionally, farmers have no way of transporting the fruit to the market in a way that will keep the product fresh. If the farmer happens to get to the market when other farmers are there, demand plummets. Farmers are forced to sell their product for less than production value or transport them back to their farms. Small farmers in Nigeria aren’t exactly equipped with refrigerated semi-trucks.
The unstable and unlikely market has led farmers to be less incentivized to make investments in better seeds, fertilizers, or farm equipment. Tomato Jos will offer these farmers forward contracts where they will buy all tomatoes passing a quality test. The tomatoes will then be harvested and transported by Tomato Jos and turned into paste. Then the farmers are provided with farming equipment, better seeds, and fertilizers.
Another problem for tomato paste production in Nigeria is the tomatoes produced are often not ideal for paste production. They are watery, full of seeds, and not as sweet. The improved seeds and different growing practices should solve these problems and produce a tomato more suitable to be turned into paste. Kiernan is currently in Nigeria creating a greenhouse for tomato seedlings, working with local farmers, and securing processing and packaging equipment and facilities.
LOCAL COMPETITION AND ECONOMIC IMPACT
Mira Mehta
In 2013, Aliko Dangote, Africa’s richest person, splashed headlines by announcing his plans for creating a tomato paste plant in Nigeria. The billionaire teamed up with the country’s central bank to create a $25 million tomato paste factory and is supposed to boost income for 8,000 farmers. According to Kiernan, this has yet to happen. But it also serves as proof of the need and opportunity.
There are a few tomato paste factories in Nigeria but Kiernan says they get tomatoes from outside of the country. This drives the cost of the paste up and is just one step removed from importing product completely from China—which matters to Nigerians who seek local and fresh food.
According to a McKinsey report, Nigerians are incredibly loyal to brands. If they like your brand, 70% of them will most likely continue to buy your product. Half of the country is mainly concerned with freshness of food when grocery shopping. Still, the underlying goal is to shift more of the country’s economy from gas and oil to agriculture and boost income for local farmers.
“As it stands, a farmer may make $1,000 a season,” Kiernan says. “Through the Tomato Jos program a farmer can earn $5,000 a season.”
Shane Kiernan
NEXT STEPS
Despite the award from the HBS New Venture Competition, funding is still needed to expand operations for Tomato Jos to ensure a quality product. Mehta says the model is what is best for the farmers but the final key is translating that into what the consumer wants.
“To get this to work well, we need to get the right tomatoes in the right way,” Mehta says. “We really want to help change lives in rural Nigeria. We are going to test on a small scale first, then raise the funds and produce the first large-scale batch of paste.”
A Kickstarter campaign was released yesterday (Oct. 15) to help generate the funds to produce the paste on at a high amount.
“I fundamentally believe this is where the productivity from agriculture is going to come in the future,” Kiernan says. “This is the continent that will feed the entire world in the next 30 years. We want to do it right and help the farmers increase income. We want to become an agribusiness.”
Source: https://poetsandquants.com/2014/10/16/why-these-mbas-keen-nigerian-tomatoes/2/