Hometown conglomerate 3M Co. is taking a gamble in its quest for global growth, investing in nations where traffic jams, clogged ports and electrical blackouts are part of the daily rigors of doing business.
The Maplewood-based company recently launched an unusual sub-Saharan growth initiative that will create a $500 million empire that flows from Kenya and Nigeria. Its plan, which CEO Inge Thulin calls the company's "newest frontier," differs starkly from typical corporate expansion targets like India and China, where U.S. companies have made significant investments in recent years.
3M is leaning on the sub-Saharan region to tap into a deep well of new customers. Nigeria, which has seen a population explosion over the last 50 years, is expected to reach 390 million people by the year 2050 and is benefiting from a surge in oil production. Meanwhile, Kenya, with more than 43 million people, has the biggest and most advanced economy in east and central Africa.
3M says it is reactivating its presence in Kenya while creating an entirely new unit in Nigeria. The company is also investing in Saudi Arabia, where it expects to generate another $500 million in sales. It's likely 3M will sell its wide assortment of products in Nigeria and Kenya, while it will manufacture, sell products and conduct research in Saudi Arabia.
"With the slow recovery here in the United States, the financial situation in Europe, and the slowdown in China, companies are looking for new markets for their products," said Troy Walters, an economist with IHS Global Insight. Nigeria and Kenya "are very unconventional areas for most U.S. companies to invest in," he said.
3M is counting on increased spending by the Kenyan government and expects to sell its products to health care, IT, and mining and agricultural firms there. In Nigeria, it plans to sell respirators, surgical drapes, bandages, and stethoscopes, as well as anticorrosion coatings for oil pipes.
But doing business in sub-Saharan Africa is risky. Nigeria is plagued with crowded ports, slow commerce, spotty electricity and a brutal infrastructure that thwarts industrial development. Kenya has faced political fighting, a near civil war and an influx of Somali refugees in the last decade. The combination has created headaches for many businesses and for a time thwarted investment.
But those days are over, insists Irfan Malik, 3M's Middle East and Africa area vice president. In order to increase revenue, 3M must look at other regions.