Do you want to know how much money you can make running a cereals business in Kenya? As a grains trader, your work is to buy, store, dry, re-bag and transport them at a profit. In this post, we help you to estimate the profits you can make and write your cereals business plan.
The analysis will give you an ideal business model, costs
and profits, challenges and the best tips to make extra profits. Your cereals
business can buy and sell various types of cereals and legumes like maize,
beans, wheat and rice. The post covers the following aspects of how to start
and run a cereals business.
The best business model for a cereals business
The business
model will explain the four key parts of your cereals shop business
plan namely; Who: (target consumers), What: (value
proposition) How: (value chain) and the Why: (revenue
model)
- Who:
sell your grains to individual consumers and other business customers like
flour millers and institutional buyers like a boarding school or
hospitals.
- What: The
value proposition of your business. It is the products and services that
you will cereals business will offer to your consumers or clients.
- Cereal
business goods or products are the range of the cereals, pulses, dried
tubers and spices you will sell in your grain store. These most
profitable cereals to sell in Kenya are listed in the table
below.
- Cereal
shop services, that you can provide to your clients are free deliveries,
aggregation and grain milling.
- How: It’s
the value chain or the operations you will undertake to produce or provide
your goods and services for sale. Examples are transport, storage, grading
and re-bagging before sales.
- Why: Your
revenue model, its how you will price, market, market, sell and collect
payments or value from your customers. For instance, you can use free
Social media sites like mobile Apps, Facebook and WhatsApp to market your
goods. In turn, they can pay you using m-banking.
|
Product Category |
List of most profitable cereals in Kenya |
|
Grains/ |
Maize, |
|
Pulses/ |
Beans (kidney, black, yellow, mung), |
|
Flour |
Wholegrain/brown flour, Sifted flour, |
|
Dried Tubers |
Cassava, |
|
Spices |
Black pepper, |
|
Other |
Omena |
A list of the most profitable cereals in Kenya
How to start a cereals business in Kenya
If you are wondering how to start a cereals business in
Kenya? The following are the best tips and steps you need to follow before you
can launch a grain store business in Kenya.
- Conduct
a cereals industry market research and feasibility study; It
will help you to
- Explore
and understand the market dynamics of your cereals market, such as volume
and value, potential customer segments, buying patterns, competition etc.
- Answer
whether cereals business is a viable venture for you to invest in given
your capabilities, resources and a consideration of risks
- Draft
your cereals business plan. Draw a road map of how you
actualize your cereals business idea into a thriving business. It will
focus on financial projections, marketing plan etc.
Cereals business feasibility study
The first step, the market and feasibility analysis is to
identify target consumers, products, suppliers and business location. You can
carry out one on your own or hire (recommended) an agribusiness consultant for
professional insights. The questions to answer include
- Target
consumers: You can sell your cereal products under B2C (retail)
or B2B (wholesale) models. The key buyers of grains and cereals in Kenya under
B2C are individual or final consumers and institutional ones like boarding
schools and hospitals. In the B2B model, you will target other grain
traders or brokers maize millers and restaurants.
- Products; as
illustrated above, a grain store can stock different brands and varieties
of whole grains and pulses, flour, dried cassava. To settle for the best
research into the consumer preferences, the buying and selling prices to
get your profits projections.
- Suppliers: Identify
the sources of your shop products. You can buy from farmers directly or
rely on local or importers who source quality grains from Tanzania, Uganda
and Ethiopia. Look for one who is reliable for long term contractual
arrangements to deal with price and volume fluctuations.
- Business
location: identify the best areas to locate your business. An
ideal location in a busy town or estate. Around Nairobi, the main grain
markets are in Nyamakima in the CBD, Kariobangi and Githurai markets. You
can set one in an open-air food market, a shop/store or roadside grocer
(kibanda)
- Financial
and Resource Availability; This step will help you to put into a
perspective both the Startup and operational costs of a cereals business
The start up costs including securing business premises and getting
business permits. Besides outline your skills and experiences and those of
your family that will assist in running the business.
The market and feasibility study will give you an informed
conclusion of investing in cereals or business. While you are the best suited
to conduct it, consider hiring a consultant like Agcenture advisory for
technical areas like cash modelling and competitor analysis. The studies ranges
from as low as Ksh 10000- 10,0000 depending on your goal. The consultant should
give you feasibility study recommending your next steps.
How to write a Cereals Business plan in Kenya
The second step is drawing a an implementation plan on how
you want to start your business idea and grow it to a profitable venture. The
final output is a cereals business plan to start and run a grain business. Its
major components are;
- A
description of your cereals business; wholesale or retail, location,
products range, vision and mission etc.
- Environmental
Analysis; including the SWOT & PESTLE analysis of factors likely
to impact your success.
- Competitive
environment; identify your rivals like supermarkets and outline your
competitive advantage of what you will do different.
- Marketing
plan; Identify how you will brand, market, package and price your
products.
- HR
(people requirements); identify the skills and experiences of the key
people who will run the business including the gaps of what you will hire
or get consultants.
- Financial
Projections. Have the start-up financial documents like the
balance sheet (1st 3 years) cash flow and profit and loss (monthly for 1st
year and yearly for year 2 and 3)
Launching your cereals business
Having completed the the above, the next step is to start up
your business. It will involve you acquiring business licenses and secure the
business premises before you can bring in the cereals.
Before you can operate, get a single business permit to run
a food store from the county government. The cost is around KES 10,000 in most
counties, and it is renewable each year.
To secure business premises, you will need to pay rent in a
business store and construct raised cereal stacks and shelves for dry storage
of maize. Rent in towns in Kenya range from one to the next. You can get one at
a cost of around KES 5,000 per month in a busy town that can hold 50 bags of 90
kgs of cereal. Constructing a raised stand made of timber can cost around
KES 10,000. The stands will keep your maize free of pests like rats and mice or
the moisture from the floor.
Operational costs
The grains business model operates on a “buy low, sell high”
model. You will buy cheap grains during harvest season; store awaiting prices
to raise and sell later. As such the following are operational costs of
operating a grain store in Kenya.
- Buying
costs; It is the price you pay to buy products. You can
access real-time prices of a 90 kg bag of maize, beans and other cereals
and pulses each day. These are published by the NAFIS, NCPB or the
Ministry of Agriculture in Kenya.
- Transport
costs: the cost you will pay to transport commodities from
your supplier to your grain store. It includes the costs of loaders and
off loaders. It is charged per bag or a lorry. It will depend on the
distance and cost of fuel.
- Cess
& Levies; the cost you pay at county boundaries to be
allowed to trade your goods in the county.
- Storage
costs: the cost you will pay to operate a store. Similar
to the rent costs. To get the cost per bag, divide the total rent per year
by the number of bags you bought and sold in the year.
- Labour
costs: The total amount of salaries and wages for store
attendees, drivers and other store workers.
- Package
costs: The cost you will pay to buy hermetic bags and
sacks to store and sell your cereals.
These costs are highly flexible and depend on your shop size
and the amount you can handle in a year.
How to run and grow a profitable cereals business in
Kenya
In addition to the mentioned ideas under value proposition,
the following are business recommendations or tips for making extra profits as
a cereal trader.
Direct sourcing from farmers: it is costly to
source goods from brokers. Instead, buy direct from farmers. The best time is
to buy cereals during the harvest season when prices are low.
Transport: Consider owning your own transport or
hire a lorry together with other farmers to cut on costs of transport.
Hermetic Storage: buy airtight and
moisture-proof hermetic
bags and small silos to store grains dry and free of storage pests.
Besides, lower costs of operation by storing commodities at home stores and
operate from a small store in town.
Institutional buyers: Apply for tenders and
respond to bids to become a grain supplier for the school feeding programs and
public firms like hospitals and colleges and private schools.
Diversify: sell a wide range of cereal products
instead of focusing on maize and beans only. The table above gives you a list
of different cereals, pulses, spices etc. Besides, diversify in brands and or
varieties of each commodity. For example, if you are selling rice, you can
diversify by selling basmati, pishori or brown rice.
Food processing: food processing or value
addition is an ingenious way of making extra profits in the grain business. One
cheap method is grain milling. To diversify further, mill and package pure or
blended maize, wheat and porridge flours.
Challenges facing cereal businesses in Kenya
Which challenges are you likely to encounter as a maize
broker or trader in Kenya, Uganda or Nigeria? Gathering feedback from secondary
data, the following are the key challenges that face SME cereal traders in many
parts of Africa.
- High
cost of doing business due to expensive business licenses and permits.
- Most
cereal business are informal without records keeping or formal banking
limiting their access to formal credit and commercial loans for expansion.
- Fluctuating
commodity prices between harvest and scarce periods affects traders,
profitability, planning and investing for growth.
- Climate
change effects like drought, poor rainfall patterns and floods causes
supply challenges driving costs up and lowering the trader’s profits.
- Incidences
of informal and double taxation in cess and levies in intercounty
boundaries during transport.
- High
incidences of food waste from aflatoxin or storage pests like the weevils
that infest maize, sorghum and green grams.
- Inadequate
storage infrastructures that contribute to cereal losses from weather
exposure.
conclusion
Grain business remains one of the most profitable
agribusinesses you can start today. Cereals, pulses and flours make a large
component of food demand for individual and business consumers. The analysis
above gives you the perfect business model for a successful grain store, the
steps and costs of starting or expanding a grain business and the challenges
grain traders in Kenya’s face. The post concludes with recommendations on how
to run a profitable or successful cereal business for extra profit.