/photo/3#BottomUpEconomicsKe
— 𝐃𝐲𝐧𝐚𝐬𝐭𝐲_045 🇰🇪🇺🇸 (@kevo_atandi) February 14, 2022
Slopes Dairy in Nyeri with a capacity 5,000 L a day. Kadogo economy 200 ml at 15 bob while paying farmers 45 bob per liter. The heart of Bottom Up economy benefits both producers and consumers@WilliamsRuto @DavidNdii @UDAKenya @ahmednasirlaw pic.twitter.com/rdjiNCk9K9
Even Kiambu needs more 'simple' interventions in cost of feeds; electricity costs; timely payments by supermarkets.
https://www.kbc.co.ke/githunguri-dairy-raises-dividends-as-turnover-grows-to-kshs-8-2b/
Now take the rest of the country where milk has to be trucked from Ruiru to Mombasa, Kilifi!
Yes what started in kiambu need to be spread nationally..for milk revolution in Kenya.Feeds and value chain growth...we need to allow duty free imports of animal feeds while we grow ours..then remove brookside from monopolizing the marketHow us brookside monopolizing the market? They have 30% share of the market. They compete on farm gate prices.
During Uhuru Kenyattas first term the consumer price of milk increased 67 percent (from KSh 36 to KSh 60 per half-litre packet), while producer prices remained unchanged at KSh 35 per litre), effectively increasing processors gross margin by 130 percent (from KSh 37 to KSh 85 per litre). Given the industrys 400m litre annual throughput and Kenyatta familys market share, which stands at 45 percent, the consumer squeeze translates to an increase of the Kenyatta Familys turnover from KSh 13 billion to KSh 22 billion, and gross margin from KSh 6.7 billion to KSh 15 billion a year
Some farmers in Nyeri have declined to sell their milk to a leading processor despite the dairy firm enticing them with Sh43 per litre of milk.
Farmers said after luring them, the processor reduce the prices drastically leaving them with no option but to offload huge volumes of the produce at low prices.
The farmers said the processor has been duping them and have learnt their lessons, adding that they have decided to stick to their cooperatives that pay Sh37 a litre.
State capture my foot. How comes the other dairies didn't compete? Ndii wants to recycle poverty not to scale up
The solution is simple - it's difficult to grow a brand like KCC or Brookside many brands.
The small dairies should package their product in one brand
Like KCC - with KCC focusing on standardization and quality control of small dairies.
KICC should there after focus on marketting and brand building.
This will eventually should see KCC milk dominating the market; and Brookside contributing 20 percent or less.
The billions gong to kenyatta will be spread all over the country
And the farmers like KTDA has shown will benefit more.
Ruto says there is big milk market in Africa - especially Central and West AfricaThey do not have their own cows?
They do not have their own cows?
Ndii is a dreamer. He is a man providing Simple solution for very complex problems.. Thinking that packaging Kadogo milk in plastic is revolution is nothing. We real hustlers have done it all, We have cooled the milk in Drums filled with water and home made Fridges taken it straignt to the marker and sold it there.. In early kibaki days my bro used to sell over 500 litres in Uhuruma. My neighbor had a cooling plant and was driving his in all nairobi ghettos and selling it in bulk. Then came formalization of that market. Prices at the farm gate rose and made this type of this market not so profitable. My point is that ndii is just taking this to Far flung areas of central like Nyeri but in Kiambu this a revolution that happened 30 years ago,I trust Ndii when it comes to assessing Kenyan economics and coming up with good solutions centred around the good of the common mwananchi. He lost a good chunk of my respect when he allowed himself to insult Luos two years ago, but that's just bitterness with Raila. He feels betrayed by the Handshake. But I find him solid in matters economics. I'm glad Pundit is no longer insulting him like he used to before he became team Ruto :D But I think Ndii is a plus for Kenya. If we ever implement a meritocracy, we would want to stock policy-bodies with heads like Ndii :D
I trust Ndii when it comes to assessing Kenyan economics and coming up with good solutions centred around the good of the common mwananchi. He lost a good chunk of my respect when he allowed himself to insult Luos two years ago, but that's just bitterness with Raila. He feels betrayed by the Handshake. But I find him solid in matters economics. I'm glad Pundit is no longer insulting him like he used to before he became team Ruto :D But I think Ndii is a plus for Kenya. If we ever implement a meritocracy, we would want to stock policy-bodies with heads like Ndii :D
One of my regular twitter interlocutors engaged me privately on how he understood #BottomUpEconomics after listening to a clip of my comments at our Nyeri economic forum. When I was done with the response, I felt that it was worth sharing more widely. Here goes. pic.twitter.com/U5zjFyETN0
— David Ndii (@DavidNdii) February 16, 2022
How come other dairies e.g wakulima(mukurweini), Aspendo(kangema), Githunguri (fresha), Kinangop, mt. kenya(meru) don't lower prices to capture more market-share? Also how come they pay almost the same farm gate prices? What's the cost structure of a packet of milk? The informal milk market is well above 75% and not shrinking actually its expanding, this is the biggest competitor to the formal dairies. Lately there has been advent of independent pasteurizers due to dairy board requirement a clear indication of entrenchment of the informal market.
I dont what processing cost is - milk ideally is just heating then cooling - centrifugal thing for seperating fat/cream from milk - nothing complex so I doubt it's expensive. What I think ail the sector is marketing and distribution cost....this is why we need to have one milk brand....there is really no point having all these 30 milk brands. We should copy India's Gujerati Amul. Kenyattas have been buying brands essentially.You're truly enamored with monopolies and forced clusters. Economy of scale in the industry would be marginal that's the reason why informal market is expanding. The industry needs more productive farmers, the cost of feeding a 5litre cow would be the same as 15litre cow. Fresha the best and the biggest owned farmers cooperative is only limited to githunguri, how come it hasn't expanded to the rest of kiambu? Cause the formal market isn't expanding, a dairy can only grab market share from other dairies not from informal market. Its the reason why brookside was buying dairies instead of expanding. Dairies need to study how informal sector is thriving and work to grab market share from the informal sector.
So for me the solution is to have all these small processing plant process milk (more value chain) - and then be branded in KCC - KCC would sell those factories - and become KTDA - focusing on management/distribution/marketting/feed supplies/spares/ export/ import/standardaziation/quality.
So ideally copy KTDA model - have farmers owned and run dairies - all branded with KCC or any other super brand - let KCC focus on brand building -and eventually exports.
So gov should start with privatizing KCC dairies by selling to farmers - and KCC should change it business model - to copy KTDA
Each diary will pay 2-5 percent fee for management - and with these economies of scale - KCC will sell milk very cheaply - and eventually become international brand by building exports.How come other dairies e.g wakulima(mukurweini), Aspendo(kangema), Githunguri (fresha), Kinangop, mt. kenya(meru) don't lower prices to capture more market-share? Also how come they pay almost the same farm gate prices? What's the cost structure of a packet of milk? The informal milk market is well above 75% and not shrinking actually its expanding, this is the biggest competitor to the formal dairies. Lately there has been advent of independent pasteurizers due to dairy board requirement a clear indication of entrenchment of the informal market.
You're truly enamored with monopolies and forced clusters. Economy of scale in the industry would be marginal that's the reason why informal market is expanding. The industry needs more productive farmers, the cost of feeding a 5litre cow would be the same as 15litre cow. Fresha the best and the biggest owned farmers cooperative is only limited to githunguri, how come it hasn't expanded to the rest of kiambu? Cause the formal market isn't expanding, a dairy can only grab market share from other dairies not from informal market. Its the reason why brookside was buying dairies instead of expanding. Dairies need to study how informal sector is thriving and work to grab market share from the informal sector.
Informal market is basically unprocessed milk - or half-processed - so no processing cost - no brand - no package- it's just milk - a litre is half the price -50/60sh. And that is really what it ought to be - milk is milk - farmers and dairy should concentrate on producing and processing milk - branded KCC milk - just for standarisation/branding - there is no mopoly here - they get paid small percentage - to manage things.Folding brands to create one single brand is creating a monopoly. The question is why doesn't kcc squeeze all the other brands from the marketplace? There are more dairies coming up with different business model. Milk especially isn't processed only boiled to extend shelf life and packaged for distribution. The farmers needs to capture as much of the value chain as possible, this is the reason why informal milk industry is huge. Dairy board had tried to ban sale of "unprocessed" milk but obviously there was major revolt.
So challenge is really simple - how can we sell milk at same price it's sold informally - a litre at 60shs - with farmer getting 40shs? There has to be massive economies of scales - in purchase of inputs/feeds- in processing - and distribution.
And then of course nirvana would be to turn the big dairies into export oriented - milk powder and others.You're truly enamored with monopolies and forced clusters. Economy of scale in the industry would be marginal that's the reason why informal market is expanding. The industry needs more productive farmers, the cost of feeding a 5litre cow would be the same as 15litre cow. Fresha the best and the biggest owned farmers cooperative is only limited to githunguri, how come it hasn't expanded to the rest of kiambu? Cause the formal market isn't expanding, a dairy can only grab market share from other dairies not from informal market. Its the reason why brookside was buying dairies instead of expanding. Dairies need to study how informal sector is thriving and work to grab market share from the informal sector.
Folding brands to create one single brand is creating a monopoly. The question is why doesn't kcc squeeze all the other brands from the marketplace? There are more dairies coming up with different business model. Milk especially isn't processed only boiled to extend shelf life and packaged for distribution. The farmers needs to capture as much of the value chain as possible, this is the reason why informal milk industry is huge. Dairy board had tried to ban sale of "unprocessed" milk but obviously there was major revolt.
Our local dairy has coffee flavored yogurt, and its away of standing out in the marketplace. The focus should be increasing farmers productivity and creating new distribution model to capture more of the informal market.
I think biggest problem is simple: Farmers want to get paid more; Consumers want to pay less;Its very simple, let KCC earn the scale not forced consolidation. Farmers would flock to KCC if were getting better value for their produce and the same applies to consumers. Basically let the companies earn their marketshare not forced consolidation. Urbanization is probably the biggest driver in formalization of food industry, this is going to continue tracking increase in incomes and living standards.
Now if you wear the shoes of a gov policy wonk; then it will become clear; you want people to buy cheaply and sell safe milk profitably!
I feel you're talking as dairy or farmer - but looking at the entire sector.
Informal hawking of milk - is unsafe - and we need to move from there.
Most informal milk is owner produced and owner consumed.
So lets not romanticize primitivity and under-development.
We want milk like other sectors to be quickly formalized.
We have working model to copy from - KTDA and India's AMUL.
The idea is farmer should be paid 45shs for a litre of a milk - and I should buy that litre of milk for 70shs.
So 500ml should be bought for 30shs - not 60shs.
That way processed milk will compete with unpackaged milk - even a farmer will not take raw milk
They will buy processed safe milk....safe treated no microbes milk
The solution is to create or force massive economies of scales. You need to cut cost.
You cut branding, marketing and such cost by ensuring at least 80 percent of the market is selling milk branded MILK :) very very cheaply - the rest can buy their coffee flavoured milk
You also need to massive cut - input cost - feeds - by massively investing in cheap quality feeds.
That is where quasi-gov or farmers cooperatives come in to consolidate the sector and create massive economies of scale
(https://cdn.corporatefinanceinstitute.com/assets/economies-of-scale-theme.jpg)
And it not monopoly - KTDA exist - but there are 150 private tea companies - competing for the same tea.
Big organisation like KTDA create massive economies of scale that make small holder farming profitableFolding brands to create one single brand is creating a monopoly. The question is why doesn't kcc squeeze all the other brands from the marketplace? There are more dairies coming up with different business model. Milk especially isn't processed only boiled to extend shelf life and packaged for distribution. The farmers needs to capture as much of the value chain as possible, this is the reason why informal milk industry is huge. Dairy board had tried to ban sale of "unprocessed" milk but obviously there was major revolt.
Our local dairy has coffee flavored yogurt, and its away of standing out in the marketplace. The focus should be increasing farmers productivity and creating new distribution model to capture more of the informal market.
Its very simple, let KCC earn the scale not forced consolidation. Farmers would flock to KCC if were getting better value for their produce and the same applies to consumers. Basically let the companies earn their marketshare not forced consolidation. Urbanization is probably the biggest driver in formalization of food industry, this is going to continue tracking increase in incomes and living standards.
This bottoms up has happened in the school shoes industry. Cobblers with small machines all over Kenya are making better quality school shoes at a cheaper price than Bata. For a 1,000 you get a hardy shoe while Bata are doing theirs at 2000+ and you hear complaints online.I agree. The dairy industry doesn't necessarily needs consolidation but innovation in distribution (Atms, subscription model etc). The biggest impediment to more production is feeds. This is where policy and investment needs to be directed.
We do not have to go KTDA/KCC way. Milk market is local and does not have to involve to much transport. Just a proper marketing and once the farmers are convinced that pasteurised milk tastes better, they will stop taking raw milk and buy from their local micro processors. Milk ATMS even in local secondary schools - kids can use pocket money to buy milk from 10 shillings instead of scrambling for useless mandazi.
Lowering animals feeds has many hacks. We need to go big in fodder in ukambani. Even Galana- what is so hard in growing grass? Even fund KARI give us a thorn less mathenge shrub species. There are fat goats all over Kitui thriving on mathenge. Then find a protein source alternative to retail at 50 per kilo.
Brookside, which is seeking settlement of a Sh457 million debt, has filed its papers in support of the winding up petition.
The list of top creditors includes furniture distributor Redstar International (Sh261 million), Kisima Management Limited (Sh201 million), dairy processor New KCC (Sh290 million), Kenindia Insurance (Sh167.2 million) and Nexus Holdings Limited (Sh103 million).
In joining the petition, Githunguri Dairy Farmers Co-operative Society had revealed that Uchumi owed it Sh99 million. It was not possible to establish wether the latest dispute is linked to the old debt or is the product of a separate dispute.
Small cottage businesses develop to big huge companies with their own brands. Instead of having sweatshops to make shoes/clothes kenya can sell indigenous brands capturing the entire value chain. The small cottage industries need capital to expand to capture the addressable market especially in africa. The economic output of this model is far much greater in aggregate compared to a single company approach. How much of the value chain is KTDA capturing in the entire tea industry? KTDA has done good job consolidating collection of basic commodity tea. However the company hasn't been able to move up the chain to promoting its brands or creating new products to address shifting drinking habits. Its instructive that unilever sold its kenyan tea business but retained india, nepal and indonesia and more importantly held on to their ready to drink business https://www.wsj.com/articles/unilever-sells-ekaterra-tea-business-to-cvc-capital-11637257633
Yes KTDA has done well in basic - farming - and producing quality tea - now it's need to move to branding. Many people dont know Kenya produce tea. They know tea is LIPTON. They imagine its grown in Europe by Uniliver. With our market dominance - and we really need to ban export of bulk raw tea. Like the min reserve tea price - the buyers have nowhere to go - and gladly accepted it. They will shift operation to Kenya. Our market dominance is such that we can dictate terms. We should tell them no tea can be sold raw. Come and blend here....come and develop brands here. It's our tea. That should be phase one...let Lipton make their tea...here...in Kenya. They can make it in Mombasa or wherever. Let them write MADE IN KENYA. Then slowly we can build our brand. If they dont want - let them go and grow their tea elsewhere..it will take them years.Companies likes https://muharata.co.ke/, kevian juice or even nice &lovely were all jua kali and now are region's leading companies in their respective sectors. Jua kali is entry level point more like incubation. What's needed is capital investment and R&D to scale up . A decree or fiat isn't a solution to tea industry, sri lanka hasn't banned export of raw tea but has managed to create a global brand in the last 15yrs.
I dont know how our juakali sector ever growing organically - It has not the last many decades - and it cannot now.
For me gov using cooperative (not forced) model - like we have done in matatu saccos - should aggregate these small producers or cottages- so they can start doing big things.
Otherwise throwing money randomly to a villager making shoes - will not result into anything.
Gov should formalize these sectors 1st - like in Matatu - they should only get funding - if they are SACCOS - so Nyeri cobblers can form their sacco - and they can be assisted with leather cutting machinery funding - slowly they will be able to do big things.
Otherwise JUAKALI sector is all over Africa - it's taken us NOWHERE.Small cottage businesses develop to big huge companies with their own brands. Instead of having sweatshops to make shoes/clothes kenya can sell indigenous brands capturing the entire value chain. The small cottage industries need capital to expand to capture the addressable market especially in africa. The economic output of this model is far much greater in aggregate compared to a single company approach. How much of the value chain is KTDA capturing in the entire tea industry? KTDA has done good job consolidating collection of basic commodity tea. However the company hasn't been able to move up the chain to promoting its brands or creating new products to address shifting drinking habits. Its instructive that unilever sold its kenyan tea business but retained india, nepal and indonesia and more importantly held on to their ready to drink business https://www.wsj.com/articles/unilever-sells-ekaterra-tea-business-to-cvc-capital-11637257633
Companies likes https://muharata.co.ke/, kevian juice or even nice &lovely were all jua kali and now are region's leading companies in their respective sectors. Jua kali is entry level point more like incubation. What's needed is capital investment and R&D to scale up . A decree or fiat isn't a solution to tea industry, sri lanka hasn't banned export of raw tea but has managed to create a global brand in the last 15yrs.
How do we grow more of nice & lovely - from Kariobangi light industries - to proper companies - and how can we do it nationally. We cannot wait for them to grow. We cannot help them individually. For me the 1st step is to organize them. If you're in Kariobangi and doing metal fabrication like Muharata - form a cooperatives - apply either for individual loan or group loans - buy CNC machine - and start making serious stuff - not Juakali.Jua kali doesn't necessarily need government help(serikali saidia), just needs easier access to capital, zero rated capital goods and limited regulations. Backed by serious easily available trained workforce pool(tivet to the rescue). This is the reason why things like credit growth or budget deficit matter. For a more interventionist government it can offer incubators that are fully equipped for a fee. Things like commercial kitchen for food industry, lathe and cnc machines for the metal industry etc. Ultimately jua kali would be weeded out to a handful of successful companies each sector.
Srilanka I think banned the export of unbranded tea. And yes we need to follow them - Ceylon Tea is now a global brand. I saw India is trying.We have kenya brands - but we need to go international. I wish we had money to buy Lipton. It would be worth 5B dollars they were selling it for. KTDA would borrow with Kenya gov gurantee - and at least own even half of Lipton brands.Companies likes https://muharata.co.ke/, kevian juice or even nice &lovely were all jua kali and now are region's leading companies in their respective sectors. Jua kali is entry level point more like incubation. What's needed is capital investment and R&D to scale up . A decree or fiat isn't a solution to tea industry, sri lanka hasn't banned export of raw tea but has managed to create a global brand in the last 15yrs.
Jua kali doesn't necessarily need government help(serikali saidia), just needs easier access to capital, zero rated capital goods and limited regulations. Backed by serious easily available trained workforce pool(tivet to the rescue). This is the reason why things like credit growth or budget deficit matter. For a more interventionist government it can offer incubators that are fully equipped for a fee. Things like commercial kitchen for food industry, lathe and cnc machines for the metal industry etc. Ultimately jua kali would be weeded out to a handful of successful companies each sector.