Value addition.......extra notes!

I had taken a break from writing on this blog but that was not deliberate. I actually was not aware that I had many readers till the other day I met an architect....yes, a real architect who told me he was excited to read one of my previous posts on value addition. I promised to continue writing and here I am, I can write and write because I have a following.

We have a very popular fresh juice parlour in Mombasa and my key role in the business is keeping things new and fresh all the time. For that reason, we have weekend specials, today's and that sort of thing without being dishonest in our promises. Few days ago, we could only get avocado fruits and that limited our product varieties. As I was thinking of the challenges, a good idea came into my mind and it was 'eureka' for me. After sharing with colleagues, I decided to come up with a unique fresh avocado vanilla shake for our weekend special. The new product sold like as if everyone was waiting  for it. Every customer who came wanted to buy...and they bought till the last drop. We had to make juice many times in a day. The last time I saw those kind of sales was more than 10 years ago, back in the year 2010.

What really happened this time? Value addition plus a bit of innovation in marketing. Ok, let look at how we did it in terms of value addition....please pay attention to this. To make 5 litres we required four medium avocados at a cost of KES 30 each. To give it a nice vanilla taste required KES 100 and the cost of other ingredients did not exceed KES 50; getting to a total cost of KES 300 for 5 litres. Our juice parlour is not located at a high income area so we sold fresh juice at a price of KES 100 a glass. Each 5 litre volume gives 13 glasses so the sales value is KES 1,300 for a product that cost KES 300 to make. Are getting the point? Can you see the change in value? Now, that is value addition.  We actually had a special weekend, a time to rejoice...the sales were wonderful. 

It seems easy, but how were we able to do it? Of course, the first thing is the innovative recipe, a unique formula. Second, the preparedness....even to the point of writing 'weekend special' all over. However came in had to see something fresh was taking place. And finally, the presentation. We do not sell juice in ordinary glasses. Our standard juice glass costs KES 420 per piece at a local supermarket. The model is always available throughout the year. Customers find the glass beautiful and easy to handle. This is the best part......the glasses do not break even if you bang them on a table.

This is about fresh juice, you can use this approach on many other products that you can sell. And before you do something, there is something else you do . You must prepare and organize yourself. Now...go and do something that can create good value for you and the economy.  

Our customer is selling charcoal and makes good money

Few years back, as a pioneer agency banker in Kenya I used to walk in the neighborhood trying to win customers and open new bank accounts using a mobile app. It wasn't easy presenting door to door and meeting almost the same people most of the time. I had decided that I would not stop even when people kept on saying 'no' to the service. Of course, with every 10 people I talked to I was successful with 2-3 and sometimes I opened 10 new accounts in a day. There is joy in looking back and seeing where we came from. To this day, close to 70% of the bank accounts in the area were opened at our agency location. We rose above resistance and that was a great thing.

Why am I starting my story this way? Among the people who could not open a bank account for 2 good years is a customer we call Tim. He used to operate motor cycle taxis popularly known as bodaboda. This guy had several. He was also an informal landlord, owning several open stalls on a road reserve and he received rent each month. Every time I talked about opening a bank account and the benefit of savings and banking, he would remind me that he was buying a piece of land and he paid KES 20,000  each month. According to his argument, he did have any money to keep in a bank account. Tim's story is very different today and he makes good cash deposits each day. He has 2 accounts with different banks which we represent as an agent.

You must be wondering what happened with Tim. The other day, he told me a different story. Tim said we helped him a lot with advice though it took him too long to put anything into practice. As I write this, he no longer operates bodaboda service. He does not even own a motor cycle. Tim is selling charcoal at an open shed that does not qualify to be a premises and that means that his informal business does not qualify for a business permit. As we talked, he told me it costs almost KES 100,000 to have a motor cycle for bodaboda service. Amazingly, he only needs less than KES 5,000 per day to operate his charcoal business. He has 2 outlets each selling 2 bags of 50 kg each day. The sourcing cost of a bag of charcoal is KES 500 and he sells a kg at KES 40 hence making a profit margin of KES 1,500 from a 50 kg bag that cost 500 bob to buy. At the end of each day, Tim make a profit margin of KES 6,000 from the 2 outlets. He was happy to say..."I make more money than I would get from 3 bodaboda motor cycles. A bank officer is able to give me a loan even without a formal business". 

Tim's story make a lot of sense. Looking at what he does you may not think he makes any money. Even as a revenue officer working with the government will dismiss him as a poor fellow who is trying to look for just enough to eat! We, in a lot of times chase businesses that have a positive image, those which need lots of capital and we forget the simple ideas. Talking as a business person, I would say that Tim is in the energy sector....only that he deals with charcoal. He could add paraffin, firewood, fire lighters and even advance to charcoal briquettes, petroleum and all manner of energy products. 

Watch this space for another story. Another guy I know could not get a job for almost 10 years after university.....you should meet him today. What he drives is likely to be your dream car. I started a unique business, I will talk about that in the coming days. 

Value addition, the way to go!

Recently, I joined a team of Trade officials as a consultant to establish a one-stop-business centre for a County government in Kenya. One of the most interesting ideas about the project is the opportunity to work and with the smallest of the small business people at the community level and to help them to grow. I loos like community service...and it is. 

During my first field visit, I had a chance to share ideas with a group of women involved in poultry, farming, food processing, energy saving stoves and other little businesses. I was able to discuss value addition using very familiar examples..and I can share that right here. In Kenya, we all know what a chapati is. A 2kg packet of wheat flour makes 40-45 commercial size chapati selling at KES 10-15 each. Someone will make a profit margin of approximately KES100 - 150 from one lot. How many pieces will you sell to make a decent living? 

Now, lets say you decided to be more innovative in value addition and you make samosa out of the same size of chapatis. You may choose to make the tiny ones so that you get 4 pieces from each chapati selling at KES 10 -20 depending on whether you use fish, chicken, rabbit, beef, vegetable or other meat. If you make a bigger size, lets say 2 pieces from each chapati, you may sell a piece at least KES 20 so that one piece of chapati gives you KES 40. Therefore, a 2kg packet of flour gives KES 1,600 in sales value. If you use chicken meat, you can actually use all the parts including the neck. What does this tell us? By so doing, you accelerate the value many times more by doing almost the same amount of work. At this point, how many pieces do you need to sell to make a decent living? 

You can get more for less work if you changed the location of selling point to a place next to a supermarket, bigger town, bus station, specialized food store, etc and sell more at even double the price. What happens with such little food stuffs? Just like with fruits, most customers will tell 'give me for a 100 bob, give me for 200 bob, 50 bob, etc. My experience as person who at one point sold fruits for survival, I am familiar with buying behavior in Kenya urban centre. Majority of people find it easy to buy something costing 20 bob, 50 bob, 100 bob up to 200 bob. 

Does this give you an idea of value addition? My next write up will be value addition on fresh fruit. I have done this sort of thing for 7 years now.  Keep it here.  Your comments are welcome, let build our potential and make it right here in Kenya!

Creative statements & matatu art

This is very brief! For more than 10 years, I have been involved in translating Swahili statements (locally known as "methali" in Kenya) to English and someone else does it in Japanese. As Japanese company buys Lesso/Kanga from Mombasa and make products preserving the written statements.

As you move around in Kenya, you will see interesting writings on local public transport vans locally known as 'matatu'. Yesterday, somewhere in South coast in Kwale County, I spotted a matatu written 'maskini hafilisiki'. That means....a poor person does not get bankrupt.