How milk glut helped couple start lucrative food processing firm

Stellar Kimemia and Wachira Kariuki do not cut the stereotypical image of accountants — an unaenturous and life in a world that begins and ends with ledger entries.

The couple, however, quit their decent jobs to venture into the milk processing business, a risky move that has since paid off bountifully.

Ms Kimemia, 38, and her 40-year-old husband are the owners and founders of Classic Foods, a processing giant with interests in milk, maize flour, yoghurt and more recently fruit juice.

The milk products trade under the brand name Classic while the maize flour and juices are referred to as Capital and they have collectively propelled the company to an annual turnover of over Sh100 million after just eight years of existence.

“We got into the milk business after noticing that my parents-in-law and their neighbours in Ruringu, Nyeri were having trouble getting a steady market for their product,” Ms Kimemia told the Business Daily at their Juja Farm factory.

“We set up a business collecting their milk and selling it to established processors. That was in 2007 and my husband and I were still employed so we hired people to oversee operations.”

The business picked up almost instantly, the mother of two explained.

The budding entrepreneurs invested Sh10 million in the business that included vehicles to collect milk from farmers, chilling equipment and trucks to transport the product to processors.

Ms Kimemia says the start-up capital included savings made from their formal jobs which they topped up with a bank loan.

Before long, they had contracted more than 60,000 farmers to supply milk which they forwarded to Alpha Dairy Limited and Sameer Agriculture and Livestock Limited the processor of Daima brand of milk.

In a day, they would buy about 30,000 litres of milk for between Sh16 and Sh18 and sell it to processor at nearly double that amount.

In 2009, two years after setting up the business, Ms Kimemia quit her job at Heritage Hotels to fully concentrate on the business and her husband followed suit two years later.

Around this time, the country had experienced a glut which forced processors to discard large amounts of milk since many did not have the technology convert it to long-life or powdered form.

This seasonal event cost Classic Foods heavily as processors scaled down on collections but it also got the duo thinking about venturing into processing business themselves.

“We began looking for premises and a milk processing machine and sometime in 2008, we were fortunate to get an idle plant in Industrial Area and we began processing a year later,” says Ms Kimemia.

The rent and equipment leasing cost about S00,000, an amount which cut the company’s profits and had them searching for a piece of land to set up their own factory.
Classic Foods bought an acre of land in Juja Farm and, using a loan and cash from the business, went about building a Sh25 million plant where they relocated to in 2011.

By this time, the company had bought the Industrial Area machinery for Sh16 million, sparing them the expensive costs of importing and installing a new processing line.
The former accountants split the roles in their business to ensure smooth running and its sustainability — Ms Kimemia acts as the chief food technologist while her husband concerns himself with the engineering matters.

“The thing with business is that you have to know it inside out, we cannot just hire people and expect them to run the business well,” said Ms Kimemia, adding that this is the only way to avoid being duped.

“This was my motivation when I quit employment a year after setting up Classic Foods. I felt that my husband or I needed to be physically present in order to properly manage the company.”

Diversified

And she was right about that if the scale of their business is anything to go by. Every day, Classic Foods processes between 8,000 and 10,000 litres of milk, about 14 tonnes of maize meal and has the capacity to produce 700 litres of fresh juice. The company has 35 employees.

The company also diversified into production of maize meal and fruit juice.
Ms Kimemia told Enterprise that they used to supply farmers feeds for their animals and soon realised that the main raw material of this input is maize germ, a processing by-product.

They started processing maize into flour and use the resulting germ to cheaply produce cow feed for their 30,000 farmers in Juja, Gatundu, Nyeri and other parts of central Kenya.

Classic Foods sources most of the maize from the ‘Ukambani’ area while more is brought in from Eldoret and Kitale.

The company also imports maize from Uganda and Tanzania when production dips locally, ensuring its factory has a steady supply of raw material.

More recently, the company started preparing fruit juices, putting it in the crosshairs of established multinationals such as Del Monte and Coca-Cola and locals like Kevian Kenya which produces Afia.

The company produces mango, orange, mixed fruit and pineapple juices and sources the raw material from milk farmers whom they have trained on the benefits of mixed farming.

Classic Foods briefly ventured into making tomato sauce but shelved this line of business to concentrate on the new juices which were showing better promise.

Ms Kimemia’s primary aice to start-ups is that they should form strong partnerships with their suppliers and financiers in order get flexibility when they are experiencing financial ‘downtime’.

“You also need to study the market and understand who your target market is, your supplier and what kind of marketing strategy to use including choice of labelling,” she says.

“The customer decides whether to buy your product or not based on their first impression,” she said, adding that the product’s quality will only determine if they become repeat customers or not.

schao@ke.nationmedia.com

SOURCE: BUSINESS DAILY