Kenyan cosmetics manufacturer taking on large multinationals
Barely three years ago, Victor Rasugu (29) and his two friends, Janet Otieno (32) and Charles Nyawire (36), could hardly dream of getting into the competitive world of cosmetics, an industry dominated by large multinationals. The three friends knew that they had to be innovative to evade joining the ever increasing numbers of educated but jobless Kenyan youths. Dinfin Mulupi spoke to Victor Rasugu, managing partner of Melrose Bounty and Bown (MBB), about the company’s success and his ambitions for the firm.
Tell us more about your company
MBB is a cosmetics manufacturing firm I founded with two friends in 2007. We were all students at the time and wanted to evade joining the ever increasing numbers of educated but jobless youths in Kenya. We started with a paltry Ksh.150,000 (US$1,900). Currently MBB is valued at approximately Ksh.65 million ($830,000). We were driven to venture into entrepreneurship due to the high unemployment rate among the youth in Kenya. Somehow at the back of our minds we knew getting employment after school would take years.
What was it like starting the company considering that giant cosmetics multinationals dominate the market?
We looked at a few samples of business ideas before settling for cosmetics manufacturing. We consulted a cosmetic scientist who guided us on the formulation and development of the product range. In 2007 we raised the initial capital to start a production plant in Kariobangi, just next to the Korogocho slum in Nairobi.
Was there a demand in the market for your products?
We realised most ladies would buy lotions, then buy glycerine, and mix the two. We decided to produce a beauty lotion that would have glycerine built-in but also have natural extracts like avocado, aloe vera and sunflower. Our first products, however, did not match up to the set standards. This forced us to withdraw the product for further analysis before submitting to the Kenya Bureau of Standards (KEBS) for certification and approval.
How do you manufacture the lotions?
The process involves two key stages, the water phase and the oil phase. In the water phase, after weighing raw material we mix it with water and glycerine heated to 70°C. In the oil phase, we blend vegetable waxes and heat it to 60°C. Using a motor powered stirrer we mix the residue from the water and oil phases for ten minutes. The combination is then left overnight to thicken to have consistency. The next day the mixture is stirred again and pumped into packaging bottles, branded and is ready for distribution.
How much do you produce?
In a day we produce 600 cosmetic bottles carrying the brand name, Back 2 Nature, in three ranges of avocado, sunflower and aloe vera. They are packed in 130 ml and 220 ml bottles and retail at between Ksh.60 ($0.76) and Ksh.75 ($0.95). We use cheap machines customised by Jua Kali Artisans in Kenya, these are more affordable than imported machines.
How do you distribute your products?
We focus on small and medium fast moving consumer goods businesses. These include cosmetic shops and distributors, wholesalers, and mini-supermarkets that have a consistent flow of customers.
Is the venture profitable considering that well established firms control the market?
Our operating costs are very low considering that our machines were fabricated and modified by Jua Kali Artisans locally. We also use locally available active ingredients in the formulations, this means the costs do not eat into our profits. We value consistency in quality and supply. We do not allow our products to be out of stock which would give our competitors an opportunity to replace our products in the market.
What challenges have you faced in the market?
Our competitors try to undermine our presence in the market by convincing suppliers and outlets not to stock our products. At one point, one of the competitors approached us to buy MBB for Ksh.30 million ($384,000). We turned down their offer because we know our company is worth much more than that and has potential to grow into a much larger firm.
What plans do you have to position yourself in the market and counter such competition gimmicks?
We are bringing in a new partner namely Morex Media who put in Ksh.6.5 million ($83,000) in exchange for a 10% stake in the company. They will spearhead sales and marketing. With specialisation in production and marketing we are hoping to enter new markets. This is part of our strategy to achieve countrywide circulation of our cosmetics products.
How is MBB performing financially?
The first quarter net profit recorded by MBB in the year 2010 was Ksh.600,000 ($7,700). Our annual profit has the potential to be between Ksh.2.4 million ($30,700) and Ksh.3 million ($38,400) annually. Currently we have eight employees.
Tell us about your plans for the future?
We are planning to expand our production plant to have increased mass production as well as develop a unique mould for our packaging bottles which would make our products more identifiable. Our key strategy is to build our brand. We have already come up with formulations for diverse hair care and skin care ranges to be launched later in the year. We believe the new products will ride on the success of our existing range.
What makes a good entrepreneur?
One should be ready to take calculated risks. Carry out research to indentify the target market for your products and ensure that those around you share the same vision and a similar drive and attitude. Other than having relevant skills and passion in the line of investment, one should have a vision and own that vision. Once you make the people around you own the vision, then you are working in the right direction to achieving your goals.
What drives you?
I want to be counted in the list of young people who contributed in reducing poverty levels and creating job opportunities for other youths in Kenya. We are committed and focused on taking on the cosmetic giants through visionary leadership, team work and professional guidance.