Lessons from East Africa’s top consumer goods manufacturers
A few decades ago the consumer goods manufacturing industry in East Africa was dominated by foreign multinationals. But today there are several locally-run businesses holding considerable market share. Dinfin Mulupi takes a look at how some of these companies built their empires.
Some people may think waste paper is a nuisance, but for Kenya’s Chandaria Industries, it is a critical raw material, core to the success of its business.
The company manufactures its tissue products by recycling waste paper sourced from local collectors. Darshan Chandaria, CEO of Chandaria Group, which operates several subsidiaries, including Chandaria Industries, says the group’s waste paper recycling activities creates jobs for nearly 20,000 people.
Established over five decades ago, Chandaria Industries is now a leading manufacturer of tissue and hygiene products in East and Central Africa. It has plants in both Kenya and Tanzania.
“I tell people not to burn their waste or not to dispose of it, but to bring it to us and we will buy it,” he says. “We are recycling the country’s waste and transforming it into a source of national wealth, and providing employment to many thousands of people.”
“We have been able to innovate constantly and serve customers right from the bottom of the pyramid to the top in terms of our product and price offerings,” Chandaria adds.
Family is at the heart of the success of Kenyan consumer goods manufacturer Kenafric Industries. The Chedda family (all the individual members go by the Shah surname) has faced many hurdles, from losing everything in the 1982 attempted coup to making millions of losses in ventures that just didn’t take off. But their passion for entrepreneurship, ability to jump on opportunities and learn from mistakes, plus a willingness to pass the business from one generation to the next has worked to their advantage.
The business was set up by four brothers and their father in 1987. Today it is a large manufacturer and distributor of consumer goods with brands such as OYO food seasoning, Fresh chewing gum, Obama Pop lollipops and Chapa Dollar flip-flops. Its products are sold in 22 countries across Africa.
In the early days the family worked long hours. One of the brothers, Mayur Shah, travelled extensively across Africa, scouting for export opportunities.
“We couldn’t afford big overheads so I personally went and did all the canvassing. That is where we got a big kick, because I would put on my track shoes, hit the streets, talk to retailers, and decide right there and then whether or not we would expand to that particular market,” says Mayur.
The company has also benefited from a culture of quick decision-making and a willingness to adapt to changes in foreign markets. A third generation is now actively involved in the business and Mayur says they have room to take risks, innovate, and learn from their mistakes.
“We took some courses as a family, and we had sessions with great lawyers and discussed and agreed on everyone’s role. Of course it was tough passing the baton to the next generation. But what we are seeing is they are doing a great job. They are hungrier for business, and they have that drive and passion.”
Tanzania Tea Packers (TATEPA)
Some entrepreneurs would rather hold on to their business than go public and have to co-own it together with thousands of shareholders.
But for Tanzania-based British-born entrepreneur, George Theobald, and his business partner, Joseph Mungai, a prominent Tanzanian businessman, listing their business was a good decision. It meant more capital to expand, and even better returns for all shareholders. In 1999 it became the third company to list at the Dar es Salaam Stock Exchange (DSE).
At the time TATEPA owned the country’s most popular tea brand, Chai Bora, and made profits in excess of US$700m.
“When you list, you open yourself up to much easier access to cash. We expanded by buying big tea estates, we got into smallholder tea production and avocado production. It allowed us a much higher profile,” says Theobald.
In 2008 TATEPA sold its Chai Bora brand to Kenyan investment firm TransCentury, which later exited the business to East Africa-focused private equity firm, Catalyst Principal Partners. Today Chai Bora is a leading tea manufacturer in Tanzania with multiple brands.
One of the reasons for Chai Bora’s success is its diverse product range that caters for different income levels and tastes.
Chai Bora managing director Kapila Ariyatilaka says Tanzanian tea is smoother than Kenyan tea. Most Tanzanians like that smoother taste, but those who prefer a stronger flavour are also catered for.
“We make a specific blend for the small percentage of people who love that instant kick [of strong tea],” he says.
Access to funds to finance expansion and a strong management team put in place by its private equity owner is also working to Chai Bora’s benefit as the company ventures into new markets.
“We put in strong financial management systems and procedures to ensure the business not only grows, but grows in a way we can manage. In Africa, companies lose a lot of money due to theft, misuse and overspending. We try to manage those aspects very carefully,” he explains.
Kenyan-headquartered FMCG manufacturer Bidco Africa is already a leading player in the region. But the company is not resting on its laurels. Instead it is pushing even further to “grab, grow and sustain the number one market share in African markets by 2030”.
Bidco has come a long way from its humble beginnings in the 1970s in central Kenya where it started as a garment manufacturing company. Challenges in the garment industry, caused by market liberalisation in the 1980s, forced a shift into soap manufacturing. CEO Vimal Shah says at the time banks were unwilling to back the new venture, concerned it would never stand a chance in a market dominated by powerful multinationals.
But today Bidco is one of the largest and fastest growing manufacturers of products such as edible oils, cooking fats, detergents, laundry bars and animal feeds. It has 48 brands sold in 17 countries in Africa.
And it is gunning for more. The company is expanding into the soft drinks industry, putting up a new manufacturing plant in Madagascar, and evaluating new markets such as Ethiopia.
Bidco has built a strong business using new technologies and maintaining strong relations with farmers that supply raw materials. It has also put in place distribution mechanisms to get products to the most remote regions.
“Sceptics will always exist, and sometimes you should listen to them, but don’t let their views get you off the track,” says Shah. “If you come with something new today they will give you 100 reasons why it won’t work. That is why your own conviction is so important.”