The sweet side of Kenafric Industries' diversified business
From confectionery to footwear and stationery, Kenya's Kenafric Industries has built a successful brand.
For most people brought up in Kenya, Kenafric sweets bring back fond memories. Kenafric Industries, the company behind this brand, is one of Kenya’s leading manufacturers of confectionery, food, footwear and stationery products. The business has evolved from a small trading outfit to a multi-billion shilling enterprise with a presence in 12 countries in Africa riding on its popular confectionery and footwear brands.
Mikul Shah, executive director at Kenafric, told How we made it in Africa the business was founded by his father and uncles in 1986 because they couldn’t find employment. Although his grandfather ran a trading business and was involved in manufacturing, their wealth had been wiped out in the 1982 failed attempt to overthrow former president Daniel arap Moi's government.
“My uncles and my dad came back from [school] in the US and India and they couldn’t get jobs. The coup d’état had happened in Kenya and we had lost everything in our trading business. So, through money from family, friends and the Shah community they were able get enough money to buy a business which was [called] Kenafric Film Distributors.”
Kenafric Industries chose to specialise in footwear at a time when “plastic shoes were a big thing”. An oil crisis in 1992 prompted a change of strategy.
“The prices of oil spiked suddenly and footwear is correlated with oil. So, all of a sudden we found our inputs going up and we were being hit with margins. It was a tough time,” says Shah. “So we decided to try this business of confectionary. It happened because in our trading business we were selling confectionary. We felt this was a good business to go into. It was interesting to the family.”
The family bought its “first bubble gum machine out of Taiwan and started production at a small scale” capacity. In the next decade, Kenafric built a strong brand and distribution network taking its sweets and bubble gums all over Kenya.
“Today we are probably the largest producers of confectionary in Africa,” he says, adding that Kenafric converts up to 36,000 tons of sugar into sweets annually.
Last year, Kenafric unveiled a KSh 1bn (US$11.5m) confectionery machine, an investment aimed at increasing its production capacity. Kenafric Industries vice chairman Bharat Shah told reporters at the launch that the business would invest up to KSh 4bn ($46.3m) in the region in 24 months and increase its markets to over 30 countries in Africa.
Mikul Shah told How we made it in Africa that Nigeria, South Africa, Zambia and Angola are top on the list of markets the company would like to enter in the next three years.
As it expands, Kenafric is adopting new technologies such as SAP that gives the firm’s management the ability to not have to be everywhere. “I can be sitting in China and looking at my entire business on a dashboard and seeing where things are headed.”
Spreading the risk
In the last decade, Kenafric has expanded its business beyond confectionery and footwear riding on its strong distribution network and systems. In 2009 it acquired food spices brand OYO from Spanish food processing firm CGB Foods. Kenafric’s food production business line competes with multinational Unilever which produces Royco. Kenafric also acquired a stationery business that manufactures books and notepads.
“It’s just a thing of spreading your risk. If one vertical is going through a tough time, the other one is doing well,” says Shah about the diversification.
Kenafric today faces increased competition in all its business lines from local and international manufacturers.
“What gives us an advantage is the fact that we do practice lean manufacturing. We have gone into branding our products and consumer driven marketing [which] seems to be yielding better results year on year. Being localised helps: we are able to respond faster and we are able to understand the consumer better and the needs better.”
The biggest hurdles for Kenafric, Shah says, is dealing with the government and managing its 2,000 strong workforce.
“Managing a big business is about managing people. So managing people is the most critical and it comes with emotions. [You have] keep them constantly motivated.”
The family behind the business
The family behind Kenafric is part of the greater Shah community which has been remarkably successful in business in Kenya, particularly in manufacturing. Shah says the Shahs were originally farmers drawn from 26 villages in Gujarat state in the northwest India. They emigrated to Kenya during the 1920-1940 economic depression. On arrival in Kenya, they adopted the surname Shah for easy identification.
“My grandfather came here on a steamboat because his brother was here and had told him there is opportunity in Africa. At the time, India was going through depression and it was very difficult to make ends meet. Just like him, there were thousands of others who came.”
Shah attributes the community’s success in business to hard work, passion and the belief that it is possible “to do bigger and greater things”.
“I think there is a fear of failure. It’s because we came from this background where we had nothing, so we don’t want to go back to that. There is a sense of belonging to the community,” he says. ”The community is about 12,000 strong in Kenya and everyone is a businessperson. Either they own a shop or a factory or they are in trading or in services. When you put all that together it builds a beautiful value chain and through the ages we have tried to support community members to grow.”
Younger generations have often taken over the running of the family business, not just among the Shahs, but also in most Asian family businesses in Africa.
Educated in England, Shah joined the family business six years ago.
“There are people like me… who have been educated in the West… and everyone is coming back here because they see the opportunity, Africa rising. But at the same time there are people who have found jobs in the service sector in the Western world, mainly in banking and have chosen to live and work there. But those same people are still very jealous of us.”
With most young people from the Asian community going to school in Europe and the US and choosing to pursue careers of their own choice, professionalising family business is inevitable in the long run.
“Obviously at our stage and where our business is at we are professionalising… and definitely the end result is an IPO [listing]. So we could always give our kids shares then they can be astronauts or whatever they want and still live a good life.”