Flour miller Unga Group has ventured into sale of cereals to diversify its revenue base and grow earnings.
The Nairobi bourse-listed cereal miller has begun retailing beans, green grams, pigeon peas, black beans (njahi) and plans to start selling premium rice varieties next year.
Unga told shareholders at its annual general meeting on Tuesday the new business unit is targeting high-end shoppers who prefer buying all their supplies in malls and retail stores.
The commodities are trading under the ‘Amana’ brand.
Shareholders approved Unga’s planned acquisition of a majority stake in Ennsvalley Bakery.
The miller, however, declined to disclose the amount it had invested in the commodities trading business, but said it was partnering with local small and mid-sized firms in sourcing for rice and pulses.
“The middle class is growing very quickly and for us it is natural to go into the food business rather than just flour,” said Isabella Ochola-Wilson, chairperson of Unga Ltd.
Unga will have to fight it out with retailers such as Tuskys and Nakumatt which have taken to packaging grains under their own brands to capture the urban consumers.
“More people want to have nutritious food. Shopping patterns have changed, people no longer buy foodstuff in the open market but more shoppers are making purchases in supermarkets,” said Ms Ochola-Wilson on the sidelines of the AGM.
The company said the grains would be locally sourced but rice would be a mix of local pishori and imports. Kenya imports rice from producers such as Pakistan, Thailand, India, South Africa and Vietnam.
Unga reckons that consumption of grains has been gaining currency in urban areas, fuelled by an increasingly health-conscious middle class with higher disposable incomes and growing appetite for nutritious meals such as legumes.
Unga’s venture into the retail commodity market comes on the back of increased deal making and divestitures by the flour miller.
The firm announced that it would spend Sh542 million to buy a 52 per cent stake in Ennsvalley Bakery owned by inflight caterer NAS Holdings.
The move for a second bite of Kenya’s lucrative baking business comes decades after it exited Elliots Bakery.
It also comes after Unga sold its 51 per cent stake in paper-packaging firm Bullpak in a deal worth Sh335 million.
“The shift in strategy would enable the company to improve its gross margins that have been dwindling over the years due to a fiercely competitive milling industry,” Unga said in a statement to shareholders.
Ms Ochola-Wilson said Unga has introduced its line of animal feeds under the brand name ‘Fugo’ to Tanzania as it searches for a bigger market.
The entry of Unga into the retail rice market puts the miller in a head-to-head battle with established brands such as Pearl, Daawat, Sunrice, Royal, Ranee, Tastic and Golden Harvest.
Rice is ranked third among Kenya’s staple foods.
Its rate of consumption has been growing rapidly over the past decade in tandem with economic growth.
“Rice is quickly replacing maize meal as a staple food. We’ve chosen to offer a premium brand at a premium price,” said Nick Hutchinson, managing director at Unga.