Early this year, Anthony Wambua, saw a gap in the cereals market.
Millions of Kenyans grow crops on a small scale but lack proper markets for their harvests.
Wambua founded Kingdom Grains Company, which does bulk-sourcing of maize, soybeans, chia seeds, red sorghum and beans among others.
He gets produce from small-scale growers and traders in Kenya, Uganda and Tanzania, then sells them to millers and other bulk purchasers.
“We cover about 17 value chains right from the farm gate and delivering to buyers,” he says.
Mr Wambua worked in Uganda in 2008 and would travel to Rwanda and Tanzania, a job that enabled him to spot a market need in agribusiness.
“When I came back, I worked for Cargill, an American global food corporation with offices in Kenya, and in as much I had experience in agribusiness, Cargill was a big eye opener for me because of the exposure I got to know the gaps in grains supply chain, more so on quality issues,” he says.
It is at Cargill that he saw farmers with the capacity to produce but had little knowledge of post-harvest handling and how to minimise losses.
Kingdom Grains has two categories of buyers — those looking for legumes, maize, and red sorghum for human consumption, and another group that purchases cotton seed cake, sunflower seed cake and rice germ to produce animal feeds.
A majority of the buyers are millers, food processors and wholesalers who bulk-source.
“One of the key concerns is the issue of aflatoxin, which is a post-harvest issue, so we work alongside suppliers on post-harvest handling where we can because when you compromise on quality from the source, the whole value chain is compromised,” he says.
Mastering the trade takes time and it has come with lessons. Mr Wambua says he has had to turn to imports amid a cutthroat business environment locally.
“We are being forced to import maize from Uganda, which attracts taxes because of the high cost of fertiliser in Kenya that makes production costs go up. Kenya is also a highly competitive business environment. The market is vibrant with many millers thus the cost of buying raw materials goes higher,” he says.
Mr Wambua says the main headache in a logistics business is that you can get the right source of grain at the right prices but face challenges of collecting and delivering it.
One needs to have a very efficient supply chain so you need to always have intelligence on the ground and a network that gives you accurate information continuously.
The other challenge is market dynamics. For example, before the General Election in August, the soybean demand in Kenya was high because about 80 per cent of the produce comes from Uganda with smaller quantities from Malawi and Zambia.
“The buyers, who are food processors, started getting jittery and stocked their warehouses with soybeans from Malawi and Zambia,” he says.
By the time Ugandan farmers started harvesting their soybeans, Kenyan buyers had stocked the produce.
“The grain industry market is very dynamic. It can be very fluid. You can do your projections but something happens, people start panic-buying and when harvest comes in, prices drop,” he says.
He says the market is very competitive as both growers and millers through their respective lobby groups are fighting for the best grain prices for their members.
Import on their behalf
Despite being a young company, Kingdom Grains does about 1,000 tonnes per week.
“We are growing. We are talking to Nakuru Business Association and some of their members would want us to do about 300 metric tonnes a week,” he says.
An accountant, by profession, Mr Wambua says two millers have also requested them to import on their behalf 3,000 metric tonnes of maize and even though the company is not able to do that right now, they are thinking of collaborating with companies.
One strategy that has sustained the business is contacting the farmer well in advance before they harvest.
“We create relationships with the farmers. People appreciate when you walk with them, from when they start growing as opposed to showing up when it’s harvest time. We somewhat involve farmers, in the whole process,” he says.
His plans to sustain the business?
“On post-harvest handling, we invested in things like tarpaulins for drying the grains, which people take for granted. We have a network of farmers in Kenya, and Uganda, and we’re entering Tanzania. We want to start teaching them post-harvest management and how to use moisture meters and invest in rapid aflatoxin testing kits, just to make the business sustainable.
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“The second thing is being competitive in terms of pricing – we update our price list every time meaning having market intelligence and getting information from our sources,” he says.
To survive the stiff competition, Mr Wambua says Kingdom Grains is setting its eyes on the smaller buyers.
“These are people buying approximately 500 kilos of grain so we are trying to map out this market and be very specific in catering to their needs.
“This is where quality and food safety comes in because you are selling to restaurants and want assurance that what you are giving them is safe,” he says.
25 workers in EAC
He has built Kingdom Grains Company to about 25 workers, currently, with a presence in East Africa.
The well-travelled agribusiness entrepreneur says the company plans to launch an e-commerce platform.
“This makes all the difference because as an entrepreneur you are available.
Availability and effective communication are key in the market,” he says.
For those willing to venture into the grain value chain, Mr Wambua advises that the first thing is to get information and learn as much as you could about the different grain value chains from sourcing, standards, harvest periods, supply chain components of transport, and logistics and all the dynamics involved at all levels and what it takes to aggregate grain from point A and transport it to point B and lastly the market.
“There’s no shortcut but to start on a small scale with smaller volumes and grow. And even as you start, it’s going to be a learning curve.
“Everything you do should be market driven and informed by the needs of the market,” he says.
He adds that one cannot talk about a growing grain-sourcing company without food safety because they are two sides to a coin.
“Anybody that wants to be in the grains value chain in Kenya, East Africa, and Africa has to tackle the issue of food safety and that has been our differentiating point even in these early days as a business,” he adds.