Firm tastes sweet profits as it taps export markets

Preeyesh Shah, director of Kenya Sweets Limited, has what many CEOs would consider a very good problem — he is able to sell everything the company produces and keeping up with demand is the biggest challenge facing the company.

This is what informed the management’s decision to move to bigger premises in July 2007, from 29,000 square feet in Nairobi’s Industrial Area to a five-acre plot on Mombasa Road.

“Before the move we were just floating along, happy to be where we were and satisfied with life in general. But the move woke us up and we started getting ambitious,” says Mr Shah.

Kenya Sweets has a long pedigree in the sweets market and two of its well known brands - Tropical Mints nd KSL, account for 80 per cent of its revenues.

In total the company has seven brands including a new range called Happy Sweets. Only a tiny percentage is imported.

Kenya Sweets has 160 employees and exports 40 per cent of its products to the EAC region and also has a presence in Congo, Malawi, and Sudan.

“Now that we have the space to expand we are exploring new export markets and expanding the product range by experimenting with centred sweets and spices,” says the production engineering graduate from Bristol, UK.

Mr Shah says that he’s always had a sensitive tongue and develops new flavours himself.

“I love sweets and will eat 15 to 20 a day. My dentist loves me because I’m his best customer. Whenever I am on the production floor I randomly sample the products to make sure that the taste is homogenous and the quality is good. If I don’t like a new product it doesn’t get made.”

Increasing capacity

Adding products and increasing capacity will involve updating existing machinery and buying new equipment.

Unlike many SMEs which often struggle to get financing, Kenya Sweets has benefited from a combination of factors to escape this hurdle.

First its products move briskly thus generating cashflows a significant amount of which is in dollars thanks to its substantial exports so the company is able to service bank loans with no major problems.

The family business was started in 1943 by Mr Shah’s grandfather in Ruaraka.

When he joined the company he started at the bottom despite being a graduate.

“I was a mechanic for 20 years - repairing and servicing the machinery before getting into management,” he says.

Today, he runs the company together with his brother and cousins.

Initially, they would all do everything and each person would simply go where they were needed.

“I would be in the sales office handling cash sales, or offloading sugar deliveries from trucks, loading goods and so on. It was a very tightly knit organisation,” he says.

But it wasn’t the best management approach and board meetings were characterised by indecision and disagreements.

The partners hired Mike Eldon, a management consultant, to help them better align their energies and today each partner has a clear, well defined role in the company.

“My brother Nikunj Shah and I look after production. I’m also in charge of exports, purchasing and information technology. My cousin Sangeet Shah is in charge of local sales and marketing. Another cousin Rajeet Shah is in charge of finance. He joined the company in 2005 and brought a sense of professionalism into the company.

Data collection

He computerised a lot of processes and enhanced data collection and analysis, which boosted decision making which previously was more based on gut feeling and hunches than anything else,” says Mr Shah.

The biggest challenge is sugar politics. “The sugar produced in Kenya is not good enough quality wise to produce nice, clear bright coloured sweets. Local sugar makes the sweets dull and so we can only use it for dark coloured sweets,” he says.

Pricing of the sugar is an additional challenge because sugar accounts for half of the company’s production costs.

“Until recently local sugar prices were 30-40 per cent higher than imported sugar but right now imported sugar is more costly so we’re trying to use as much local sugar as we can without compromising on the quality of our sweets.”

However considering that the bulk of the company’s market is for tropical mints and KSL for which it cannot use local sugar, the company has no choice but to use the more costly imported sugar.

While in Europe and US chocolates take up the bulk of the market, in Kenya hard sweets like tropical mints remain the market favourites he says.

While children eat sweets because they love them adults usually eat sweets for a specific reason-to ward off hunger pangs, mints to freshen breath for instance after smoking, and menthol or medicated sweets to treat a sore throat.