From chicken shed to 5-star dairy products supplier

In 1991, Binoy Zachariah quit his plum job at flour miller Unga Group to set up a dairy firm due to his love for milk products. Mr Zachariah, a German-trained grain milling engineer, had worked at Unga for eight years when he decided he wanted to try out something new.

Using his personal savings, Mr Zachariah set up a cottage dairy plant and began manufacturing yoghurt from a ramshackle chicken shed in the backyard of a house in Nairobi’s Lang’ata Estate. This marked the birth of Bio Food Products Ltd, a dairy processing company that has now grown to supply five-star hotels and airlines with its range of milk products.

“I wanted a new challenge. I chose dairy because I love quality dairy products,” he told the Business Daily. “I started off in a chicken shed at a farm house situated in Lang’ata. We were only producing yoghurt.”

With a team of three, including the founder, Bio Food Products was churning out 5,000 litres of yoghurt at inception. And although Mr Zachariah declined to disclose how much he invested in setting up the company, he said the business broke even in five years and continues to register huge growth in sales.

The company’s output grew six fold in a decade to hit 30,000 litres of dairy products at the turn of the millennium, and has soared to the current 100,000 litres of assorted milk products per month.

Bio Food Products now has 125 employees and its range of products include yoghurts, creams, flavoured milk drinks, fermented milk, long life milk, portion packs (jams and marmalade), muesli, honey, mayonnaise and pudding.

Mr Zachariah said his dairy products target the high-end market, a segment he says offers great opportunities for those who can meet the quality demands of such consumers.

“Our dairy products are designer products and consumers pay more for them because we offer high quality products,” said the engineer who came to Kenya in the early 80s.

He says all their products do not contain artificial ingredients and use real fruit to produce variants such as strawberry, vanilla, tropical mix, mango, peach, and berry cocktail.

Some of Bio Food Products customers include top hotels such as Sarova, Norfolk, Ole Sereni, Southern Sun, and in-flight catering firm NAS Servair. The company has relocated four times and in August 2009 moved to its current premises off Mombasa Road behind the Sameer Business Park in Nairobi.

“We kept on experimenting. We have now diversified our range of products and flavours available,” said Mr Zachariah, who is also the firm’s managing director.

The company has now began making soft cheese which it supplies to hotels.

“We just started producing soft cheese about four months ago,” he said.

Mr Zachariah graduated from the Deutsche Müllerschule Braunschweig, a German milling school.

Bio Food Products sources its milk from six large-scale farmers in Central and Rift Valley regions, with whom it has signed supply agreements.

“We buy our milk at a premium because we are very particular on getting good quality milk and constant supply,” he said.

The company says it has a bonus scheme for milk suppliers based on the quality delivered, and applies penalties to farmers who flout agreed quality and supply parameters.

Mr Zachariah said the company currently buys 1.2 million litres of milk per year or 100,000 litres a month. It takes about 15 hours to produce a line of dairy products at the factory.

The company has grown to export its dairy products to neighbouring markets including Tanzania, Uganda, Rwanda, and Sudan – which makes up about seven per cent of total sales.

Bio Food Products was in 2008 listed among Kenya’s leading enterprises in the Top 100 Survey – a study that grades Kenya’s fastest growing mid-sized companies. Top 100 mid-sized companies survey is an initiative of Nation Media Group’s Business Daily and auditing and consulting firm KPMG, and tracks SMEs with an annual turnover of between Sh70 million to Sh1 billion.

The dairy processor in 2003 won the prestigious Golden Europe Award for Quality at a ceremony in Paris, France.

In June 2013, Mr Zachariah sold a 35 per cent stake in his dairy firm for an undisclosed amount to Willow Impact, a Dubai-based private equity firm.

The deal was meant to raise cash and upgrade Bio Food’s dairy processing facility to increase output and enhance efficiency, hygiene and flexibility in making multiple milk products.

Proceeds from the equity sale to Willow Impact has been used to buy a new dairy processing plant from Germany for pasteurisation, homogenisation and cream separation – which is expected to increase production.

“We needed the funding to upgrade the facility. We want to bring new products to the market,” said Mr Zachariah.

Willow Impact said it was attracted to Bio Food Products because of the firm’s quality products and growing market share.

“Bio is an established, premium brand. It has earned Bio an exceptional reputation over the years and has enabled expansion in its market reach and customer base,” Willow Impact said in a statement.

Mr Zachariah said the company would continue focusing on the high-end market where he forecasts increased demand.

“We want to keep the company small and focused on quality and food safety,” he says. “There is a growing market for premium dairy products due to the growing middle class. That’s our focus.”

Some of the challenges in the dairy business, according to Mr Zachariah, include high cost of borrowing, poor road network and non-tariff barriers which makes it challenging to access export markets.

Mr Zachariah also owns Rickshaw Travel Group, offering services such as organising safaris, flight bookings as well as conference and event management.

He also runs a consultancy dubbed Bio Consult, specialising in three major areas namely grain milling, dairy equipment and renewable energy.

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