How to Start / Open A Cookie Mania business in Kenya

Download Cookie Mania Business Plan - Kenya PDF➥

 

 

 

 

 

 

 

The Brief

 

 

This overview looks at the possibilities, opportunities and pitfalls of starting a

 

 

 

 

 

specialist only cookies shop in Nairobi targeting the mid income level mass

 

 

 

 

 

market. It could also apply to other major center. What becomes clears is that

 

 

 

 

 

there is a good opportunity to start a well branded cookies only bakery shops in

 

 

 

 

 

the estates or high traffic areas. There is still room to innovate in terms of

 

 

 

 

 

distribution, packaging, flavors and branding so as to reach a bigger market.

 

 

What Exists in

 

 

The cookies business in Kenya is characterized by a handful of midsized

 

 

The Market

 

 

companies, supermarkets and tens of small bakeries running from homes or

 

 

Presently

 

 

small production units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

None of the players can be said to be dominating the market though obviously

 

 

 

 

 

there are those controlling a significant share of the market. It is instructive

 

 

 

 

 

though that not a single of the bigger players is a cookies only player rather they

 

 

 

 

 

tend to have cookies as part of a wider variety of related products like cakes,

 

 

 

 

 

biscuits or buns.

 

 

 

 

 

Generally players in the cookies business can be grouped into:

 

 

 

 

 

 

 

a)Formal Mid Sized Companies – We counted 31 of these. They are of various sizes but still by turnover and market share can’t really be described as large companies. This despite some having turnovers of millions. These include:

-Gal Baking Services – Gal operates the Krumble brand of cookies, shops and baked products. They started by distributing products to supermarkets and shops before opening a number of shops in downtown Nairobi. Presently they operate six shops within Nairobi CBD. They plan to increase these to 15 in the near future Significantly in 2014 Fusion Capital bought a 45 % stake in the bakery for Kshs. 245 million, valuing the company at nearly 500 million.

-Paul’s Cookie Man's – This is perhaps the oldest and one of the better recognized brands in Nairobi. It originated in Eldoret and has two shops in Nairobi, along Accra Road and Moi Avenue. It’s also a brand that identifies with cookies and a pioneer in selling freshly baked cookies by weight. Paul’s also sells in wholesale to smaller cake shops in addition to selling through supermarkets.

-Mjengo Limited – Though well known in biscuits though the Nuvita brand it’s a relatively new comer in the cookies business. They sell cookies through supermarkets, packaging them a little different from the usual cookie packaging and more like biscuits. They have an advantage of a relatively well known brand and access to shelf space.

-California Cookies – This is also a cookie proper bakery and one of the oldest in Nairobi. They have a shop along Moi Avenue, Nairobi where you can see the cookies being prepared. They also distribute in supermarkets

-Bakers Inn – They operate a chain of bakery shops in Nairobi CBD and some estates. They are also a fairly well known brand, selling breads, cakes and cookies over the counter and also through supermarkets.

-Other significant midsized companies are Mill Bakers, Jolly Smart, Masculino , Mibisco, Namada bakers Cake House, Treasure Bakers , East Africa Star Bakery, Joy super bakers

b)Smaller Semi Formal Bakers – These operate from home or relatively small cake shops. Some bake within the premises while others bake at home and supply to the shops. Still some cake shops buy in wholesale from bigger bakeries and stock. In Nairobi estates there are an average of at least three cake shops in every estate, these not counting the home based bakers who don’t have a shop.

None of the small and home based home based bakeries that we observed specialized in cookies. Cakes were the main products cookies were made as extras. For most home based bakeries cookies, just like cakes were made on order. However a few of these small bakeries supply to shops not really based on capacity or even higher quality but business acumen.

The reasons that the small bakeries have not seized cookies in a big way will become clear below.

c)Supermarkets – It has become fashionable for mid sized and large supermarkets to have a kitchen section which in addition to fresh food has a bakery. Some of the supermarkets prepare and sell cookies though not in a revolutionary way.

Some will pack and place on the shelves while others sell in more of the counter method. None of the supermarkets has laid emphasis on cookies with most efforts going to bread, cakes and ready to eat food.

Outside Nairobi the pattern is to have the leading Nairobi bakeries supplying most of the cookies on the shelf space and some local bakers filling in the gaps. There could be one or two major over the counter bakeries.

For instance in Nakuru local bakeries supplying supermarkets and a few retail shops include Racera Bakers, Riva Mini Bakers, Serian Premium Bakers and Rift Valley bakers while suppliers located in Nairobi include: Mill bakers, Mibisco and Gal Baking Services. Mibisco has the highest supplies in all supermarkets. Retail shops are mainly stocked with Mibisco cookies which they obtain from supermarkets (Gilani’s Supermarket) in bulky.

Major over the counter bakeries within the town include Rift Valley Bakers and

Nakuru Patisserie Bakery. (See appendix for profiles.)

Varieties and Flavours

Cookies are mainly differentiated by their flavor. In addition to plain cookies the most common flavor in the Nairobi market are:

Vanilla – which is almost baked by all in the cookies business

Ginger

Strawberry

Chocolate - Krumble

Coffee

Coconut

2 big cookies held together by icing Lemon

Eggless bakers inn

Nut

Chocolate fingers

Cheese - made by Cleanshelf Supermarkets

In addition to flavours there is also experimentation with shapes, decorations and toppings.

Some of the common flavors found Kenya internationally but are not commonly found in Kenya include:

Chocolate chip

Mint

Peanut butter

Oatmeal

Banana nut cream

Plain sugar

Iced sugar

Raspberry

Cherrie

Cookie greetings – birthdays, thank you, congratulations,

Personalized cookies – sports, football, music

Packaging

In Nairobi cookies are either sold prepackaged, as in supermarket shelves and some shops, weighed and packaged on purchase ( Paul’s Cookie Man's, California Cookies and some other shops) , piece by piece ( common in small scale shops).

The common prepackaged weight is 225 grams though there is 180 grams, 200 grams.

Cookies sold in supermarkets are packaged in the same general way; there could be differences in brand colors but the packaging is more or less the same.

Packaging in the market presently include:

Light plastic containers – Currently this is the most common packaging. Initially it was supposed to be a method of differentiation and a replacement of dull polythene bags, but now has been adapted by many bakers.

The containers are either rectangular or circular with a lid. The cookies are arranged neatly inside. Only one baker has come with a more differentiated though plastic container which has a sort of reinforcement that protects the cookies, and stands out from the others.

Plastic papers – On shelves cookies are also in plastic papers branded. For instance Bakers Inn sells cookies in plastic bags. These are also used by small bakers when packing for the over the counter customers.

Khaki Papers – Khaki are mostly used by small cake shops to pack for those ordering over the counter.

Boxes – Cookies boxes are used by some of the more established cookies bakeries and shops. For instance Paul’s uses boxes at times.

( See some sample packaging pictures at the bottom)

Distribution

Cookies as noted are largely found in bakery shops or supermarkets. Supermarkets have a wider variety of cookies and flavors from their own kitchens and different companies and thus are more popular.

Where there are no enough or established bakery shops with the kind of cookies a customer wants then supermarket are the first stop. Still where there are ‘good ‘bakeries the cookie lover could opt for the shop because of the freshness, price and sometimes the one to one interaction with the baker. Often because of the extra cost of packaging, taxes and margin pressure cookies prices in supermarkets could be higher than in shops.

Nonetheless supermarkets are preferred distribution channel by bakeries because of the high foot traffic they attract, the kind of mid level consumers who are the preferred in building a cookie brand and discovery.

Retail shops are the other distribution channel. Yet it is common to find only 2 in 15 shops stocking cookies compared to related items like bread, mandazi and queen cakes. A number of reasons were given by both shops and bakeries:

Buying cookies is more of an impulsive exercise unlike and so if they are not properly displayed or supported with some marketing efforts then consumers don’t purchase them in numbers deemed sustainable.

Cookies are not yet recognized like bread or mandazi. Retail shops unlike supermarkets play it safe and reluctant to deal with products they doubt will move.

Most bakeries produce and price cookies in a way that is not attractive for the shop owners and customers. Consumers find them expensive as compared to purchasing from supermarkets. The cunning of the small bakeries will have two grades of cookies: grade one for more discerning customers and grade two for the mass market. For mid class consumers they take time to trust unknown brands sold in neighborhood shops.

Most small bakers who sell over the counter don’t have the KEBS mark of quality and though they could package cookies and sell to shops some shopkeepers are jittery to sell them because of harassment from county or health officials especially in more urbane estates and centers.

Production costs of small bakeries are high relative to the bigger ones. They also don’t have the capacity to meet market demand and establish brands unless they go rogue producing sub standard cookies.

Some small bakeries also said they don’t pay much attention to cookies because to them you need one customer to move a kilogram of cake while you will need several to move a similar amount of cookies. The argument is weak and based on marketing inadequacies.

There has been no major innovation in distribution of cookies. Gal Baking Services with its chain of Krumble shops targeted at the mass market is perhaps the most innovative.

Competition

In Nairobi estates there are at least 4 cake shops cum bakeries and three supermarkets and mini supermarkets that sell cookies.

Competition in the cookies business is based on:

Location – Bakers selling through own shops try as much as possible to locate in high traffic areas or if in the estates where they are likely to get the most customers.

In Nairobi CBD prime space, meaning front shop, high traffic is highly competitive. And as more small bakers get interested in setting up outlets to sell products then competition for space is becoming even for more intense. The plan for the more established bakers like Gal Bakery Services (Krumble) is to have shops in high traffic areas of downtown Nairobi. Paul’s Cookie Man's with two shops, with the Tom Mboya branch being on its own building, is said to be planning to open more branches in downtown Nairobi. Though not explicitly said some bakers could be trying to fence space in all prime locations of the city. The chances of a cookie shop failing when it’s in a high traffic location are minimal

compared to one in an off road path in the estates.

b)Flavors – Initially cookies in the local market were plain. But as competition increased so did differentiation by adding flavors. As noted above the flavors in the market are more or less the same. New bakers tend to copy the old bakers in terms of flavors. And when they try something different it’s nothing radical. It’s instructive to note that flavors don’t provide any real long-term advantages. Unlike recipes flavors are sold in the open market.

Still conversations with consumers will show preference for one baker over the other for the same flavor. For instance a customer could prefer vanilla cookies of shop A over vanilla cookies of shop B. This often has to do with the recipe, quantities and quality standards. Vanilla is the most widely used flavor. Others are ginger and chocolate. Cheese cookies sold at Cleanshelf supermarkets are perhaps the more unique of the mass market flavors.

Packaging – As noted above packaging has been used and is still used to differentiate and compete in the market. Competing by packaging has to do with aesthetics, convenience, reusability and well standing out. On the business side it has to do with the cost of packaging material; companies are careful not to pack in material which though makes them stand out increases their costs significantly. Presently the lead in packaging is only temporary as it’s very easy to replicate what the leader is doing. That said there are advantages in being the leader as consumers come to identify you with the particular packaging even though there could be copy cats...

Distribution – Competition by distribution is by trying to get the cookies into all the right places where customers are likely to be. Thus a baker could establish a number of shops, try to get to supermarkets shelves, shops, hotels, hawkers or any other places where they are likely to get customers. Presently competition for own shops and shelf space are the main methods used.

Niche – Rather than target the mass market some bakers will compete by focusing on niche customers. Such niches are mostly to do with income and taste. In terms of income it involves baking higher quality or gourmet cookies. On the flip side it could be low quality cookies for the low income areas.

Some home based bakeries also target those holding birthday parties and other corporate functions rather than trying to sell through the normal channels of shops and supermarkets. In the mass market two or so bakers have eggless cookies made at those who have egg allergies or are keeping off eggs for health or other reasons.

Cost Efficiencies – Competition is also based on trying to be as efficient as possible compared to the competitor. Efficiencies are in terms of production, raw material purchases, distribution and operations cost. A more efficient bakery will have higher margins and be able to take more risks, expand capacities and survive long cash cycles.

Pricing – As seen from price figures above competition is also price based. Some bakers try to price as low as possible compared to the competition, while

others who have a relatively stronger brand will price slightly higher than the competition to imply better quality. Price based competition s more intense in shelve spaces than in shops.

Branding

Branding in the local cookies industry is more through presence rather than intentional efforts say marketing, advertising and promotion. This means brands are established by say having a number of branded shops (a name, similar setting. Think Krumble and Bakers inn) or having products in as many supermarkets as possible. With time and because of constantly seeing the shops or brands in every corner or supermarket consumers form identify the product in their head.

Pricing

See bottom for some pricing of cookies and related products from a sample of different supermarkets.

Substitutes

Substitutes in the cookies business can be in two forms:

a)Substitute for Cookies – So in cases where for a reason of distribution or taste a consumer cannot find cookies what products form the closet substitutes? Biscuits came tops (62 %) followed by queen cakes. Some consumers opted to forego consumption until they found the cookies of their liking.

b)Shopping Substitutes – So what are the alternative shopping for cookies? Established and trusted cake shops (think Krumble or Paul’s in Nairobi CBD) came first followed by supermarkets. Because supermarkets are one stop shopping centers many consumers purchased cookies there out of convenience. This even when they would have preferred to purchase from a shop attracted by freshness or price. Supermarkets also sell a lot of cookies because of the high number of impulsive shoppers who visit them.

 

 

 

 

 

 

 

 

 

Strengths of the

 

Cookies bakeries which have been in existence for at least an year enjoy some

 

existing cookies

 

strengths:

 

 

 

 

 

bakeries

 

Understanding the consumer – Though a research like this will give a picture

 

 

 

 

 

 

 

 

of what is happening in the market it takes practical experience to understand

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the particular tastes of consumers in a location.

These includes such attributes as favorite flavors, are they experimental enough to try new flavors, can you reduce quality without the consumer differentiating, are there any advantages of packing in papers over cartons, which is the optimal price before they shift to the competition, how does the weather affect consumption, is it worth opening until 8 pm, and other consumer attributes. It would take at least a year of trying this and that to get a respectable amount of data to help you understand the consumer fully.

Bakeries that have been in the business longer than you will have more of consumer data though they necessarily may not make use of it.

Distribution Relationships –It takes some time to establish necessary relationships for effective distribution. For instance it could take months to get your product on the shelves of the major supermarkets. Though relatively easier to establish distribution channels through retail shops it will also take some time to build mutual business agreements. It also takes some time to establish a chain of profitable shops. Bakeries that have been in the market for at least 6 months have a head start in distribution.

Supermarket Shelf Space – Related to distribution is the struggle to get into the shelf spaces of the major supermarkets. The reality is that supermarket shelf space is limited and they can only accommodate a limited number of cookies brands. This means brands which have been in the market longer are already in the supermarkets or have a higher chance thus locking out smaller newer players. This does not mean that as new player you can’t get into the shelves, you can especially if you have a unique and relevant product, but you will have to work harder.

Supplier Relationships – A bakery which has been in the market for a longer period, a year or so, is able to build relationships with suppliers. This could help enjoy discounts and credit facilitates. The latter could come in handy when there is a cash crunch. For instance there are bakers who receive raw materials from suppliers and only make payment after they have prepared and sold products.

Location – A number of bakers have managed to establish in key location of the city and estates. These gives them advantage of visibility, high terrific and accessibility. Good locations are at times hard to find or end up being too expensive.

Cost Efficiencies – The more you bake the more you find better ways of doing it, of being faster, saving costs through sourcing , process or better equipment. These are efficiencies a new player in the market will take time to have.

Brand – Branding comes from marketing efforts or presence. By being in more locations and having products in supermarkets and shops some of the bakeries dealing with cookies have stronger brands and are easily recognizable, this has a positive influence on sales.

 

 

 

 

 

 

 

Weakness of the

 

 

Despite the strength of having some strengths the existing bakeries have some

 

 

existing bakeries

 

 

weaknesses:

 

 

with respect to

 

 

 

 

 

cookies

 

 

Limited Flavors – There are only a limited number of cookies flavors for the

 

 

 

 

 

 

 

 

 

 

mass market. This has nothing to unavailability of flavors or consumer apathy

 

 

 

 

 

but a copy cut culture and a reluctance to experiment. Small scale bakers are

 

 

 

 

 

especially reluctant to experiment with new flavors for fear of market backlash

 

 

 

 

 

and hence losses. They want to go with the tried and tested.

 

 

 

 

 

Distribution – The main distribution channels are supermarkets and own

 

 

 

 

 

shops. Retail shops and hotels are treated as second tier channels. The often

 

 

 

 

 

reason given is that retail shops are not the best channel for the target market.

 

 

 

 

 

Yet in many cases that is not the actual reason rather the lack of innovation in

 

 

 

 

 

distribution. There are opportunities beyond formal shops and supermarkets.

 

 

 

 

 

Branding – Most of the cookies in the market are poorly branded. For some

 

 

 

 

 

branding is just getting a name, while for others it’s just the packaging.

 

 

 

 

 

Sometimes it’s not even easy to differentiate a cookie from company A with that

 

 

 

 

 

of company B by taste, appearance or even packaging.

 

 

 

 

 

Marketing – Marketing efforts are simply through distribution in supermarkets,

 

 

 

 

 

shops, social media for a few and signboards. There are no proper marketing

 

 

 

 

 

efforts like promotions, posters or proper advertising that pushes the product to

 

 

 

 

 

the consumers’ minds.

 

 

 

 

 

Capacity - Small bakers lack the capacity to bake enough cookies to satisfy a

 

 

 

 

 

bigger market. The limitations range from small ovens, lack of credit facilities,

 

 

 

 

 

skilled manpower for marketing and accounting, inadequate capital to rent

 

 

 

 

 

space in great locations and lack of innovation.

 

 

 

 

 

Poor Customer Service – In some outlets of the major players service is below

 

 

 

 

 

standards; with attendants looking indifferent, gloomy, overworked and

 

 

 

 

 

sometimes ultimately bored. Many don’t even try to sell to you more than you

 

 

 

 

 

have ordered; thus if you purchase 250 grams of vanilla cookies they don’t try to

 

 

 

 

 

encourage you to try the chocolate or some related products.

 

 

 

 

 

 

 

 

Opportunities

 

 

On the face of it the Cookies and generally the bakery business in Nairobi is all

 

 

 

 

 

well and growing. But away from the generalities what are the actual

 

 

 

 

 

opportunities and gaps with regard to cookies?

 

 

 

 

 

 

 

a)Specialist Cookies Shop – Presently there is no specialist cookies shop in the market. Even bakeries which started with a bias towards cookies like California Cookies, and Paul’s Cookie Man’s have diversified to cakes. This is as to keep up with the competition, respond to market needs, and tap into new revenue streams. This has left a big gap in the market for a cookies only shop.

What then would be the advantages of specializing when the trend is towards diversifying:

- Branding and Marketing – With an increase in cake shops, home

based bakeries, and small and medium sized bakeries in the estates it’s becoming tougher to stand out. From the outside a cake shops gives a sweet snacky feeling which is not different from the shop next door. The only exceptions are the bakeries doing ‘live baking’ like in supermarkets and a few estates.

A specialized cookie shop will help win a very specific market. It will give a clear idea to the consumer of what to expect. In the current state of the bakeries business in Nairobi it’s easier to market a specialist bakery than one that does everything.

-Better and wider variety of products – Some of the smaller and midsized bakeries in the market are trying to do everything. And as much as this is a way to capture as many customers as possible they end up stretching their resources too thin, and not doing anything exceptionally well. With specialization you have more to experiment, and since your focus is on cookies you make effort to understand the market more, increase production efficiency learn more recipes and become exceptionally good. This reflects in the brands and eventual profits.

b)Flavors – There is opportunity to have cookies of more flavors in addition to the common ‘safe’ ones. There isn’t a very good reason why bakers don’t use more flavors to bake cookies. Usually the mentality is to go with what is already in the market. This does not mean the consumer is not willing to try other flavors, she just doesn’t know about them. As we have noted some bakers fear introducing a flavor and then consumers reject it.

But if you are running a cookies shop you can gradually introduce new flavors let customers try it and that’s when you actually know whether they will like it or not. And the more flavors you introduce occasionally the more you establish yourself as The Cookies Bakery.

Compared to other ingredients flavors are affordable, and possible to try out. You can also ask customers for feedback but the real prove of how a new flavor will perform is to offer it to customers. To reduce losses in case the flavors backfire you can start with small quantities and increase gradually as you learn from the market. The shelf life of a cookie is about two weeks, and in that period you should have a good idea of what works or not.

c)Distribution – There are is gap in availability of cookies shops in mid level Nairobi estates. Yes there are cake shops but as they increase they are becoming more and more like retail shops in that they are not differentiated and buying from them is more out of convenience. But cakes, just like good food, are not simply about convenience but taste, quality and experience. It’s almost impossible to tell cookies from the estate shops apart.

There is opportunity in cookies only shops in the estates which offer a superior experience: sell a variety of cookies in flexible quantities, great quality prices and packaging. This does not necessarily have to be

anything fancy but a shop which in terms of cookies does more than the present cake shops. It’s taking the cookies to the consumers and giving them what they need but which they don’t get in their neighborhoods.

Eventually it’s possible to have a chain of small cookie shops in different estates but supplied from a central point.

-Though there are retail shops selling cookies it’s not in the magnitude of similar products. Cookies are sold in shops either as single cookies, especially in lower end kiosks, or polythene packets. Some bakers say that they are not able to get to the cookie eating market through the retail shops. On the other hand a significant number of shop keepers said consumers don’t purchase cookies from shops rather they prefer supermarket.

Cookies are not as recognized by consumers compared to related products like queen cakes, bread and different various plain cakes. Cookies are more of an impulse luxury purchase. This means to move cookies through retailers you need to have good display, such that a consumer coming to buy something else sees the cookies and buys them. It also means some marketing support to push the cookies to the minds of the customers.

You can invest in seductive jars you give the retailers to keep at the counter, and you be refilling as need be. A great poster promoting the cookie will also help. The idea is to put the cookies in the eyes of the consumers. You can also pack in smaller quantities say 4 cookies and the retailer sells at Kshs. 20.

Think Oreo which though not a cookie per se is marketed as one. Smaller packets are easy to display, and if the packets are attractive then the consumers will note them. These can also be distributed to street vendors and hawkers who move big quantities of confectionary. A long term plan could be facilitate shops to sell cookies based on weight, like some shops in Nairobi do

-After trying out new flavors and figuring which work then there is potential in introducing the same to the small cakes shops which don’t bake rather they purchase from the more established bakeries like Paul’s and other smaller wholesale bakeries in downtown Nairobi, Kiambu and some of the city’s low income areas.

-On paper this could look easy but in reality you will need to be patient, strategic and possibly hire a street smart marketing professional to assist.

d)Packaging – If you are distributing to supermarkets or shops there is room to innovate in terms of packaging and go beyond what is in the market without hurting your bottom line. One baker is really trying and just by observing the shelf space it’s working. Good and unique packaging will help you stand out from what is in the market, and

possibly help you get into the supermarket shelves in the first place.

 

 

 

 

 

 

 

 

 

 

 

 

Is The Timing

 

 

This is the right time one because there is an obvious gap, two because

 

 

Right

 

 

consumers are becoming more receptive to new tastes and trends. Thus a

 

 

 

 

 

 

cookies only bakery won’t be a total shock. Thirdly there is the chance to

 

 

 

 

 

 

establish a brand before the better capitalized bakeries start moving to the

 

 

 

 

 

 

estates, every town and corner. Establishing now will give you first mover

 

 

 

 

 

 

advantages.

 

 

 

 

 

 

Challenges of

 

 

 

 

 

 

 

 

 

Starting and

 

 

Location - A premise in a good location is a key challenge. This kind of

 

 

possible

 

 

business requires you to be in a location where there is a high traffic of the right

 

 

solutions

 

 

 

 

 

 

kind of customer. Prime locations have become competitive and the cost

 

 

 

 

 

 

 

 

 

 

 

 

sometimes a little exaggerated. Getting a premise that is priced at a level that

 

 

 

 

 

 

makes your business sustainable is a challenge but not impossible.

 

 

 

 

 

 

 

 

There is no full proof formula to get space than to have your ear on the ground.

 

 

 

 

 

 

To look out for buildings coming up and book space, search for vacant houses

 

 

 

 

 

 

or observe which shop is closing down. Most important have the capital ready

 

 

 

 

 

 

so as not to dilly dally once you find a suitable location and premises.

 

 

 

 

 

 

 

 

Knowing what works and what doesn’t – Despite having done market

 

 

 

 

 

 

research you will not be 100 % sure what works what doesn’t. This will cause

 

 

 

 

 

 

you to experience some losses and possibly extend the period it takes you to

 

 

 

 

 

 

break even.

 

 

 

 

 

 

 

 

 

 

Losses you incur at the early stage as you experiment with various flavors,

 

 

 

 

 

 

packaging or other attributes are more like market research costs. Make the

 

 

 

 

 

 

impact less by getting as much feedback from your customers, and also

 

 

 

 

 

 

keeping good records so that you are able to observe trends and not make

 

 

 

 

 

 

hasty judgments.

 

 

 

 

 

 

 

 

 

 

Getting supermarket shelf space – Getting supermarket space is not a walk in

 

 

 

 

 

 

the park. A quality of differentiated product is not enough; you need to strategic,

 

 

 

 

 

 

patient and persistent. See supermarket shelf space section for some tips.

 

 

 

 

 

 

Distribution – Initially you could face challenges in building relationships with

 

 

 

 

 

 

retailers, understanding what they want and fitting your business into their

 

 

 

 

 

 

finance cycles.

 

 

 

 

 

 

 

 

 

 

Yet with patience the learning curve is not so steep. Relationships are built on

 

 

 

 

 

 

basis of value. You offer the retailer value and you can start negotiating on

 

 

 

 

 

 

terms. Depending on your capability you can hire someone to assist you in

 

 

 

 

 

 

distribution.

 

 

 

 

 

 

 

 

 

 

Still it’s good for you as the owner to build one to one relationships with retailers

 

 

 

 

 

 

or other participants in your distribution channel. This will protect you in case the

 

 

 

 

 

 

sales and distribution personnel quits.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With retailers be real to the fact there is risk of bad debt. Some retailers are reluctant to pay even after selling your products. It doesn’t take too long to know who pays, who delays or who never totally pays.

Capital – Depending on how much money you have capital could be a challenge. It also depends on the scale that you want to start with. If you start supplying to supermarkets or retail shops, or even selling through your own shops you need to have the capacity to satisfy the market so as not to disappoint your customers and distributors.

You also need enough money to start and run your operations comfortably for about six months without making a profit.

Price pressure – Like you could have observed in the sample prices there is a lot of price based competition. Some of the bakeries able to offer lower price because of their scale which allows them to buy raw materials in bulk and efficiencies built over time. Others offer lower prices so as to penetrate the market and gain some share.

A better strategy for a new specialist bakery is to price at what standard market prices are, and which assure you profit. But be consistent and better in quality then gradually raise the price. You can also use tricks to raise prices. For instance by selling fresh cookies by weight. (See Revenue for more). You ales need to keep your costs low without compromising quality of products or service. This ensures whatever the price you are making higher margins.

Major player entering the market - There will always be the threat that any of the well recognized brands moving to the estates and using theory muscle to win customers. As much as this is a cause of worry as a small player you have more room to innovate and experiment. And that is what you should aim for. Also from day one aim to build a sort of brand that differentiates you from what else in the market. Do also build good relationships with your customers and distributors.

Target Customer Research in Nairobi CBD shows that 81% of cookies consumers are female between the age of 21 and 40, with higher consumption between those of 24 years and 33 years.

Cookies in a big way are a semi luxury purchase and thus the probability of consumers to purchase increases with income. Most of the consumers had an income of at least Kshs.20, 000. Still there are significant numbers of students who purchase cookies.

For the mass market you can have divide the consumers into:

Mid Income urbanite consumers

Low income consumers

Mid level consumers with income from Kshs. 20,000 to Kshs. 200,000 should be the primary target consumers. The advantage of this group is that as much as they care about money they are also keen on lifestyle. Not the very high end of life (Think Artcafé) but standard decent and well sweet life. They are the group who are likely to forego bread and have tea with cookies or some other cake. These consumers can be classified into two; the more sophisticated consumers with so called oomph and the ‘plain; easy consumers.

Those in the bakery business will talk of the ‘ sophisticated ‘ group with acquired tastes being ‘ proud’ which means they are sometimes very choosey and can ‘ act up’ …Depending on the location they need to feel the outlet fits in…quality, chutzpah , service and product understanding. With this you have to get it right otherwise they eschew your service. This explains the death of some small bakery shops established in the estates that were not clear who their target market. The plain middle class is easy and will look for basic decency and service in the outlet. They are the group that explains the success of Krumble.

Another advantage of the middle class is that they are less affected by inflation when compared to the lower class. Thus as much as they could cut their spending because of inflation it is not as drastically as the low income consumers could. Consumption for the urban middle class is less driven by rationale but lifestyle, the need to fit, try new things. They are likely to react positively to a specialist cookies shop.

Low Income – The low income also form a large market for cookies. They are actually small bakeries operating in low income areas that are mass producing cookies and other baked items for these areas and doing well. The difference between the cookies in such areas and those found in higher income areas or in the CBD is the quality, some are smaller, weaker and there are all those unconfirmed stories about the source and types of ingredients used. The size of the low income market is what makes it attractive. To target both you can have grade one and grade two, with grade two cookies going to the lower income areas because of affordability.

Brand depending on your target market.

 

 

 

 

 

 

 

 

 

Customer

 

In Nairobi cake shops in the estates rely on customers within an average radius

 

Accessibility &

 

of 400 meters. In the CBD the range is larger because there is much to and fro

 

Concentration

 

foot traffic. You should try locate your shop where it so easy to access you

 

 

 

 

 

 

 

 

within the radius.

 

 

 

 

 

 

 

 

Always remember cookies are so much of an impulse buy and you need to push

 

 

 

 

them to the face of the consumers. A front downstairs shop is preferred and if

 

 

 

 

otherwise then you have to invest in advertisement that stands out and attracts

 

 

 

 

attention to your shop. Of course the situation is different if you are in a mall or

 

 

 

 

some building with high traffic.

 

 

 

 

 

 

 

If you are selling through supermarkets and retailers then you don’t necessarily

 

 

 

 

need to have a shop in a strategic location. Actually to cut costs you can have it

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in an easily accessible but away from the high rent areas. From your bakery you should be able to conveniently deliver to all your distributors and they should locate and access you easily too

It is not advisable to concentrate a large percentage of your sales only on a few consumers say distributors or supermarkets. Whereas there are advantages in this the flip side is that the customer will have more power in negotiating prices and other terms. Also if the consumer cancels your orders or collapses for one reason or another then you will be left hanging. Same way if he doesn’t pay. At the shop retail level the customer spending is spread over many consumers so there is no danger of a couple of customers having too much sway. Still you should recognize the power customers who buy regularly or large quantities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer

 

 

 

 

 

 

 

Switching Costs

 

76 % of cookies consumers interviewed say they have a favorite brand of

 

 

 

 

cookie or shop from where they purchase from. The favorite is based on what

 

 

 

 

they tried first, recommendations by friends or just exploration. Flavor and “the

 

 

 

 

way it is baked” and price influenced the preference of one brand or shop over

 

 

 

 

another.

 

 

 

 

 

 

 

 

However the loyalties were not absolute. They said if they discovered a better

 

 

 

 

brand of cookies or shop than they have now, and the price is fair, location

 

 

 

 

convenient and are easily available then they would switch. To the customers

 

 

 

 

there were no significant direct costs associated with switching.

 

 

 

 

 

 

 

 

 

 

 

 

Customer

 

As a new and specialist cookies shop you will need to differentiate from the

 

Acquisition Costs

 

cake shops and retail shops sprouting all over. This is more so in estates whose

 

 

 

 

shopping centers are congested. The basic way to do this is by signboards,

 

 

 

 

shops in estates use standard signboards you need to use a way to attract real

 

 

 

 

attention. Use signboards not commonly used in your location. Place a cookie

 

 

 

 

board with flavors and prices outside. Brand the outside differently. Place

 

 

 

 

leaflets in your shop and wherever you get opportunity.

 

 

 

 

 

 

Of course the more you invest in advertising the more in fees you pay to the

 

 

 

 

county government. The county government charges for signboards and any

 

 

 

 

form of advertisement that you run.

 

 

 

 

 

 

 

But it’s worth it, you have to work hard to acquire and maintain customers, until

 

 

 

 

that point that word of mouth and brand work for you.

 

 

 

 

 

 

If you are selling in wholesale to shops or supermarkets then you might also

 

 

 

 

need to invest in a salesperson, some publicity in form of posters, packaging

 

 

 

 

materials and follow up. The cost of this will vary. (See costs). Yet it’s a price

 

 

 

 

you have to pay if you want to make progress in the market. Sometimes when

 

 

 

 

you are a new supplier supermarkets want prove or some assurance that you

 

 

 

 

will support the marketing of your products, and if you are already doing it

 

 

 

 

before you approach them then the process of landing on their shelf spaces is

 

 

 

 

much easier.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cross Sell

So if you have a shop what can you sell in addition to cookies without diluting

 

your cookies specialist brand? You can have some juices, queen cakes and

 

perhaps depending on the setting of your shops great tea or coffee. Think of

 

those items that go hand in hand with cookies without compromising the brand.

 

You want to be known as the cookies shop though you could have other items.

 

Paul’s Cookies along Accra road sells ice cream in addition to the various

 

cookies and cakes; With the traffic they receive it’s not a bad idea. Ice cream?

 

 

Quality/ service

- There is a big room to improve the service in relation to the competition.

relate to

Speed and more motivated friendly employees with good product knowledge

competitor

and customer service skills will give you an edge irrespective of the customer.

 

 

 

 

 

 

Addressable

If you set up a cookies shop in a place like Thindigua along Kiambu Road you

Market

will be looking at consumers living in at least 36 four storey flats within a radius

 

 

of about 400 meters. With an average household of 5 people this makes about

 

 

2500 people. The average rent of a two bedroom house, which are the majority,

 

 

is Kshs. 17,000 per month, meaning most households have a monthly income

 

 

of at least Kshs 60,000.

 

 

The size of the addressable market will depend on the exact location, but a

 

 

location with a population of at least 2000 mid income consumers is enough to

 

 

sustain a cookies shop. Of course keeping everything constant. Like assuming

 

 

the shop will be in place where a majority of the population can view and access

 

 

it, and where there is no dominating player.

 

 

 

 

Organic Growth

Gal Baking Services grew organically by clever marketing and distribution. This

 

 

is before Fusion capital approached them and started pumping small amounts

 

 

of capital and after 4 years purchasing outright a 45 % stake. Paul’s bakeries

 

 

have also grown organically but we have to note that the cookies market scene

 

 

was less competitive when Paul’s started, and almost enjoyed a monopoly at

 

 

some point. More industrial bakers have grown by a mix of ploughing back

 

 

profits and credit.

 

 

There is unsatisfied demand in the market and there are now many more

 

 

aspiration customers in the city. This means there is potential to grow

 

 

organically. Still it’s a fact that competition in the bakery business is increasing,

 

 

and for a low capitalized baker waiting to grow organically could lead to loss of

 

 

opportunities if highly capitalized entrepreneurs enter the market, picking all the

 

 

best locations, advertising and branding. If low on capital the best things is to be

 

 

innovative in distribution, plough back profits and find a balance between credit

 

 

and ploughing back profits. Or you could get a partner with a long term outlook.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory

The major licenses required to run a bakery are:

 

Single Business Permit – This is issued by the county government. The cost

 

will depend on the size of the premises and location. For a proper midsized

 

bakery budget at least Kshs. 20,000 for the annual license. In Nairobi and most

 

counties licensing has been decentralized so that it’s now relatively easier to

 

acquire licenses in an office near you.

 

b) Food and Chemical Substances Certificate – This is issued by the public

 

health department (sometimes in collaboration with KEMRI) to premises used

 

for food processing. The license expires on 31 December irrespective of when

 

you acquired. Cost range between Kshs. 1000 and Kshs.5000 depending on the

 

size of the premises. The checklist is lengthy but generally covers the following:

 

- Grounds surrounding a food plant to be kept free form contaminating

 

conditions. Grounds should be free from improperly stored equipment, litter,

 

waste and refuse which may attract, harbor or constitute breeding places for

 

rodents, insects and other pests; and inadequately drained areas that may

 

contribute to the contamination of food products through seepage or foot-

 

borne filth and provide breeding places for insects or micro-organisms.

 

- Layout and construction of food plants and facilities. The food plant and the

 

facilities installed therein shall have adequate lighting to hand-washing areas,

 

dressing and locker rooms, toilets and to all areas where food or food

 

ingredients are examined, processed or stored and where equipment and

 

utensils are cleaned; separate areas, either by partition, location or other

 

effective means, for those operations which may cause the contamination of

 

food or food contact surfaces with undesirable micro-organisms, chemicals,

 

filth or other extraneous materials; adequate ventilation

 

- Construction floors, walls. The floors, walls and ceiling shall be of such

 

constrain to be adequately cleanable and maintained in a clean and

 

good state of repair.

 

- Equipments, utensils and food contact surfaces – Don’t use wooden surfaces.

 

Use aluminum tables or cover with Formica. Basically the surfaces shall

 

smooth and free from pits, crevices and loose scale; non-toxic; capable

 

of withstanding repeated cleaning, disinfection and sanitizing; and

 

non-absorbent, unless the nature of a particular and otherwise

 

acceptable process renders the use of an absorbent surface such as

 

wood necessary.

 

- Sanitary facilities and controls. No person shall use any premises as a food

 

plant unless adequate sanitary conveniences are provided for use by

 

employees and every premise where food is prepared and served are

 

provided with adequate separate sanitary conveniences for public use.

 

Toilets have to have a sanitary bin. There are companies offering

 

sanitary bin services for Kshs. 1000 a month and they empty the bins

 

twice within a month

 

- The purpose is to ensure safety of the food being prepared. There are cases

 

where the checklist is disregarded in exchange for a bribe. Still

 

depending on the inspecting officers it could be had to compromise on

some things like surfaces and sanitation.

c)Food Handlers Medical Certificate – This is issued by the county government public health department through hospitals. It costs an average of Kshs. 600 and involves a medical checkup. This is to certify that you meet hygienic and health conditions to handle food.

e)Fire Clearance Certificate – This is issued by the fire department of the county (Nairobi). The cost averages Kshs.1500 per year. The general process is you go to the fire department, they will ask for the size of your premises in square feet and based on that advice on the number of fire extinguishers you need. Depending on the nature of your business they will also advice on the best kind of extinguisher.

For instance in bakeries the often used are the carbon dioxide extinguisher. In addition to the extinguisher you need to purchase a fire blanket. Once you have all in placed you notify the fire officials who come inspect and issue you with the certificate. You need to purchase the fire extinguishers from authorized companies, who will also be inspecting the extinguishers every six months and stamping it.

Some Nairobi county officials are in the fire extinguishers business and could insist you purchase from them. A fire blanket costs an average of Kshs.1, 500 depending on size while a fire extinguisher will range between Kshs. 6000 and Kshs.10, 000 depending on brand, size and supplier. It’s recommended you consult with the county fire department before purchasing the fire extinguisher.

f)Kenya Bureau of Standards – If you plan to formally distribute to supermarkets and shops you need to get the KEBS standardization certification. If you are selling over the counter only you don’t need the certification.

Once you have set up your bakery and are ready visit the KEBS offices and make an application. KEBS officials will visit your premises, look at your processes, ingredients and carry samples. Depending on the outcome they will give you feedback and guidelines on what to improve change until all is okay and you get the certification. KEBS also sells a booklet showing the checklist required for certification. The book costs Kshs. 2000 and is available from their offices. The certification costs at least Kshs. 20,000 and could be as high as Kshs. 70,000. Exact costs will depend on location (because KEBS charges you for transport), variety of products, how soon you meet the standards (because you are charged for audit time) not forgetting the application fee.

g)Barcode – This is not necessarily a license, however if you plan to sell in supermarkets then you need to acquire a barcode that will be used to identify and manage your stock. Registration fee is standard at Kshs. 5,500 but there is an annual subscription which depends on your turnover. For instance if your turnover is up to Kshs. 12.999 million GS1 one of the barcode providers will charge Kshs.5,500 registration fees,

Kshs. 5,500 annual subscription, a one off training fee of Kshs. 2320, a verification fee of Kshs.1160, bringing the total cost to Kshs. 14, 480. After you will pay Kshs. 250+ VAT to generate a 1-4 barcodes, and Kshs.100 +VAT if over 5 barcodes.

 

 

 

Suppliers

 

Kenya Bureau of Standards - KEBS (For Standardization)

 

 

Head Office

 

 

Popo Road, Kebs Building, Nairobi

 

 

Phone:020 6948000

 

 

 

 

 

GS1 Kenya ( For Barcodes )

 

 

Allbid House, 2nd Floor

 

 

Wing C, Mombasa Road, Opposite ASL Packaging

 

 

P.O Box 3243-00200,

 

 

Nairobi, Kenya

 

 

(+254)20 238 5270, 20 2319414

 

 

(+254) 20 2353520

 

 

(+254) 710 122252, 735-965168

 

 

 

Equipment Suppliers

The below is not an exhaustive list of suppliers, but just some of the most commonly used. Nowadays there are also a number of independent importers of baking equipment. Also more than ever before there are a lot of second hand equipment from bakeries closing or upgrading. For Jua Kali equipment check the ‘jua kali’ area from Machakos Country Bus all the way to City Stadium.

 

 

 

 

 

 

 

 

 

 

 

 

Nairobi

Main Branch

P.O.BOX 49938, 00100 NRB Kenya

 

 

Kitchen

Main Mombasa

Ph. (+254) (0) 706 991 469 Mob.

 

 

Care

Road, Allbid House.

254(0)727 246 209

 

 

 

 

 

 

Opp ASL

[email protected]

 

 

 

 

 

 

Town Branch

 

 

 

 

 

 

 

Luthuli Avenue

 

 

 

 

 

 

Walibhai Karim

 

Kathlawa Hse, Ground Floor – Biashara

 

020

 

 

 

 

 

 

 

 

and co

 

 

Street , Nairobi

 

 

2222808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hypermart Ltd

Mombasa Road, Nairobi

020 824455

 

 

 

 

 

 

Kitchen

Airport South

P.O.Box: 66609-00800 Westlands,

 

 

 

 

 

Professionals

Rd, Near TNT,

Nairobi

 

 

 

 

 

 

 

 

Limited

Nairobi

Tel: +254-202100662

 

 

 

 

 

 

 

 

 

 

Mobile: +254-717445591, +254-

 

 

 

 

 

 

 

 

 

735445599, +254-724445599+254-

 

 

 

 

 

 

 

 

 

202667449

 

 

 

 

 

 

 

Sheffield Steel

 

Kenbelt Industrial

P.O.Box: 29-00606 Sarit

 

 

 

 

 

Systems Ltd

 

Park, off

 

Centre

 

 

 

 

 

 

 

 

Mombasa Rd, Nairobi

Tel: +254-202095883

 

 

 

 

 

Meaf

Sameer Business Park,

254 20 357 9028, 254 737 117

 

 

 

 

 

Consultants

Block D1, 2nd Floor Off

257, +254 734 688 983

 

 

 

 

 

 

 

Mombasa Road, Along

www.meafconsultants.co.ke

 

 

 

 

 

 

Enterprise Road

[email protected]

 

 

 

 

 

Cute Kitchen

 

 

 

 

 

Tom Mboya

0711

 

 

 

 

 

 

 

 

 

 

 

Street , opp fire

850

 

 

 

 

 

 

 

 

 

 

 

station , next to

850

 

 

 

 

 

Kitchen

Commonwealth

0726

 

Family bank

 

 

 

 

 

 

Appliances

house, Ground Floor,

949449

 

 

 

 

 

 

 

 

Ltd

Moi Avenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item

 

 

Breakdown

 

 

Total

 

 

 

 

 

 

Licenses

 

 

 

 

 

 

 

 

 

 

 

 

Single Business Permit

 

1

 

 

20,000

 

 

 

 

 

 

Food and Chemical

 

1

 

 

3000

 

 

 

 

 

 

Substances Certificate

 

 

 

 

 

 

 

 

 

 

 

Food Handlers Medical

 

1

 

 

600

 

 

 

 

 

 

Certificate

 

 

 

 

 

 

 

 

 

 

 

 

Fire Clearance Certificate

 

1

 

 

1500

 

 

 

 

 

 

KEBS Certification

 

1

 

 

30,000

 

 

 

 

 

 

Barcode

 

 

1

 

 

15,000

 

 

 

 

 

 

Company Registration

 

1

 

 

30,000

 

 

 

 

 

 

Sub Total

 

 

 

 

 

100,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment

 

 

 

 

 

 

Oven

 

1

 

70,000

 

 

 

 

 

 

Mixer

 

1

 

50, 000

 

 

 

 

 

 

Cooling Rack

 

1

 

20,000

 

 

 

 

 

 

Baking Sheets

 

4

 

16000

 

 

 

 

 

 

Bakers Scale

 

1

 

12,000

 

 

 

 

 

 

Work Table

 

2

 

22000

 

 

 

 

 

 

Supplies

 

 

 

30,000

 

 

 

 

 

 

Miscellenious items

 

 

20,000

 

 

 

 

 

 

(Bowls

 

 

 

 

 

 

 

 

 

 

Spoons

 

 

 

 

 

 

 

 

 

 

Racks

 

 

 

 

 

 

 

 

 

 

Cutters

 

 

 

 

 

 

 

 

 

 

Buckets

 

 

 

 

 

 

 

 

 

 

Knives

 

 

 

 

 

 

 

 

 

 

Flour sieves

 

 

 

 

 

 

 

 

 

 

Dipping forks

 

 

 

 

 

 

 

 

 

 

Dough dockers

 

 

 

 

 

 

 

 

 

 

Measuring jugs

 

 

 

 

 

 

 

 

 

 

Oven gloves

 

 

 

 

 

 

 

 

 

 

Waste bins

 

 

 

 

 

 

 

 

 

 

Soft brushes

 

 

 

 

 

 

 

 

 

 

Packaging material)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total

 

 

 

240,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premises

 

 

 

 

 

 

 

 

Rent

 

2 Months Deposit plus 1

51,000

 

 

 

 

 

 

 

 

month rent (Will depend

 

 

 

 

 

 

 

 

 

on location. For this

 

 

 

 

 

 

 

 

 

 

case we use @

 

 

 

 

 

 

 

 

 

 

Kshs.15,000 per month)

 

 

 

 

 

 

 

 

 

+ Electricity & Water

 

 

 

 

 

 

 

 

 

 

Deposit ( Kshs.3000 +

 

 

 

 

 

 

 

 

 

 

Kshs.3000)

 

 

 

 

 

 

 

 

Renovation

 

Repainting / Partitioning

40,000

 

 

 

 

 

 

 

 

/ Branding

 

 

 

 

 

 

 

 

Digital Scale

 

1

 

10,000

 

 

 

 

 

 

Fire Extinguisher

 

1

 

10,000

 

 

 

 

 

 

Miscellaneous Items

 

 

15,000

 

 

 

 

 

 

Sub Total

 

 

 

126,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital

 

 

 

 

 

 

 

Stock ( Supplies)

 

 

 

30,000

 

 

 

 

 

 

Salaries

 

3 months @ Kshs.8000

24,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

per month

 

 

 

 

 

 

 

 

Electricity

3 months @ Kshs.4000

12,000

 

 

 

per month

 

 

 

 

 

 

 

 

Water

3 months @ Kshs.2000

6000

 

 

 

per month

 

 

 

 

 

 

 

 

Miscellaneous

3 months @ Kshs.5000

15,000

 

 

 

per month

 

 

 

 

 

 

 

 

Sub Total

 

87,000

 

 

 

 

 

 

 

Grand Total

 

427,100

 

 

 

 

 

 

Notes on Capital

The above figures are based on some actual small and medium sized bakeries but should act only as a guideline.

The figures could be higher or lower depending on your scale, location and how you want to brand. For instance if you are selling over the counter in your own shop you don’t need KEBS, Barcode and Company Registration. You may also need more employees, pay higher rent or opt to go for the cookies making machine which costs at least Kshs.2 million. You could also opt for jua kali or charcoal ovens some which cost as low as Kshs. 40,000.

There could be price differences between what is stated here depending on the supplier and your location

 

 

 

 

 

 

 

 

 

Critical Success

 

-

Visible and easily accessible location

 

 

 

 

Factors

 

-

Marketing

 

 

 

 

 

 

 

-

Distribution

 

 

 

 

 

 

 

-

Quality

 

 

 

 

 

 

 

-

Innovation

 

 

 

 

 

 

 

-

Variety

 

 

 

 

 

 

 

-

Cost Management

 

 

 

 

 

 

 

-

Good customer service

 

 

 

 

 

 

 

 

 

 

 

 

 

Size of Industry

 

Euro monitor an international research firm estimates the local confectionary

 

 

 

 

 

industry to be worth USD 2 billion. But even without the generalities there have

 

 

 

 

 

been some significant trends in the local banking industry which point to the

 

 

 

 

 

potential of the business.

 

 

 

 

 

 

 

For a start this can be seen by expansion of the wheat products shelf space in

 

 

 

 

 

supermarkets, number of new bakers and pastry shops. Supermarkets have

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

also gotten into the baking business in a big way with even small mini

supermarkets having kitchen and baking’s sections contributing a significant

part of the revenue.

Also there has been renewed interest in small and medium sized bakers by

foreign companies and relatively large local companies. For instance in

December 2013 Tiger Brand a South African multinational acquired Rafiki Mills

and showed interest in Magic Oven both which is medium sized bakeries. In

January 2014 Unga Group limited acquired Ennsvalley, a small bakery based in

Nairobi. Still in 2014 Fusion Capital bought 45 % of Gal Bakery Services, a

small bakery specializing in cookies, bread and queen cakes.

There has also been an explosion of cake shops in residential areas especially

in Nairobi. Most sell cakes and cupcakes, and a few also cookies.

Major Equipment The major equipment required to prepare cookies commercially are:

a)Oven – For a small scale or medium cookie bakery a standard electric oven will do. This can either be one deck or two decks. A convention two deck oven with a fan is recommended for its versatility, its efficient, reduces baking time by almost a half and moistens baked items. Prices average Kshs 70,000 for a single deck oven and Kshs. 150,000 for a double deck oven. Among bakers in Kenya the Caterina brand of ovens tend to carry some favor. This is by no means sanctioning the brand. There are also jua kali ovens. As much as the jua kali ovens can be of high quality there have been reported issues to do with quality control. A common complaint is poor heat regulation, over heating or knobs which don’t work as indicated. This is not a blanket condemnation of the jua kali ovens still be aware of these shortcomings, test or purchase from recommended jua kali artisans.

There are also charcoal ovens made by jua kali artisans and other semi formal engineering forms. A challenge with charcoal ovens is temperature regulation. At times the heat is not too enough while at others it’s too low especially if the oven is not of high standard. It could be a little tricky for a start up bakery with a novice baker. Again this is not a condemnation of charcoal ovens since there are small bakeries using them, but do your due diligence before purchasing.

Beyond these standard ovens there are also commercial cookie making machines. These automate the whole cookie baking process. You input the dough and within a few minutes you have the cookies. To see how this works visit California Cookies along Moi Avenue. This machine costs between Kshs. 2,000,000 and Kshs. 3,000,000.

b)Mixer – A standard mixer for a small and medium bakery will suffice. The cost of a mixer largely depends on the capacity measured in liters. For example a 20 liter Caterina mixer which is good for a small commercial bakery averages Kshs. 50,000.

c)Baking sheets – To bake cookies you need baking sheets. The number of sheets you need depends with the possible scale of your operation. Normally Caterina ovens come with two baking sheets. You can add four or even more so as to have a continuous process: as others cool, others are cooking.

d)Cooling Rack – After you have prepared your cookies you need a cooling rack where they can cool and be ready to serve. A cooling rack will depend on size and suppliers but a standard rack average Kshs.20, 000.

e)Bakers Scale – This is required to measure the different ingredients as required. Cost depends on size but budget at least Kshs.6, 000.

f)Other Items

In addition to the above major items there are other relatively minor but still relevant:

 

 

 

Bowls

 

 

 

 

 

 

 

Bakers scale

 

 

 

 

 

 

 

Spoons

 

 

 

 

 

 

 

Racks

 

 

 

 

 

 

 

Work tables

 

 

 

 

 

 

 

Cutters

 

 

 

 

 

 

 

Buckets

 

 

 

 

 

 

 

Knives

 

 

 

 

 

 

 

Flour sieves

 

 

 

 

 

 

 

Dipping forks

 

 

 

 

 

 

 

Dough Dockers

 

 

 

 

 

 

 

Measuring jugs

 

 

 

 

 

 

 

Oven gloves

 

 

 

 

 

 

 

Waste bins

 

 

 

 

 

 

 

Soft brushes

 

 

 

 

 

 

 

Packaging material

 

 

 

 

 

 

 

Items that you could need for the shops

 

 

 

 

 

 

 

- Cash Register

 

 

 

 

 

 

 

- Shelves

 

 

 

 

 

 

 

-Renovations

 

 

 

 

 

 

 

- Chair and Desks

 

 

 

 

 

 

 

Trolleys

 

 

 

 

 

 

 

Billboard / sign board

 

 

 

 

 

 

 

Aprons

 

 

 

 

 

 

 

Others – Calculators

 

 

 

 

 

 

 

Refrigerator

 

 

 

 

Time Frame To

 

Process of setting up :

 

 

 

 

Set Up / Process

 

Raise capital

 

 

 

 

 

 

 

Identify Premises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renovate

Purchase equipment

Acquire licenses

Hire Staff

Stock

Advertise

Start Operations

Assuming you have the capital ready and premises available the set up process could take about 30 days. Licenses about 3 weeks, Renovation about a week, Hiring a week, and stocking a week too. All these can be done concurrently. Once you have the premises then you should be in a position to start operations as soon as possible.

 

 

 

 

 

 

 

 

 

Revenue

 

The number of cookies that you can make from a certain amount of wheat flour

 

 

 

 

will depend on the size of the cookies, quality and other ingredients. The better

 

 

 

 

the quality and the more ‘pampered’ the cookies are the less that can be

 

 

 

 

produced. To illustrate a 2kg of wheat can make between 240 cookies and 900

 

 

 

 

cookies. For instance Unique Bakers an informal bakery in KM (that is they

 

 

 

 

don’t have licenses and operate under the radar) makes an average of 900

 

 

 

 

cookies from a 2 kg packet of flour. But these are small weak and fragile

 

 

 

 

cookies. They pack the cookies in 10 pieces, 12 pieces, 15 pieces, 20 pieces,

 

 

 

 

25 pieces, even 30 pieces in each packet. They then sell to retail shops: at

 

 

 

 

Kshs. 20 for 25 pieces. At 25 pieces per packet then 900 cookies will be 36

 

 

 

 

packets, at Kshs.20 that is Kshs.720. At Kshs.135 per 2 kilograms of flour wheat

 

 

 

 

and about Kshs.300 in production costs then they make a net profit of Kshs.285

 

 

 

 

from 2kg of wheat flour. Retail shops sell the cookies at Kshs. 1 each or Kshs.

 

 

 

 

25 to Kshs. 30 per packet.

 

 

 

 

 

 

 

An almost similar bakery in Nakuru makes about 600 cookies using 2 kg of

 

 

 

 

flour, while another in Nairobi makes 400. Larger commercial bakeries are more

 

 

 

 

efficient due to the better equipment so they produce more per quantity. For

 

 

 

 

planning purposes use 300 cookies per 2 kg flour. With an average price of a

 

 

 

 

cookies being Kshs.5 then that assures you of revenue of Kshs.1500 and

 

 

 

 

margins of about 60%.

 

 

 

 

 

 

 

Margins range from 40% to 70% depending on your production costs. There are

 

 

 

 

some cases especially with low end bakers supplying relatively lower quality

 

 

 

 

cookies where the margins of 100% have been noted.

 

 

 

 

 

 

Revenue and margins depend on :

 

 

 

 

 

 

 

Your production costs – How efficient you are managing your bakery, source

 

 

 

 

of supplies, whether you purchase in bulk, type of oven you are using, rent you

 

 

 

 

are paying, cost of labour, rent, transport to suppliers

 

 

 

 

 

 

Pricing – There is a big room to play around with price. If your productions

 

 

 

 

costs are low and your prices average or above average then your margins will

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

be higher.

Cost of Packaging – A cookie box as used by some bakeries to pack 250 to 500 grams of cookies costs between Kshs. 7 and Kshs. 15 depending on the bulk and supplier. Packaging averages about 4 % of the retail price, with the exact price depending on the kind of packaging. The cost is as low as Kshs.1 for bakers using small khaki or polythene bags.

Distribution and Negotiations Skills – If you are selling to supermarkets or retailers they will try pushing the price down so that they make as much profit as possible. And how you negotiate determines how much eventually you get. Often big retailers will try dictating the process. On the other hand if you are selling from your own shop the margins are higher. Then if your cookies are available to many retailers then you rake more revenue eventually.

Method of Selling:

Cookies are sold prepackaged, unpacked and weighed as per the customer’s request or as single cookies. In reality the price difference between pre packaged quantities and weigh on order is minimal but the former tends to attract more customers because the cookies seem many, and of course the packaging costs are minimal. Taking one case study the price of one cookie when weighed on order was Kshs. 6 while a prepackaged cookie cost an average of Kshs. 5.each.

For shops selling cookies and cakes the average contribution of cookies to the total sales averages 20%.

On average small cakes shops within Nairobi CBD make sales of at least Kshs.16, 000 per day. One shop reported sales of Kshs. 67,000 on a Saturday in August.

Buying in Wholesale To Resell

Some small cake shops don’t bake their own cookies rather they purchase in wholesale from the bigger of the cookies shops or supplier bakeries and resell. In this case margins will range from 8 % TO 12%. For instance Paul’s Cookie Man’s sells a kilogram of cookies at Kshs. 440, while the retail price is Kshs.

480.To purchase in wholesale you must at first buy a kilogram at the retail price at least thrice so that they know “ you are serious”

Like stated there is opportunity to be a wholesaler by offering better margins and wider variety. Another opportunity is to support investors to open franchises in high potential areas.

 

 

 

 

 

 

 

 

 

Cash Cycle

 

When you are selling in cash from a shop the cash cycle is short, meaning that

 

 

 

 

you don’t tie your cash so long between purchasing supplies and making actual

 

 

 

 

sales. When the cash cycle is short it means that your cash flow will be good.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yet if you are selling to supermarkets you won’t be paid on cash. On average

 

 

they take 60 days to pay and sometimes taking 90 days to 6 months to pay.

 

 

When you are a small player that is a long time to wait for cash. Partially this is

 

 

the reason that motivated them to open shops from where they could sell in

 

 

cash and at least assure themselves of a steady cash flow as they wait for the

 

 

supermarkets to pay.

 

 

 

 

 

Retail shops take an average of 3 days to pay, but sometimes this could extend

 

 

to a week. Often the way it works with retail stores you deliver, they sell then

 

 

you come for the money later.

 

 

 

 

 

You need to have a good cash flow so it helps even if your big plan is to supply

 

 

to supermarkets and retail shops to have an outlet of your own where you can

 

 

sell in cash and keep the business running. Also try having access to short term

 

 

finance though banks, saccos or microfinance institutions.

 

 

 

 

.

 

 

 

 

Breakeven Point

The break even for the business is averages 8 months. This of course will

 

 

depend on a number of factors such as your location, quality of products and

 

 

pricing, competition, marketing and distribution. It helps to have a long term

 

 

view.

 

 

 

 

 

 

 

 

 

 

 

Scalability

There is room to grow. Once you get the initial traction, and get the recognition

 

 

and appreciation of your target customer then some will slowly transfer their

 

 

significant monthly shopping to you. Then again the population is growing and

 

 

with it more potential customers. But as noted above there will always be a

 

 

threat of a deep pocketed competitor coming into the space. To scale you must

 

 

be innovative and cunning from the start.

 

 

 

 

 

 

 

 

 

 

Manpower

The number of staff you need will depend on the size of the bakery. But it goes

 

 

without saying that even if you know how to bake but supplying to shops you

 

 

need at least one assistant.

 

 

 

 

 

If you are running a shop you will need a shop assistant and staff to help you

 

 

bake. The number of shop assistants will depend on how busy your shop is.

 

 

Shop attendants and bakery staff are paid between 8000 and Kshs. 15,000 per

 

 

month. The exact amount will depend on their skill and both your negotiation

 

 

skills. Some bakeries hire workers on a daily basis and pay them between Kshs.

 

 

400 and 600 shillings a day.

 

 

 

 

 

Always find ways to keep your staff motivated even if not by monetary means.

 

 

This will ensure they are more dedicated and serve the customers better.

 

 

 

 

 

 

 

Management

You don’t need to be a baker to start the cookies business. But at least you

 

 

need to know the basics, especially to do with processes and quantities used to

 

 

prepare a particular amount of cookies. You can do this by an informal crush

 

 

course from a proper baker.

 

 

 

 

 

Ideally it’s advisable to manage the business yourself more so at the start. This

 

 

is because dishonest workers can take advantage of your absence or lack of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

proper knowledge to swindle you. In a bakery common swindles include outright

 

 

stealing of raw materials and finished products. At other times staff will say they

 

 

baked lesser products than they actually did and either hoard the raw materials

 

 

or sell the extra and keep the money. Sometimes staff will make lower quality

 

 

products so as to use a lesser amount of raw materials and keep any material

 

 

savings.

 

 

If the bakery is not located where the shop is, pay more attention to the bakery

 

 

without necessarily neglecting the shop. This is because most theft is likely to

 

 

happen at the bakery, and also the risk of compromising quality.

 

 

In situations where you can’t manage the bakery get someone trusted to do it

 

 

for you. Set some guidelines on quality, standards and procedures to be

 

 

followed by all your employees this is so as to ensure consistency and better

 

 

management of all the resources. Try building a culture of quality, honesty and

 

 

customer focus.

 

 

 

 

Conclusion

In conclusion:

 

 

The baking industry is growing as a result of increased demand for baked

 

 

products.

 

 

There are more bakeries making cookies than there were five years ago.

 

 

The shelf space occupied by cookies in supermarkets has been increasing.

 

 

There is price competition among the bakers.

 

 

The margins from cookies range between 40% and 70%

 

 

There are only a limited variety of cookie flavors available locally.

 

 

Distribution is largely limited to supermarkets

 

 

There are no specialist cookies shops.

 

 

The barriers to entry have more to with premises and lack of a proper marketing

 

 

and distribution plan. For small bakers lack of capacity due to limited capital is a

 

 

big barrier to entry.

 

 

There is an opportunity for a well branded specialist cookie shops in the estates

 

 

and other high traffic areas.

 

 

There is opportunity for more innovative distribution, flavours and locations.

 

 

Success in the business depends on the location, innovation, reliable staff,

 

 

marketing and branding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There are wide price variations between cookies products, companies and even between the supermarkets. Also a particular quantity, say 200 grams, could have different numbers of cookies depending on the company. For instance one company could have 12 cookies and another 14 cookies. Here are sample price

 

Supermarket

Bakery

Flavour

Quantity

Price (

 

 

 

 

 

 

Kshs.)

 

 

Supermarket 1

Mill bakers

Chocolate,

200 grams

84

 

 

 

 

Strawberries,

 

 

 

 

 

 

Vanilla, Coffee

 

 

 

 

 

 

( Packaged in

 

 

 

 

 

 

plastic

 

 

 

 

 

 

containers)

 

 

 

 

Supermarket 1

Uchumi

Vanilla

14 pieces

120

 

 

Supermarket 2

Namada

Ginger

200 grams (

60

 

 

 

bakers

 

12 pieces in

 

 

 

 

 

 

polythene

 

 

 

 

 

 

bag)

 

 

 

Supermarket 3

Joy cookies

Vanilla

180 grams

60

 

 

 

 

 

 

 

 

 

 

East Africa

Vanilla and

200 grams

72

 

 

 

Star Bakery

Lemon

 

 

 

 

 

East Africa

Chocolate

200 grams

115

 

 

 

Star Bakery

 

 

 

 

 

Supermarket 4

Bakers Inn

Eggless (

250 grams (

80

 

 

 

 

Polythene

12 pieces)

 

 

 

 

 

bag)

 

 

 

 

 

Krumble

Vanilla (

200 grams

85

 

 

 

 

Plastic

 

 

 

 

 

 

Container)

 

 

 

 

 

Millbakers

Vanilla

200 grams

85

 

 

Supermarket 5

Cleanshelf

Vanilla,

20 pieces

130

 

 

 

 

Chocolate,

 

 

 

 

 

 

Cheese (

 

 

 

 

 

 

Khaki papers

 

 

 

 

 

 

over the

 

 

 

 

 

 

counter /

 

 

 

 

 

 

plastic

 

 

 

 

 

 

containers)

 

 

 

 

Supermarket 6

Jolly Smart

Chocolate

200 grams (

70

 

 

 

 

 

12 pieces)

 

 

 

 

Bakers Inn

Eggless

200 grams (

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Download Cookie Mania Business Plan - Kenya PDF➥

 

 

 

12 pieces)

 

 

Bakers

Egg

200 grams (

90

 

Delight

 

12 pieces)

 

Supermarket 7

Masculino

Chocolate,

200 grams (

70

 

 

Vanilla or egg

12 pieces)

 

 

Mill Bakers

Strawberry ,

200 grams (

80

 

 

Coffee

20 pieces)

 

 

Bakers Inn

Coffee

250 grams (

90

 

 

 

12 pieces)

 

 

Fancy Bakers

Egg

12

85