How to Start / Open An Ice Cream Business in Kenya

Ice Cream (Lollies) Business Plan (Kenya)



Overview

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Ice lollies or what are commonly known as Lamba Lamba are made by simply mixing water with some food color , flavours and sugar then freezing to ice. Sounds pretty simple until you think of doing it commercially which then you have to consider speed and capacity.

It’s important to note that there exists many different forms of ice lollies , and even some which can be made using juices, fruits and milk products, however the focus of this quick guide are the Lamba Lamba per se; the simple lollies whose primary ingredients are food colour, flavours and water. And which are made for commercial purposes; to sell at a wholesale or retail level.

Before we look at the equipment; it would be good to get an idea of how ice lollies are made. Basically an ice lollie is coloured, flavoured water frozen in a simple shape, then affixed with a stick to hold and lick. This means to make an ice lollie you need:

Water

Flavours / Food Colours

The freezing and moulding equipment.

The sticks

So you mix the water with the colour, flavor and sugar, fix the sticks moulds, insert in the freezing gadget, wait for it to freeze and once they turn to ice, remove them and get them to the market. Generally it’s as simple as that.

Let us now look at it in detail.

Equipment

Ice Lollies Maker

The major and very basic equipment to make lamba lamba is the ice lollies maker. As noted the major process in making ice lollies is freezing and shaping (moulding), and ‘sticking’ (affixing the sticking handle). This is what the machine is designed to do in bulk.

There are various forms of makers, but at the end they do the same thing. A typical machine, the ones commonly used in Kenya has the moulds to shape the lollies and a freezing component.

That is basically it. Everything else are just variable additions on aesthetics, efficiencies and capacity.

For commercial purposes you need capacity, and that’s one of the major differentiating various machines. Hence you could have an ice lollie maker that can make 120 lollies per time, 240 and so forth. “Per time” here means the duration between pouring the water ingredients in the

moulds and freezing ready to sell. This duration ranges between 30 minutes and one hour. The maker is powered by electricity.

Back to the maker when purchasing capacity is the major price determinant. The higher the capacity the more the maker costs.

The ice lollie maker is sold in two parts: the freezing component and the moulds. These are priced separately.

There are various price points depending on who is selling the maker to you. However below are the January 2016 prices from a leading supplier. They fall within the market range and should act as a general guide for new ice lollies makers:

Ice Lollies Maker (Kshs)

Capacity

120

240

 

 

 

Freezing Component

65,000

85,000

 

 

 

Moulds

3 @ Kshs,12,000 =

6 @ 12,000=

 

36,000

72,000

 

 

 

Total

110,000

159,000

The 240 capacity is the most popular maker because of higher capacity at a lower cost; for Kshs.49, 000 more you get double capacity.

When deciding what capacity to go for look at your capital, the size of the market you hope to capture in the short run and long run. If for instance you establish in an area whose population is growing due to development or some other reason then your market will expand in the future, and you need to be prepared when it does.

On the other hand like any business this one too needs good cash flow, the machine is one of the costs and there will be other items you will require. So no need to invest all in the maker and then freeze because you lack the capital to start operations.

It is also a market reality that there are entrepreneurs who close down their ice lollies businesses for a variety of reasons from low sales, poor management, more profitable alternatives or simply boredom. This means that at times there are second hand ice lollies makers available for sale.

Ensure such a maker is in great condition. Don’t buy it theoretically; test it, and make sure it’s

working as it should. The pricing for a second hand machine should be lower, but when possible go for a new ice maker and the peace of mind that comes with it.

Just a heads up as you think of capacity say you have a maker with 120 capacity which gets the lollies ready in thirty minutes, it doesn’t then follow than in one hour you will make 240 lollies (120 x 2). Remember there is the preparation process, and then removing the ready lollies from the maker and some things here and there. Though simple tasks they could be time consuming and so you end up spending one and a half hours or more making 120 lollies.

Suppliers

Ice Lollies makers have not fully moved to the formal market. They have a jua kali touch to them. Though there are automatic and advanced ice lollies machines in the international market

the small scale entrepreneurs don’t use them. Ice Lollies used in the local market are either

imported or made locally.

One of the more professional and highly recommended companies selling ice lollies maker is:

Benmatt Refrigeration Services

Eastleigh 1st Avenue

Near St. Teresa’s Dispensary 0722 669 300

Contact: James Matara. [email protected]

An advantage of Benmatt is that they guide you as a beginner even supplying with the sticks when they have them in stock. Of course at a cost. Their customer service is also great.

You could also try your luck at Jua Kali, the area near Shauri Moyo, Nairobi where they make metallic items. We don’t give a specific supplier here because they tend to be erratic and inconsistent. But when there ask around.

For the second hand makers kindly check internet classifieds such as www.olx.co.ke. If you still can’t get an ice lollies machine on your own let us know and we will be able to assist you.

Lollie Sticks

The sticks are used to hold the ice lollie when licking it. Sticks are either in a big boxes of 10,000 sticks, or smaller quantities of 50 -100. The average price of a stick is Kshs. 0.50. Benmatt (see above) sells a box with 10,000 sticks at Kshs.5, 000.

Other suppliers include Asami, Popman House, opposite Koja Mosque, Moi Avenue Nairobi 0722 759110. You can also find them in some stalls along River Road Nairobi opposite KCB.

Storage

When you make the lollies you need a place to keep them as you wait to sell to consumers or retailers or even prepare more. Remember this is ice and if kept in the open even with room temperatures will melt.

Thus ice lollies should be kept in a deep freezer, refrigerator or cooler. Deep freezers

Start from Kshs. 40,000 depending on the size, make or even design. You can start with one mid size freezer and expand as the business grows. There are a variety of cooling solutions, such you can get depending on how much money you have.

You can get these from supermarkets, household shops or even Benmatt above.

Cooler Boxes

Depending on the working model you have with retailers or salespeople, you could need cooler boxes, which to go sell the ice lollies. A cooler box costs between Kshs.3500 and Kshs.6000 depending on the size and where you are purchasing it from. They are available in supermarkets and household items shops.

The cost of the cooler box could be a barrier to recruit retailers, especially if the business is new. Still a salesperson who has invested in his own box could be more motivated to sell so as to recoup. He could also have a long term outlook rather than one who comes and is paid daily.

You can start with 3 0r 5 cooler boxes and increase the salespeople with time. Match the salespeople to the population of the area. Having many salespeople within an area is not necessarily a good thing.

The salespeople need to maximize sales so as to earn enough money to meet their basic needs and remain motivated.

If you have so many salespeople within a small area they all end up struggling for a small pie and their earnings are minimal. This will demotivate the workers and could lead to an overall drop in sales. There will also be a high turnover of salespeople, and this will negatively affect sales. Still don’t do this blindly; consider the density of the area. If an area is geographically small but the population density is high (like slums) then you could need more salespeople. Find a profitable balance.

Flavours / Food Colour

Flavours and food colours are required to give the ice lollie taste and colour. These can be bought in supermarkets or better still specialist flavor and food colour shop. In Nairobi check Pradrip, along Keekrok Road. (Off River Road, near Koja mosque)

Location and Premises

The biggest consumers of ice lollies are school going children followed women younger than 26

Years old. Therefore a good location is one with a high density of children. For instance, a place with a big number of primary schools, a densely populated estate or urban center with high population.

Urban areas tend to have more competition because of the population density. Despite this the pie is sometimes big for everyone. The fact that most of the operators are small means they expand at a slow rate, and is normal to find areas where vendors rarely reach.

That said some of the midsized peri urban and rural towns have no ice lollies entrepreneurs Despite their populations. When starting it would be good to think beyond the traditional urban locations.

Still when setting up in rural locations think of the income trends in the area. Urban children tend to have more income at their disposable than their rural counterparts. However in some areas, like the coffee growing areas of Central province, children earn their own money during the coffee harvesting season. The keyword being season.

Do consider the weather in the location. If it’s cold most of the year then few consumers will purchase the ice lollies. Urban locations have a bigger and more diverse population, meaning even when it’s cold there could be customers to help you break even. Nevertheless a hot location with a high population is the ideal place to start this kind of business.

An ice lollies maker with a capacity of say 240 will occupy a space of roughly 1meter by 2 meters. You need some free space to work, space to place a freezer, the cooler boxes, a table, water storage if need be, buckets, jugs a chair and anything else that could be necessary. So look for a midsized room with electricity.

You can also work from your house and there are several ice lollies vendors who do this.

Your premises should be near your market. This way it becomes convenient to the retailers. If they finish their stock they can come to the premises and replenish at any time.

The amount you pay in rent will depend on location. You need not locate in a prime area of a town. The key thing should be how easily accessible you are. Remember it could take even five months before you break even and for that period you will still need to pay rent and keep the business running as it picks up.

Licenses

 

License

 

Details

Cost

 

 

County Business License

 

This is issued to all

Budget at least Kshs.10, 000

 

 

 

 

businesses operating within

for this.

 

 

 

 

the county. The cost depend

 

 

 

 

 

on the county and location

 

 

 

 

 

within the county.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Health Certificate

This is issued by the county

The cost varies from county to

 

public health officials if you

county but will average

 

will be running from a central

Kshs.3000

 

visible place (unlike your

 

 

house). They will come

 

 

inspect your premises to

 

 

make sure you meet the

 

 

required hygiene standards.

 

 

Have a clean source of water,

 

 

good drainage and a well

 

 

maintained, painted room.

 

Medical Certificate

 

Since you are making food

 

 

products you will need a

 

 

certificate to show that you

 

 

don’t have any communicable

 

 

diseases you can pass on to

 

 

consumers. You can acquire

 

 

this

 

 

From public hospitals at Kshs.

 

 

500 again depending on the

 

 

hospital.

 

 

Every of your employee and

 

 

even the vendors will be

 

 

required to have the medical

 

 

certificate.

 

 

The vendors will also be

 

 

required to pay hawkers

 

 

licenses or their equivalents.

 

 

This could be as

 

 

Low as Kshs. 20 in a day,

 

 

Kshs. 300 in a month or Kshs.

 

 

3000 in a year. Again this will

 

 

depend on your

 

 

Location.

 

 

 

Capital Breakdown

 

Item

 

 

Breakdown

Total

 

 

 

 

 

 

(Kshs.)

 

 

 

Licenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

County Single Business Permit

1

 

10,000

Public Health License

1

 

3000

Medical Certificate

1

 

500

Fire Inspectorate

1

 

1500

Sub Total

 

 

15000

 

 

 

 

Equipment

 

 

 

 

 

 

Ice Lollies Maker

240 Capacity

 

149,000

Tables

2

 

5000

Ice Lollies Sticks

10,000

 

5000

Freezer

1

 

40,000

Cooler Boxes

5

 

25,000

Water Storage

1

 

3,000

Fire Extinguisher

1

 

6000

Jugs, Bucket, Mixing spoons and small items

All

 

3,000

Counter

1

 

4,000

Sub Total

 

 

237,000

 

 

 

Food Colour and Flavours

 

 

1,500

 

 

 

 

Premises

 

 

 

 

 

 

Rent

2 months deposit + 1

 

24,000

 

month rent. Will depend

 

 

 

on location. (@

 

 

 

Kshs.8,000 per month)

 

 

Sub Total

 

 

24,000

 

 

 

 

Working Capital

 

 

 

 

 

 

Salary

3 months @ Kshs.7000

 

21,000

 

per month for one worker

 

 

Electricity

3 months @ Kshs.2000

 

6,000

 

per month

 

 

Water

3 months @ Kshs.900

 

2700

 

per month

 

 

Sub Total

 

 

29,400

 

 

 

 

 

 

 

 

Grand Total ( Adding all the above sub totals)

 

 

305,400

The above is supposed to give you an idea of the capital you need, but it’s not ideal or standard. For instance if you pay lower rent then your capital will be less. Same if you go for an ice lollies maker of less capacity. If you buy a higher capacity you will spend more. If you decide to operate from your house then you will not pay extra rent, and will not require the licenses. The costs of other items could also vary. One thing we will insist is the need to have working capital; you need to sustain your business until you break even.

Sales / Distribution

Once you make the lollies you need to get them to the market. You should think of this clearly before you even start. Although it’s possible to sell from your premises, this can only work if you are operating from a very high traffic area. And not just traffic but the right kind, the consumers who are most likely to purchase.

The best method is to be a distributor and have people selling on your behalf. Alternatively you could be a wholesaler whereby the retailers/ hawkers purchase from you and go sell where they get the market.

In the first case you will recruit the salespeople and provide them with cool boxes. They will be coming to your premises to pick the lollies you have made and then go out and sell. At the end of the day, or when they exhaust their stock they will come back with the money from sales they have made. You give them a commission. If there is stock that is remaining they return it. This is the preferable method when you are starting the business. The disadvantage is that although they are earning a commission they have not invested money in the business and can easily become lethargic.

In the latter case where you act as the wholesaler the retailers purchase the lollies from you at a discounted price and go sell at a higher price. They prepay for stock. The quantities they purchase will depend on what their projected sell. If at the end of the day there are lollies remaining then that is up to them.

Try mapping your market and recruiting appropriately. Say one person to cover area A, another area B and so forth. This should apply in either above cases. The aim is to maximize the earning of the salespeople and retailers while making every area is covered. Sometimes this is not wholly possible and enforceable so you let the salespeople sell anywhere they find a customer. Still aim to cover as much as for the area as possible, lest a competitor or potential entrepreneur notes you don’t cover a certain area as much as it is within your reach, and thus decide to start and give you a run for your money.

Revenue and Margins

When making ice lollies direct production costs are water, electricity, flavors, colours and lollie sticks. Other costs are labour, sales, rent and marketing.

The gross unit cost of making an ice lollie ranges between Kshs.2 and Kshs.4 depending on your efficiencies and capacity. The more lollies you are able to make and sell the lower the cost

Ice lollie makers sell to retailers at between Kshs.6 and Kshs.7, and the retailers sell to consumers at Kshs.10

Even say at a maximum margin of Ksh.4 per lollie, and you sell 100 lollies, you make Kshs.400. And if you have two salespeople and each sells 50 units then that is Kshs.150 per person at a commission of Kshs. 3.

An ice lollies maker located in Huruma, Nairobi (a highly populated low area) vending through a network of four people sells an average of 450 lollies in a day. But you will start slowly, and by the time you get to such levels you will have a very realistic taste of the market. For planning purposes use lower figures.

Competition in the business is largely based on location, distribution and reach. There is very little product differentiation.

If you have aggressive retailers who are also able to cover a wider area then you will make more sales. Still there is room to compete on flavors or variety of shapes.

To get different shapes you may need to buy from the ice lollies maker supplier or commission moulds (from juakali) with slots of different shapes.

Though the classical lollie is one color: yellow, orange, blue more entrepreneurs experiment with a mix of different colors. There is also room to experiment with simple but unique flavors. This might slightly increase your costs but will differentiate you in the market. It’s better to start with the common widely recognized flavours and introduce new ones gradually as you monitor how the market reacts.

You can also brand in such a way those consumers whether children or adults are able to identify your retailers easily. These could be through stickers on the cooler boxes and well labeled coats. Have an easy to remember name.

Branding will help customers to stick with you even when competitors copy your product. Remember any differentiation you make will only give you a temporary edge since nothing will be really proprietary and the competitor can easily copy it.

Considering the weather patterns in most of the country then sales will fluctuate depending on the time of the year. That is why it’s important to sell as much as possible during the hot season to compensate for the fewer sales you will make during the cold season.

Since there is little differentiation in the business, and the product a low end ‘luxury’, consumption is impulsive and in most cases unplanned for. Leaving church on a hot Sunday, you see a lamba lamba guy, you have some extra Kshs.10, and you purchase. This illustrates the importance of the vendor being available; being seen; being on the face of the consumer; being at the right place at the right time say school path on a weekday afternoon.

The costs of production are low but you can keep them lower so to be able to survive before you break even.

So Is It a Feasible business?

Yes if you get the location and distribution right. If not the business is likely to perform poorly. There are opportunities especially in satellite towns. You may not to make hundreds of thousands but tens of thousands. Urban areas with high population and few vendors also offer an opportunity.

The barriers to entry in the business are less to do with capital but lack of information of how to get into the business. However as information becomes much easily available then there will always be the threat of competition.

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