Innovators often identify a gap and predict its value to society. That is exactly what Julius Mwaura is doing – bringing pasteurised milk closer to the people.
Mwaura, the managing director of Tassmatt Agencies Limited is the brain behind a milk vending machine.
“If you are interested in agricultural value addition, there is a big opportunity in milk dispensing business. This business idea has great potential given that every household in Kenya consumes milk in many forms. Milk will always sell, as long as there are people to sell to, meaning demand for milk is ever present and growing. As an entrepreneur, you can get into this business and cash in on this demand. Sale of milk across the country has gone high-tech with the introduction of vending machines in many urban centres that dispense milk just like money from an Automated Teller Machine.” Mwaura tells Farmers Trend
How it works
The Anytime Milk Machine (ATM), which works like an Automated Teller Machine (ATM), allows consumers to purchase milk from a mechanised nozzle. Here, they bring their own canisters and key in the amount of milk they want and pay for it. The bonus about this innovation is that they don’t have to pay for packaging, making it a cheaper option for consumers. With this innovation, customers have the chance of working within their budgets.
The system also eliminates the middle men – major diary firms – and pumps milk directly from farms to coolers for pasteurisation, from which point it goes straight to the vending machine.
Mwaura, a jolly fellow, sits me down and takes me through his whole innovation.
Where to set-up a Milk ATM machine
A milk dispensing business will require a location which has an active sizable market for the milk product each day. Remember that many people who will come to buy your milk will most likely be buying other food items such as bread, sugar, vegetables and others. This means that the best location for your business will be in a main shopping area such as in or near a shopping center or supermarket.
A good strategy is to approach major supermarkets with a proposal and negotiate a revenue sharing agreement. Propose to install your milk dispenser inside or at the entrance of the supermarket to attract those who go to shop in there and offer to share your profit with the supermarket in exchange for the location. The advantage of this arrangement is that you will use their electricity, water and security while not paying rent. If this cannot work, you still have an option of renting your own room within the area, to take advantage of the foot traffic already present around the business center.
Look for a clean and organized room with adequate lighting and ventilation with reliable running water and electricity.
The major equipment you need to have in milk dispensing business is a milk dispenser, commonly called milk ATM here in Kenya. These machines come in various capacities and types – portable and wall – such as 150, 200, 300, 400, 500, 600, 200 and even 1,000 litres. The machines are refrigerated and can dispense any denomination of milk in 100ml units. They keep the milk fresh by maintaining a constant temperature and can be manually operated to release the milk.
“Currently we are having a special offer and the cheapest machine is going for 250,000 Shillings. We are also giving our customers a chance to pay the amount in installments.” Says Mwaura
Regulatory Requirements and Licensing
Depending on where you set up your milk dispensing business, Kenya Dairy Board (KDB) permits, licence and other levies including business permit from the county government will cost approximately Ksh10,000. You may be required to have a permit if you transport the milk and a health certificate for your staff. We highly recommend that before you set up the business, confirm KDB levies and requirements since KDB is the regulator of milk business in Kenya.
The success of your milk dispensing business will heavily depend on dependable supply of good quality milk. Look around for local dairy farmers who will supply the milk at a good price each day and identify one or two sources for your regular supply.
Kenya Dairy Board (KDB) regulations require that milk sold through the dispenser has to be pasteurized before sale to consumers, therefore ensure that you either get pasteurized milk or pasteurize it yourself by heating before dispensing. You can also get already pasteurized milk from farmers’ cooperatives. Milk is delicate and must be handled with a lot of care.
Pasteurized milk may cost about Ksh50- ksh55 per litre but these prices will vary depending on the season, farmers, location and distance from major towns. During your research, ensure you confirm the correct prices at that time in your area and any current additional KDB requirements, if any.
Milk consumers will come with clear bottles to buy the milk. You can stock these bottles for sale to those who do not have, giving you extra income. Depending on your location and source of milk, you can dispense milk at Ksh60 – Ksh70 per litre.
In a good location, you can sell 200 to 500 litres of milk per day, generating a gross profit of Ksh2,000 – Ksh7,500 per day. In a major mall or supermarket, daily sales of up to 800 litres are possible.
Good customer service will keep consumers coming back to buy milk from your dispenser. Maintain high standards of hygiene to avoid contaminating the milk or the dispenser and ensure the machine is well maintained. You don’t want the machine to develop breakdowns when your customers are being served.
Some customers may not have enough loose change to buy the milk therefore remember to have a good supply of coins to exchange with notes for those who come with bigger denominations. Even though the machine is automated, always be around or have an assistant around when customers are being served to assist those who may not know how to operate the dispenser or to exchange bigger denomination with coins.
A milk dispensing business may be expensive to set up initially but will bring in good returns if you are strategic. The location will determine the sales and therefore the profits you can make in this business.
Finally, make sure that you have identified a reliable supplier or suppliers of milk before you launch the business otherwise you may be forced to post notices such as “No Milk Today” or “Hakuna Maziwa Leo” which will effectively kill your business.
But like any business, they have encountered challenges which are majorly operational that include supply chain management, particularly transport and logistics. They aim to have ATM minimum downtime between refills but the traffic slows them down delaying their ability to have the milk ATMs refilled on time.
Power reliability used to be a major challenge since the machines need electricity to keep the milk cool. However, they have been able to purchase cooling machines which can work even after a power blackout.
A word for budding entrepreneurs
Mwaura advises other upcoming entrepreneurs to have focus.
For Mwaura, being an entrepreneur means signing up to an exciting journey with a lot of disappointments and mishaps but one should learn to quickly get up and move on.
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