From Selling Milk As A Side Hustle To A Top Milk Processor In Kenya
When Margaret Munene started keeping dairy cows, her immediate vision was to have a few cattle to supply her household with adequate milk. Within no time, the herd grew that she had more than enough cows and milk for the family.
Still working at the then Kenya Agricultural Research Institute (Kari), now Kenya Agricultural and Livestock Research Institute (Kalro), she decided to share the excess milk with her colleagues.
“After some time, I realised the milk was a lot even after giving it out and since the cows were consuming quite some money in terms of feeding and care, we decided to take the milk to the nearby Githunguri Dairy Cooperatives Society,” says Ms Munene, the founder and managing director of Palmhouse Dairies, a milk processing company based in Githunguri, Kiambu County.
However, the cooperative was not paying enough to balance off the costs and her colleagues suggested she sells to them the milk instead of giving it out for free.
Initially, she was skeptical about delivering unprocessed milk in bulk, bearing in mind the hustle it involved. Gradually she started distributing it, marking the beginning of her milk side hustle.
“I sold it to my friends and Githunguri Cooperatives Society and after a couple of years, we would have about 300 litres of milk in the car boot. After dropping our three daughters to school, I would quickly go around selling the milk and by 8 am, I would be at my office desk,” she says.
Running a dairy farm is quite involving and since Ms Munene and her husband were still in formal employment, they decided to employ knowledgeable staff to manage the small dairy farm.
“My husband was very helpful and has always been hands-on so we ran the dairy farm together. It was not easy but doable,” she adds.
Due to the high demand for raw milk in Nairobi then, she stopped delivering milk to Githunguri Cooperatives Society and opted to sell all the milk to consumers directly but since the family car was not big enough, they bought a pickup and employed a driver to deliver the milk.
Having seen that she was making more money from milk sales compared to her job at Kari, coupled with the fact that she did not find her work as a bacteriologist as exciting, she resigned. That is how she founded Palmhouse Dairies.
“I was not finding satisfaction in my work, so in 1995 after working for nine years, I decided to quit and become a dairy farmer and milk hawker while my husband who had a better job, continued working,” says the Bristol University-trained scientist.
Formalising her business
She did this for one and half years and around that time, the then leading milk processor, Kenya Cooperative Creameries (KCC) was enjoying monopoly in the dairy sector. The liberalisation of the sector in the 90s, opened an opportunity to formalise her business. As a research scientist and agriculturalist, she knew that it is better to sell processed clean milk than raw milk.
“We toyed with the idea for a year while saving some money. We wrote a project paper to source for funds to start a dairy processing company,” she says.
She went around looking for funds including her bank with a payslip as collateral but was not successful.
“It wasn’t like today where everybody wants to give you money. Nobody could fund us but eventually, a family friend told us that the European Investment Bank (EIB) was supporting SMEs through KCB and that we could use that,” she adds.
After presenting their project proposal to KCB, they secured a loan with a one-year grace period.
The couple then travelled to Belgium and bought their first milk processing machine which was installed within a couple of months and began processing 400 liters per day in 1997.
“Luckily for us, KCC was already on its death bed, could not pay farmers or source raw milk so we had a lot of milk supplies, we went into business promising to pay them on time,” she says.
Palmhouse Dairies began by paying farmers in cash and Ms Munene prides herself in showing women in Githunguri how to open bank accounts at a time when few women knew banking. About 85 percent of their farmers are women.
Being among the first people to venture into milk processing in Githunguri and having decided that Palmhouse Dairies was to be a medium enterprise, meant that theirs was a trial that could backfire.
“We were going into unchartered grounds, not sure what to expect. We also had to establish people to work without forgetting that farmers were so used to KCC and the only reason they could give us milk was that they had nowhere else to sell their milk,” she says.
Despite all that, Ms Munene says that she did not have fear of failure and the only time she was anxious was when she quit employment.
“My mother was against it considering my education level. That was very challenging and it made me question my decision yet by then, we hadn’t even started processing,” she says.
What has helped grow her business, she says, is that from the start, Palmhouse Dairies’s saw milk suppliers are not just as farmers but partners.
“From the very beginning, ours became a social enterprise that wanted to improve farmers’ lives as we grew. We would supply them with feed concentrates and deduct from their milk proceeds and even employ a veterinary doctor to assist them.”
Even during glut, Palmhouse Dairies could collect milk and destroy rather than fail to collect because they had pledged. This has led to a high farmer retention rate. They also give back to the community. Palmhouse Dairies set up Palmhouse Foundation in 2003, an education trust to finance the education of students from poor backgrounds and mentor them.
“We invited a couple of our friends who began with three students 20 years ago. We later increased the number to ten the following year. This was scaled up with the support of corporates and fast forward, over 1,000 students have gone through the foundation,” she says.
And having decided that theirs was to be a medium enterprise, their focus was to use their small size and quality as a strength. “We process our milk immediately because we source locally,” she says.
This strategy has seen the company move from the initial machine capacity of 3,000 litres to 15,000 litres per day onboarding 500 farmers, with products ranging from fresh milk, yogurt, and cream.
At the peak of the Covid-19 pandemic when the customers shut down, Palmhouse Dairies collected milk from farmers and delivered it to other processors that were making long-life ultra-high temperature (UHT) processed milk –until they returned to profitability in 2021.
Passing on the button
Having been in operations for 25 years and seen the company grow in leaps and bounds, Ms Munene says she and her husband are now taking a step back from the day-to-day running of the milk processor.
“Palmhouse Dairy was our dream and it doesn’t have to be our children’s dream but if anyone of them wants to carry the vision and take it to the next level then that’s fine but I don’t want to push it down their throat,” she says adding that the children can still oversee the company as directors if they don’t feel like being in it full time.
The research scientist says that she is happy to have decided to quit her research job to start Palmhouse Dairies.
“I’m also happy that our company has lasted 25 years because the mortality rate in the dairy industry is very high and to have lasted that long makes me proud. I have impacted the lives of many farmers, especially women that supply us with milk. They have become part of our family apart from profits,” she says.
She attributes her success to persistence.
“We have been very persistent and determined – there were times when business was very difficult– the dairy industry is not easy but I was sure I was going to succeed.”
To succeed in entrepreneurship, she says, do it with courage and prepare well, be organised and careful about what you have in mind and know your strength and most importantly, have some savings.
“Being in business is a wonderful thing because you become your employer and much as it is very taxing, especially at the beginning, you are your boss and your time is your own,” she says.
Article By: Elly Aoko