Contract farming doubles income for Bomet farmers

A potato contract farming model by snack maker Deepa Industries Limited has delivered a win win for the company and farmers with the farmers earning more in farmgate prices and the company now getting year round supply of the potatoes.

Initially erratic supply of the potatoes was giving the chairman of Deepa Industries Limited Mr. Nilesh Shah sleepless nights.  “Potatoes are the primary ingredient in our snacks. Frequent shortages and the resulting high prices had really pushed up the costs of production. We had reached a stage where we weren’t getting enough potatoes and to solve this problem we decided to invest in the supply of the crop,” he said.

The idea of a potato out growers’ scheme in Bomet was thus hatched. It provides farmers in the scheme with inputs like fertilisers, potato seeds, and weed killers which has allowed them to increase production. The farmers sell their potatoes to the company as per its quality requirements—size and sugar content. “This ensures a steady supply of quality potatoes for us and in the process we’re helping farmers earn good income from their crop,” said Mr Shah. The company’s goal is to get at least 50 per cent of its potato requirements from the out growers scheme.

The investment in the supply chain has been necessitated by a rapid increase in sales of its snacks which have been growing at the rate of 30 per cent per annum. This rapid growth is the result of the company’s investment in improving its packaging, product innovation and introducing new products over the last five years.

The factory located in Nairobi’s Industrial Area is now fully automated increasing its capacity and enhancing the quality and consistency of its products, says Mr Shah. The packaging of its Tropical Heat range of spices was also overhauled and the logo modernised at a cost of Sh20 million.

“The original packaging had not changed for 15 years. The new packaging has increased our sales volumes as consumers now feel that our products are at par with international products,” he said.

For example, the grinders are new in the market. Consumers can now simply grind spices on food directly at the table which has enhanced the product’s value as people prefer fresh spices. The snack range also underwent radical change in packaging to improve freshness.

“We no longer have manual sealing which are prone to leaks. We use foil packaging treated with nitrogen which allows products to retain freshness and aroma and increases the shelf life of products,” said Mr Shah. The extensive re-branding and using branded gondolas at retail outlets has enhanced visibility of the company’s products on the shelves.

Deepa Industries does not do much advertising preferring to use promotions at retail outlets to market its products. “We find continuous promotions at the point of sale more relevant than advertisements targeted at the mass market.

Decisions are made by housewives at the supermarket level so we feel that engaging with the consumer at that point has got the biggest dividend. Through our network of 30 merchandisers we try to ensure that our products are clean and visible on the shelves and available,” he added.

Deepa Industries has come a long way since its inception in 1973 as a cottage industry employing two people. Today it has 150 employees and sells a wide range of products including snacks, grinders, curry powder, salts, spices, herbs and seasonings.

Two months ago, the company expanded its operations to the region by setting up a factory in Uganda at a cost of Sh15 million. Until then the company had been serving this market through exports. Its other markets include Tanzania, United States, Australia and the UK. Exports are a big part of its business accounting for 40 per cent of sales.

“For years we had been exporting ready made snacks from Kenya to Uganda, but the cost of transportation was very high and therefore uneconomical.

To address this issue and take advantage of the ready availability of raw material such as cassava and matoke we decided to set up operations in Uganda to serve the country as well as its neighbours—Rwanda, Southern Sudan and DRC. This will enable us to have a strong regional presence. Our vision is to become a pan African brand,” said Mr Shah. Once Uganda has stabilised the company plans to expand to Tanzania in another two years.

In Kenya, the company has been looking for land to build a bigger factory. With a larger factory Deepa Industries can get into contract manufacturing for oversees companies.