Well, the headline is misleading, but by the end of this article, you will understand why.
I have been sharing my journey of setting up an agro processing firm. If you missed it, here is what I wrote last:
#HerDiary: Are There Affordable Manufacturing Spaces for Entrepreneurs in Kenya?
Over the last 2 weeks, I have been doing some research on purchases that are needed in a manufacturing business. I now realize why most of our products are more expensive than imports.
Economies of scale, which obviously small manufacturers in the country struggle with.
Packaging
A jar of 375 ml cost Ksh 35. So packaging alone adds an extra Ksh 35 for each product. What I realized, however ,is that if you buy 100,000 of such jars the cost will come down to almost Ksh 15 per jar.
In my projections, I still have not figured when I will sell 100,000 jars of my product. Even if I did, I need to have Ksh 1.5 million set aside for packaging alone if I really wanted to cut my expenses on packaging.
Branding
I will do a whole article on branding, covering my experience with creatives.
The last designer I dealt with did some amazing designs. We really wanted to have amazing packaging that we can export someday.
Like with most other things on your expenses records, when it comes to printing labels you want to print more as it becomes cheaper. I did learn something about colours – it becomes more expensive with every additional colour. Also, there is a minimum number for each colour.
My designs are four colours, which is the maximum there is. For me to save on cost, we have to print a minimum of 50,000 labels.
Materials
Its hard to negotiate for materials if you are just buying a few kilos of the necessary raw materials. However, if you buy tonnes of them, you can actually get them straight from a farm and this is incredibly cheap.
So, this got me thinking. If I manufacture my product with the little capital I have, how will I compete with the giants who make the same product and enjoy all these benefits of having finances to buy everything in bulk?
My team and I sat down and came with creatives way to get to customer that will see us sell, make profits and scale to a level where we will be enjoying economies of scale, as well.
Kamaitha will be sharing with you #HerDiary every week! If you just can’t wait that long, you can follow her on Twitter @Kamaitha
