Do Cereals Business in Kenya Make Money?

Wondering how profitable is a cereal business in Kenya?

As a grain trader, your work is to buy, store, dry, re-bag, and transport them at a profit. In this free guide, we help you with a step-by-step method of how to establish a successful cereals business in Kenya’s big towns such as Nairobi, Kisumu, or Mombasa. By following it, you can write a cereals business plan in Kenya, budget, source products, launch your shop, and manage it as a pro. Your grain shop can buy and sell various types of cereals and legumes like maize, beans, wheat, and rice. The post covers the following aspects of how to start and run a cereal business in detail.

In this guide, you get an ideal business model, cost and profit estimates, challenges, and the best tips for running a cereal business in Kenya.

The best business model for a cereals business

The business model will explain the four key parts of your cereals shop business plan namely; Who: (target consumers), What: (value proposition) How: (value chain), and Why: (revenue model)

• Who: sell your grains to individual consumers and other business customers like flour millers and institutional buyers like boarding schools or hospitals.
• What: The value proposition of your business. It is the products and services that you will cereals business will offer to your consumers or clients.
  • Cereal business goods or products are the range of cereals, pulses, dried tubers, and spices you will sell in your grain store. These most profitable cereals to sell in Kenya are listed in the table below.
  • Cereal shop services, that you can provide to your clients are free deliveries, aggregation, and grain milling.
• How: It’s the value chain or the operations you will undertake to produce or provide your goods and services for sale. Examples are transport, storage, grading, and re-bagging before sales.
• Why: Your revenue model, is how you will price, market, market, sell, and collect payments or value from your customers. For instance, you can use free Social media sites like mobile Apps, Facebook, and WhatsApp to market your goods. In turn, they can pay you using m-banking.

Read Next: Which are the most profitable cereals products in Kenya

Product Category	List of most profitable cereals in Kenya
Grains/ Cereals	Maize Wheat Rice Sorghum Millet Oats Barley
Pulses/ Legumes	Beans (kidney, black, yellow, mung), Green grams Soybeans Black turtle beans Lentils (red, green, brown, yellow) Garden peas Chickpeas Nuts (peanuts, veal nuts, cashew nuts, groundnuts)
Flour	Wholegrain/brown flour Sifted flour, Mixed/blended flour Fortified Flour
Dried Tubers	Cassava, Sweet potatoes Bananas
Spices	Black pepper Turmeric Cinnamon Cloves
Other	Omena Dry fish Package bags Food containers

How to start a cereals business in Kenya

If you are wondering how to start a cereals business in Kenya? The following are the best tips and steps you need to follow before you can launch a grain store business in Kenya.

1. Conduct a cereals industry market research and feasibility study; It will help you to
   • Explore and understand the market dynamics of your cereals market, such as volume and value, potential customer segments, buying patterns, competition, etc.
   • Answer whether the cereals business is a viable venture for you to invest in given your capabilities, resources, and consideration of risks
2. Draft your cereals business plan. Draw a road map of how you actualize your cereals business idea into a thriving business. It will focus on financial projections, marketing plans, etc.

Cereals business feasibility study

The first step, the market and feasibility analysis is to identify target consumers, products, suppliers, and business locations. You can carry out one on your own or hire (recommended) an agribusiness consultant like agcenture for professional insights. The questions to answer include

• Target consumers: You can sell your cereal products under B2C (retail) or B2B (wholesale) models. The key buyers of grains and cereals in Kenya under B2C are individual or final consumers and institutional ones like boarding schools and hospitals.  In the B2B model, you will target other grain traders or brokers maize millers, and restaurants.
• Products; as illustrated above, a grain store can stock different brands and varieties of whole grains and pulses, flour, and dried cassava. To settle for the best research into the consumer preferences, the buying and selling prices to get your profits projections.
• Suppliers: Identify the sources of your shop products. You can buy from farmers directly or rely on local or importers who source quality grains from Tanzania, Uganda, and Ethiopia. Look for one who is reliable for long-term contractual arrangements to deal with price and volume fluctuations.
• Business location: identify the best areas to locate your business. An ideal location in a busy town or estate. Around Nairobi, the main grain markets are in Nyamakima in the CBD, Kariobangi, and Githurai markets. You can set one in an open-air food market, a shop/store, or a roadside grocer (kibanda)
• Financial and Resource Availability; This step will help you to put into perspective both the Startup and operational costs of a cereals business The start-up costs include securing business premises and getting business permits. Besides outline your skills and experiences and those of your family that will assist in running the business.

Related: How to store your cereals without Toxic chemicals

The market and feasibility study will give you an informed conclusion about investing in cereals or business. While you are the best suited to conduct it, consider hiring a consultant like Agcenture Advisory for technical areas like cash modeling and competitor analysis. The studies range from as low as Ksh 10,000 to 100,000 depending on your goal. The consultant should give you a feasibility study recommending your next steps.

How to write a Cereal Business plan in Kenya

The second step is drawing an implementation plan on how you want to start your business idea and grow it into a profitable venture. The final output is a cereals business plan to start and run a grain business. Its major components are;

• A description of your cereals business; wholesale or retail, location, product range, vision and mission, etc.
• Environmental Analysis; including the SWOT & PESTLE analysis of factors likely to impact your success.
• Competitive environment; identify your rivals like supermarkets and outline your competitive advantage of what you will do differently.
• Marketing plan; Identify how you will brand, market, package and price your products.
• HR (people requirements); identify the skills and experiences of the key people who will run the business including the gaps in what you will hire or get consultants.
• Financial Projections. Have the start-up financial documents like the balance sheet (1st 3 years) cash flow and profit and loss (monthly for 1st year and yearly for years 2 and 3)

Cereal business Startup costs in Kenya

Having completed the above, the next step is to start up your business. It will involve you acquiring business licenses and securing the business premises before you can bring in the cereals.

Before you can operate, get a single business permit to run a food store from the county government. The cost is around KES 10,000 in most counties, and it is renewable each year.

To secure business premises, you will need to pay rent in a business store and construct raised cereal stacks and shelves for dry storage of maize. Rent in towns in Kenya range from one to the next. You can get one at a cost of around KES 5,000 per month in a busy town that can hold 50 bags of 90 kgs of cereal.  Constructing a raised stand made of timber can cost around KES 10,000. The stands will keep your maize free of pests like rats and mice or the moisture from the floor.

Cereal Shop Operational Costs in Kenya

The grains business model operates on a “buy low, sell high” model. You will buy cheap grains during harvest season; store awaiting prices to raise and sell later. As such the following are operational costs of operating a grain store in Kenya.

• Buying costs; It is the price you pay to buy products. You can access real-time prices of a 90 kg bag of maize, beans, and other cereals and pulses each day. These are published by the NAFIS, NCPB, or the Ministry of Agriculture in Kenya.
• Transport costs: the cost you will pay to transport commodities from your supplier to your grain store. It includes the costs of loaders and offloaders. It is charged per bag or a lorry. It will depend on the distance and cost of fuel.  
• Cess & Levies; the cost you pay at county boundaries to be allowed to trade your goods in the county.
• Storage costs: the cost you will pay to operate a store. Similar to the rent costs. To get the cost per bag, divide the total rent per year by the number of bags you bought and sold in the year.
• Labor costs: The total amount of salaries and wages for store attendees, drivers, and other store workers.
• Package costs: The cost you will pay to buy hermetic bags and sacks to store and sell your cereals.

These costs are highly flexible and depend on your shop size and the amount you can handle in a year.

How to successfully grow your cereal business

What is the secret of running a successful cereals shop in Kenya? This guide has 7 tips to help you make extra money as a cereal trader in Nairobi.

1. Direct sourcing from farmers: it is costly to source goods from brokers. To make extra profits, buy your stock like maize directly from farmers. The best time is to buy cereals during the harvest season when prices are low.
2. Food processing: value addition is a cheaper way to make extra profits in the grain business. One cheap method is grain milling. To diversify further, mill and package pure or blended maize, wheat, and porridge flour.
3. Transport: Consider owning your own transport or co-hiring a lorry together with other farmers to cost-share transport.
4. Chemical-free Storage: buy airtight and moisture-proof hermetic bags and small silos to store grains dry and free of storage pests.
5. Cost Cutting; to lower your operation cost, opt to store your commodities at home stores and operate from a small store in town.
6. Institutional buyers: Apply for tenders and respond to bids to become a grain supplier for school feeding programs. Source for orders in public firms like hospitals colleges and private schools.
7. Diversify: sell a wide range of cereal products instead of focusing on maize and beans only. The table above gives you a list of different cereals, pulses, spices, etc. Besides, diversify in brands and or varieties of each commodity.

Challenges Facing Cereal Businesses in Kenya

Which challenges are you likely to encounter as a maize broker or trader in Kenya, Uganda or Nigeria? Gathering feedback from secondary data, the following are the key challenges that face SME cereal traders in many parts of Africa.

• High cost of doing business due to expensive business licenses and permits.
• Most cereal businesses are informal without records keeping or formal banking limiting their access to formal credit and commercial loans for expansion.
• Fluctuating commodity prices between harvest and scarce periods affect traders, profitability, planning, and investing for growth.
• Climate change effects like drought, poor rainfall patterns, and floods cause supply challenges driving costs up and lowering the trader’s profits.
• Incidences of informal and double taxation in cess and levies in intercounty boundaries during transport.
• High incidences of food waste from aflatoxin or storage pests like the weevils that infest maize, sorghum, and green grams.
• Inadequate storage infrastructures that contribute to cereal losses from weather exposure.

conclusion

Read Next; How profitable Is a maize milling Business in Kenya

The grain business remains one of the most profitable agribusinesses you can start today. Cereals, pulses, and flours make a large component of food demand for individual and business consumers. The analysis above gives you the perfect business model for a successful grain store, the steps and costs of starting or expanding a grain business, and the challenges grain traders in Kenya face. The post concludes with recommendations on how to run a profitable or successful cereal business for extra profit