Entrepreneurship Zone: 24 July 2021 :: Company taps into demand for essential oils from Kenya’s arid areas

Sat Jul 24 08:47:43 CAT 2021

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Entrepreneurship Zone:  24 July 2021 :: Company taps into demand for essential oils from Kenya’s arid areas

About a quarter of the global land surface consists of arid and semi-arid drylands. By definition, rainfall in these areas measures less than 500mm per year. Creating livelihoods for the approximately 20% of the world’s population that live in these areas has been a development topic for governments and non-profit organisations for some time.

For one Italian entrepreneur living in Kenya, these drylands present a clear business opportunity. Tommaso Iser Menini founded African Agency for Arid Resources (Agar Ltd) in February 2018 after reaching a point of frustration with his non-profit work in Kenya. Communities were being empowered to collect agricultural commodities but had no access to a market where they could be sold.

“If you capacitate so-called beneficiaries but you don’t consolidate a commercial exit strategy for the products, you create bottlenecks. I kept seeing this as I was helping pastoralist communities enhance the collection of gum arabic,” explains Menini. “I realised what was needed was more private sector engagement and, quite simply, I became the private sector I couldn’t find.”

In the beginning, Agar Ltd was set up as a commodity trader for gum arabic (harvested from the Acacia senegal tree), black frankincense (from the resin of the Boswellia neglecta tree) and myrrh resin (tapped from the Commiphora tree). Gum Arabic is commonly used as a stabiliser and emulsifier in the food industry, while frankincense has gained popularity as an alternative treatment for pain and swelling and is used as a fragrance in cosmetic products. Myrrh is also used as a fragrance and for the treatment of some medical conditions.

Very quickly, within the first two months, Menini realised the company would have to do value addition for the business to be sustainable. “We were moving large consignments of the raw material but the margins were not great,” he says.

In June 2018, Agar Ltd was asked to participate in an expo for Italian companies in Nairobi. Although the company is fully Kenyan, Menini grabbed the opportunity to increase exposure and quickly found a third-party distiller to produce essential oils from the existing frankincense and myrrh resins it had. At the expo he sold directly to the public. “With just these two essential oils, we made $1,000 in two days. That is when I realised essential oils were a good market to venture into.”

A retail brand is born

Over the course of a year, Agar Ltd did extensive research, both on the local and international market, before deciding on its product line-up and sourcing strategy.

Tommaso Iser Menini in Isiolo County, Kenya.

In September 2019, Essenza by Agar – the retail arm of the company – was launched with 11 essential oils that can be used to alleviate various health ailments. Nine of these are sourced from Kenya: myrrh, frankincense, geranium, lavender, rosemary, clove bud, lemongrass, tea tree and citronella. The eucalyptus oil comes from Rwanda and ylang ylang from Madagascar.

“The retail arm has helped us understand how to get from the trees to the shelves. We now have several vendors and sell Essenza products throughout East Africa. We also have marketers in Italy,” notes Menini. In addition, the company trades through its own online shop, offering shipment globally in partnership with DHL.

Agar Ltd produces essential oils from trees found in Kenya’s arid areas.

For frankincense and myrrh, everything is done in-house, apart from the distillation: sourcing from collectors in Kenya – whom the company has trained to do the harvesting – sorting and cleaning, as well as the bottling, labelling and distribution.

“Agar was approved for a loan to install our own distillation capacity about two years ago but something at the time made me cautious about incurring that debt. It was just before the pandemic hit.”

As essential oils are stocked on the shelves of most of the retailers that Agar Ltd approaches, the company pitches its oils as higher quality, ethically sourced and organically certified. “We usually go out with the sales team and do a comparison of our product to the ones already available. We have strong essential oils in terms of quality and this is clearly seen when compared to the imported products,” he says.

Another successful strategy was to focus on white-label clients. Currently, Agar Ltd provides seven clients with white-label options, including Kenya’s Healthy U chain of wellness stores. “We targeted Healthy U quite aggressively as our research showed they were functioning as the go-to for essential oils in the country. Today, we are the sole supplier of their internal line of essential oils under the brand name Aroma Essentials. We provide a packaged and labelled product ready to be sold,” adds Menini.

The next phase of growth through diversification and export

In the coming year, Agar Ltd will be establishing its own aloe farms with a grant of GBP 100,000 from the Kenya Catalytic Jobs Fund (KCJF) that it received at the end of 2020. The money will be used to establish the supply of indigenous aloe for a range of body products the company is bringing to the market: shampoo, conditioner, liquid soap, body lotion and shower gel.

“We are setting up our own nurseries that will create 200,000 seedlings in the first year and we continue to empower the pastoralist communities who will grow to aloe so we can purchase the raw material from them. The aloe farms will also create a green wall against desertification, furthering our arid and semi-arid resource mandate.”

Frankincense resin

The range of aloe products is specifically aimed at the hospitality sector, which was hard-hit by the pandemic; however, Menini remains optimistic, saying the company is starting to sign its first hospitality clients. “We are now commissioning litres of these products to be used in AirBnBs, lodges and hotels.”

Apart from the KCJF grant, Agar Ltd’s funding has come from Menini himself, family and friends and one Japanese seed investor, Kepple Africa.

Menini reveals that setting up the distillation facility is the next step for the company once it has secured a customer for the bulk export of essential oils, specifically for frankincense. It is hoping to reignite commercial conversations that had died down during the last year or so as a result of the pandemic.

“We are looking for a buyer to take one to two tonnes of frankincense essential oil per year. If we find this strong buyer that understands the supply from Ethiopia and Somalia is declining and that we can provide high-quality oil from trees that are not endangered, that is when the company will move to the next level,” he says.

A selection of essential oils produced by Agar Ltd.

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