Entrepreneurship Zone: 28 January 2022 :: Kenyan cheese company sees growing demand in East Africa

Fri Jan 28 11:37:19 CAT 2022

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Entrepreneurship Zone: 28 January 2022 :: Kenyan cheese company sees growing demand in East Africa

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Kenya has a long history of making dairy products. The sector is big business with several large dairy manufacturers producing milk on an industrial scale.

The historical interest in dairy has led to a thriving marketplace for value-added goods like cheese. Kenya-based company Raka Cheese has been producing cheese in the region since 2001 and managing director, Kalpa Padia, believes that demand is increasing.

“Since 2005, I have seen an increase in the demand for cheese,” she says.

The company’s main products are cheddar, mozzarella, paneer and pizza cheese which are sold to middle-income customers in supermarkets as well as business-to-business clients across Kenya.

Modest beginnings

The idea to start the company first came from Kalpa’s husband Rajesh, who ran a cheese business in the 1980s. However, the venture had to shut down due to a change in the commercial climate which adversely affected many small-scale enterprises.

The cheese-making business was started again in 2001 under the brand name of Raka, which is a combination of the first two letters of their names, Rajesh and Kalpa. The company began operations by processing milk that was purchased from small-scale dairy farmers. The liquid milk was processed in a 450 litre tank and a small cheese press.

After producing cheese on a small scale, the next step was to move to industrial-scale production by purchasing machinery with family savings.

“The farmers bring the milk to our factory and then each cheese has its own process. We have to pasteurise the milk and then heat it to 78 degrees to kill the bacteria. Each different cheese requires different manufacturing techniques,” Kalpa says.

The introduction of machinery has meant that Raka Cheese, which is based in Nyeri, a town 150km north of Kenya’s capital city of Nairobi, has been able to move from processing 200 litres per day to 10,000 litres.

A selection of Raka Cheese products.

Changing consumer habits

Aside from increasing the scale of operations, Raka Cheese has also benefited from changing consumer choices in Kenya. Kalpa says that the rise in fast-food and takeaway culture has led to an increased demand for cheese from the company’s corporate clients.

“We have a lot of international restaurants entering the country like Domino’s Pizza. People have travelled and tasted different pallets, so they are demanding more cheese. Children are also more inclined to eat fast food than traditional home food; they like things like pasta, pizzas and sandwiches,” she says.

International supermarkets, like France-based Carrefour, have also entered Kenya in recent years. The downside, however, is that these foreign chains have started importing cheese from Europe to compete with local market brands. But Kalpa remains confident that this will not decrease her company’s sales.

“The Kenya Dairy Board gives first preference to the Kenyan market. Foreign imports have a lot of taxes. And Kenyans still prefer ‘made-in-Kenya’ products,” she says.

An imported cheese weighing around 250g can sometimes cost more than $10 in a Carrefour supermarket compared to local equivalents that are often less than half the price.

Mild cheese

Though consumer preferences are changing in Kenya, Kalpa says that the best-selling cheeses are those with relatively bland flavours like cheddar, mozzarella and paneer. Indeed, the stronger blue cheese flavours on offer in Europe, like Stilton and Roquefort, are not yet popular in Kenya.

However, Kalpa says the company makes Raka Nyeri Blue cheese and her son is experimenting with other kinds of stronger cheeses, as they expect the market to slowly increase in size.

“On the whole, it is a very niche market that enjoys a stronger cheese. But with the current generation, with all their travelling and everything, they do enjoy that kind of cheese with their wines and beers when they have parties,” she explains.

Regional growth

Raka Cheese currently exports to Uganda, Tanzania, South Sudan, Rwanda, Ethiopia and Eritrea. The managing director says that South Sudan is surprisingly one of the largest importers of Kenyan cheese in the region. She attributes the growth to a large United Nations base in South Sudan as well as demand from the local population.

With a commanding presence in the Kenyan market, Kalpa expects the next stage of growth to come from increasing sales to the greater East African region.

Barriers to growth

One of the main problems for the business is the supply and quality of milk. Kenya’s commercial dairy industry is controlled by a few powerful individuals who are able to manipulate the price of milk.

This makes it hard to budget for the cost of purchasing raw material and it can often impact the supply. The other option is purchasing milk from smallholder farmers, though this often leads to milk that differs greatly in quality according to how the farmer has reared the cows.-Howwemadeitinafrica

Kalpa Padia, managing director of Raka Cheese

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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