Entrepreneurship Zone: 30 May 2023 :: A businessman’s account of establishing a spice company in Uganda

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Entrepreneurship Zone: 30 May 2023 ::  A businessman’s account of
establishing a spice company in Uganda

 




 


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Based in Uganda’s bustling capital, Kampala, Africa Spices is an
agro-processor specialising in dried spices. The company’s portfolio spans
about 30 products, from ginger and tea masala to dried rosemary and garlic
powder. Jeanette Clark spoke with founder and managing director, John Paul
Ssengendo, about the origins of his business idea and the obstacles he
navigated to scale the company.

In 2015, John Paul Ssengendo visited Zanzibar as part of an incentive trip
offered by the Ugandan insurance company he worked for. Ironically, this
trip, intended to motivate, catalysed his departure from the firm. Finding
inspiration amongst the island’s spice sellers, Ssengendo decided to
establish his own business in the production of dried spices.

Ssengendo, who owned a 10-acre plot of land, turned to three of his
neighbours to supply the vegetables and herbs for his new venture. They
became the first suppliers of ginger and cinnamon to Africa Spices.
Ssengendo dried and ground the spices by hand, then packed them in polythene
bags, sealing the edges using a candle’s heat. Thinking back to the
candle-sealing process, he states, “I wish I had taken photographs.”

For Ssengendo there was a clear opportunity. Many farmers in Uganda were
able to grow coriander, ginger, turmeric and rosemary, yet lacked a market
for their produce. This often led them to sell their surplus at
exceptionally low prices.

Africa Spices started expanding its supplier base from the original three
neighbouring farms. It offered potential partner farmers agricultural inputs
and advice on growing the crops required, committing to buying the harvest.
Soon the company was able to add four new products.

The next step was to appoint an “aggressive” sales team who could take the
products to markets, schools, hotels, restaurants and shops. Ssengendo
ascribes the fact that the company went from zero to 103 clients in a year
to the efforts of this team.

Ten months after the first packet of spice was produced, Africa Spices’
demand outstripped supply to the extent that the company had no other option
but to find machines to automate some of the processes, like mixing and
grinding.


Finance and payment woes


The company’s growth trajectory was looking promising, but it was not all
plain sailing. Finding finance for expansion and working capital proved
difficult. “I could not afford the security the banks were asking for, which
made expansion in those early days very difficult,” says Ssengendo.

The company had to plough back every bit of profit it was making in order
to grow, something that it has kept doing over the years.

Another hurdle for Ssengendo was receiving payment from some of the
supermarkets and shops to which Africa Spices supplied products. With the
aim to gain customers rapidly, the company offered products on consignment
to some stores, many of which defaulted on payment without returning the
stock.

“It really is a problem a lot of new producers are facing in Uganda,” he
says. “Some of the supermarkets are not honest. We decided to only deal with
those who would sign a contract that included fixed payment terms.”


Overcoming the challenges one by one


As the company started to grow, Ssengendo and his team had to clear various
other hurdles. For instance, getting certification for its products from the
Uganda National Board of Standards (UNBS) is an ongoing challenge, with some
of its products still awaiting the seal of approval.

A growing customer base spread out across the country, also meant that the
company needed to look at its distribution strategy. Up to this day, it has
kept the logistics of delivery in-house and handles all distribution with a
five-truck-strong fleet.

As sales continued to increase, the company recognised the need for a more
secure and reliable supply of raw materials. To address this, Ssengendo
sought partnerships with organisations that could provide access to a larger
network of farmers, rather than establishing individual relationships.
Through a collaboration with the international NGO Fauna & Flora, Africa
Spices now has over 300 farmers who supply the crops needed for its dried
spice products. It also grows coffee, coriander, rosemary and turmeric on
its own farm.


Expanding the product range


The company has expanded from offering six products in its first year to a
current total of 30. Ssengendo notes that four of these items contribute
significantly to the overall revenue: pilau masala, masala tea, spiced tea
leaves, and ginger.

Other products include dried and ground rosemary, cloves, cardamom,
cinnamon, garlic powder and turmeric. These are mostly sold in 50g
containers, but after the company saw its sales decline due to the economic
impact of Covid-19 on customers, it introduced smaller sachets for
lower-income households at the end of last year.

At the moment, Africa Spices packs close to 70,000 containers and 200,000
sachets a month at its manufacturing facility in Kampala. The brand has
5,000 business customers on its books and 27 permanent employees. While
schools, restaurants, and hotels comprise part of their clientele, Ssengendo
believes retail presents the most significant growth potential.


International aspirations


Currently, the company’s domestic presence spans 90% of Uganda. However,
Ssengendo is not content with merely local success; he has his sights set on
the international market. Africa Spices already has some customers who
travel from South Sudan and the Democratic Republic of Congo, buying in bulk
to take over the border.

In time, he sees a possible market not only in these neighbouring countries
but also in the UK and the US.

“We first have to get all our certifications in place, which we hope to
achieve by the end of 2023 or early next year. Then export will be on the
cards.”



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