Entrepreneurship Zone: 202 April 2024 :: Starting a food company in Burundi: Businessman shares his experience

Tue Apr 2 09:51:29 CAT 2024

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Entrepreneurship Zone: 202 April  2024 ::  Starting a food company in Burundi: Businessman shares his experience

 <mailto:coordinator2 at zitf.co.zw> 

We take a closer look at Claude Nikondeha’s Burundi Fortified Foods, examining the company’s approach to overcoming local supply chain challenges, distribution obstacles, and seizing emerging agribusiness opportunities in the region.

Business model

Born and raised in Burundi, Claude Nikondeha relocated to Europe for education before working in the US, ultimately returning to his homeland in 2010. Initially, he established Kazoza Financial Group, a community bank where he still holds the position of president. Subsequently, Nikondeha turned his attention to addressing malnutrition in Burundi, founding Burundi Fortified Foods (BFF) in 2019.

Nikondeha’s motivation for BFF came from the staggering statistic that an estimated 52% of Burundian children under five years old suffer from chronic malnutrition. He explains, “When you look at the challenges of finding people for the workplace, that’s when you realise something’s not right. Malnutrition plays a big role in this situation.” The consequences of malnutrition, particularly during the first 1,000 days of a child’s life, can include lasting effects on cognitive development.

BFF produces porridges from locally grown and sourced ingredients, which are milled and enriched with essential vitamins and minerals. The company offers five distinct products catering to different segments, including babies, pregnant mothers, families, and school feeding programmes. Adults consume the porridge as a breakfast meal. Nikondeha asserts that a single cup of porridge provides all the daily vitamins and minerals a person requires.

The company’s goal is to eventually provide 50% of its production for free to poor communities. “Most people who need our products can’t really afford it. So we’ve designed a good product with good packaging so that we can sell a good amount in the cities where people’s incomes are high enough to buy it. That will then give us enough margin to be able to give away to vulnerable communities. We haven’t yet reached a place where we are able to give away 50% of our production but we started with 5%, 10%, now we are up to 25%,” Nikondeha says.

Burundi ranks among Africa’s poorest nations. In 2022, its estimated GDP per capita stood at US$293, significantly lower than figures in Rwanda ($913), Kenya ($2,255), and South Africa ($6,739). Nikondeha reveals that the company’s addressable market, who can afford its products, comprises around 30% of the population, primarily residing in urban areas.

In addition to direct consumer sales through supermarkets, BFF also sells its products to NGOs active in Burundi. These organisations subsequently distribute the products to the communities they assist. At present, NGO clients make up 60% of BFF’s total revenues.

Setting up manufacturing

The initial steps to get the company off the ground involved developing a formula for the porridge, which Nikondeha accomplished by collaborating with nutritionists. Securing investors proved relatively straightforward due to his background in the finance industry. Once funding was in place, the company acquired a facility in Bujumbura, the economic capital, and imported the necessary machinery.

Nikondeha admits that finding qualified technicians and laboratory staff for the factory was challenging. The company explored options in regional countries like Kenya and Uganda but had no success. Ultimately, he decided to hire Burundians who then underwent training from an international expert.

A group of children with Burundi Fortified Foods’ products.

Localising the supply chain

Maize is a key ingredient in BFF’s porridge products. Initially, the company imported maize from Zambia, but the inconsistent supply and increased costs prompted BFF to collaborate with local farmers. By guaranteeing the purchase of their entire output, BFF incentivised farmers to work with the company. Additionally, BFF provides these farmers with access to agricultural experts, has built several storage warehouses near the farms, and supplies farmers with fertilisers and high-quality seeds. Presently, the company partners with 33 co-operatives, representing over 700 farmers.

However, BFF still relies on some imported inputs, such as milk powder and packaging materials. The company currently sources its packaging from Italy, as Nikondeha was unable to find suitable suppliers in neighbouring countries. He reveals that one of his future ventures will involve establishing a local printing and packaging business, but acknowledges that it will take some time to get it up and running.

Marketing efforts

Nikondeha asserts that one of BFF’s most effective marketing strategies has been utilising radio. The company has also created a brand mascot named Kipo and organises events at schools. Moreover, it has appointed a musician as the brand ambassador. Nikondeha highlights that the company’s commitment to donating a portion of its income to provide free products for impoverished communities has also contributed to driving sales.

Competitive landscape

The company faces competition from both imported and local brands. Imported products, such as Nestlé’s Cerelac and PepsiCo’s Quaker Oats, remain prominent in Burundi. European brands are popular due to Burundi’s colonial history with Belgium and the influence of France (French being an official language of Burundi). BFF’s products, however, are priced at roughly half the cost of many imported alternatives.

In addition to international competitors, BFF coexists with local players like Doha, Akabirya Flour Mills, and Muselac. Among these, BFF considers Doha as its main local competitor. Many domestic food producers operate on a small scale with limited production capacity due to their reliance on home-based equipment.

During the Covid-19 pandemic, border closures led to shortages of several imported products, leaving consumers with no choice but to try BFF’s products. This situation resulted in an increase in sales for the company.

Burundi Fortified Foods’ factory.

Tackling distribution hurdles

One of the main challenges BFF faced in its early days was distribution. Initially, its products were only available in the economic capital, Bujumbura, as there were no strong specialised third-party FMCG distribution players covering the entire country. Large FMCG companies, such as Heineken, typically handles their own distribution with their own trucks.

To overcome this challenge, BFF collaborated with established small-scale distribution businesses, encouraging them to expand their reach. In line with the long consumer goods supply chains commonly found in many African countries, the distributors BFF works with supply wholesalers, who then provide products to smaller semi-wholesalers. These semi-wholesalers ultimately supply the retailers.

The DRC: A giant next door

Nikondeha identifies a significant market for BFF’s products in the eastern part of the Democratic Republic of Congo (DRC). The company has already begun selling its products in small quantities, with availability in approximately 11 outlets. BFF is currently evaluating strategies to boost its sales in the region, such as whether to open a factory in the country or continue exporting its products from Burundi.

The DRC last year joined the East African Community, and according to Nikondeha, the eastern DRC offers a substantial market with higher purchasing power than Burundi.

One advantage of trading in the DRC is that goods are priced in US dollars, which benefits BFF as it imports ingredients like powdered milk and packaging materials from Europe. Burundi, on the other hand, faces a shortage of US dollars.

Claude Nikondeha

-HowwemadeitinAfrica

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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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