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STAWI FOODS AND FRUITS LIMITED

PROFILE

SEPTEMBER 2014

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INTRODUCTION

Stawi Foods and Fruits is an award winning food processing company based in Nairobi,

Kenya. The company’s flagship product is a nutritious great tasting gluten free banana

flour. Stawi also produces two fortified porridge flours for children aged 6 months to 5

years and adults. Stawi was incorporated on February 15th 2012 as a market place for

small-scale banana farmers who needed a better buyer for their perishable produce.

Stawi now converts the bananas into banana flour which are sold in local and export

markets.

Stawi Foods enables small-holder farmers in Kenya to earn higher incomes on their

produce and is making an effort to reconnect society, and provide genuine benefit to

surrounding communities. In providing a major buying culture change, Stawi has called

time on the model where middlemen served their own interests leaving farmers

exploited and poor. Stawi has been featured on CNN and the founder Eric Muthomi is

listed on Forbes among Africa’s top 30 under 30 entrepreneurs.

Vision Statement: Our vision is to be a leading provider of nutritious processed foods

in Kenya and other African countries and a meaningful direct and indirect employer in

Kenya.

THE PROBLEM WE ARE ADDRESSING

To create sustainable growth, banana farmers in Meru, one of the largest banana

producing regions in Kenya, needed buyers willing to purchase their produce at

responsible prices. It was the same cycle over and over. Farmers would invest heavily

in banana farming, only to end up disappointed by an oversupply in the market or poor

pay by middlemen. We thought farmers deserved better. Middlemen were profiteering at

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the expense of the farmers because of the low market prices caused by an oversupply

of bananas to the market during harvest time. Stawi Foods believed this situation

required a shift.

Partly due to the shadow cast by bananas not being available all year, they usually

become cheap during harvest time and expensive in the dry season. Furthermore, the

volatility in price was dangerous for bananas, as it was a crop used to avoid famine and

served as food buffer in times of scarcity between cereal harvests. Due to this,

thousands of farmers remained poor as a result of waste and poor yields from their

banana harvests. Lack of storage and processing facilities, bad roads and poor access

to markets, also did not help matters.

Stawi Foods was looking for ways of providing a market for small-scale farmers and

increasing the shelf life of bananas, which would rot in farms, especially those belonging

to farmers who could not reach the collection centers set up along the tarmac road on

market days.

The farmers held their breath for many years, as a large percentage of the bananas

harvested in Kenya either got rotten, wasted or never got sold. Several farmers are left

teetering on the brink of poverty, as they suffer serious losses as their produce go to

waste or was sold at throw-away price.

We have been strong advocates for Kenyan businesses to engage in value addition,

and not just concentrate on selling raw products that can be later processed, only for us

to import what we had in the first place as unprocessed raw material. The food

processing industry is critical in providing a market for farm produce, creating

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employment and curbing rural-urban migration. Value addition promotes the export of

finished goods rather than raw materials and earns the country more foreign currency.

Stawi is replicating its value addition approach to reduce post-harvest losses, provide a

market and sustainable income for smallholder farmers in mangoes.

PRODUCTS

Banana Flour: Banana flour is a nutritious

flour used mainly in baking of cakes, bread

and making pizza. Stawi Banana Flour is made

from processed green bananas which we

source in Meru.

Nurture Junior: Nurture Junior is a precooked

and fortified porridge flour that contains

adequate supply of protein, carbohydrates,

energy, minerals for infants and children. It is

the perfect choice for parents during and after

weaning as it contains all nutrients a baby

needs during early growth and is easy to

prepare. Nurture Junior contains a blend of

whole maize, fat free soya, millet, wheat, milk

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powder and fortified with vitamins and minerals.

Nurture Family: Nurture Family is a

precooked and fortified porridge flour that is

formulated to cater for the nutritional

requirements of the whole family regardless of

age or gender. It is made of a blend of whole

maize, millet, sorghum, amaranth and fortified

with vitamins and minerals.

MARKETING PLAN

Our target customers are:

A. Retail customers in Kenya:

These are middle and lower income consumers in Kenya who buy processed food in

large and small supermarkets situated in urban areas across Kenya. We sell to 2 large

supermarkets that have 50 branches across Kenya and 6 medium sized supermarkets

in Nairobi that sell to their shoppers. There are at least 3 million consumers in Nairobi

and other major cities/towns in Kenya that we target. However we are unable to reach

them all due to various constraints like sufficient working capital to produce enough

stocks; an issue we would address with the capital from the grant.

B. Institutions/Businesses in Kenya, Africa and Internationally (USA and Europe):

These are organizational buyers who buy processed foods (such as our gluten free

banana flour) as an ingredient in their production process. For instance, pizza chains

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NIGERIA: We have signed an agreement on the 18th May 2014 with a business partner

in Nigeria to sell our baby porridge to consumers in Nigeria. The initial order will be one

40 foot container worth $ 64,120 to be shipped in early November.

USA (OHIO): We are exploring ways of exporting our gluten free banana flour to the

USA and have conducted trials at a pizza restaurant in Columbus Ohio. We are in the

process of signing a strategic alliance agreement with a company in Ohio that will buy

gluten free banana flour from Stawi Foods and sell/market it in bulk to pizza chains and

pastry manufacturers in the US. We anticipate to ship at least 5 Tons of banana flour as

a trial.

Competition

Competition takes many different forms in the industry.

a) National supermarket chains doing private labelling

There has been a trend in Kenya where all the four national supermarkets are beginning

to stock products branded in a private label. These are sold cheaper than competing

products belonging to manufacturers like Stawi. They are also given plenty of shelf

space in strategic spots in the supermarkets.

b) Local Millers

There are various local flour millers operating at large and small levels within the

country. Competing porridge flour products include Famila, Proctor and Allan, Toto

Afya, Pembe, Soko. These large millers have several strengths. For instance they are

financially stable and can run large promotions that absorb our marketing efforts. They

also procure raw materials in bulk which is cheaper than the price at which Stawi can

procure. The large companies also pay for shelf space giving them more visibility to

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shoppers. Mid sized, small and micro millers (posho mills) are many in Kenya because

there are few barriers to entering the milling business.

c) Imported Flours

These include various porridge flour products like from Nestle and Tiger Brands that

have an advantage on packaging and positioning in the local retail outlets. Most

imported flours are owned by multinationals that are stronger than the large local

millers.

d) Substitute products

For instance cornflakes, milk, tea, Weetabix, coffee that are consumed at the same time

porridge is consumed in households.

e) Competition in the export market is in form of companies selling similar products to

ours from various countries. Some countries are low cost producers and can beat

Stawi in terms of price.

Competitive Edge

Stawi’s porridge products (Nurture Junior and Nurture Family) are different in that they

are precooked meaning they cook in less time than regular porridge flours. Our

packaging for Nurture Junior and Nurture Family is more attractive than competitors.

Stawi’s products are also fortified with micronutrients meaning they provide more

nutritional value than regular porridge flours that are not fortified.

We strive to provide the best flour in terms of design of our products (packaging),

convenience and ease of use, taste and reasonable pricing. Our aim is to capitalise on

selling a brand as opposed to a commodity product whose only difference is price. We

need to invest in continuous improvement of our products to remain competitive.

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We engage with consumers through social media and establish a relationship with

them. Most big millers in Kenya are not making use of social media to sell their products

and engage with customers.

Another source of competitive advantage will be in the markets that we serve. Stawi will

acquire new markets that we can supply flour to in bulk. This will reduce over reliance

on retail customers.

Pricing strategy

We price our products based on the production costs and the competitor’s prices. We

have gross margin of 80% for nurture junior and nurture family and a 50% gross margin

for banana flour for the retail market. As we build the brand of our products, we will be in

a position to increase the price gradually as we maintain production costs.

Advertising and promotion strategy

Stawi has promoted its products mainly using an in store promotion that was conducted

in December 2013 in 5 retail outlets in Nairobi. Stawi has been featured in two local

newspapers which generated some interest in our products. We have a Facebook page

but haven’t been able to convert it into a sales mechanism. We also rely on exhibitions,

direct selling and word of mouth to promote and sell our products.

Below are the strategies we intend to use to advertise and promote our products further:

Initial strategy

Our initial strategy for advertising and promotions is through social media and a website

and using in store promotions and wet sampling of our products.

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I. Social Media marketing and advertising

We propose to use social media as a low cost way to advertise and promote our

products. We will use Facebook, twitter, linked in and other popular social media

platforms. We are proposing to hire a social media manager who will be responsible for

developing online content for our social platforms. The goal will be to interact with

potential customers like young parents who are online most of the time. We will

maximise on search engine optimisation for our social media and website to ensure we

are visible to customers.

II. Website development

We have developed a website that will be linked to our social media platforms like

Facebook. The website contains information about our products like recipes, benefits,

where to buy and our corporate social responsibility policy. The website is be optimised

to ensure it is visible when one searches for instance for ‘healthy food products in

Kenya.’ At a later stage, Stawi can sell its products online for customers to conveniently

place orders and have the products delivered.

III. In store promotions/ Wet sampling

We propose to conduct wet sampling where porridge will be prepared and served in

small cups to shoppers to taste the product. The porridge will be prepared in great

tasting recipes for instance using tamarind, lemon, milk and plain. Shoppers will be

enticed to buy offering free giveaways like attractive calabashes or spoons or t shirts if

they buy two packets.

In 2015, propose to conduct in store promotions in 5 branches of Nakumatt

Supermarket, 5 of Tuskys, 5 of Naivas and 5 of Uchumi. We will also do in store

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promotions in 15 mid-level supermarkets. These promotions will be spread out to cover

the months of April, May, June, and July. They will be conducted at the end of the

month or early month when many customers shop.

IV. Exhibitions:

We will also exhibit our products at key events where target customers attend like Baby

Banda, cook/food fairs and church events.

V. Merchandising

We require merchandisers who will be responsible for proper presentation of our

products at the supermarkets. They will arrange the products, dust them, pursue orders

from the supermarket head offices, and track sales. Merchandising is very effective in

increasing sales when combined with other promotion methods like social media and

wet sampling.

Long term strategy/ future plans

I. Television, newspaper and radio advertisements

In year two we can place adverts on television, radio or newspapers that have most

viewers. Though expensive these means can be very effective in increasing sales.

II. International exhibitions

We will attend international exhibitions in Africa, Europe and USA where we will

showcase our food products (processed or fresh) to serious buyers who attend such

events.

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Distribution plan

At the moment we hire a vehicle to deliver products to customers who are all in Nairobi.

For the two national supermarkets we supply, we deliver to their head office and they

deliver to select branches using their trucks.

We propose to buy a motor cycle for deliveries to customer premises. This will cut down

on transport costs and enable us to distribute more products to more customers thus

increasing sales.

For the national supermarkets, we deliver either to head office for them to distribute on

our behalf or to select branches in Nairobi that are easy to access. We do the same for

smaller supermarkets. Stawi will appoint distributors in year two who will distribute the

products across the country. We will support them with effective advertising for instance

using television advertisements.

For the export markets, we can sell to brokers/agents who import in bulk and sell to

various customers.

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ORGANIZATION AND MANAGEMENT

Organizational chart

BOARD OF DIRECTORS

Name: Mr. Kent Libiso (Chairman, Director/shareholder)

Kent has over 27 years of local, regional and international experience in business

management. He is a renowned management consultant specializing in business

strategy and has served on boards of both local and international companies. He has

served as a Senior Consult/Advisor in several African and European countries and

Consulted a few Fortune 500 Companies. He is a past Chairman of the Board of the

State owned Venture Capital Organization ICDC ( a leading Development Finance

Institution (DFI) dedicated to providing medium and long-term financial solutions to

entrepreneurs and young businesses in order to promote economic development in

Board of Directors

CEO

Sales and Marketing

Manager

Social Media Manager

Merchandisers Motor Cyclist

Office Administrator

Production Manager

Production Casuals

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Kenya)

Name: Sangu Delle (Director)

Sangu is a Havard graduate with the highest honors in African studies and Economics.

He is a recipient of the Thomas hoopes prize and was named on Forbes 2013 30 under

30 best young entrepreneurs in Africa list, amongst other awards. Sangu has previously

worked at Goldman Sachs, Morgan Stanley and Valiant Capital Partners. He is the

Founder of an investment holding company, Golden Palm Investments (GPI) that funds

promising start-ups that can have social impact and generate jobs.

Name: Eric Muthomi (Founder, Managing Director/shareholder)

An award-winning entrepreneur with experience in food security and post-harvest

losses, Eric Muthomi is the Founder and CEO of Stawi Foods and Fruits, Ltd. Eric

holds a Bachelor’s Degree in Law from Catholic University of Eastern Africa. He also

has a certificate from the prestigious United States International University Nairobi

where he was awarded a Certificate in Management and Innovations for Agribusiness

Entrepreneurs. Eric has also has a Certificate in Enterprise Management. Eric has

received four awards for his outstanding work including an international award in 2013

by Forbes Africa for Top 30 under 30 best young entrepreneurs in Africa. Eric is a

Washington Fellow in the business track at Clark Atlanta University where he studied

business management and technical business tools including lean six sigma.

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CHALLENGES FACING THE BUSINESS/BUSINESS NEEDS

Stawi is facing a number of challenges which are limiting its growth as described below.

We are requesting support to tackle these challenges.

1. Processing equipment

We need support to acquire additional processing equipment in order to increase

production so as to meet growing demand for our products. We are unable to dry

enough bananas on time and in sufficient quantity as required by our customers. We

need support to buy a commercial dryer and supporting equipment so that we can dry

bananas in volume as demanded by customers. The dryer will also be used to dry

mangoes for export.

2. Access to more bulk markets

We would like to access bulk high profit markets for our current and new products.

These markets could be in Africa, USA and Europe for our current flour products or new

products like ABE Chillies and dried fruits.

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PRODUCTION

Stawi’s production occurs in a small factory based in Nairobi. There is a small office that

can sit two employees with external sanitary facilities outside and a temporary fence

around the compound. This is a residential area. We want to move to a bigger

industrial/commercial area as the business grows.

Pictures of production area:

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INTEGRATION OF BANANA FARMERS INTO OUR BUSINESS

Stawi is working with two farmers groups in Meru Central made up of 200 banana

farmers. We buy dried banana chips/milled banana flour from the groups. The groups

have received support from USAID KHCP which has installed solar dryers that the

groups use to dry. The challenge with the solar dryers is low capacity and inability to dry

during cold weather. We would like to acquire a dryer as Stawi to boost our drying

capacity and add on to what the farmers will buy from us. We are also proposing to

have better dryers installed for the farmers groups or additional solar dryers.

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