Zaidi Technologies // Spotlight on Rebuilding Kenya’s USD$ 3.5 Billion Informal Dairy Value Chain

Zaidi Technologies // Spotlight on Rebuilding Kenya’s Informal Dairy Value Chain

An entrepreneur can only hope that they will start and run their business without facing any challenges or hurdles on the way. The same entrepreneur, in most cases, anticipates that they can secure funding with the first pitch to investors while growing the client base instantly. However, that is never the case, and every entrepreneur has a different story.

How it Started

Graham Benton, founder & CEO of Zaidi Technologies, set-up his business in January 2020. All was going well until two months later when everything came to standstill.

Zaidi Technologies works with farmers from Nyandarua County. So the cessation of movement with-in and out of Nairobi County, that came with the 1st confirmed case of COVID-19, brought Graham a new challenge. He was tasked with finding the right documentation to move across the counties as well as getting the right PPEs for his employees.

Another challenge was the inability to find funding for his company. “Securing investment at the onset of COVID-19 was proving to be a little bit hard for most companies that were starting off, with most investors seeking to finance their portfolio companies instead,” he explained.

Graham could not operationalize the company for six months as he shifted his focus on raising funds. They had to think quickly and this saw Zaidi Technologies opt for other sources of funding like self-funding and borrowing from family and friends, which saw the company raise USD 43,000 to continue with its operations.

Since then, Zaidi Technologies has been able to work with about 150 farmers in Nyandarua County who bring in about 450 liters daily. The milk demand is on the rise and through their milk ATMs, Zaidi Technologies sources an extra 150 liters, to total to about 600 liters sold daily to about 900 consumers daily.

To date, the company has installed 4 points of sales in Kawangware and Kibera and they are working towards developing the Internet of Things (IoT) enabled ATMs that will allow the use of live data on how sales are progressing and ensure customers are getting fresh milk each day.

Zaidi Technologies Backstory

In Kenya, 70% of the milk is managed by the informal market and is worth more than USD$ 3.5 billion. The informal market is defined by small traders who buy milk from smallholder farmers.

These milk traders then sell the milk to brokers, who process it and sell it on to points of sale (POS), which sell the milk to the end consumer.

In this value chain, small farmers and traders are not paid fairly, on time, or even a consistent amount. The brokers often leave the traders and the farmers without pay.

Furthermore, neither brokers nor traders offer the smallholder farmers any value addition such as access to finance or farm inputs.

To run a POS for milk, a shop must invest thousands of dollars in the machines and the hardware to run them. If they make the choice to buy, they can often only afford machines that are not food-grade and are unable to keep up with high cleaning and maintenance costs.

Additionally, when a shopkeeper finds a supplier to buy from, they are signing up for a certain amount of milk each day, whether they can sell it. This means they either face 10-20% losses or they try to sell the old milk as fresh, often tainting the new milk.

To resolve this, Zaidi Technologies is digitizing the relationship between smallholder farmers and traders, enabling us to buy milk from them as an out grower-agent model.

70% of the milk sector is managed by the informal market.

The organization is removing the brokers from the supply chain and rethinking the relationship with shopkeepers to help them sell more milk that is quality assured, not charging them for the milk that is not sold. We move the milk through Zaidi branded milk ATMs, giving the people who sell the milk a commission.

“The relationship that we have with the farmers and traders means that we are paying the farmers directly for the milk that is collected from them by the traders. We then can sell products and services to the farmers that they would not otherwise have access to. Overall, we can deliver twice the value to the farmer than any standing dairy organization can as we develop rich producer retention and parallel revenue streams,” explained Graham.

He further stated that the ATM leasing model means that they don’t need a brick-and-mortar shop, installation is very affordable, and ATMs can be moved if they are not doing well.

“With our digital payment interface, we can directly interact with the consumers, giving them rewards for different behavior, communications regarding new products and rebates if they are unsatisfied,” shared Graham.

“Overall, Zaidi represents a new type of dairy value chain that is more inclusive, transparent, and accountable. This is just the beginning to a new age of dairy with informal markets around the world,” he added.

As of the first quarter of 2021, Zaidi Technologies is looking into working and rolling out its first IoT enabled, ATM that will allow the use of live data on how sales are progressing and ensure customers are getting fresh milk each day.

“This also means that we are able to de-risk the payments for the milk, reduce the costs of administration and pass those savings on to the consumers,” added Graham.

The Impact

Explaining the impact his company is bringing to society, Graham explained that there are three Sustainable Development Goals (SDGs) that they seek to address, SDG1 No Poverty, SDG 2 Zero Hunger, and SDG 8 Decent Work and Economic Growth.

The primary areas that they are creating a positive impact on are smallholder farmers, shopkeepers, and milk consumers.  “When buying milk from the farmers because we are digitizing the process, we are banking them for the first time, making working capital, asset financing, insurance, and post-pay services available to them for the first time. For the shopkeepers with whom we contract to sell our milk, we install a milk dispensing machine (ATM) in their shops, helping them bring new customers as well as add a new revenue stream,” he explained.

He further stated that the extra money they make on milk alone will increase their profits by over 80%. For the consumers, Zaidi gives them a new way to buy milk that is 40% more affordable than alternatives on the market.

“For every 5,000l of milk we sell to consumers, we are able to save them 2,500 USD. Together, we can increase the lives of hundreds of thousands of low-income people living both in rural areas as farmers and urban areas as shopkeepers and milk consumers,” he said.

A Ray of Hope

Despite the hard start, Graham explained that things look a little bit brighter now! Sometime in the year, Zaidi Technologies was named among the 15 African AgriTech and FoodTech startups to this year’s cohort of the Investment Readiness Program under Scaling Digital Agriculture Innovations through Startups’ (SAIS).

A project implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

The SAIS project seeks to help these African AgTech and FoodTech start-ups improve their investment readiness and to facilitate their access to investors and business partners. GIZ has partnered with Seedstars and VC4A.

The fully-funded, nine-month program is set to provide Zaidi Technologies and other participants with weekly advisory and coaching sessions; access to additional service providers; integration in one of GIZ-SAIS’s partner hubs; and a demo-day with investors and business partners to conclude the program in July 2021.