Guts Agro: “2SCALE helped us with last-mile distribution of Supermom’s”

Irmgard Jansen
By on October 26, 2015

On October 27th agribusiness entrepreneurs who are part of the 2SCALE programme will come together in the Netherlands for the ‘Food for thought: made in Africa, for Africa’ conference. Engidu Legesse one of these entrepreneurs, his company GUTS Agro in Ethiopia specializes in low-cost, nutritious food products. Early July they launched Supermom’s, a corn-soya blend for young children and mothers-to-be. Legesse spoke to us about his ideas and the company’s future plans.

Engidu LegesseWhat is Supermom’s and how is it made?

“It’s a highly nutritious blend of maize and soybeans, developed for low-income consumers. It provides the extra energy and protein needed by young children and expectant and breastfeeding mothers. We source grain from small-scale farmers and produce and package Supermom’s at our factory in Hawassa. It reaches consumers through a network of women entrepreneurs who use ‘tricycles’ to deliver products to the customer’s doorstep (see picture above). We call this distribution model ‘Likie’, meaning ‘just the right size’.”

Where did you get the idea of the Likie distribution model?

“We asked the 2SCALE project for help with last-mile distribution. A market study commissioned by the project and the discussions that followed generated several options. Finally we chose Likie for several reasons, not in the least because it creates employment for women. The tricycles make their task easier, and customers take the ‘Likie Ladies’ more seriously when they have transport and uniforms. We were also looking for something we could scale out easily, so tricycles were clearly the best choice.”

 

What are your expansion plans?

“We have started marketing in three towns (Hawassa, Adama and Dire Dawa). One year from now we will be in nine towns across the country. In the first phase we are using tricycles imported from China, but we are also working with local engineers to develop an upgraded, locally fabricated model.”

Your products are focused on nutrition, why did you choose this niche?

“In addition to Supermom’s, GUTS produces high-quality iodized salt, shiro powder and a range of ‘healthy snacks’. Before this venture I used to import food processing equipment such as wheat flour mills, and I worked on water bottling and biscuit production lines. My business partner owned a wheat flour mill, so we had knowledge of the food industry. We came together, and chose a nutritional focus for several reasons.

This segment was completely new in Ethiopia and we knew the market potential and the profitability. Of course we needed some technical assistance, but we were confident we did not have to go anywhere else and could just focus on nutrition products. There are personal reasons too. I have three children, so I know how important nutrition is, and how difficult it can be to maintain nutrition when your income is limited. Every time I bought milk powder or infant formula for my children I would ask myself: Why can’t we produce this locally?”

Did you face technical challenges with packaging?

“Whenever we think of packaging, we tend to look abroad. This is a challenge everywhere in Ethiopia, for any industry. But we wanted to do it locally. We were limited by what can be done here. For example, our competitors print on transparent plastic but we were concerned with the possibility of sunlight-induced degradation. We tried metallic foil packaging, it took us two months to perfect. 2SCALE played a big part, providing ideas on packaging material as well as design and colours.”

Supermom’s is available in 200-gram packets. How did you decide on this size?

“Normally we use the cost-plus model. You estimate production costs, add margins and so on. But this is a product for low-income families, so we asked ourselves: How much can people afford? What can we deliver for this price? I think we found the right answer. If you have 10 birr (about 50 US cents), you can have a good snack. A 200-gram packet is enough for four people, and it’s ready in 10 minutes.”

What are the prospects for agribusiness development in Ethiopia?

“Ethiopia has huge agricultural potential but it’s not being fully utilized. We have arable land, water, and hard-working people. We are no. 1 in Africa in number of cattle. We are the largest chickpea producer on the continent, and one of the largest sesame exporters in the world. The vast majority of the population depends on agriculture, so agribusiness development is critical. Fortunately, thanks to sound policies and Ethiopia’s inherent competitive advantages, the prospects for agribusiness development are excellent. Agribusiness is part of development.

Every company aims for profit, but humanity and the community are important too. I live in Addis, my factory is 300 km away, and it’s the local community that keeps our business alive. We don’t do Corporate Social Responsibility for show. We provide water to the community and we recruit locally. We don’t select our security guards ourselves, they are nominated by the community, we pay for their training and then employ them. This is not just altruism – tomorrow, they will become customers for my products!”

Visit the venture profile of GUTS Agro.