IS SOAP MAKING/MANUFACTURING A LUCRATIVE BUSINESS IN KENYA?

Soap is the fastest moving and the most widely used commodity in the world and particularly Kenya. Cooking oil, salt and onions follow in that order.

This probably explains why most laundry soaps are made by oil refinery companies. The business goes hand in hand with cooking oil refinery since the oils we use in cooking are the same oils used in making this product with difference being the grade of the oils used for either products.

Kenyan oil refinery companies usually import these oils because they have the financial muzzle to do so. It is, however, a reprieve to note that the same oils are locally produced and readily available to both small and large scale manufacturers and at relatively cheaper prices.

Palm oil is widely available in Mombasa, imported from Mbeya, Tanzania, while Coconut oil is abundantly pressed by many companies at Malindi, Kilifi and Changamwe.

Over my years in business consultancy, I have noticed one thing with almost all the people who ask for my advice concerning soap business venture: uncertainty and fear of starting.

Over 95% of them ask this question: Can I really succeed in this (soap making) business on such a “competitive” market? The other question that I get from these clients is this: “Does this business need/require big capital and space”?

Obviously, what I immediately conclude from these questions is fear of competition (among them) from the big players like Pwani Life, Menengai Oil Refineries, Bidco, Unilever and Kappa Oil Refinaries.

The above mentioned companies are five among seven prominent players in soap making business in Kenya. They own leading laundry soap brands like Ushindi, Kuku, Panga, Menengai, White Star, White Wash, Sunlight, Key etc.

It is quite interesting to learn that only nine (9) laundry soap brands dominate the Kenyan Market of over 52 million people. Assuming that every Kenyan bathes once at any time of the day, and does home laundry at least twice weekly, then you don’t need to be a great mathematician to guess the enormous amount of cash that Kenyans spend on only the 9 brands.

This begs a valid question: Do these few 9 companies satisfy this great population with this commodity?

The answer is yes, and no. Yes they do satisfy the demand and this is what propels them into prominence because the big local population spends billions of shillings in this valued commodity.

No, because only a sizeable number of this great population of consumers buy their brands. Then whose other brands does the other members of population use?

Now, the hard truth is this: The players in this soap industry are so over-stretched that they will not disclose it. This fact is proven by the soaring prices of bar soap and occasional lack of the commodity in many local shops.

The prices for soap are on upward trend because these few companies that produce them have no serious competitors thus making them appear to monopolize the trade.

For example, the lowest priced 800 grams bar soap costs Ksh.140 in retail Supermarkets, while the most expensive bar costs Ksh.170 at the convenient stores – never mind the quality here.

In my research, I have established that the cost of production for one bar of 800g is Ksh.45 (by the big refining companies, while for small-to-medium firms (numbering about six in Kenya), the cost of production for a similar item is Ksh.50.

These small-to-medium companies are usually family owned and supply local population (they never go beyond county level because their production capacity is too little to meet the huge local market demand).

They usually source for their raw materials (mainly Oils) from retail outlets, and local factories situated at the coastal towns of Mombasa. This retail buying is what pushes their Cost of Production that “high”.

Now, you have started noticing that making a 800g soap with ksh.50 and selling the same at Ksh.140 is a good business deal, haven’t you?

In other words, put it this way: Produce a 800g soap bar at a cost of Ksh.65 (packaging and market included) and give it at wholesale price of Ksh.100. Isn’t this a worthy venture?

Then why isn’t everyone in this business? You might ask.

People and particularly Kenyans have a poor reading culture. This leaves them with little or no room for research and knowledge, especially in a society where such business is shrouded with mystery of conspiracy, secrecy and silence.

This leaves them in darkness when it comes to matters of business enlightenment.

Secondly, many would-be manufacturers have a culture of fear or “the big-boy-syndrome”. What they do not understand is that these big companies also at one time started small. They started when there were other “big boys” in the game.

To them, courage, vision and ‘risk taking’ only propelled them to where their “seniors” are.

Subsequently, big oil refinery companies stave off competition from emerging small players by denying them access to soap making oils. Sometimes they sell crude (Acid Oil) at exorbitant prices in a bid to discourage them from manufacturing soaps.

Many of you can recall the once gigantic East African Industries – now Unilever, an even bigger giant. They once owned the world re-known Kimbo brand (now the property of BIDCO).

The recent entrants such as Kappa and Pwani Life – considering where they are now – is a testimony enough that you can also be the next entrant.

This is how I have been mentoring new Soap and detergent business entrepreneurs. The level of starting does not matter. Even with as little as Ksh.13,000 you can make it in soap business.

Ten village Kiosks at your locality are enough to propel you into unparalleled greatness. I will show you how.

Science has mapped out a common trend in business: When any businesses is growing and expanding, it leaves out “accommodative loopholes” worth capitalizing on by the new emerging players. These loopholes are usually seen in customer service, pricing and taste.

*Pricing*

An average customer values the price of a commodity more than quality, especially the low-to-medium income earners (who ironically constitute the biggest market).

A drop in two shillings, say for a 100g bar soap, can persuade a customer to prefer the “cheaper” bar over the other-regardless the quality as long as the bar soap is lathering and foaming well.

A big multinational manufacturing company with a stock value of 500,000 bars in the market, whose price is set at, say Ksh.20 per 100g bar will be losing a whooping 1 million if they decided to adjust the prices downwards with two shillings i.e. Ksh.18 per 100g bar.

Yet a small scale manufacturer whose stock value is 500 bars will not lose or gain much if he decided to adjust downward or upward the price of his bar.

One million shillings for a big company is probably the salary of 100 employees (assuming they earn Ksh.10,000 each a month).

This kind of adjustment (2 shillings down) must require a long-term, thorough decision by the company’s highest policy making organ whose board members will take several days of “seating’ in order to “deliberate” on the cons and pros of the price adjustment.

The small-scale company won’t need much thought to “lose” 1,000 bob! It won’t be a great burden for this small-scale company.

*Customer service*

A small scale manufacturer can supply local Kiosks on credit to collect his money from each retailer after they sell all his soap bars. Big companies cannot do this to local kiosks, but only supermarkets.

*Capital and space*

Generally, any amount of money can start a business, provided that the cash, commonly referred to as Business Capital, is capable of buying all the required raw material and packaging material.

For a soap business, one can start with as little as Ksh.13,000.

Soap making oils, retailing at Ksh.90 per kilogram will consume about Ksh.9,000 (i.e. 100 kilograms of Oils capable of producing 300 killograms of soap or simply 500 bars of 600g each).

Ksh.1,480 will go towards purchase of 18.5kg of Sodium Hydroxide (required to saponify 100 kilograms of Oils).

Now, Ksh.1,500 can make wooden Pour – Moulds of 12 bars, while Ksh.916 of the balance can purchase 41 cartons – enough to pack all the 41 dozens produced by the 500 bars. The balance of Ksh.104 can aid in movements here and there.

*Space*

Boiling and saponifying of the oils can be done at the fireplace of the homestead, by use of coated Aluminium pots and wooden laddle.

Kenya Bureau of Standards has no qualms over that environment of production.

One professional body, Cosmetics Kenya Limited – 0723424240 has a training program for soap manufacturing and they advise their clients on how to standardize their products at home before taking a sample to KEBS.

I had a chance to meet Mr. Herman of Cosmetics Kenya who is a very kind and helpful man to clients seeking advice on how to brand, market and register their products with KEBS.

*Source of Raw Materials*

As I said earlier, you can buy tallow locally at very cheap prices, while coconut oil can be bought from many vendors at Coastal towns of Kilifi, Malindi and Changamwe in Mombasa.

Betty Industrial Chemicals, Kilifi Oil Press, among many other retailers can sell Palm Oil, Corn Oil and Coconut Oil. Blended oils are cheaper and come with different mixed ratios for different grades of soaps.

For those who wish to start with large scale production, they can source for Soap making machines from various vendors in Nairobi, among them, Express Marine Corporation Kenya, East Africa Biocutical Company, Express Machines Kenya etc.

Avoid Jua Kali machines which do not come with warranty or standardized Extrusion Gauges or Compression Pressure. (Compression Pressure ensures that the soap bar is of uniform weight, does not crack or does not lose quality after some time).

Blended Oils for soapmaking saves a lot of money while the quality of soap is maintained. Printed Soap wrapping can be worthwhile considering but one can buy plain polythene paper roll and do screen printing at home as it saves more money.

*In Conclusion*

Even with as many as 1,000 soap manufacturers, they will never satisfy a population of 52 million people. You can join the existing few players and cut yourself a sizeable share of the market.

Written By Justine Nyachieo
Business Man & Mentor

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