Is Charcoal Retail Business Profitable In Kenya?
The high cost of energy sources such as gas and electricity has made many Kenyans resort to charcoal as their main source of energy for cooking. In Kenya, many urban households still use charcoal as their main source of energy.
Other places where charcoal is still used for cooking and heating are hotels and restaurants, schools, hospitals and other institutions.
The continued use of charcoal presents a business opportunity for aspiring entrepreneurs who are looking for a simple business idea which does not need advanced skills to set up and operate.
Let us look at some of the requirements for a successful set up and operation of a simple charcoal retail business.
*Location*
Any charcoal business will obviously thrive in an area where charcoal is predominantly used. Such areas are in or near urban slums, low income areas, some rural areas and some lower middle income areas.
Such areas have high population densities and this increases the chances of selling high volumes.
A good location will enhance visibility and accessibility to your charcoal business, therefore look for a premises which has a clear view of the street front.
A medium sized room will require monthly rent of about Ksh.7,500 – Ksh.10,000 in a good area for charcoal business.
A bigger double room should attract rent of about Ksh.15,000 – Ksh.20,000 for this business.
If you opt to display your charcoal in the open, ensure that you have a secure room for safe keeping during bad weather or at the close of business for the night.
*Licenses*
Just like any other business, your charcoal business will require a business permit from the county government. The cost of the license will depend on your location and size of the business. Ensure that you confirm legal requirements and cost of business permit from your county government.
Typically, costs range from Ksh.5,000 – Ksh.10,000 per year for medium and bigger shops.
Those who operate from the roadside or temporary structures may pay about Ksh.50 – Ksh.200 per week. A receipt will be issued and you need to keep this receipt safely as proof of payment.
*Supplies*
Most of the charcoal sold in Kenya is sourced from different areas such as Meru, Narok, Kajiado, Ukambani, North Eastern, Coast and other areas along Nairobi-Mombasa road.
Producers of charcoal transport bags of charcoal from the above areas to different towns and areas where they are sold.
As a retailer, your supplies will be from such transporters or middlemen. These dealers will sell to you a bag of charcoal at between Ksh.1,300 and Ksh.1,500 depending on quality and origin.
Your market research before set up should include getting contacts of these suppliers and learning about different qualities of charcoal in the market. Some regions produce lower quality charcoal and you should learn to detect poor quality charcoal.
Those already in charcoal business have supplier contacts and this would be the place to start as you plan to set up your charcoal business.
If you are a smaller seller, you can still buy bags from other bigger dealers at wholesale price and sell in smaller quantities.
*Sales*
As indicated above, some of the buyers of your charcoal will be individuals and other bulk buyers such as hotels, restaurants, schools, hospitals and others.
You will sell each bag at about Ksh.1,600 – ksh.1,700 depending on quality and your location. To each bag of charcoal, you can always add Ksh.200 – Ksh.300 to the buying price for those who buy in bulk.
For smaller buyers for use in the households, you can sell to them in small 4kg tins. These tins are available from construction sites at about Ksh.15 each.
The price of charcoal ranges from Ksh.70 – Ksh.100 per tin depending on quality and location.
Each bag of charcoal will give you about 35 of these tins and many of these sellers move up to 8 bags in a day.
On good days, such as end month, rainy and cold seasons, small roadside shops sell up to 4 bags a day while bigger stores sell about 11 bags a day.
Nothing goes to waste as the remnants are collected and sold at Ksh.150 – Ksh.200 per bag for recycling.
The small shops reported profits of about Ksh.1,500 per day while bigger ones Ksh.4,700 on average. This is a good return and can be better with more sales.
*Finally;*
As we always tell you, there’s no marathon race that has ever been won by those who did not start the race. If you like the idea discussed above and you have what it takes to actualize it…then don’t wait to start…just do it.
By
Timothy Angwenyi
Business Consultant
Justine Nyachieo
Business Man & Mentor
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