Untapped - Another Street Snack ?

The Present Situation

That Kshs.20 that remains after buying supper, and the consumer can’t resist the mutura right there in front of her eyes. The temptation to sacrifice Kshs. 30 to buy a kachumbari-filled smokie, not because she is hungry or thinking of any nutritional benefit but because it looks tasty and delicious. And from previous experience, she knows it is.

This is a kind of impulsive spending not necessarily driven by logic, but an urge not emotional but primal. And what options does the consumer have on a busy street in Kitengela at noon?

Often, a boiled egg or smokie sold through a cart or mobile vendor. But why only the smokie and egg? Could the consumer appreciate a new product that is not these two but has the same endearing characteristics of the two?

 

The Context

• There are existing distribution channels, in the form of vendors. The channel is underutilized.

• The snacks street food market is dominated by two products; boiled eggs and smokies.

• Other foods that dot the market and with respect to the vendors are sausages, samosas, kebabs, and similar other products.

• Other forms of informally sold street foods include gizzards, liver, potatoes, various pieces of meats, hot dogs and other foods.

• Street snacks are consumed not as substitutes for food but as extras mostly for their taste.

• The consumer doesn’t plan to go buy the street food; rather it’s on the face and craves the taste.

• The vendors by their location and products have an average amount they make every day. They are open to anything that would positively impact on their sales and profitability as long as the barriers in time, and processes aren’t high.

• There is low loyalty in the street food business both in terms of products and vendor. A consumer who buys a boiled egg today could buy roasted potatoes tomorrow. If he has a favourite vendor, and today he is another part of the estate then he will buy from where it is most convenient.

• As much competition intensity is high, the vending part of the market is fragmented. There are no dominating vendors. Each operates on its own. This is a plus in terms of accessing the market; there is no one dominating vendor who if she rejects your product then you struggle in the market.

• The strength of the leaders has to do with the products. Farmers Choice and Kenchic have the advantage of capital, scale, supply efficiencies, and capital.

• There are tales of a few businesses that tried to get into smokies and sausages but didn’t last. Quality, consistency, and competitiveness are their undoing.

• Farmers Choice beef smokies and Kenchic chicken smokies are more or less the only smokies in the market.

• Farmers Choice smokies are the most popular. They are priced at Kshs.5 to Kshs.10 higher than the Kenchic. The general consensus is that they taste better than Kenchic smokies.

• The Kenchic chicken smokies have a tolerable taste, but they are priced lower. And for that they sell. Then are also the consumers who can’t differentiate between the two.

• Sausages are sold by a relatively small number of vendors. Although they were the precursor of smokies, quality, the cost of production and hence price edged them out. A high quality low priced sausage always seemed a mirage. But a Kshs. 20 sausages relatively good tasting sausage are now in the market.

• Vendors either prepare the smokies themselves or pick them ready from stockists; a value addition by the stockiest.

• A significant number of vendors have experimented with samosas. In cases where the vendors were making the samosas themselves, the time required vis a vis the margins were a turn off to some. Further, the aesthetic result and taste were not always good enough to justify sales.

• The vendor experimentation with other products is a sign they are willing to try new products and maximize their revenue.

• A number of the non-smokie non-eggs vendors tend to sell products that are just marginally processed, like fried or boiled potatoes, cassavas gizzards or liver.

• Farmer’s choice put the number of smokie vendor at around 500,000.

• Taking into consideration vendors nit selling smokies then we can estimate street food vendors to be at least 650,000.

• About 70 % of smokies vendors also sell eggs.

• Weekly smokies sales – 3.5 million pieces. At an average price of Kshs.30 then this is a weekly value of Kshs.105 million or Kshs.420 million per month. This does not include all other kind of street foods.

• Street food is often consumed impulsively. This means that consumers are likely to consume a street food as long as it meets or matches the basic conditions of price, tasty.

The Opportunity

• The opportunity lies in producing a snack-like street food to be distributed and sold through existing street food vendors, such as smokies and egg carts.

• We aim to become producers and distributors of street food to these vendors, akin to a crude, lower-level Farmer's Choice. This food will serve as a complement or substitute to existing street foods, targeting the spontaneous spending of Kshs. 20 or Kshs. 30.

• We have no intention of setting up our own cart to sell our products as we would be constrained by foot traffic, limiting our potential sales relative to the population and hindering scalability. Therefore, the effort to develop a new product would not be worthwhile.

•  Our concept is not to replicate existing offerings like smokies, but rather to introduce a different food form that capitalizes on the way consumers purchase street foods, much like eggs, muturas, potatoes, liver, cassava, and others.

• Entering the market with products similar to those of established leaders is not strategic, especially if we cannot meet the basics of form and quality as leaders.

• While distribution channels exist, initial acceptance may pose challenges. However, resistance will likely be tied to the form, process, and margins offered to vendors by the new snack.

• In the worst-case scenario, we could begin by establishing our own distribution channel through vendors exclusively selling our product, proving the concept, and then transitioning to existing channels. The primary challenge in this venture is developing the right product, but it's a challenge that can be overcome.

 

Advantages over existing products include:

• Newness.

• Opportunity to pioneer and lead in a specific type of street food.

• Insight into the market gained through on-the-ground research from vendors and consumers.

• No burden of expectations, thus room for experimentation to get the best product.

 

How It Would Work

Broadly:

• Come up with an appropriate product from research and experimentation.

• Set up a production facility. Could be formal or informal.

• From the production facility we distribute the product direct to the vendors.

Characteristics of the Product

The ideal product should have the following characteristics :

•  Be priced in the same range as smokies, eggs, and other foods.
• Be tasty. Very tasty.
• Be aesthetically appealing.
• If vendors don’t offer them ready to eat, then they should be easy to prepare, similar to boiling eggs, deep frying smokies, or boiling and frying gizzards.
•  Be easily available.
•  Be consistent.
•  Include trust signals regarding safety.
•  Offer vendors equivalent or higher margins compared to other street food products.
• Be easy to produce but difficult to replicate.

 

Product Possibilities

• A meat (beef, chicken, fish or other) based product.
• A cereal (wheat, millet, maize, rice or other) based product
• A root (cassava, arrow root or other) based product
• A blended (E.g. wheat + chicken) product
• Any other appropriate product

 

Process

ü  Research on the product to make. It could be a completely new product or an improvement on the existing food such as samosa. Or it could be a derived from foods consumers are familiar with such as chicken and fish. This research could involve a food production professional.

ü  Short list product. Considerations include vendor ease of preparation, cost of production, storage, perishability, taste, and familiarity.

ü  Start production semi-formally. Smoothening bumps. Get a share of the market and you could then automate or be totally formal.

ü  Identify pilot location, talk to vendors.

ü  Link with vendors, provide samples, get vendor and consumer feedback, improve.

ü  Launch and start distributing to vendors.  You can deliver or they can pick from a production center within the location.

Marketing

• Free sample
• On-site activation to create awareness and generate demand
• Catchy naming and branding
• Stickers and posters

Challenges

·         Product development: Ensuring the creation of a high-quality product that meets consumer preferences and demands.

·         Product choice: Selecting the most viable product, considering factors such as profitability, consumer appeal, and production feasibility.

·         Production at competitive prices: Maintaining cost-effective production processes while ensuring product quality and consistency.

·         Logistics: Managing the transportation, storage, and distribution of products efficiently and effectively.

·         Marketing: Developing effective strategies to promote the product, increase brand awareness, and attract customers.

·         Threat of bigger players: Competing with larger competitors who may have greater resources and market influence.

Back of the Envelope Calculations

Capital

These are minimum quick estimates. Do thorough more detailed analysis before proceeding.

·         Product research and design – Kshs. 40,000

·         Premises – Kshs. 50,000

·         Production Equipment – Kshs. 80,000

·         Raw Materials – Kshs. 30,000

·         Marketing – Kshs. 40,000

·         Working capital – Kshs. 50,000

·         Regulatory – Kshs. 25,000

Total – Kshs. 315,000

 

Revenue

We are going to use a more casual method of estimating where we don’t consider the market but the number of vendors likely to stock our product. These are quick estimates based on observable trends and present average sales among vendors. This acts as a loose guide.

 

·         We can work with a minimum net margin of Kshs. 2 per product. ( Significantly lower than those  of existing products. )

·         If you are operating in a mid-size town like Nyeri then you can with some effort get 40 vendors stocking your product.

·         If on average each sells 35 of your products, it means you are generating a net revenue of (Kshs. 35* 2) = Kshs. 70 per vendor.

·         For 40 vendors then this will be Kshs. (40 * 70) = Kshs. 2800.

·         With the right strategy you can scale this up .

 

 

Haters

 

Objection: Developing a new product is difficult.

Counter: It's more of a challenge than difficulty. It's achievable. Many individuals have successfully developed new food products and improved existing ones before. There are ample skills and resources available to make this happen.

 

Objection: The processed meat business is cutthroat. You can’t beat Farmers Choice and the bigger companies..

Counter: While stories of the processed meat industry being dominated by cartels exist, if our product involves meat, we won't directly compete with them, at least initially. We'll operate slightly under their radar, and by the time they acknowledge us, we'll have established ourselves enough to engage in competitive tactics.

 

Objection: Vendors won’t stock a new product they are unsure will sell.

Counter: We'll prioritize developing a product with consumers in mind. If consumers love it, vendors will have no choice but to stock it. Additionally, we'll collaborate closely with vendors, recognizing their critical role in our product's success. To incentivize them, we'll offer marketing support, attractive margins, exceptional vendor customer service, and various incentives.

 

Objection: Consumers won’t eat a new street food they are not familiar with.

Counter: Consumers, even with products like smokies and smocha, have demonstrated a willingness to try new offerings as long as they are tasty, appealing, and affordable.

 

Objection: Regulatory hurdles and compliance issues may impede product development and distribution.

Counter: While regulatory compliance is essential, it's not insurmountable. We can navigate the necessary procedures and ensure compliance without compromising product quality or safety.

 

Objection: Scaling up production may be difficult without significant investment in infrastructure and equipment.

Counter: While scaling up production does require investment, there are scalable production models and strategies that allow for gradual expansion. By starting small and gradually increasing production capacity in line with demand, we can manage growth effectively without overextending resources.

Validation

·         Existing street foods.

·         Success of the smokies, eggs, smocha.

Resilience to economic downturn

Consumption of street foods is likely to decrease during an economic downturn. Consumers may still prefer street foods but could reduce their frequency of purchase or opt for cheaper alternatives. This trend partly explains the growth of the Kenchic chicken smokie.

While a significant number of consumers prefer the taste of Farmers Choice beef smokie over the Kenchic chicken smokie, the latter is Kshs. 5 cheaper, prompting consumers to choose it. Resilience to economic downturn is closely linked to pricing and efficient production processes.

Purchase frequency

Thrice every week.

Critical Success Factors

ü  Type of product: The uniqueness and appeal of the product in the market.

ü  Quality of product: Consistency, taste, and aesthetic appeal of the product.

ü  Efficiency of production: Streamlined processes to ensure cost-effectiveness and availability

ü  Distribution: Effective distribution channels to reach target markets efficiently.

ü  Vendor relationships: Building strong partnerships with vendors for product placement and promotion.

ü  Marketing: Creative marketing efforts to create awareness and generate demand for the product.

ü  Consumer and Vendor feedback: Continuous evaluation and adaptation based on consumer preferences and feedback.   

What do you think? Let us know in the comments below

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