Tuesday June 10 2014

28 years of hot loaves

An assortment of pastries for sale at a Hot Load outlet in Kampala

An assortment of pastries for sale at a Hot Load outlet in Kampala. The bakery currently produces more than 30,000 loaves of bread a day. Photo by Dominic Bukenya  

By Dorothy Nakaweesi

The 70s and early 80s were not the best for Uganda because of the political turbulence that marred the country.

Back home, the economy almost collapsed; factories were in shambles. Basic commodities like sugar, soap and salt had to be imported from Kenya and if you needed a share of these imports, you had to endure the inefficient and costly black market.

These tough times pushed many Ugandans to flee the country to different places of the world such as the United States, United Kingdom (UK), Kenya and South Africa, among other places.

Those who fled to exile were exposed to the efficiencies of developed economies and many emulated the advanced skills of doing business.

Renowned businessman Amos Nzeyi was among the many Ugandans exiled in the UK. During that time, he was exposed to many business ideas.

Nzeyi had a special inclination to the bread business.
“While I was in the UK, I realised bread was one of the commodities consumed at a high level. As a result, I promised myself that if I returned to Uganda –a bakery would be a good business to venture into,” he says.

Idea execution

With some signs of stability in 1986 when the National Resistance Movement (NRM) took-over power, Nzeyi purchased bakery equipment and shipped it to Uganda.

Unfortunately, when the equipment reached Mombasa Port there were delays in transit.
“Because of high demurrages at Mombasa, I was eventually forced to dispatch the equipment via Dar es Salaam Port all through Kigali and later to Kabale because this region had been liberated,” he recalls.

As luck would have it, Kampala fell into the arms of NRM before he established the bakery in Kabale.

So he transferred the machinery to Kampala and set up his plant after which production started immediately.

A few weeks following the NRM’s capture of power in February 1986, Nzeyi’s dream of making bread for Ugandans came to pass under the brand name, Hot Loaf Bakery.

Baking journey

According to Nzeyi, one had to wait for imports from Kenya in order to eat bread and this would take time. Bread constituted more than 70 per cent of the imports into the country.

“That was unacceptable to me; that’s why I came up with the Hot Loaf bakery to bake bread for Ugandans,” Nzeyi recalls.

He had visited Kenya’s Elliot Bakery where he met some experts. Through their interaction they gave him some ideas about how many loaves were being exported to Uganda from Kenya. This information helped him to start a bakery with the intention of wiping out bread imports. For the last 28-years, Hot Loaf bread has graced many households.

Bread was not a highly demanded breakfast product then, but as transformation took place, people’s eating habits changed. More Ugandans later chose bread as their first breakfast choice, this saw the demand go up,” said Nzeyi.

Back then, bread was considered as a luxury since most people were used to the traditional breakfast of matooke and beef popularly known as ‘katogo’.

Hot Loaf, which boasts of 12 outlets countrywide, created a recipe which had high sugar levels unlike Kenyan bread which was low in sugar. This attracted more Ugandans to buy bread.
Today, the price of a loaf ranges between Shs4,000 to Shs4,500 depending on the type of bread.
Currently, the company employs 180 people directly, and has created jobs for another 800 people indirectly.

Capital

When he went to purchase the equipment in Britain, he also applied to become the agent to supply baking equipment. As part of the initial capital, he was given trial equipment which he did not pay for. As he expanded, he brought more equipment. His initial capital was between $200,000 and $400,000— an equivalent of between Shs504 million and Shs1 billion) in the beginning.

The business witnessed a positive growth curve thanks to the expansions. Having started off with bread, Nzeyi later introduced other confectionary products like cakes, cookies and pastries to mention but a few.

“When we launched into the market then (1986), we were producing about 3,000 loaves a day and this grew over time. In the 90s, production grew to 10,000 loaves and today we produce about 30,000 loaves a day,” said Nzeyi.

The current valuation of the business is worth more than $4.5 million (Shs11.5 billion) in total investments in terms of equipment.

He is however sceptical to reveal the company’s annual turn-over but the bakery now produces more than 30,000 loaves a day.

Products

The business which started off with bread has since diversified into other confectionary products like cookies, pastries and dessert cakes for different occassions. He is happy to note that the market, which was mostly made up of Ugandans from the diaspora, responded well to these products.
“We were meeting their demand needs -because we had the equipment, expertise and the technology,” he notes.

Source of ingredients
He locally procures the flour used in manufacturing bread. Earlier, he used to import but since the industry has expanded, local millers like Bakresa, Ntake, and Unga Mills are some of his main suppliers.
The other ingredients are imported such as baking fat from Kenya, yeast is imported from Germany and France while other ingredients are sourced from Dubai.

Competition
He admits competition is intense because then there were only two bakeries-Hot Loaf and Mother’s Choice which joined the market two-years later.
“Although we have more than 60 bakeries in the market, our brand has survived due to customers’ loyalty,” he adds.

Challenge
Unlike other EAC countries, bread is taxed in Uganda, making it a costly product.
High power tariffs are a challenge even though inflation is relatively down and the exchange rate is quite stable.

“There is no reason why Umeme should hike the tariffs. As the chairman of UMA [Uganda Manufacturers Association], I am in talks with the regulators to cut down the costs on electricity for manufacturers to have affordable commodities,” he explains.
He adds that if this is done, it will enable manufacturers to compete with the neighbours in the region.

He observed: “Kenya has the largest industrial sector in the EAC. Their cost of production is much lower since they are advantaged with the proximity to the coast (port of Mombasa) unlike Uganda.”

He says once this is done, the cost of production will be minimised, creating volumes that could solve the unemployment problem.

The other challenge is the cost of transport.
“If we had a fully functional railway from the Port of Mombasa through to Kampala –this would cut down costs by 40 per cent,” he says.
Uganda’s cost of doing business is still high. Statistics show that it is about 30 to 40 per cent above that of Kenya.

Market

The company exports to mainly DR Congo and their major client is the United Nations (UN) but now the orders have reduced because of some business men who have established bakeries in this region.

Benefits

“This business has given me satisfaction because I put up something for our brothers.”
Alongside his bread business, Nzeyi has diversified into other businesses such as production of soda, Pepsi-through Crown Beverages.

Future of bread industry
He says the bread industry will continue to grow partly because many people want to save time as life gets busier. Instead of going for a full course meal one can opt for a sandwich which is made out of bread.
For instance, “When you are doing this-you don’t have a luxury of having lunch for one hour –so one can do with a quick sandwich which can take you for a whole day,” he adds.

Advice

Nzeyi urges business people to be consistent in what they do and improve on how they do business to remain relevant in this competitive business.
“We have tried to maintain our quality and we shall soon invest in modern technology which will produce a better product at a lower cost,” he says.
Nzeyi also advises business people to minimise costs so that they produce affordable products for various customers.
“I believe in making money cheaply and this has helped me build volumes. I get more money by selling more volumes. High prices will not take you far in business,” he advises.

Other businesses

Nzeyi later ventured into other businesses like the Crown (bottle tops) in the brewery business.
“I went into this business to stop the imports from South Africa, he imported the equipment from Germany,” he recalls.

His clients were Pepsi Cola before it was privatised, Coca Cola (Century Bottling Company), Nile Breweries (NBL) and Uganda Breweries Limited. The crown corks business later led to get a franchise of Pepsi, a soft drinks business.

Because of his interaction with people from Pepsi international who knew about his crowns corks, he got information that they were looking for an investor –after contemplating to cancel the franchise with government (Lake Victoria Bottling Company Ltd).

He asked for details on how to go about the franchise and a friend led him to London, then New York and he came back with the letter of intent.

“With support of the Uganda Commercial Bank (Stanbic Bank) and other banks he secured the franchise and when they placed Lake Victoria Bottling Company on sale, I was able to bid with confidence to buy the assets,” he recalls.

He then sold the crown cork factory to Madhvani.
He is also a farmer with more than 100 heads of friesian cows.

dnakaweesi@ug.nationmedia.com

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