Retiring in the food industry

According to Moses Nyeko, the manager at Terra Natia Foods Co Limited, investing in the food business is a chance for you to give people value.  Investing in food is allowing people to pay you money for feeding them.

“Startup capital varies depending on what you want to do. If I needed an oil peanut butter factory, I would look at Shs200m,”  Nyeko says. 

However, for the food industry that produces, packages and distributes organic flavoured peanut butter under the brand name BANG-BANG peanut butter they started with about Shs13m, and did not invest all at once, but over the course of a year,” Nyeko says.

Nyeko says that some of this money went into product development and marketing. Nyeko had to do research and branding to make sure that the product thatthey produce works for the people.

Other than that, Nyeko asserts that if about 5per cent of the people decide to enter into the food industry, that means they have 95 per cent of the people to feed and people have to eat every day. That is one of the reasons why investing in the food industry makes a lot of sense.

Why the food industry?
Dr Julian Kigozi, the Dean School of Food Technology, Nutrition and Bio Engineering at Makerere University says Uganda being an agricultural country, has so much produce that goes to waste in the market.

“We are a growing country. The population is skyrocketing, and it would be good if we developed the food industry. There are many youth looking for jobs, so being able to turn this food that has been going to waste into a business that they can earn money from, I think is wonderful,” Kigozi says.

She says the agro-processing industry has the potential to absorb many jobless youth. 
While family members are potential food testers, the real test of making it through this food business lies in whether the paying customers like it. 

What success looks like
Kigozi explains that success for the agro-processor comes at different levels. 
 one there is that place, where they have developed a product on their own and then they start to scale it up to even winning awards, that is where more people begin to enjoy it and they selling it on the market. Kigozi says she thinks this is a very beautiful place to be in the food industry, but the story doesn’t end there.

She expounds that maintaining your product on the market is a completely different thing. 
As an entrepreneur, you need to make sure that at that point you are studying the market dynamics and meeting the quality and capacity for your market.

Therefore, she says if somebody manages to reach the levels mentioned above, then they are going to have very many products running in the market, retail shops, and then they will begin to cross borders. That is also success at another level.

Being an entrepreneur requires you to believe in yourself. She notes that some people start and when one or two people do not like their product, they give up.

However, she states that there are also those who say somebody does not like my product. Let me see how I can change it to suit more people and they keep growing.
An entrepreneur normally requires somebody to give them some money, but there are times when it doesn’t come easy. Some give up while others keep knocking on different doors until they eventually get an angel investor.

Why food industry fails
Kigozi food industries fail because some processors do not mind about the quality of their product. This causes the market to eventually go down, and you do not see the product anymore. So, food processors should mind the quality of their products to get repeat customers.

Martin Ssali, the chief executive officer at Smart Foods Limited, says investment in the food business requires passion and dedication. With several facets right from production, processing and marketing, it pretty much depends on where someone would love to play.

He explains that there are three or four different segments where you can focus. You can decide to grow something, be a middleman, do trading, processing, or even marketing the final product.
Ssali says the beauty of investing in the food industry first is that you can be able to make money. 
“We invest because we want to make money, and if a customer likes something then you have a customer you have hooked,” Ssali says. 

“The fact that people eat every single day, means that you can have an income on a daily basis. This is different from other businesses like car dealing where you make a one time sale. There is nothing better than earning daily,” Ssali says.

He says; “The food business is not for the fainthearted. For you to begin enjoying the money from your business, it can take you three years minimum. Though there are smaller businesses, for instance, broiler business or chicken business, for these at the end of three or months you can eat some interest.”
The food industry is not something you can benefit from within a year. This industry is something you build to last. 

“You are not building to eat from it tomorrow. You build it so that it can be scaled up by your children and grandchildren. It is something you build for a lifetime,” Ssali says.
He advises those who intend to join the food business, to desist from going in with the mentality of earning money quickly, say in six months. 

Ssali further says the operating costs (covering the raw materials they need to start a food business) are a big thing when it comes to the food business. 

The other big thing is the cost of power, water and transportation and logistics of having your product get to the marketplace, which is usually a big pain point.

He adds that they are usually interrupted by erratic power cuts. 
“When power is off, you have to run on generators whose cost is thrice that one of running on electricity. Before you know it, all your profits are lost in running on diesel,” Ssali says.

Taking a hit
Recounting the moment that almost caused the collapse of their business, Ssali mentions an incident where they were making a non-meat sausage.

When they were making these non-meat sausages, the entire market went volatile and through this, they lost millions and yet they had lots of loans to pay.

Ssali says in order to recover, they rushed to restructure the loan payment, reduced the cost of operation and realigned their efforts on to a line that was giving them more business and revenue. That way, they were able to start clearing the loan that was pending after two years.

Another moment that hit them was the Covid-19 lockdown. So, they adopted online marketing, whereby they used boda boda’s to individuals and families that sought for the foods.

He added that they also had to reduce the work force by at least 30 per cent to ensure that they are able to sustain the cost based on what they were able to produce and deliver to the customer.

 Making profits
Martin Ssali says it is not as captivating as narrating the struggles and victory of getting your business off the ground. But understanding your profit story is so important. What drives your profit and what can keep them from being  bigger is essential to growing a successful business. 

“For you to know if you are making any profits in your food business, you need to look at your books of accounts. These will help you compute the cost you are buying your raw materials, the cost of goods sold, your entire operational costs of the business and the costs of delivering to the final consumer,” Ssali explains.

“Then, you average all that together, and align it to how many units you are selling. That way, you define your selling price,” he adds.

 Once your selling price is able to cover your cost of operation, then whatever remains at the end of the day is some interest, Ssali says.