Incomplete Conversations & The Trifecta of Restaurant Supply Chain in Kenya.

It is interesting to observe the evolution of the restaurant industry in Kenya and East Africa. The last 15 to 20 years have seen tremendous growth of the sector. This has been quite exciting to me, both as a participant, and observer.

Kenya has always had diversity in its restaurant scene. Residents and visitors have been able to choose from a variety of options, a true reflection of the multicultural nature of Kenya living. From local fair, to Indian, Chinese, Japanese & Continental, we have been fortunate to have varied options to choose from. 

In the 1980s and 90s we had the likes of Minar, TinTin, Wimpy, Tamarind Group, China Plate, Hard Rock Cafe, Trattoria, and Foresta Magnetica. All group restaurant entities that defined what the primarily Nairobi and Kenyan restaurant scene was, then. 

The big change in the last 20 years, has been the emergence of the multi-unit restaurant operators. In years prior, as seen from the list above, a restaurant management company operating 3 to 5 outlets was considered large. However, with the emergence of local and international multi-unit, and in some cases, multi-unit/multi-brand restaurant operators with 10+ branches are fast becoming the norm. Growth has been quite aggressive in some cases, so much so, that we now have a couple of 60+ outlet operators.

Inevitably, this growth in multi-unit restaurant operations has led to centralization of operations and supply chains, growth of footprint has led to consolidation to adequately reap the benefits of scale. This consolidation has exposed the soft underbelly of that is the inefficiency and fragmentation of Kenya’s food supply chain. 

Multi-unit restaurant companies are huge consumers of produce. By virtue of their scale and design, this consumption tends to be purchased centrally. The central sourcing requires the consistency of that what I like to call the Trifecta of Restaurant Consumption: Quality, Quantity and Price. The supply chain requires consistent quality; multiple units require uniform standards at all branches, consistent quantities; ordering centrally means volumes tend to be quite large and all at a consistent price; cost savings are sought from efficiency in guaranteed procurement by scale.

Kenya being an agricultural country, any conversation around importation of foods tends to be very emotive and understandably so. However, discussing the importation food without addressing the trifecta is an incomplete conversation. Be it, tilapia fillets from China, onions from Tanzania, butter from New Zealand or milk and eggs from Uganda. Food items tend to be imported to fill a gap that has been created by one or all the Trifecta. 

Let us take the example of milk supply in Kenya. The narrative that dominates the market and the press is one of farmers selling their milk to milk processors for a fixed price per litre. We read numerous stories of farmers getting shortchanged by being offered unsustainable prices that fail to cover their costs of production. While valid in some cases, this is an example of an incomplete conversation. Kenya is one of the few markets where farmers are offered a fixed price per litre for their milk.

The alternative to this would be to adopt incentivized milk pricing model. In this case, milk would be graded based on protein content, butter fat content, absence of antibiotics, absence of bacterial growth inhibitors and any other chemicals or foreign ingredients. Further to this, bonuses could be offered for low Total Plate Count TPC (a measure of levels of micro-organisms in milk) and optimal temperature at the point of collection with penalties for addition of water. 

This pricing structure incentivizes good animal husbandry and milk handling processes, ensuring that farmers produce a superior quality product and thus enjoy better pricing. Ultimately this will drive more structured investment into the dairy sector leading to growth and stability. I know of one local milk processor that has adopted this model successfully, much to the commercial benefit of the processor; occasioned a high value raw material and the financial joy to the farmers supplying them; due to better and consistent pricing.

As we seek to develop our food value chains, we need to have complete conversations to adequately guide policy and legislation. We will then be well poised to take full advantage of the benefits of this fast-emerging sector. Multi-unit restaurant operators are reluctant importers of products. Matching the needs of the businesses with the production from the farmers, factoring in Quantity, Quality and Price could be catalyst for growth in farming and improvement in local farming value chains.