Most supermarkets in Nairobi now have ATM’s/’bars’ which are machines where customers can bring their own containers and buy their own quantities of unbranded milk. Today at one ATM, milk was Kshs 80 compared to about Kshs 110-120 per litre (sold in half litre packs for 55/= or 60/=) for branded milk packs.
But how does milk pricing work? M-Farm tracked a milk trader called Wangondu, who sells 1 litre of milk at 70/- at his milk bar.
- Farmers usually use donkeys to transport milk. The wholesaler is introduced into the supply chain at the point which motorbikes transport milk to a center. When there was Mid March scarcity – majority of the milk was sourced from Kinangop at 35 to 37/= per litre.
- Boda boda people who bring 100 litres to the main road are paid 250/- meaning, the milk bar trader has to add 2.50 per litre bringing the total cost to 40/- per litre. The road is bad; lot’s of push and pull which adds another cost to the milk.
- Milk is very sensitive and has to be moved quickly. If one is collecting 1,000 litres, it means there will be 20 motorbikes from different sourcing points and have a vehicle using a particular route to collect aggregated milk. At end of day of the day, milk per litre costs a trader about 40/- to 50/- given the circumstances.
- Pasteurization costs 6/- per litre bringing the total cost thus far to 56/- per litre.
- Each vehicle collecting aggregated milk has to have 3 people; a driver and 2 loaders. At this point, transport cost of the milk is charged at 6/- per litre. A wholesaler trader calculates his/her profit margin at 3/-.
- If milk is being sold to a retailer at 65/- they add 5/- margin to retail the milk to 70/- litre. When there’s surplus milk, a trader reduces 5/- per litre by demanding that the farmer delivers the milk to the aggregation center and bears the cost. Were it not for the rains, the wholesalers had an agreement that on the Saturday before the start of April rains, milk pricing would have retailed from 80/- per litre.
- When the rains come, they hire an escort to help with the pushing of vehicles who are paid 2/-. “We as traders, take advantage, don’t see the reason why we should sell the milk at 80/- and we see the way farmer and consumers suffer and we have to be neutral. When we have mercy on both the farmer and consumer, the consumer ends up claiming that my milk is cheap because it has been tampered with and therefore, of poor quality.”
But all the same, the little margins I make are able to pay licenses and pay my handymen in my milk bars. Even after all deductions, I am able to make 1/- or 2/- per litre as profit.
- When there’s scarcity of milk, we source from Kikuyu and Limuru dairies. Harvesting, transportation to the milk buyer in town, management of milk at the milk bar – this is my business solely. I have to buy from the joint business source, make sure there are no additives, and we have to be there to make sure the quality you get from the shamba is what we give the customer.
Milk is also being sourced from other countries in East Africa as and there is a butter shortage (affecting bakers like Sugarpie). 500 grams of butter is retailing at Kshs 1,000/- and this is just ridiculous.
$1 = Kshs 103.