Introduction
The fisheries sector plays an important role in Kenya’s economic and social development. The lakes Victoria and Turkana have the largest volumes in metric tonnes of fish, according to a 2019 report by the Kenya National Bureau of Statistics. Fish is a delicacy in Kenyan homes, with tilapia being a favorite of many. Because of its nutritional value, parents with young children, or those caring for their aged parents, are a big target market. Tilapia is beautifully paired with ugali, a meal that has become popular both in Kenyan homes and restaurants.
Starting out as Victorian Foods in 2007, Value Villages Food and Leather has withstood many challenges, including two closures, but have also championed fish leather processing in Kenya and setting up a fish processing plant in Turkana, a region that is victimized because of harsh weather and security problems. Throughout their journey, they received different types of funding, including grants funding by USAID and FCDO, which only goes to show that they do this fish business better than anybody else in the market!
The story of Value Villages Food and Leather begins in 2007.
How it started
It all started with Victorian Foods in 2007. Victorian Foods was a love child born out of a market need in Kericho. At the time, the founding team - a married couple, James Ambani and his wife- had observed that fish was only available on Wednesday, and even then you had to scramble if you were to get any. The decision to serve this market was a leap of faith that saw his wife quit her job in administration to become a fishmonger, as James would put it.
Timeline of Value Villages Food and Leather's growth story to date:
The factors driving Value Villages' growth
Value Villages Food & Leather has grown through great difficulties and still found a way to survive. It has shut down operations twice, yet, the founders have gathered themselves back into operations. At its core, James says that the enterprise is impact-driven and on this foundational element, it has been easy to find a reason to show up and make a difference even when the profits are negligible.
1. Co-founder
Working with his wife has served as great support. James cites that having someone who shares the same passion and vision of the enterprise helps in sharing the burden and the joys that come in the journey of entrepreneurship.
His wife depends on the business as her primary source of income. She poured and still pours herself into the business ensuring that the business stays above water. It was his wife’s idea to initially venture into the fish market and also the birth of the fish leather business was his wife’s idea. Amidst doubt, James supported it and much to his surprise, it turned out to be a worthwhile venture.
"Having her as my business partner, has made the journey easier, especially in the low lows."
Upping and leaving for Turkana was met with great support by his wife, which perhaps would not have been so, had it been another person. Looking back, James quips that many of the pivot points of the business have truly felt easier to handle because of the support of his wife and co-founder.
2. Innovation
Value Villages Food & Leather is a solid example of trying out different methods if you want to achieve different results. It has experienced great metamorphosis through the course of time, embedding small but great changes that have revolutionized the business as a whole. They have incrementally applied various methods that have made their processing high-quality.
They have moved from just being agents at Lake Victoria to being a full fish processing business that not only sells fish but also makes good use of the by-products. The incorporation of processing the by-products has opened new income streams but also created job opportunities in the community in which they exist.
James, living in a geography that is arid, in 2019 together with business partners set up a mini-grid solar power generator that produced about 50KVa. The output of the generator-powered one of the business’s cold rooms. It, unfortunately, got spoiled due to power surges and fluctuations. However, this level of innovation is what has kept the business alive despite the many hurdles it has had to jump over.
3. Resilience
Undeniably, this has been a journey of strength, courage, grit, and great tenacity. Not many people would have picked themselves up, dusted themselves off, and went back right into it as James and his wife did. But they did, and they emerged better. From agents at Lake Victoria to large-scale processing in Kitale to fish-leather processing and poultry food production in Lake Turkana, theirs is a story of great resilience.
When the business started making profits, James resigned from formal employment, only for the business to go awry not too long after. When the business started bleeding money in 2014, James and his wife had to sell most of their assets to pay back debt. Around this time, they were unbankable and had to dig deeper into their shallow pockets and overdraft themselves to get back to business in 2016.
Even when it looked better in 2020, one of their cold rooms got spoiled due to power fluctuations, leaving them with a rotten stock of fish fillets. This cost them a business partner. Moreover, their fish leather client sold his company, and the new owner was not interested in importing fish leather from Kenya.
From the outside looking in, it looks like blow after blow, but for them, it looks like lessons. Edison put it right,
“I never once failed at making a light bulb. I just found out 99 ways not to make one.”
4. Integrity
Through the course of time, James says that they have ensured that despite the circumstances they would offer the market the best quality. Integrity has been at the core of the business. That alone has ensured that customers stay. He and his wife do not believe in cutting corners. He says that even if it means profits will be negligible, compromising integrity has never been an option for him. Building a business reputation is an expensive venture that cannot be lost, and that is important to the founders.
Given this, James says he has found it difficult to work with distributors for poultry feeds. The pricing models for feeds come with a hefty profit margin to the distributor hiking the cost for the farmer. This, he says, beats logic for him to provide pocket-friendly feeds at the production level. He now works with farmers directly or with organizations such as church mission groups or farmer co-operatives, cutting out the middle-men and making poultry feeds more affordable to the farmers.
This level of integrity has ensured that he produces the best in the market at a comparably lower price, giving him a competitive advantage.
Business Model
Value Villages Food & Leather business model displays its versatility in adapting to changing demands and needs has helped in ensuring that operations continue and have fostered diversification. Value Villages Food and Leather, as of now, produces and trades with three distinct product lines upon which its business model is founded upon. These are fish processing, fish leather and poultry feeds.
1. Product Development
At the start, the business opportunity looked like supplying fish to Kericho - a place that had demand for fish but was greatly underserved. The idea was well thought out and due market research was done. Seeing that the pursuing party- James’ wife- was jobless at the time, this felt like a worthwhile venture. It would keep her busy and provide a source of income for the family.
Upon touring Lake Victoria, the business strategy changed. They agreed to serve the population there through the fish processing business. The market was ready and paid better. For a time, they worked as fish aggregators but as they grew in the business and they learned its ropes, they ventured into fish processing - fish trimming and filleting.
This value addition is a skill that would, later on, come in handy when competition increased and buying prices hiked. They leveraged these skills to supply fillets to traders in Nairobi, a venture that was only short-lived because of payment delays.
Years later, in a bid to revive business operations, they built onto their already existing fish processing skills. To it, they started processing fish leather and fish bones. While selling fish bones and skin was not new to them, the market was a long way from them and transport for the same was messy. To circumvent this, they opted to look at waste from a new lens, to reuse rather than throw out, and from that, two product lines were born - fish leather and poultry. Much to their surprise, these two products have found a market and are doing relatively well since their entry into the market. So much so, that there are strategies in place to grow them.
2. Customer acquisition
James notes that through the journey customers have not entirely been hard to get. He attributes this to integrity that has granted him customer loyalty and retention. In the earlier days, he would leverage on the fish processing companies on Lake Victoria, all he had to do was mobilize fishermen. The mobilization journey meant building rapport with the fishermen. They provided cooler boxes that were uniquely positioned and big enough to allow fishermen to drop their day’s harvest without the fear of them going bad. At the end of the day, the Victorian Foods insulated truck would weigh the fish, pay the fishermen and transport it to the fish processing companies in Kisumu.
When they moved to Kitale, their operations scaled very quickly. At the time, there were no other fish processing plants between Lodwar and Kisumu. Fish markets were therefore limited to Kisumu and Nairobi. As such, fish traders between Lodwar and Kisumu found it easier to sell their supply to Value Villages Food & Leather. In a bid to offload the fish stock he had, he sought a market in Nairobi; a decision that saw him walk into Tuskys Supermarket Headquarters. After looking at the samples, Tuskys onboarded them as their official fish supplier for their outlets in Eldoret, Nakuru, Kisumu, 6 Nairobi outlets, and 2 Thika outlets. They upheld this contract for 2 years before discontinuing it on account of delayed payments that held them in bad taste with their fish suppliers. This would ultimately become a cash-flow problem for Value Villages Food & Leather. In a similar vein, they onboard Gilanis Supermarket, Nakuru to deal with large fish stock. Impressed by their fish quality, Gilani's ordered a full truck of fish. The contract was discontinued due to a change in market prices.
Once they ventured into the fish leather market, it was imperative that they found and locked a customer. A Google search on fish leather clients yielded a company in Iceland that dealt with top designer wear like Prada and Gucci. A general inquiry on whether they would be interested in fish leather from Africa became a business proposal that quickly had Value Villages Food & Leather sending a sample of their semi-processed fish leather to Iceland. A business partnership was born, one that lasted until the onset of COVID-19.
In the years that they had shut down, many of their customers, who at the time were middlemen and direct buyers, would ask them about their plans to re-open.
"Such comments were encouraging enough for us to reconsider doing business again"
Now, especially with the poultry feeds, farmers in Turkana come to him having learned of him through mission groups, farmer co-operatives, and project partnerships that are very common in Turkana.
3. Revenue model
It is hard to separate personal money and business and oftentimes outflows and inflows do not balance. For a better part of its existence, Value Villages Food & Leather was financed directly out of the pockets of its founders. They had taken personal loans trying to sustain the business but it never broke even. Their business assets had to be auctioned to offset their major loan. James notes that when they re-started operations in 2016, they were barely liquid enough to buy fish stocks to start operations. They relied on financial partnerships from their friends that would jump-start their business. Unfortunately, their approach failed when friends expected 100% returns in a short period of time. They soon settled on a model of plowing back whatever profit they made to keep the business alive. It was not until much later that they were able to access grant funding to scale their operations.
"A revenue model for their products is not clearly defined because much of our efforts go towards market penetration. However, the business is still afloat and registers profits though profits are calculated separately for each individual product."
For the fish, he says, the profit margins have been stable at 38%. Unfortunately the fish, it’s a seasonal product, and these profits change drastically throughout the year. For the poultry feeds, they make a 17% profit margin.
Profits for the feeds are driven low because the introductory price for feeds was deliberately set very low with minimal profits to penetrate and to be visible in the market.
The fish leather is yet to become a self-sustaining product line. Orders are made once in a long space of time, but with great volumes needed. On its own, it cannot be considered a support pillar of the business but when an order comes in, the revenue generated goes a long way and acts as a good capital injection into the business.
Value Villages Food & Leather are able to hit profits, but even then the trouble with cash flow has been incumbent to them since inception. Working in a sector that hardly works with cash-on-delivery, the imbalances have proved difficult to overcome. This imbalance has led to two closures for them and heavy borrowing, a situation that has proven that sustainability for business has to be held higher than profits.
4. Sales and marketing
Value Villages Food & Leather through the years of its existence has never had much of a sales and marketing department. They have always allowed their products to speak for themselves. Ultimately, that has worked for them. Upholding their truth of integrity, they have managed to get customers mostly through networking and referrals.
However, they recently hired two Sales agents who are dispatched into towns around and within Turkana to network and talk to farmers. Their kind of marketing is to understand market needs and build rapport with the community. This helps in ensuring that farmers know about their products and in doing so, they onboard them as customers. Sales and marketing, at its very core, is about relationships, a concept that they are well utilizing.
Marketing and Expansion
Growing the feeds and fish leather product lines is at the forefront of the business. Beyond increasing products in volumes produced, Value Villages Food and Leather is set on opening outlets in Kakuma and Kalobeyei. The opening of these outlets will allow farmers in these areas to access feeds at ease and without incurring too many costs. At the moment, because of infrastructural challenges in the area, transport of feeds proves rather difficult and marks up the prices. Opening these outlets will be a way of circumventing this, and getting market penetration as being a quality feed producer offering a better price, killing two birds with one stone.
Because Turkana is a drought-prone area, they are looking to add goat pellets into their product line. They have started testing things and will hopefully be rolling this product out soon, and with any luck, the market will be responsive. However, James recognizes the challenges that this market faces. Prone to receiving aid, market penetration is difficult and oftentimes, frustrating. Citing the market challenges with the poultry feeds in which many farmers dropped off after the NARIG (National Agricultural and Rural Inclusive Growth) Project, James hopes that the venture into goat feeds will be received warmly because goats are cultural livestock among the population. This venture is a step towards a sustainable society through seasons of drought that leave many in desperate need of food, both for themselves and their livestock.
The fish leather production is now moving from a semi-processed state to a final product locally. With the partnership with Kenyan designers, they are hoping to take the Kenyan market by storm - promoting both local aquaculture and local designers. This move was necessitated by COVID-19 after their European client had to sell his firm, and the new buyer was not interested in fish leather in Kenya. Looking in, Value VIllages Food & Leather found a market for their fish leather locally. Though the articles made out of the fish leather still find a market abroad, it is impressive that Kenya is now receptive to fish leather and can process it into the final product.
Learnings/Outlook
This journey has been one that has taken us deep within the valleys and up the top of the mountains. They have had their glorious moments, but they have sure had their deep lows. It is imperative that we recognize the resilience that Value Villages Food & Leather has demonstrated through the course of its existence. It would have been easier to quit but they kept at it. Through this continuous effort, they have grown from a business without any premises, to one that has a full plant and employees. Today, Value Villages Food & Leather employs 50 people during the peak season. Through the course of time, many unskilled workers have gone through fish processing training allowing them to earn both a skill and a source of income
Value Villages Food & Leather sheds light on the place of grant funding. Having shut down twice and taken numerous loans, it is clear that financing for enterprise is neither an easy nor a straightforward path. In the absence of grant funding, Value Villages Food & Leather clearly says that they would not have made it this far. From ideation to actualization, financial access is imperative to any enterprise. Grant funding changes the ball park for some enterprises such as this one; allowing them to stay alive, pivot, and overall, create the impact they had hoped to achieve as they started out.
To fulfill its desire to be impact-driven, they continue to equip women in Turkana with fish processing skills such as fish trimming and fish filleting. They have provided a source of income and inadvertently changed the community at large. Moreover, they process high-quality poultry feed and sell it at a fair price offering every farmer a chance to access feed. The entire business model employed by Value Villages only goes to show that community-driven businesses exist and provide wholesome value to the communities in which they exist,
From here on, Value Villages Food & Leather has taken a stance to bring everything home. Fish leather is about to meet Kenyan designers and the results are only imaginable. This partnership may be the next big step for this business, attracting big investors, bigger partnerships, and a wider audience.