Food for Thought: Interview with Ethiopian Entrepreneur
Engidu Lagesse is hungry for change. He should be − his company, GUTS Agro, specializes in low-cost, nutritious food products. In July, GUTS launched Supermom’s, a corn-soya blend for young children and mothers-to-be. Lagesse spoke to us about his ideas and the company’s future plans.
What is Supermom’s and how is it made?
It’s a highly nutritious blend of maize and soybeans, developed for low-income consumers. It provides the extra energy and protein needed by young children and expectant and lactating mothers. We source grain from small-scale farmers and produce and package Supermom’s at our factory in Hawassa. It reaches consumers through a network of women entrepreneurs who use ‘tricycles’ to deliver products to the customer’s doorstep. We call this distribution model Likie, meaning ‘just the right size’.
The Likie distribution model –where did you get the idea?
We asked IFDC’s 2SCALE project for help with last-mile distribution. A market study commissioned by the project, and the discussions that followed, generated several options. Finally we chose Likie for several reasons – not least because it creates employment for women. The tricycles make their task easier, and customers take the ‘Likie Ladies’ more seriously when they have transport and uniforms. We were also looking for something we could scale out easily, so tricycles were clearly the best choice.
What are your expansion plans?
We have started marketing in three towns (Hawassa, Adama and Dire Dawa). One year from now we will be in nine towns across the country. In the first phase we are using tricycles imported from China; but we are also working with local engineers to develop an upgraded, locally fabricated model.
Your products are focused on nutrition – why did you choose this niche?
Yes, this is our niche. In addition to Supermom’s, GUTS produces high-quality iodized salt, shiro powder and a range of ‘health snacks’. Before this venture I used to import food processing equipment; wheat flour mills, water bottling and biscuit production lines. My business partner owned a wheat flour mill. So we had knowledge of the food industry. We came together and chose a nutrition focus for several reasons: This segment was completely new in Ethiopia. We knew the market potential and the profitability. Of course we needed some technical assistance. But we were confident we did not have to go anywhere else, just focus on nutrition products.
There are personal reasons too. I have three children, so I know how important nutrition is, and how difficult it can be to maintain nutrition when your income is limited, Every time I bought milk powder or infant formula for my children I would ask myself – why can’t we produce this locally?
Did you face technical challenges with packaging?
Whenever we think packaging, we look abroad. This is a challenge everywhere in Ethiopia, for any industry. But we wanted to do it locally. We were limited by what can be done here. For example, our competitors print on transparent plastic but we were concerned with the possibility of sunlight-induced degradation. We tried metallic foil packaging, it took us two months to perfect. 2SCALE played a big part, providing ideas on packaging material as well as design and colors.
Supermom’s is available in 200-gram packets. How did you decide on this size?
Normally, you use the cost-plus model. You estimate production costs, add margins and so on. But this is a product for low-income families, so we asked ourselves: How much can people afford? What can we deliver for this price? I think we found the right answer. If you have 10 birr (about 50 US cents), you can have a good snack. A 200-gram packet is enough for four people, and it’s ready in 10 minutes.
What is GUTS doing to promote modern farming technologies?
We are pushing for quality, not just providing a market. We tell farmers about moisture content, for example. They came to our factory, they’ve seen it, and understand what we are saying and why. This is knowledge transfer. Farmers would say “You are buying our maize, storing it for a month and reselling at a profit.” Now they know the facts. Together, GUTS and farmers are moving towards better technologies and modern agriculture.
When we started 10 years ago, people were suspicious and now they understand. There has been progress in mentality (e.g. production technologies, quality) and also in business-mindedness. Once, farmers would say the NGO will be here forever. Now they say, we are here, we will be here even after the NGO goes away. And that change of mindset is the first step.
What are prospects for agribusiness development in Ethiopia?
Ethiopia has huge agricultural potential, but this is not being fully utilized. We have arable land, water and hard-working people. We are no. 1 in Africa in number of cattle. We are the largest chickpea producer on the continent, and one of the largest sesame exporters in the world. The vast majority of the population depends on agriculture, so agribusiness development is critical. Fortunately, thanks to sound policies and Ethiopia’s inherent competitive advantages, the prospects for agribusiness development are excellent.
Agribusiness – is it caught between market and development, neither here nor there?
Agribusiness is part of development. Any company has to make profits, but humanity and community, these things are important too. I live in Addis, my factory is 300 km away, and it is the local community that keeps our business alive. We don’t do Corporate Social Responsibility for show. We provide water to the community. We recruit locally – for example, we don’t select our security guards. They are nominated by the community, we pay for their training and then employ them. This is not just altruism – tomorrow, they will become customers for my products!