The prices of packet milk in Kenya have skyrocketed with a litre retailing between Ksh. 120 to Ksh. 160 depending on brand. This has resulted to an increase in demand for ATM milk which retails between Ksh. 65 to Ksh. 80 per litre which is about half the price of packet milk. This makes it lucrative to start a milk ATM business in Kenya.
If you are wondering, a milk ATM is a machine that dispenses milk based on the amount that has been keyed into the machine or the coin inserted. Some ATM machines are very advanced to the extent of working with Lipa na M-Pesa.
One can acquire a milk ATM machine and get into the milk ATM business. However, it is important to understand the requirements and regulations that control this business.
Procedure of Starting a Milk ATM Business in Kenya
There are several things that one needs to do before starting a milk ATM venture. Here are the steps to starting a milk ATM Business in Kenya include:
1. Finding a populous area with a high demand for milk
The milk ATM business does well in an area that is highly populated where a lot of people are willing to buy milk from ATMs instead of packet milk. This is usually in lower and middle income localities. It would not be advisable to setup the milk ATM business in a high class area as residents of such areas usually buy packet milk from supermarkets.
The area should also have many people which will increase the demand in the long run. The profit margins in the milk ATM business are usually low (like most food items) and thus one needs to sell in large quantities to make some decent earnings. This will be explained in details below.
Location finding should be accompanied by finding a commercial house or shop to do the business. This can be an empty premises or one can partner with existing businesses like shops or supermarket. This can be done on a profit sharing business model.
2. Get Business Licenses
Starting a milk Atm business in Kenya requires one to have both a license from Kenya Daily Board and county single business permit. The Kenya Daily Board License goes for Ksh. 2500 and the application is free.
The cost of the county single business permit varies depending on area from Ksh. 5,000 in rural areas to KSh. 20,000 in urban/metropolitan areas like Nairobi and Mombasa. However, some areas urban areas like Githurai (Kiambu), Rongai (Kajiado), Mlolongo (Machakos), Kitengela (Kajiado) are outside Nairobi and their county licenses are more affordable.
3. Select a Good Milk ATM Machine
Depending on your chosen location for the business and the estimated number of customers or demand for milk, choose a suitable milk dispenser machine. These machines come in various sizes i.e. 20 litres, 50 litres, 100 litres, 200 litres, 300 litres or more.
If you estimate to be selling about 100 litres of milk per day, get a 100 litres Milk ATM machine. This will ensure you will manage sell all or almost milk in the machine by the end of the day and get a new batch the following day. However, in case any milk remains in the machine it does not go bad as the machine is refrigerated.
Milk ATMs are neither cheap nor very expensive. You can check the current prices of milk ATM machines in Kenya here so that you can budget accordingly. TechPiton provides a well detailed milk ATM machine price list.
4. Find Milk Suppliers
The other step is to get milk suppliers which is required to be pasteurized as per the law. The milk suppliers can be wholesalers who supply milk from rural areas to urban centers.
Pasteurized milk is usually sold for about Ksh. 50 to Ksh. 60 depending on supplier and location. One can also buy raw milk from farmers and pasteurize the milk.
Milk pasteurization is basically heating milk to about 72 degrees centigrade for 15 seconds or 63 degrees centigrade for 3 minutes to kill pathogens found in raw milk. This can be achieved using a pasteurizing machine or heating on fire.
Profitability of Milk ATM Business in Kenya
Here is a breakdown of the milk ATM business in Kenya if one acquires a 100 litre machine and refills it twice a day by selling 200 litres of milk per day.
100 litre Milk ATM Machine – Ksh. 95,000
Rent plus deposit – Ksh. 20,000
Kenya Dairy Board License – 2500 + 600 application fee
County Single Business Permit – Ksh . 5000 – Ksh. 20000 depending on county and location
Total Capital – Ksh. 138,100
Pasteurised milk – Ksh. 50 per litre
Power – Ksh. 1000 per month
If one sells just 200 litres per day at Ksh. 60 per litre, sh 10 profit per litre
Gross profit per month- Ksh. 60,000
Total Expenses per month – 11,000
Net Profit per month – Ksh. 49,000
One just needs about 3 months to recoup initial investment (break-even in 3 months)
This is by just selling 200 litres per day on the lower side, one can sell up to 300 litres in most estates and more than 1000 litres in supermarkets.
Closing Remarks
That is how you start a milk ATM business in Kenya. You can check other business ideas here at Zunguka Tv.