Part of the Ethiopian diversified company Risiq Group, Sendelet Foods started fresh juice manufacturing in early 2020, at the height of a pandemic. Theirs is a story of resilience, perseverance, and determination to build a juice brand all Ethiopians can identify with.
Africa is a resilient continent. Every day, its people deal with life-threatening diseases, conflicts, civil wars, terrorist attacks, and natural disasters. Somehow, against all these odds, Africans still manage to not only survive but thrive.
The pandemic, as terrifying as it was, was just another threat they had to overcome. As economies shut down in the rest of the globe, Africa was focusing on a way to feed its people. In our past edition we highlighted how two food businesses bravely launched in the middle of a pandemic.
A 100m+ people opportunity
To be established in the food manufacturing sector in Africa takes years of considerable planning and investment before the first product hits the market. For Sendelet Foods, the journey to become one of Ethiopia’s leading fruit juice processors began in 2018, the year when Ethiopia ushered in a new, more progressive government, under the leadership of Prime Minister Abiy Ahmed.
With high optimism in the air, a group of very close young close family entrepreneurs conceived the idea of starting a juice processing company. Being home to over 112 million and having an installed juice processing capacity of just 600,000 bottles a day, Ethiopia had a vastly untapped potential. The entrepreneurs having already founded the Risiq Group back in 2012 were already active in Ethiopia’s automotive dealership, import-export, manufacturing and construction sectors, knew when an opportunity presented itself, and this was one they were not willing to let go.
Benchmarking to start off
Venturing into food manufacturing, the Risiq brothers quickly discovered how an uphill task it would be to set up a juice processing plant in Ethiopia. Abdulfetah Khalid, the Managing Director of both Risiq Group and Sendelet Foods took us on a journey, back to when the idea started, and the ups and downs involved in setting up the facility in one of Africa’s last frontiers.
Before starting out, benchmarking was necessary, to know how the best in the industry do it to avoid making obvious mistakes. The benchmarking journey took Mr. Khalid and his team to Kenya and Tanzania, where companies like Kevian and Sayona Fruit were doing an exceptional job in juice processing.
Armed with the knowledge from overseas, the Risiq Group team was confident about its readiness to replicate the model back at home. After setting up, Mr. Khalid told us they quickly found out that unlike other countries in the region, Ethiopia did not have an established supply chain for key raw materials such as puree and sugar, which are necessary for juice processing.
To solve this problem, the company thought of starting its own puree processing plant but had to abandon the idea after discovering Ethiopia’s fruit production was inadequate when compared to demand. Additionally, the mango varieties in the country could not be used in puree production as they did not meet the required quality threshold. Faced with this enormous set back, Sendelet Foods now had no option but to import its raw materials from Kenya.
Importing seems like the silver bullet to solve the raw material set back. Getting materials from overseas however required that the firm had to have easy access to foreign exchange, which is not the case in Ethiopia. “If you ask anyone in manufacturing, they will tell you access to foreign currency is a challenge,” Mr. Khalid says adding that in Ethiopia, it takes 9 months to 1 year to get hold of foreign currency necessary for cross-border transactions. The Sendelet MD agrees that this situation makes it difficult for the company to bring its raw materials into the country. How then were you able to kickstart manufacturing given all the bureaucracies involved in getting hold of foreign currency, I ask. Having been in the import business as Risiq Group, Mr. Khalid revealed that through the use of a mixture of methods including holding oversees accounts and buying dollars from exporters, the company has been able to manage the foreign exchange crisis.
Sendelet realized it is not just the raw materials that needed importing – skilled labor too was in short supply. Having little to no manufacturing footprint when it comes to juice processing, it was only normal for a country like Ethiopia to lack people experienced in this field. The team once again went fishing for professionals in neighbouring countries. Khalid confesses that these set of people were key in helping the company start the manufacturing processing and in building up local capacity.
Entering the market at the height of the pandemic
Developing the necessary capacity to start production took a significant amount of time, but the company was finally ready to launch to market in 2020, almost 2 years after the idea was started and right into a raging pandemic.
Sendelet Foods, being part of the larger Risiq Group, was however not venturing into the world of many unknown. Mr. Khalid reveals to us that he and his team at Risiq Group knew the Ethiopian market well, having a previous background as a trading company, which gave them an easy time in bringing its products to the market. “We had been acting as if were present in the market for a while,” Mr. Khalid said describing their first market experience. He further notes that Risiq Group being present in the food and beverage scene since 2016 as a supplier of PET preforms to water bottling companies also gave them a good understanding of the beverage ecosystem in Ethiopia.
Even with an admirable prior experience, Sendelet Foods was still impacted by the pandemic. Khalid notes a significant number of Ethiopians lost their incomes when the pandemic got grip of the country and this depressed the purchasing power of most households. Although demand did not pick up as expected, Sendelet had gone out of its way to produce fresh mango juice that Ethiopians couldn’t resist, bad economy notwithstanding.
Trading as Omango juice, the product easily became popular among Ethiopians, helping drive the company’s market share to above 25% in a period of less than a year. Khalid says that the quality of their juice and an effective distribution channel was key in this market success, helping the company maintain sales and escape the pandemic relatively unscathed when compared to other subsidiaries in the Risiq Group.
Bringing juice to more Ethiopians
With an installed juice processing capacity of 140,000 bottles per day, the firm has already done well for itself given the challenges it had to overcome when setting up. Khalid however notes that the Ethiopian market is largely underserved.
Citing data from Euromonitor, Khalid noted that the Horn of Africa country has an installed capacity of 600,000 juice bottles per day against a demand of approximately 1 million bottles per day. To meet this demand, Sendelet is in the process of setting up and commissioning a new pouch filling line with capacity to fill 120,000 pouches per day. In addition to mango and apple juices, the pouch line will also package mixed fruit juices that the company plans to soon launch in Ethiopia, all in an effort to provide more variety for Ethiopian consumers.
Khalid reveals that the pouch filling line would have already been commissioned were it not for the Covid-19 supply chain crisis that affected delivery times. In addition, the company plans to expand its existing PET capacity to about 280,000 bottles per day to meet demand. “We already secured the finance, and we are in the final stage of sourcing the machine. We hope the new expansion plant will be ready by mid-2022,” Khalid said. The new expansion plant will have auxiliary units that will solve the company’s raw materials challenges, such as PET injection molding machines for preforms and shrink-wrap machines, he added.
Big plans for the future
Sendelet is taking its vision to become a leader in the Ethiopia’s juice industry seriously and is investing heavily in its future.
The company is for instance taking an active role in expanding Ethiopia’s fruit production capacity to guarantee future local sourcing of fruits for its juice production. It has already set up a nursery to supply farmers with seedlings that produce mangoes of the desired quality. The company has also engaged micro-finance agencies to provide financial support to farmers desiring to embark on commercial production of mangoes.
As local capacity builds, the company plans to build its own puree processing line to serve its juice manufacturing line. In future, there are also plans to install a carton packaging line because juices in laminated card boxes have a more premium feel and a better sustainability profile. The company also has plans to manufacture fruit juices that do not use stabilizers and little to no added sugar.
Unsure of when Ethiopia’s foreign exchange shortage will end, Sendelet is also looking to export its products to countries in the East African region to boost its foreign exchange reserves. Khalid revealed that the company has already identified South Sudan, Djibouti, and Somalia as some countries with potential for its juices. Most importantly, Khalid said the company plans to grow in multiple locations in Ethiopia so that many Ethiopians can have a taste of the fresh, crisp, and refreshing O-mango juice.