Zaidi Technologies

In developing economies, an average of 70% of the dairy sectors are informal. In Kenya, this means the value chain that handles over 3.5 billion USD in milk each year is highly inefficient and unaccountable. Our solution digitizes the relationship between the various players along the dairy supply chain, bringing clarity, efficiency and quality control to the sector. This results in higher profits for farmers on the production side by 20%, and both decreasing cost and assuring the quality of the product for those on the consumer side by 40%. Additionally, by controlling all aspects of the value chain, Zaidi is able to make a profit, allowing for long-term sustainability of the business.

There are 2.5 million smallholder farmers producing 3.5 billion USD worth of milk each year in Kenya which is moved through completely informal and invisible channels. As a result, smallholder farmers do not have access to value adding products and services that can help them grow and develop, are unbanked, overlooked by financial institutions due to high cost of access, and get paid poorly for the milk they produce because of inefficient links they can't see or control. Informal dairy traders, the first level of milk aggregation in the value chain, while highly effective, are hindered by a lack of tools and access to market. They also do not have what is needed to get financing and grow their business. Across almost all high-density urban areas in East Africa, shopkeepers make low revenues with little or no means to differentiate from the shops around them, are also unbanked, and struggle with access to money needed to develop their shops. Consumers have no good options for buying affordable and safe milk, often paying high prices and accepting risks when buying milk from unverifiable sources. With Kenya as an example, this problem is documented in almost every developing economy in the world.

Our solution is to digitize the relationship between the smallholder farmers and the dairy traders who are the first level of informal milk aggregators, then contract with them to buy the milk which we transport, process using third party contractors and sold through a network of IoT-enabled milk dispensing machines. We have developed the digital platform that is used to collect the milk by the dairy traders in house, using our own developers. This is android based. With operational partners to do the transport and the processing, we are able to avoid the challenges faced with large capital requirements to get started and have the ability to change assets as we need to grow. As we grow, our goal is to eliminate all access of contamination or adulteration of the milk in the value chain. Today we are sourcing our milk dispensing machines and milk cans from a local supplier, but ultimately we need to bring the development of these in house while we source better technologies and enable IoT functionality throughout the process.

There are four primary beneficiary groups in this business: Smallholder farmers, dairy traders, shopkeepers and consumers. We provides digital records and bank the smallholder farmers for the first time, giving them access to value adding goods and services such as school fee loans and insurance, while providing them with stable markets which they can rely on to buy their milk. By giving the dairy traders the mobile platform, we are able to help them access stable markets, gain opportunity for investments for their business such as finance and asset leasing. Shopkeepers are able to better compete with other shops as they have a much higher value offering then the shops that can not sell milk. Furthermore, the shopkeepers increase the profits they are taking home at the end of the day by up to 80% as they start to sell the high-value product of milk. For the consumers of the milk, it is the availability of a product they can both trust and afford which benefits them the most. They also see a 40% reduction on costs when compared to alternatives on the market.

The purpose of Zaidi's intervention is to disrupt and improve the informal dairy value chain in Kenya. By adopting a technology that is already widely used to meet our needs, we are making it more efficient and profitable for every player in the dairy value chain, from the smallholder farmer who produces the milk to the point it reaches the consumer. By assuring a market for the milk that farmers produce and utilizing IoT in our POS dispensers, we can ensure there is less waste. By controlling the entire value chain, we can assure a quality product for the consumer.

Our solution is innovative because it's digital, modular, repeatable, and disruptive. We are turning every individual milk aggregator into a digital dairy cooperative, with a full value offering to the farmers through a network of partner suppliers. It disrupts the current status quo and creates an entirely new way for the milk value chain to operate. Although there are several other solutions that we look at and admire, none of them are in East Africa. No Kenyan companies in this sector have developed an innovation like ours that gains unique insights into an otherwise opaque market. We have a far better value proposition to farmers than any traditional cooperative can offer. Additionally, nobody has gone as far into the consumer market by installing their own POSs, through which we're able to build optimizing distribution systems to offer quality milk at lower prices. We're able to bring twice the value to farmers than any other competitor, adding value addition far beyond what is currently offered. We are doing to the antiquated, stagnant, and manual informal milk market what Uber did to the taxi industry. One the consumer facing side, we are building an accountable brand with strong technical measures that are in place to help customers overcome the trust issues they have with the current bulk-milk market. Overall, we are able to offer every link in the value chain a far superior offering than what is currently available. If we are successful, it could reshape the dairy landscape in East Africa.

Mobile technology has proven effective in revolutionizing a wide range of industries, from taxis, delivery service, travel, and banking. This technology is especially effective in East Africa because, while access to complex technology may be limited, mobile phone ownership and use is widespread and affordable.

Today, 23 milk traders and 900 farmers in Nyandarua are using Zaidi’s mobile phone platform to record collection of milk and manage their accounts. We have contracted to source buy milk from 4 of these traders as we start the pilot project.

In one year, we expect to be working with 30,000 farmers, helping them to increase their revenue by 1.2 million USD per year directly from a more efficient and vertically integrated value chain. This equates to 21.5 USD per household per month. Their milk would be sold through over 700 POSs which will help those running them (almost exclusively women) earn an additional 1.9 Million USD, equating to over 225 USD of additional revenue per household. We have seen increases of an average of 70% to the amount of milk an individual milk trader is able to collect when they have an assured market and can offer value addition to their farmers. This translates to an additional 71 USD per trader per month in profits they are able to generate, meaning an estimated 32,000 USD would be generated by the traders needed to collect milk needed.

In five years, we expect to be sourcing 52 million liters of milk from 5,000 dairy traders and 250,000 smallholder farmers each month. We will sell this through 10,000 milk POSs to generate over 27 million USD in revenue. We suspect that in 5 years, we will be 75% of the way to reaching this goal.

There is great potential for scaling up and widening our impact. The market is huge. We would also like to continue to refine and adapt the technology to make it more friendly and easy to use and provide better and billable services to the value chain. As we continue to widen our reach, there are also many spin-off business opportunities that we can take advantage of as we scale up once we are operating at a high enough level. These range from insurance, amortization schemes, and asset financing.

We need to invest in building the infrastructure and products needed to move the milk through the value chain and have full control and transparency over it while assuring quality. This is too R&D focused for traditional investors, meaning we would need to sell a disproportionate amount of the company to fund the pilot.

We also need to establish partnerships in the areas of IoT hardware and software in order to develop our milk points of sale. If we can incorporate smart metering technology into the milk dispensing machines, we can predict when milk will sour, better understand the behavior of the consumers the frequency with which consumers are buying milk, and to get meta data about the consumers.

Additionally, the current dairy sector in Kenya has some challenges. The Kenyan Government is rewriting laws surrounding the sale and handling of bulk milk. The market has also been spoiled by bad players in a lot of areas of the country, meaning there is currently a lack of trust, and companies with government ties who have a lot more resources compete with us.

Grant funding would allow us to demonstrate the unit economics of the business at a scale, develop the systems needed to revolutionize the informal dairy sector, and make cash-flows that are high enough to allow us to raise larger sums of funds and scale the business.

Opportunities like this gives us a boost when it relates to finding partners. We also are capitalizing on our networks and the relationships we have built to find the right partners with the right type of support.

When it comes to the rewriting of laws in Kenya regarding the sale and handling of bulk milk, Zaidi is working with relevant government bodies to pioneer new and safer methods for handling, selling, and processing milk.

Building trust that has been lost by bad players in the milk sector can be done through demonstrating our anti-tampering technologies, having rich engagement with the consumers, and strong quality assurance policies.

Although there are companies that have strong government ties and more resources than us, they do not have products on the market and are informal, unstructured, small, and responsible for poor quality.

5 full time, 2 part time

Nilma Shah has spent the past 10 years building businesses in Kenya. She has had two commercial exits and knows what it takes to make a business successful from the inside. She is committed to and has experience in building businesses that are highly ethical and moral, with the practical knowledge of how to make it scalable and profitable.

With 9 years of experience building four socially driven businesses in Kenya and East Africa, Graham Benton has spent the last 5 years working with informal dairy traders. This has given him a uniquely rich perspective on the values that are able to be gained and derived from this market segment. He has gained a unique view of the problems smallholder farmers face and has been developing solutions with the different players to make a highly scalable and sustainable business.

Kitawa Wemo has 8 years of experience guiding businesses and helping them to develop strategic partnerships, finding the right kind of support and funding that they require. She has experience with commercial buy-outs and exits, has a deep understanding of entrepreneurship, and vast knowledge of Kenya’s business ecosystem.

We are partnered with MyFugo to offer extension services and financing products to farmers. We are working with GearBox to develop IOT enabled milk POSs. We are partnering with a grocery store to help build our supply chain and value addition at the consumer end of the value chain. We are also working with the Miliman Foundation to help us develop de-risking strategies and products, such as insurance that we can offer to the smallholder farmers. A company called CowBell has agreed to manufacture modified milk cans and train our staff in the proper techniques for testing milk quality. We are also working with Farming Solution Ltd. who are helping us to source and manage the installation and maintenance of the milk POS. We are partnering with Kenyan Dairy Board to help develop standards around the quality and accountability of bulk milk.

We are using our mobile platform that we built in-house to digitize the relationship between the smallholder farmers and the first level of milk aggregators. This gives us a lot of transparency and data on the supply side of the value chain. We then contract with the milk aggregators to buy the milk at a slight mark-up, so that they are able to make their wages. This matters to them because they have access to stable market that they can depend on to sell milk through. We then use sub-contractors to transport and process the milk. We have to do this currently until we reach a scale that makes the most sense for the business.

We are applying to Solve because, in order for us to succeed, we need partnership with and input from experts in innovation. We have an excellent idea, we have done the groundwork and started the implementation, but with a boost, we could revolutionize the dairy sector in Kenya and beyond. 

There are three key areas that we need to develop to see this innovation revolutionize the value chain. First, we need to find the partners necessary to help fund the start of the business through debt capital and other vehicles. Second, we need business that will help us to optimize the technology so that we can reduce costs and open access. Lastly, we need to have the people with the necessary skills to execute on the business model.

We need to partner with a wide range of companies. Ones that are difficult for us to find are those dealing in IoT hardware and software that we can use to develop our milk points of sale. If we can incorporate smart metering technology into the milk dispensing machines, we can know before the milk goes bad that it has exceeded thresholds for freshness, endangering the quality of the milk. Furthermore, it will help us to better understand the behavior of the consumers, the frequency with which consumers are buying and get meta data about the consumers. We would also like to partner with hardware development businesses, which can help us develop the hardware we need to optimize the milk dispensing business. Currently, milk handling is highly inefficient due to the hardware restrictions that are in place. If it can be developed, the cost of assets can be reduced while increasing utilization, and thus dropping the price of the milk for buyers and increasing it for producers.

One essential aspect of the dairy value chain, the shops that host the POSs and sell the final consumer, is run almost exclusively by women, especially in para-urban, low-income areas. Through Zaidi's intervention, these women will be able to generate an additional 150 USD per month from their shops. Furthermore, while the collection process is primarily male dominated, it is more often the women of the households who use the money earned from the sale of milk to help develop the socioeconomic status of the household. This means that the use of the revenue from milk sales goes toward developing the social well being of the household in the form of school fees, medical bills, cleaning supplies and food stuffs.

The Zaidi solution is designed to scale easily and can be implemented into any informal dairy sector, so Zaidi Technologies could realistically succeed in most emerging markets. An investment of $200,000 would allow us to demonstrate the unit economics of the business at a scale, develop the systems needed to revolutionize the informal dairy sector, and make cash-flows that are high enough to allow us to raise larger sums of funds and scale the business further. We can also use this to invest in partnerships in the areas of IoT hardware and software in order to develop our milk points of sale. If we can incorporate smart metering technology into the milk dispensing machines, we can predict when milk will sour, better understand the behavior of the consumers the frequency with which consumers are buying milk, and to get meta data about the consumers.