KWALE COUNTY INVESTMENT FORUM 2014
INVESTING IN VALUE CHAINS IN AGRI-INDUSTRIES:
The Case of Fruit Value Chains in Kwale County
By: ENG. DAVID K. OPIYO
KENYA INDUSTRIAL ESTATES LTD
OUTLINE
1. Introduction
2. Resource availability
3. Viable value addition products
4. Business profiles
5. Economic and social benefits
6. Required business development
services
7. Conclusion
INTRODUCTION
Agriculture and Business Environment

Agro-ecological zones :
-Medium agricultural potential : 15% of land
-Marginal lands: 18%
-Range land (arid and semi arid: 67%

Annual precipitation:
-900mm – 1500 mm per annum along the coast;
-500mm to 600 mm per annum in the hinter land.

Climate:
-Hot and dry from January to April/May;
-June to August is the coolest period of the year;
-Short rains from October to December;
-Long rains from March/April to July

Business Environment
-High level of poverty - 74.9% (National poverty level-50%);
-Lack of sustainable income from manufacturing, trade and other commercial ventures in the
region;
-No facilities for post-harvest preservation ;
-Very little local value addition to agricultural commodities and fish products;
-Main business is in hospitality and tourism sector.

Infrastructure:
-Roads, electricity and water have lately been improved;
-County is well linked to other parts of the country through highways;
-Linked to the export market through the port of Mombasa and Moi International airport;
-The county lies along the Indian Ocean;
-Neighbours Tanzania and Zanzibar.
Resource Availability - Fruits
Mangoes
-Most widespread fruits along the coastal region;
-Kwale is one of the largest producers after Tana River ;
-Main growing areas are Matuga and Msambweni Sub counties;
-Acreage under mango tree is 4135 hectares mostly holdings farms in and
around homesteads;
-Approximately 500,000 trees which yield an average of 179 kgs per year
per tree;
-43,196 tonnes sold in the year 2011; 52,574 and 91,390 in 2012 and 2013
respectively.
Main species (cultivars):
 Ngowe, which is the dominant variety estimated at 50%;
 Boribo/Kipunda/Kimji or indigenous variety that is being gradually
replaced due to low yields and biennial harvesting;
 Apple – popular for its sweetness and amount of flesh; about 20%.
 New varieties: Haden, Tommy Atkins, Van Dyke, Sensation and
Kent - yield between 1,000 and 1,200 fruits per tree
Mango Market
 50%:
Kongowea Market in Mombasa;
 20%:
exported to Tanzania;
 10%:
Hotel Industry along the South Coast;
 10%: Processors, mainly Milly Processors in Mtwapa, Kilifi County (famous for Picana
brand);
 Balance is sold locally by hawkers or consumed at farm level;
 Mango fruits fetch a price of Kshs.20 per Kg, i.e. Kshs.5-7 per fruit;
 Figure goes down drastically during peak harvest periods - as low as 50 cents due its rapid
ripening and perishability.
Main Challenges
 Poor market development and weak supply chains leading to exploitation of the farmer;
 Pest and disease invasion: fruit fly, weevil, powdery mildew, etc;
 Unreliable rainfall hence the need for irrigation;
 Low uptake of modern farming practices; farmers’ unable to buy inputs/implements;
 Poor post-harvest handling;
 Lack of storage facilities for ripe fruits;
 Minimal value addition.
Citrus
 Kwale is the largest producer in the coastal region, followed by Taita Taveta;
 Citrus family includes oranges, lemon, tangerine, grapefruit and lime;
 Main growing areas are Matuga, Msambweni, Shimba hills and Mwaluphamba;
 Acreage: 2870 hectares - mostly small holding farms in and around homesteads;
 High potential within the current growing area and beyond.
 Approximately 800,000 trees which yield an average of 52 kgs per year per tree;
 20,157 tonnes sold in 2011; reduced to 8,398 in 2012; increased to 41,400 in 2013;
Market
 60%:
Kongowea and other markets in Mombasa;
 20%:
Hotel Industry along the South Coast;
 10%:
Grocery stores; balance - hawkers or consumed at farm level;
 Price Kshs. 20-25 per Kg/ Kshs.3-5 per fruit; as low as Kshs. 1 during peak season;
 Stiff completion from Tanzania - sweeter, juicier variety in Tanga Region.
Challenges to production

Pests / diseases, poor husbandry practices, old trees that need replacement;

Destruction of the crop by wild animals, especially in Shimba Hill area;

Lack of technological packages of training and extension services;

Poor infrastructure -high transportation costs for off-farm delivery to markets;

Exploitation by middlemen due to unorganized market structures;

Poor post-harvest handling, lack of storage facilities for ripe fruits;

Minimal value addition.
Passion

Farming of passion fruit is among the fastest growing agricultural activities in Kwale
County (KARI report)
 Growing areas : Msambweni, Shimba Hills, Mwaluphamba and LungaLunga (lower
parts);
 1million trees in Kwale County which yield an average of 14 kgs per year/tree;
 Acreage is 887.8 hectares mostly small scales farmers;
 Can harvest throughout the year using irrigation and modern farming methods;
simple to cultivate, inter cropped as a creeper, can thrive even on hedges;
 KARI has introduced Varieties like Brazil and CF4 – better tolerance to diseases and
bugs compared to the local yellow passion fruit;is training farmers in orchard
management and fruit harvesting; rapid increase in fruit supply - has doubled in 4
years;
 20 collection centers supported by MESPT have changed the supply mode.
Market
 Mostly sold to ALL FRUIT EPZ Limited, Changamwe, Mombasa County. Requires 10,000
MT pa but farmers can only supply 400 tonnes.
 12 MT sold between Dec. 2011 and Feb 2012; increased to 44MT in June – Sept 2012 and
85MT in Dec 2012 – Jan 2013. Prices: KShS.6 to Kshs.14/Kg;
 70%:
Kongowea and other grocery markets in Mombasa and Kwale Counties,
 20%: Hotel Industry along the South Coast; balance - processors or consumed at
farm;
 Challenges to production: Similar to other fruits
Pineapple
 The most important variety "Smooth Cayenne" is grown commercially in
Kenya for both canning and the fresh market.
 Not widely grown in Kwale County; found in Msambweni and Matuga Subcounties but have a very high potential ;
 Only 30.7 hectares most of which are small scale holding in and around
homesteads;
 Approx. 300,000 trees - average of 2.95 kgs per year per tree;
 694 MT sold in 2011, increased to 729 and 902 in 2012 and 2013 respectively;
 Planting to harvesting takes 1 – 2 years; ratoon crop 9 months – 18 months;
 For canning and puree production, sugar/acid ratio 13 to 16° Brix is suitable attainable when the fruits mature when there is plenty of sunshine.
Market
 80%: Kongowea Market in Mombasa ;
 20%: Hawkers or consumed at farm level.
 Price:
Kshs.20 per Kg, i.e. Kshs. 20 per fruit.
 Challenges to production : Unreliable rainfall hence the need for irrigation +
similar to other fruits.
Paw paws
 Popular fruit in Kwale County; main growing areas are
Msambweni, Shimba Hills, Matuga and Lunga Lunga (lower parts);
 450,000 trees in the County - average yield of 39 Kgs per year/tree;
 Acreage:
722 ha mostly small scale farmers;
 Harvested throughout the year; high potential for more cultivation.
Market
 60%: Kongowea, other grocery markets in Mombasa and Kwale;
 10%: Hotel Industry along the South Coast;
 Balance is consumed at farm level.
 Price:
Kshs.10/Kg, i.e. Kshs. 10 per fruit.
Challenges to production
 Pests and diseases; poor crop husbandry practices;
 High transportation costs due to poor infrastructure;
 Lack of inputs and knowhow; very limited value addition.
Others
 Include: bananas, jack fruits, guavas, tomatoes and
water melons;
 Currently grown on a very small scale, mainly as
subsistence crops; combined annual yield 2,000MT Kshs. 30,000,000;
 High potential for commercial production, especially
guavas, tomatoes and water melons - in high demand
due to their medicinal value and nutrients;
 Establishment of processing factories – like a tomato
paste plant - would instantly catalyze the crop
production.
Summary
Fruits
Growing
Regions
CITRUS
(oranges,
lemons and
tangerine)
MANGO
Msambweni
Matuga
Shimba Hills
Mwaluphamba
Matuga
Msambweni
Kinango (very
rarely)
Msambweni
Shimba hills
Mwaluphamba
Lungalunga
(lower part of
Lunga Lungaalong the
beach)
Matuga
Msambweni
PASSION
PINEAPPLE
PAWPAWS
OTHERS
Msambweni
Lungalunga
Shimba hills
Matuga
Approx.
No. of
Trees
797,222
Yield (Tonnes) Per Year
2012
2013
2014
Income
(Ksh.M)
Potential
Yield (T)
51.93
Price
(Ksh/
Kg)
20
8,398
41,400
828
100,000
510,493
52,574
91,390
179
15
1,370.85
300,000
986,444
5,740
14,108
14.3
20
282.16
50,000
307,000
729
908
2.95
20
18.16
5,000
451,250
8,326
17,597
38.99
10
175.97
50,000
30,000
20,000
2000
MAIN FRUITS IN KWALE
350,000
300,000
PRODUCTION
250,000
200,000
150,000
100,000
50,000
0
CITRUS
MANGO
PASSION
PINEAPPLE
PAWPAWS
FRUITS
current production (MT)
potential production (MT)
OTHERS
Viable Value Addition Products
Fruit Juice
 Liquid that is naturally contained in the fruit;
 Mechanically extracted and flavored but retains its natural quality;
 Most popular juices are made from mangos, citrus, paw paws, pineapple,
tomatoes, guavas, apples, pitches and strawberries;
 Orange juice is most recommended for Kwale with option to produce
mango, passion, tomatoes and guava juices as alternative products during
low citrus season.
 Reason: presently no large scale processors of orange juice in the Coast
Region. Mango, passion factories available.
Fruit Puree
 Made by boiling peeled fruit and adding sugar and starch to produce a
sweet a jelly;
 Can be consumed directly or incorporated in making juice, jam and squash;
 Is locally popular, mainly as a sweetener in oriental and Arabic dishes;
 Pineapple or mango puree added to cake makes it soft, sweet and yummy;
 Also a great baby food. Can also be topped on desserts, cookies or to the
bowl of cereals.
 Huge export demand in the Middle-East and Europe.
Fruit Jam/Tomato Paste
 Thick mixture of fruits, pectin and sugar; boiled gently but quickly until the
fruit is soft and has an organic shape;
 Most fruits can produce jam but pineapple, mango, strawberry and plum
jams are the most common and popular brands;
 Marmalade is a variety of jam made from citrus fruit, adding peels to bring
a bitter-sweet flavor.
Tomato paste
 Thick paste made by cooking tomatoes for several hours to reduce
moisture, straining them to remove the seeds and skin, and cooking them
again to reduce them to a thick, rich concentrate;
 Used as a flavor /gravy on dry fried food like potato chips, chicken, rice,
bananas grilled beef and fish.
Other Products
Raw Material
Benefits
Animal Feeds
Fruit fibre and other
wastes
 Linkage to
livestock farming
Biogas
Fruit fibre and other
wastes
 Green energy
Non-nutrient compounds
Citrus peels
 Medicinal value
Dietary fiber or NSP (nonsoluble polysaccharides)
like hemi-cellulose, pectin,
tannins and gums
 Help prevent
constipation by
reducing gastrointestinal time
 Increase the bulk
to food.
Juice
Location Annual Output (MT ‘000)
producers in
Pulp
the Coast
Region
Mango
Market
Citru
Passion Others
Total
(mango, juice
s
Juice
(MT ‘
passion,
Juice
000)
citrus)
All fruits EPZ
Changa
30,000
0
0
0
30,000 Export,
mwe
Local
EPZ
Refiner
s
Milly
Mtwapa,
processors
Kilifi
Malindi
Malindi
7,000
4,000 2,000
1,000
1,000
15,000 Export,
local
3,000
0
0
0
0
Farmers Co-
3,000 Local
refiners
op.
Coast
Hola
0
1,500
0
0
Development
)
Kilifi
5,000
0
0
0
2,000
(proposed)
Over 20
2,000 Local
(tomato
Authority
ICDC project
500
7,000 Export,
local
All over
0
200
300
200
300
1,000 Local
Current Juice Production
2,300
1,200
3,800
5,700
Pulp (mango, passion, citrus)
Mango juice
Citrus Juice
45,000
Passion Juice
Others
Juice Demand Structure
Type of Consumer
Number Weekly
Demand Est.
(M ltrs)
Large Supermarkets ( e.g.
Annual
Demand (M ltrs)
40
0.4
20.8
78
0.12
6.3
0.18
9.4
43
0.02
1.04
Other Hotels & Restaurants
300
0.05
2.6
Other institutions
150
0.02
1.04
Nakumatt, Uchumi, Naivas,
Budget, Tuskeys)
Medium size supermarkets
and grocery stores
Retail shops
3,000
Tourist Hotels
(Hospitals, Colleges,
Schools )
Export to Tanzania
Total
10
-
51.18
Proportion of Demand by Consumer
Annual Demand (Million ltrs)
25
20.8
20
AMOUNT
15
10
10
9.4
6.3
5
2.6
1.04
1.04
Tourist Hotels
Other
institutions
0
Supermarkets
Export to
Tanzania
Retail shops
Grocery stores
Restaurants
TYPE OF CONSUMER
Market for other products
 Demand for fruit jam, puree and tomato paste is closely related to that of juices;
 Prominent exporters can take 20,000 MT of puree and jam/marmalade pa for the MiddleEast and European market;
Market Challenges and Constraints
 Seasonality of the crops might impede continuous production; facility required for
preservation of the raw materials during off season.
 Food production industry - protracted licensing and regulation processing, especially
regarding environmental and public health concerns.
Marketing Strategy
 Direct marketing of bottled juice and tomato paste to supermarkets, retailers, hotels,
institutions, etc;
 Ex-factory sale of juices, tomato paste and compost manure;
 Sub-contracted supply of concentrate to large juice processing factories;
 Targeting the export market for the bulk of puree;
 Ensuring that products are standardized, branded and well packaged to meet
international standards;
 Use of website, media and word of mouth to advertise the products.
Pricing Strategies
 Consider terms of sale - credit sales, wholesale vs. retail, distance to market and type of
packaging.
 Adopt penetration pricing as an entry strategy - slightly lower than the average industry
prices.
SUPPLY CHAIN
Raw Material Supply Chain
 Key success factor for fruit projects - over-ripe, rotten fruits are discarded as
waste at considerable loss to the business; delays in supply cause factory down
time.
 Recommended supply chain:
-farmers deliver to collection centers; picked by factory;
-Co-ops manage the collection centers and pay the farmers;
-Co-ops are contracted suppliers to the factories.
 Other inputs - sugar, starch and packaging material - procured in sufficient
quantities to last for approximately one month.
Transportation of Raw Materials
 Most efficient and currently popular - vehicle leasing. Frees the company from
maintenance, service and insurance costs.
 It is thus recommended to lease transport but have one (1) 7 - ton lorry as fallback.
Product Supply Chain
 Distributors, wholesalers and retailers;
 Exporter to the export market (for puree);
 Factory gate sales for manure and other by-products.
Business Profiles:
1. Juice Production
Reception
of goods
Sorting
Washing
Peeling
Splitting and
removal of core
Blending
Pulping
Filtering
Dispatch
Labeling
and packing
into cartons
Packaging
into bottles
Cooling
Pasteurizing
Proposed Factory site
 Local leaders and the business community prefer plant to be located
along the Mombasa – Lunga Lunga Highway, i.e., between
Msambweni and Matuga
- easy access to market;
-good transport infrastructure.
 County Integrated Development Plan (CIDP) recommends
Kikoneni/Dzombo in Lunga Lunga Constituency.
 Other factor to consider is closeness to the source of raw materials Shimba Hills produces the largest quantity of citrus fruit.
 At least 3 acres of land is required; necessary infrastructure must be
in place.
Organizational Structure
Board of
Directors
Managing Director
Chief Finance Officer
Human Resource Manager
Adm.
Asst.
Accountant
Clerks/ Storekeepers
Drivers
Production Manager
Food
Technologist
Security
Technicians
Chemist
Lab Staff
Prod.
Supervisor
Operators
Estimated Investment (5,000 tons pa)
Item
Costs
Land and building
25,000,000
Plant & equipment
70,000,000
Other assets
6,000,000
Working capital
5,000,000
Start-up costs
2,000,000
Total
108,000,000
Financing Plan
 County government: land, construction of factory shed, provision of
infrastructure;
 Farmers co-operatives: establish fruit collection centers; in future plans
to carry out semi-processing (pulping) in those centers;
 Co-operatives to raise funds from members for initial costs and
working capital;
 private investors: plant, working capital and other fixed assets
Shareholder
Percentage
shareholding
Items financed
Kwale County
/Cooperatives
30%
Land & building
Start-up costs
Working Capital
Total
Plant & Equipment
Private Investors 70%
Other assets
Total
Grand total
Amount
(Kshs)
25,000,000
2,000,000
5,000,000
32,000,000
70,000,000
6,000,000
76,000,000
108,000,000
Projected Income Statement
Indicator
IRR (10 years)
ROI 3rd year
Return on Equity
year
BEP 3rd year
Rate
9%
18%
3rd 22%
Comparison to market
Treasury bonds: 5-6%
Fixed deposit: 7 - 8%
Unit trust rate: 8 -10%
32%
Net profit after tax 3rd Kshs. 24,062,960
year
Industry average: 30 – 50% of
capacity
Shows good profitability
40000000
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
Year 1
Year 2
Year 3
Year 4
Year 5
2. Fruit Puree
Particulars
1st Year
2nd
3rd Year
4th Year
5th year
Year
Capacity
40%
Utilization
Raw
Material
Input (tons)
Puree
production
(tons)
10,000
50%
12,500
60%
70%
80%
15,000
17,500
20,000
2,000
2,500
3,000
3,500
4,000
4,000
5,000
6,000
7,000
8,000
By-products
(manure) (tons)
Summary of Investment
Item
Costs
Land and building
25,000,000
Plant & equipment
65,500,000
Other assets
Working capital
Start-up costs
Total
6,000,000
11,800,000
2,600,000
110,900,000
Proposed Business Model
Ownership Structure
 Private investors to take full ownership of the project – Kshs. 110.9M;
 Farmers to form cooperatives for supply of raw materials;
 County Government to extend necessary support to the business: infrastructure,
ease of licensing, business development services to farmers in order to increase
crop yield.
Proposed Factory Site
Msambweni is the most suitable and convenient location:
-Easy access to market;
-Good transport infrastructure, especially to collect pineapples and mangoes beyond
the boundaries of Kwale County.
-Availability of land (at least 3 acres) and necessary infrastructure will be an important
consideration.
Main Markets
 Export markets in the Middle East and Europe;
 Supermarkets and hotels in Kenya and neighboring countries;
 Ex-factory sale of compost manure to farmers;
Projected Income Statement
Indicator
Rate
IRR (10 years)
9%
ROI 3rd year
20%
Return on Equity 3rd 27%
year
BEP 3rd year
27%
Comparison to market
Treasury bonds: 5-6%
Fixed deposit: 7 - 8%
Unit trust rate: 8 -10%
Net profit after tax 3rd Kshs. 29,905,274
year
Industry average: 30 – 50% of
capacity
Shows good profitability
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
Series1
20,000,000.00
10,000,000.00
Year 1
Year 2
Year 3
Year 4
Year 5
3. Fruit Jam/Tomato Paste
Production Program
Particulars
Capacity
Utilization
Raw
4th Year
5th year
40%
50%
60%
4,000
5,000
6,000
7,000
8,000
800
1,000
1,200
1,400
1,600
1,500
1,900
2,300
2,600
3,000
70%
80%
Material
Input (tons)
Jam
1st Year 2nd Year 3rd Year
production
(tons)
By-products
(manure) (tons)
Process flow chart
CLEANING
PULPING
DE-SEEDING
CRUSHING
COOKING
MIXING OF PECTIN & SUGAR
COOLING &PACKAGING
DISPATCH
Summary of Investment
Item
Costs (KES)
Land and building
16,000,000
Plant & equipment
38,500,000
Other assets
1,000,000
Working capital
9,000,000
Start-up costs
1,500,000
Total
66,000,000
Proposed Ownership Structure
 Farmers form a cooperative society which will own and manage
the project;
 Raise 20% of investment through shares; balance financed through
a medium-term loan, preferably from the Co-op. Bank of Kenya;
 County government could also inject funds to support farmers.
Optional;
 County Government will also extend necessary support to the
business.
Proposed Factory Site
 Most suitable and convenient location is Ukunda town:
 Easy access to the beach hotels in Diani which are the main local
consumers;
 Good transport infrastructure ensures easy linkage to Mombasa
and the up- country market;
 Direct link to Northern Tanzania where there is a good market for
the product.
Projected Income Statement
Indicator
Rate
IRR (10 years)
14%
ROI 3rd year
31%
Return on Equity 3rd 132%
year
BEP 3rd year
28%
Net profit after tax 3rd Kshs. 17,870,775
year
Comparison to market
Treasury bonds: 5-6%
Fixed deposit: 7 - 8%
Unit trust rate: 8 -10%
Industry average: 30 – 50% of
capacity
Shows good profitability
ECONOMIC AND SOCIAL BENEFITS
Economic Indicators
a. Wealth creation:
 Increased income from fruit farming since there will be a ready market
 Dividends from shares in the investments;
 Income from direct and indirect employment;
 BDS providers will be engaged;
 Linkage to transporters, wholesalers and retailers;
 Providers of technical services e.g. maintenance, plumbers etc.
b. Tax revenue:
 National and County government will benefit from tax revenues, licenses and other levies.
c. Value addition: potential to add value by over 50% to raw fruits.
d. Employment creation: approximately 100 direct jobs and over 1,000 indirect employment
e. Export potential: high potential for export to the international markets and East African region
especially Tanzania.
Social Benefits
 Improved standard of living for local farmers
 Strengthening the cooperative movement in the region
 Reduced insecurity due to gainful employment of idle youth
 Employment opportunities for women
IMPLEMENTATION PLAN
Activity
Feasibility Study
Raising Equity
Growing of fruits
Construction
Procuring
&
Installing plants
Training
Trial/Commissionin
g of projects
Jul-
Oct-
Jan-Mar Apr-Jun Jul-Sep
Oct-Dec
Sep
Dec
‘15
‘15
‘14
‘14
‘15
‘15
REQUIRED BUSINESS DEVELOPMENT SERVICES
BDS Activity
Enhanced
agricultural Local
extension
including
Target beneficiary
farmers
services cooperative societies
provision
of
essential farm inputs
Entrepreneurship
Expected benefits
and 

Right fruit varieties for the proposed products

Improved land utilization

Improved living standard
and Cooperatives and small scale 
management training

enterprises
Better yield
Better business management
Inculcation of entrepreneurial culture among
locals

Governance
and Cooperative
management 
Job creation
Better managed cooperatives and businesses
leadership skills
and SMEs

Strong cooperative movement
Technical skills training
Youth and women

Enhanced human resource capacity;

Improved product quality;

Job creation
Marketing and accessing Cooperatives,
public procurement
and Women
SMEs,
Youth 
Improved market access
CONCLUSION
 Proposed business models are financially viable and also
economically/socially beneficial to the local community
and the country as a whole towards the attainment of
Vision 2030;
 It is possible to implement all the proposed projects
within a period 12 to 18 months as outlined in the
implementation plan above;
 The investors will have the latitude to vary plant
capacities, technology and product range including
integrating all the products in one factory.
Potential investors are therefore invited to:
 Consider the business proposals contained in this report;
 Identify suitable investment opportunities therefrom.
THE END
THANK YOU.