Youth-Led Cooperatives for Collective Bargaining and Market Access in the Sugarcane Industry
Overview
This model focuses on creating youth-led cooperatives pooling resources, collectively negotiating better sugarcane prices, and accessing larger markets. By organizing smallholder sugarcane farmers, the cooperative model ensures consistent supply to millers and maximizes profits. It also opens opportunities for processing byproducts like bagasse and molasses, further diversifying income streams.
Startup Costs and Requirements
| Item | Cost (KES) | Description |
| Cooperative Registration | 10,000 (10 people) | Registration fee with cooperative societies. |
| Capacity Building and Training | 200,000 | Training members on governance, finance, and sugarcane agribusiness. |
| Administrative Setup | 80,000 | Office setup, equipment, and staff salaries for 3 months. |
| Transportation and Logistics | 40,000 | Purchase or lease of trucks for sugarcane transport. |
| Aggregation Centers | 200,000 | Establish 2 aggregation centers for sugarcane collection and weighing. |
| Marketing and Outreach | 10,000 | Promotion to recruit members and attract buyers. |
| Miscellaneous Costs | 20,000 | Contingencies, legal fees, etc. |
| Total | 560,000 | Estimated startup costs for the cooperative. |
Market Potential
- Kenya Market
- Domestic Sugar Industry: Kenya produces approximately 600,000 metric tons of sugar annually but has a demand of over 900,000 metric tons, leaving a deficit filled by imports. Cooperatives can supply sugar mills like Mumias Sugar, Nzoia Sugar, and West Kenya Sugar, which rely heavily on smallholder farmers.
- Byproducts Market: Bagasse (for briquettes) and molasses (for ethanol and animal feed) are growing markets in Kenya. For example, companies like Tamuwa Limited buy molasses for energy production.
- Retail Market: Cooperatives can venture into direct sales of processed sugar through supermarkets and wholesalers.
- Export Market
- Regional Demand: Neighboring countries such as Uganda, Rwanda, and Tanzania import sugar to meet their demand.
- Byproducts: Molasses and bagasse products like briquettes and ethanol have potential export value, especially for East African Community (EAC) industries.
Where to Sell and To Whom
1. Local Market
- Sugar Millers: Secure direct supply agreements with leading sugar factories such as Mumias Sugar, Nzoia Sugar, and West Kenya Sugar, ensuring a steady demand for sugarcane.
- Byproduct Buyers: Engage renewable energy firms and bioethanol producers, such as Tamuwa Limited and Eco2librium, who require bagasse and molasses.
- Retailers and Wholesalers: Package processed sugar under a cooperative brand for distribution to major retail chains like Naivas and Carrefour, as well as independent wholesalers serving urban and rural markets.
2. Export Market
- Export Partnerships: Collaborate with the Kenya Export Promotion and Branding Agency (KEPROBA) to identify and penetrate international markets, leveraging Kenya’s trade agreements within the East African Community (EAC) and COMESA regions.
- Global Buyers: Supply sugar byproducts, such as molasses for ethanol and bagasse for renewable energy, to manufacturers and distributors in neighboring countries like Uganda, Rwanda, and Tanzania, as well as further afield in the Middle East.
Strategies to Access These Markets
1. Local Market
- Strategic Partnerships with Sugarcane Processors: Establish long-term supply contracts with leading processors such as Mumias Sugar, Nzoia Sugar, and Chemelil Sugar to ensure a consistent revenue stream. Build relationships by offering high-quality sugarcane and reliable delivery schedules.
- Byproduct Sales to Renewable Energy Firms: Negotiate bulk sales of bagasse and molasses to companies like Tamuwa Limited, which specialize in renewable energy and bioethanol production. Highlight the environmental benefits of using sugarcane byproducts to attract sustainability-focused buyers.
- Retail Distribution Agreements: Collaborate with major retail chains such as Naivas, Quickmart, and Carrefour to package and supply branded sugar products directly to consumers. Additionally, tap into smaller wholesalers who cater to rural and peri-urban areas, ensuring a broader market reach. Offer competitive pricing and bulk discounts to secure shelf space.
- Leverage Local Market Trends: Identify demand hotspots in high-consumption areas like Nairobi, Mombasa, and Kisumu and target these regions with tailored marketing campaigns to increase visibility and sales.
2. Export Market
- Quality Assurance and Certification: Obtain mandatory export certifications, such as KEBS (Kenya Bureau of Standards) and ISO standards, to meet international market requirements. Ensure compliance with EAC and COMESA trade regulations for smoother cross-border transactions.
- Government Incentives and Trade Expos: Leverage government export initiatives like the Kenya Export Promotion and Branding Agency (KEPROBA) programs. Participate in trade fairs and expos such as the EAC Regional Trade Fair and Kenya International Trade Exhibition to network with potential buyers and showcase the products’ unique value.
- Market Research and Targeting: Conduct detailed market analysis to identify countries with high demand for sugar and byproducts like ethanol and molasses, such as Uganda, Tanzania, and Ethiopia within East Africa, and Middle Eastern markets for ethanol.
- Digital Platforms for Outreach: Use platforms like Yakazi to connect with buyers, logistics providers, and exporters in the EAC region. Yakazi can also facilitate introductions to freight companies, provide access to trade networks, and promote the business to potential clients looking for consistent suppliers.
- Diversified Marketing Channels: Develop export marketing campaigns highlighting the sustainability and quality of Kenyan sugar products. Utilize social media platforms, email campaigns, and trade directories to reach international buyers.
Profit Potential
- Case Study:
- A youth cooperative farming 100 acres of sugarcane can yield approximately 600 tons annually (average yield of 6 tons/acre).
- Selling sugarcane to a miller at KES 4,200 per ton generates KES 2,520,000 annually.
- By selling bagasse (at KES 1,000/ton for briquettes) and molasses (at KES 5,000/ton for ethanol), the cooperative can earn an additional KES 500,000 annually.
- After operational costs of KES 1,800,000 (labor, transport, etc.), net profit is KES 1,220,000 annually, providing income for members and reinvestment.
How Yakazi Can Facilitate and Support
- Labor and Expertise
- Provide skilled and semi-skilled labor for sugarcane farming, aggregation, and transport.
- Facilitate training for cooperative members on sugarcane farming techniques and cooperative management.
- Market Linkages
- Connect cooperatives with sugar mills, retailers, and export buyers through Yakazi’s digital platform.
- Partner with energy companies and ethanol manufacturers for byproduct sales.
- Technology Integration
- Offer tools for tracking member contributions, payments, and market prices via Yakazi’s app.
- Enable cooperative members to access agribusiness learning materials on the Yakazi platform.
- Funding Opportunities
- Yakazi can share information on microfinance options and grants for youth cooperatives.
- Awareness Campaigns
- Promote the cooperative’s activities and products through Yakazi’s marketing network, including social media and events.
Conclusion
Youth-led cooperatives in the sugarcane industry offer immense potential for enhancing market access and profitability while empowering young entrepreneurs. With Yakazi’s resources and market access, this business model can achieve significant growth and create a sustainable income for its members.