How to Start a Profitable Wines and Spirits Business in Kenya

Starting a successful business is the dream of every aspiring entrepreneur. In this article, we explain how you can establish one of the most profitable business ideas in Kenya. Beer, wines and spirits have a high demand because they are addictive products.

In microeconomics, addictive products have a low elasticity of demand, which means that their demand does not change significantly regardless of how high the prices go. If you increase the price of meat today, its demand will decline because people can learn to live without it. However, even if you raise the price of wine above the ceiling, people will break the roof to satisfy their thirst. That is the reason why the demand for alcohol continues to rise in Kenya.

NACADA has estimated that approximately 15 million people drink alcohol REGULARLY. That is about a quarter of the entire population and more than half of adults. You take advantage of this growing market for alcoholic beverages in Kenya to make millions of money.

How profitable is a wines and spirits business Kenya

Generally, a wines and spirits business is significantly profitable. There is no low season for wines and spirits business, and if appropriately located, customers can come in large numbers regularly. This translates to huge revenue and profits. It may not be possible to determine exactly how much you can make while selling wines and spirits in Kenya, but in a busy town you can make up to KES 5,000 in profits daily. This translates to KES 150,000 per month. However, this depends on the location, size of your business, and your marketing efforts.

Factors to Consider Before Starting a Wines and Spirits Business

Like any other desirable business, there are things you must consider before making the decision to start a wines and spirits business. There are external and internal factors that may boost or hinder your business, depending on how you handle them. Let us look at them in details:

1) Location

The three most important determinants of success in business are always location, location and location. Well, at least before you relocate online. Choosing a good location is essential if you are aiming to make good profits from your business. The location should be near a business center to attract people who are leaving work in the evening. It should be accessible from the main road and must have high traffic. Remember, it is illegal to sell alcohol near a school or in an apartment building.

2) Competition

You should do a competitive analysis before establish your business. In this regard, you need to identify potential competitors in your chosen location. For each competitor, list their strengths, weaknesses, prices, and strategies. To stay competitive, you should learn from the strengths and weaknesses of your competitors. This helps you to provide products and services of better quality and set competitive prices.

3) Customers

You also need to do a market research and identify your target customers. Market segmentation and positioning helps you to categorize customers based on their demographics, psychographs, and buying behaviors. You then target a specific segment and deliver products and services that meet their needs. For instance, you may identify youth who love sports as your target market. You then set prices and offer services that match the target market, e.g. by installing sports television your shop to attract sports enthusiasts.

4) Licensing & Regulations

Wines, spirits and other alcoholic drinks require a lot of licensing and regulations. Before starting a wines and spirits shop in Kenya, it is mandatory to seek relevant licenses such as:

  • County Government’s single business permit (license)
  • Health certificate
  • NEMA Approval
  • MCSK License

You should also know the rules and regulations for wines and spirits distribution. For instance, alcohol should not be sold to persons below the age of 18.

Requirements for Setting up a Wines and Spirits Business

In every business, the entrepreneur is required to gather the required resources and equipment to facilitate the operations of the business. After choosing the location and establishing the feasibility of the business through market research, the next step is to acquire materials, facilities, and licenses. You need a sizeable room, shelves, furniture, drawers, record books and receipts, employees, initial stock, and operating cash. Usually, rent prices for wines and spirits business range from KES 20,000 to KES 50,000

Costs of Starting a Wines and Spirits Business in Kenya

The cost of starting a wines and spirits business depends on your location, business size, and the types of liquor you are selling. For the purpose of estimations, we use a business located in a small wines and spirits shop located in a suburban area of a major city like Nairobi. The cost of starting such a business can be estimated as follows:

Item Cost (KES)
Licenses 70,000
Furniture (including shelves) 50,000
Stock 50,000
Rent 30,000
Employees (3) 45,000
Miscellaneous 30,000
Total 275,000

 

Challenges

Every business faces significant obstacles, especially in its early stages. Wines and spirits business has its own sets of challenges just like any other enterprise. Some of the challenges include:

  • Short operating period – between 5pm and 11 pm on weekdays and 2pm-11pm weekends.
  • High start-up cost
  • Dealing with drunk people can be challenging for employees
  • Keeping records of stock purchases and sales
  • Competition can be strong in a busy area
  • Regulations of the business

Parting shot:

You can never know whether you can do it unless you try.

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