An Agrovet runs the business of selling farm inputs like seeds, fertilizers, animal feeds, pesticides, herbicides, acaricides, knapsacks and other farm inputs to farmers. This can be done either through wholesale, distributors, or retail.
The business has expanded since the late 90s as more people get into farming. Lately there has been an upsurge of people doing farming as a business. Such farmers whether big or small are more professional thus use as much as of the necessary inputs throughout all stages of production. This has increased the demand for farm inputs and has attracted entrepreneurs to the agrovet business.
Farm chemical companies have also become more aggressive in their marketing leading to the establishment of more distribution systems up to the grassroots level.
Wholesale and Distributors
Companies use various distribution methods to get their products to the retailer.
In the first instance a company sells produce to a distributor, who is more of a super wholesaler. In some instances the distributor can only sell to wholesalers, while in others he can sell; to both wholesalers and retailers.
There are companies which don’t use exclusive distributors rather they sell to wholesalers who then sell to retailers.
In some instance manufactures sell directly to retailers. This is more so for the smaller companies or when introducing new products.
Although farm input companies sometimes seek distributors by advertising in the public media, often distributors are appointed by virtue of volumes and cash at hand
The exact requirements needed to become a wholesaler or distributor will vary from company to company. There are those who ask for a security deposit of say Ksh. 1m to 5m, set minimum purchases at Kshs.500, 000 and so forth. Others will zone regions so that there are only a limited number of distributors within a certain area. There are also those who require distributors not to touch products from rival companies.
With capital of Ksh. 1 million and above, capacity to raise more, facilities and a good plan you have a chance of becoming a wholesaler. It’s much easier if a company is using distributors to sell to wholesalers rather than selling directly to wholesalers.
A number of distributors in the market started as retailers and as their sales volumes increased the farm input companies approach them to become wholesalers or distributors.
There are 3 licenses that are required to run an agrovet retail.
Single Business user permit – This is issued by the county government to all businesses operating within the county. The cost will vary from county to county, the exact location within the county and size of premises. The average is Ksh. 7,000.
Kenya Plant Health Inspectorate Service (KEPHIS) License – Anyone commercially dealing with seeds needs to have a license from KEPHIS. KEPHIS estimates there are about 7000 registered agrovets, which is about 80% of all agrovets in the country.
However the reality is that there are hundreds of agrovets who have not registered with KEPHIS. Many are not even aware that they are required to have a KEPHIS license.
KEPHIS has satellite offices in various parts of the country but has not been very strict in following up on the licenses largely because of lack of capacity. There are many agrovets which are located in small remote rural towns and if KEPHIS was to follow up on all of them then it would require a big investment in manpower and vehicles.
Still the cost of the license and process of approval is not hectic so try getting the license.
You need to get an application form from ant of the KEPHIS offices or their website (www.kephis.org). You could be required to show proof that you will purchase from a licensed distributor or the seed company itself.
- Retailer – Ksh. 1,000
- Wholesale – Ksh. 5,000
- Distributor – Kshs. 30,000
Ideally KEPHIS should come and inspect your premises to see what you are selling meets the set requirements. Sometimes they do at sometimes they don’t. The license takes an average of two weeks to process. You can start operations without the license.
Pest Control Products Board License – This is issued to anyone dealing with pesticides and related products. However just like with the KEPHIS license there are many agrovets who are able to survive comfortably without license either due to ignorance or lack of strict enforcement by the board.
To apply you fill an application form which can be acquired from the PCPB website (www.pcpb.or.ke) or from their offices.
The annual license fee is Kshs. 1000 for retailers and Kshs. 4000 for wholesalers and distributors. You can get the application form at the PCBP offices.
PCBP officials will come inspect your premises. Among the requirements for a premise to be approved are:
- Suitable design, layout construction to facilitate the health of workers and to avoid contamination of the environment. Adequate ventilation must be provided.
- Sufficient space for the placement of equipment and storage of materials which is necessary for the health of workers and operators.
- Separate areas, either by partition, location or other effective means for those operations which do not require workers to be exposed to pest control products.
- Workers must wear adequate protective clothing. (Rubber Gloves, masks, overcoats and gumboots)
- First Aid facilities must be available to cater for accidental poisoning (First-Aid Box, antidotes and fire extinguishers)
- Operators in charge of premises for manufacturing, formulating, and packaging of Pest Control Products shall have adequate knowledge of chemistry, toxicology, efficacy, and general use of products being dealt with in the premises.
- Identify Location – Look for a location with a high density of farmers and relatively low competition. Presently it might be impossible to get an agricultural rich region without an agrovet within a radius of 5 kilometers. However that should not discourage you since with right strategies you can compete effectively. That said avoid an area with a dominant highly capitalized player. This being a very price sensitive business the larger player will likely be offering lower prices and a wider variety. And though you can survive its will be hard to thrive. –
- Renovate Premises – Brand clearly, have a good display that farmers can view products from a far. This tempts them to try new products and purchase more.
- Identify a supplier / wholesaler – Suppliers will be found in county headquarters or other significant towns. Shop around to identify who is offering the fairest prices. In most cases you will find that one supplier is offering lower prices for one item but higher for others.
- Stock – Stock intelligently especially if you have limited capital. Consider the season and more importantly the major farming activity in the region. Stock more of the products supporting the popular crops in the area.
- Preferably you should have a little of everything but with limited capital that is not possible. Then you also don’t want to tie your capital in stock that does not move. Where possible have different brands of similar products, for instance pesticides targeting the same pest but from different companies. This will cater for the varied budgets and tastes of farmers.
In one region you could find that farmers favor a particular brand. This could be as result of promotion efforts by the manufacturers, success stories by farmers or the influence of a leading agrovet. Thus it’s important to know what the preferred brand in an area is. You don’t want farmers coming to your new shop and asking for the product only to realize you don’t have enough of it. This might make them have a dim view of your business.
It’s also an advantage to generally know what is happening in the agriculture scene; new products, diseases, solutions and so forth. You can know this by reading, talking to technical and sales reps, listening to farmers and any other source. Be proactive in seeking for information. A good wholesaler will advise on what to stock but its better when you have your own market intelligence.
When making purchases consumers will consider the price and the brand. Say if a farmer has an acre of tomatoes he will not risk going for the cheapest but less effective pesticide rather he will opt for the brand that is known to have better results even if it could be relatively expensive. Hence the importance of variety and proper understanding of the market
Minimum quantities so at enjoy wholesale prices will vary from wholesaler to wholesaler but averages about 6 items. Then after the first initial purchases you build a relationship with a wholesaler and minimum quantities stop being a factor.
Main terms of payment are cash. Nonetheless some wholesalers extend credit facilities after dealing with a retailer for some time. . Representatives of manufacturers will at times sell directly to agrovets especially when they are introducing new products. Frequently this is by consignment selling, where they leave the products and come for money after you have made actual sales.
- Single Business permit 7000
- KEPHIS License 1000
- PCPB License 1000
- Stock 300,000
- Premises 10,000
- Salary 8,000
- Miscellaneous 15,000
- Working Capital 40,000
- Total 382,000
The prices of the products may vary according to the area and competition. Still those indicated are more or less the average. In brackets are the active ingredients apart from Easy Grow foliar feeds. For easy grow they are the various variants Fertilizer prices also vary according to season.
Margins – 15% to 30 %
Average breakeven point – 10 months. This could be longer or slightly shorter depending on the competition in the area, farmer density, how active farmers are, the weather and the general state of the economy.
Average Daily Sales:
Kirinyaga – Kshs. 3500
Machakos – Kshs. 2800
Highest sales recorded (Peri Urban) – Kshs. 46,720
Sales will depend on competition and location.