The prices of packaged milk in Kenya have significantly increased, with a liter now retailing between Ksh. 120 to Ksh. 160 depending on the brand. As a result, there is a growing demand for milk sold through ATMs, which is priced between Ksh. 65 to Ksh. 80 per liter; approximately half the cost of packaged milk. This makes starting a milk ATM business in Kenya a lucrative opportunity.
If you’re unfamiliar, a milk ATM is a machine that dispenses milk based on the desired amount entered or the coins inserted. Some advanced ATM machines even accept mobile payments through platforms like Lipa na M-Pesa.
To enter the milk ATM business, one must acquire a milk ATM machine and comply with the requirements and regulations governing this type of business.
Procedure for Starting a Milk ATM Business in Kenya
Before venturing into a milk ATM business, there are several essential steps to follow. Here’s a breakdown of how to start a milk ATM business in Kenya:
- Identify A Densely Populated Area With High Milk Demand
The milk ATM business thrives in densely populated areas where a significant number of people prefer purchasing milk from ATMs rather than buying packaged milk. This is typically observed in lower and middle-income localities. It’s not advisable to set up a milk ATM business in high-end areas, as residents there usually buy packaged milk from supermarkets.
The chosen area should also have a substantial population to sustain long-term demand. Profit margins in the milk ATM business are generally low (similar to most food items), so selling in large quantities is necessary to generate decent earnings. We will discuss this in more detail below.
When finding a location, consider securing a commercial space or partnering with existing businesses like shops or supermarkets. Collaboration on a profit-sharing basis can be a viable option.
- Obtain The Necessary Business Licenses
Starting a milk ATM business in Kenya requires obtaining a license from the Kenya Dairy Board and a county single business permit. These are the main milk atm business in Kenya requirements. The Kenya Dairy Board License costs Ksh. 2500, and the application is free.
The cost of the county single business permit varies depending on the area, ranging from Ksh. 5,000 in rural regions to KSh. 20,000 in urban/metropolitan areas such as Nairobi and Mombasa. However, areas like Githurai (Kiambu), Rongai (Kajiado), Mlolongo (Machakos), and Kitengela (Kajiado) are located outside Nairobi and offer more affordable county licenses.
- Select An Appropriate Milk ATM Machine
Choose a suitable milk dispenser machine based on your selected business location and estimated customer demand. These machines are available in various sizes, such as 20 liters, 50 liters, 100 liters, 200 liters, 300 liters, and more.
If you anticipate selling around 100 liters of milk per day, consider acquiring a 100-liter Milk ATM machine. This ensures that you can sell all or nearly all the milk in the machine by the end of the day, allowing you to refill it the following day. In case any milk remains, it won’t spoil as the machine is refrigerated.
Milk ATM machines are available at different price points, neither cheap nor very expensive. You can check the milk ATM machine price list in Kenya to help you budget accordingly.
- Establish Connections With Milk Suppliers
The next step is to establish connections with milk suppliers who provide pasteurized milk, as required by law. These suppliers can be wholesalers who transport milk from rural areas to urban centers.
Pasteurized milk is typically sold for approximately Ksh. 50 to Ksh. 60 per liter, depending on the supplier and location. Alternatively, you can purchase raw milk directly from farmers and pasteurize it yourself.
Milk pasteurization involves heating the milk to around 72 degrees Celsius for 15 seconds or 63 degrees Celsius for 3 minutes to eliminate any pathogens present in raw milk. This can be achieved using a pasteurizing machine or by heating the milk over a fire.
Profitability of Milk ATM Business in Kenya (The Figures)
Here is a breakdown of the potential profitability of a milk ATM business in Kenya, considering the acquisition of a 100-liter machine and selling a total of 100 liters of milk per day:
- Cost of a 100-liter Milk ATM Machine: Ksh. 85,000
- Rent plus deposit: Ksh. 20,000
- Kenya Dairy Board License: Ksh. 2,500 + Ksh. 600 application fee
- County Single Business Permit: Varies between Ksh. 5,000 and Ksh. 20,000 depending on the county and location
Total Capital Investment: Ksh. 128,100
- Pasteurized milk price: Ksh. 50 per liter
- Electricity cost: Ksh. 1,000 per month
Assuming you sell 100 liters per day at Ksh. 65 per liter, with a profit of Ksh. 15 per liter:
- Gross profit per month: Ksh. 45,000
- Total expenses per month: Ksh. 11,000
Net Profit per month: Ksh. 34,000
With these figures, you can expect to recoup your initial investment and reach the break-even point within approximately 4 months. That is the good profitability of milk ATM machines which have improved the lives of many Kenyans.
It’s important to note that selling 100 liters per day is a conservative estimate; in most areas, you can sell up to 200 liters in residential estates and over 500 liters in supermarkets.
Conclusion
That concludes the steps to starting the best milk ATM business in Kenya. By following these guidelines and considering the profitability potential, you can embark on a successful venture in the milk ATM industry.
Also Read: Small business Ideas In Kenya