NAIROBI: The New Kenya Co-operative Creameries (New KCC) will spend Sh140 million to finance new milk processing infrastructure as a strategy to strengthen its ability to endure stiff competition.
The milk processor’s chairman Mr Matu Wamae said the fund will be used to expand its Nyahururu plant by putting up a dedicated line for the production of the 100ml milk packets known as 'Kabambe', at a cost of Sh70 million.
The balance of Sh70 million will finance installation of a UHT line at the Eldoret factory to increase production of the long-life brand. Milk powder has a shelf life of two years and processors with dry plants use it to supplement their stocks by reconstituting it in times of shortage.
Wamae explained that New KCC is targeting to grow Kabambe’s revenue contribution from the current five per cent of its total income to 15 per cent. The new Nyahururu processing line is expected to start operations in August this year.
Kabambe, which mainly targets low income earners, was launched last year and sells for Sh14, compared to the common 500ml packet that goes for about Sh52.
“We will be establishing a dedicated line for Kabambe given the fact that the product has become popular though we have never had a dedicated line for it,” said Wamae.
Wamae confirmed that the volume for the raw milk intake has grown by 10 per cent and the firm is banking on modernisation to accommodate increased supplies from farmers. At the moment, the firm has a daily capacity of 700,000 litres. “We have been experiencing increased volumes from farmers in recent days and we need to modernise our infrastructure in order to absorb all supplies that they bring in,” he said.
The expansion comes at a time when Treasury has allocated Sh400 million to New KCC to establish an instant powder milk plant in the current financial year, to put them at par with market leader Brookside.
The Treasury allocated the State-owned firm the cash to set up a plant which will absorb excess milk from farmers, sparing them the losses such as those witnessed in 2010 when processors poured milk worth millions of shillings for lack of market.
“We are currently running on old machines which cannot make instant powder milk for our market,” said Wamae. “The market is changing and we need to meet consumer preferences.” The new plant, Wamae said will also increase New KCC’s processing capacity and create room for absorption of more milk from farmers.