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The secret to our 128-year-old family business

Elgon Kenya Managing Director Bimal Kantaria. [File, Standard]

When Bimal Kantaria, the Elgon Kenya managing director talks about the company’s future plans, it is with the enthusiasm of a kid with a brand new toy.

You would think Elgon Kenya is a start-up.

Yet Elgon Kenya - a family-owned business that deals in an assortment of agricultural products — is nearly 130 years.

And, going by its robust succession plan and strategic management, Elgon Kenya could easily clock another 100 years.

Started in 1898 in Limuru, Kiambu County, Elgon Kenya moved to Nairobi some two decades ago, even as it funnelled out into the region while helping farmers and giving university students a platform to hone their innovative skills.

The secret to the company’s long life is not only constant innovation, but the company also has an impeccable succession strategy which it hopes will propel it into the next century.

The children of the two director brothers (Bimal and Baiju Kantaria), right from a young age, were wired into the family business.

Talking to Bimal, you get the feeling that Elgon Kenya, like many other Indian family businesses, is as strong as its family ties. 

“So, as an Indian family, from childhood, we train our children to focus on the family business,” Bimal tells Enterprise.

The two directors (brothers) are the fourth generation in the company. “My son, who is the youngest son in our family of ten, if you ask him what he wants to do, he will tell you.”

“He will tell you this is a family company. He knows which office he wants. At this age, he is ready,” says Bimal, adding that his niece and nephew, part of the fifth generation, will soon be joining the company after completing their university education.

The education of the children is largely an initiation towards ownership and management of the business. Moreover, the Kantarias all live in the same house and work in the same company. “And the conversation in our house at the dinner table is business.”

As a philosophy, the company which sells fertiliser, chemicals, packaging materials, and irrigation pipes, has never compromised on the quality of its products. 

The Kantarias also have an open-door policy, with every factory worker at liberty to walk into Bimal’s or his brother’s and talk to them.

Hidden in the sprawling Industrial Area, along Mombasa Road, one would dismiss Elgon Kenya as just another humdrum Kenyan manufactory.

“We are big. By far the biggest in the region,” says Bimal. The company runs the National Farmers Award as part of its corporate social responsibility.

It has also partnered with the University of Nairobi (UoN) to set up an agricultural innovation hub that will help students in agriculture develop new ideas to help farmers.

As a private company, Elgon Kenya does not reveal its turnover.

However, Bimal hinted that should the company be listed on the Nairobi Securities Exchange (NSE), it could easily be among the top ten in terms of market capitalisation.

Slowing down

Elgon Kenya, which has over 900 employees, has been growing at an annual rate of between 15 and 20 per cent, which is unusual for such an old company.

“At this stage of our company’s life cycle, we should be slowing down, or selling out as other people have done,” remarks Bimal.

As the Kantarias infiltrate the multi-billion shilling blend fertiliser market and break the dominance of European multinationals, the secret could be the ability to make decisions quickly.

“Because this is a family-owned company, it is quite quick at adapting,” continues Bimal.

Elgon Kenya recently acquired a $1 million (Sh117 million) blend fertiliser machine as it positions itself for the next phase of growth.

With the new blend fertiliser that it has been manufacturing for over a month now, the company believes it is going to give the Kenyan farmer the ingredients they need for their particular crop and soil while making it cost-effective. “There is no spending money to buy ingredients he (the farmer) does not need for his soil.”

It is a risky gamble.

Farmers, all over the world, are generally very conservative and will never want to fix what they believe is not broken.

“It is a gamble because to convince a traditional farmer to move away from the DAPs (Diammonium phosphates) of this world requires a lot of investment from us.”

For a long time, Elgon Kenya has been selling imported fertiliser blends from Europe.

But this locked them out of a lucrative tea market, with a lot of farmers using compound fertiliser blending which is made in very hi-tech European factories.

Compound fertiliser blends are controlled by only two companies.  But they also kept hearing complaints from farmers about increased soil acidity due to the fertiliser they used.

 “We wanted to grow our market share. We couldn’t compete with multinationals. So we re-invented the game.”

Elgon Kenya is looking into the future. And this explains why it has been digging deeper into its pockets. It has recruited an additional 40 to 50 agricultural experts to educate farmers on how to use the blends.

Elgon Kenya has also partnered with the University of Nairobi with 20 of the institution’s graduates getting a soft landing through a six-month internship programme.   

The firm also spent Sh10 million on radio campaigns last month alone. Elgon Kenya has always been re-inventing itself.

Fifteen years ago, the company, which was 90 per cent floriculture, diversified from flowers to other crops grown by small-scale farmers like coffee, tea and maize, horticulture.

At the time, with the onset of devolution, small-scale farmers were largely abandoned, thanks to the confusion that come with the new Constitution.

The company had to quickly re-engineer its operations. “We had to bring in a whole new product line of small-scale products, new chemicals, new fertiliser and new people.”

They also needed new ways of sales and marketing.

Today, the component of floriculture has reduced to 40 per cent while the rest is taken up by other crops. “We are the biggest suppliers of chemicals and fertiliser among the small-scale farmers,” he said.

Thirty per cent of the company’s production is also now exported into the region.

“It is unusual for a 130-year company to suddenly diversify and keep growing,” noted Bimal.

Another innovation was to change the packaging of fertiliser from the conventional 50-kilogramme for DAP and Calcium ammonium nitrate (CAN) into 10 and 25 kilos.

This is after they noticed that agro-vets were opening the 50-kilogramme bag of fertilisers, and scoop out some of the inputs for the small farmers.

“Instead of doing that and contaminating the whole bag, why not give them in 10 or 20-kilo bags?”

Elgon Kenya also helped cascade drip irrigation technology from the large farmer to the small-scale farmer who constitutes over 70 per cent of the country’s production.

To make it cheaper for small-scale farmers, they started manufacturing the drip irrigation pipes locally, the first Kenyan company to do so.

But Elgon Kenya has also been rigid when it suits its market.

For example, they have stuck to the original molecule, refusing to abandon original brand names for generic molecules.

Although these generics are cheap they may not be as effective as original multinational chemicals, says Bimal. Elgon Kenya has also benefited a lot from good advice.

It has constantly been hiring new faces to bring in fresh ideas.

“One of the secrets of this company is that we are very flat in hierarchy,” says Bimal, noting that there is a direct line of communication between the 50-odd managers and the directors.

That has meant that the directors are involved in every decision made at any level.

Every order -purchase or sales order- is approved by the two directors. “Nobody else is allowed to approve an order-sales order or purchase order.”

Internal controls

This, Bimal notes, has intrigued a lot of people. “How is Bimal making small decisions? But it has helped us to see where the market is going.”

Consequently, the directors have been extremely switched on what is happening in the market. The two brothers work for 12 hours a day. “From my grandfather to dad, we have always been involved in the business every single minute of the day.”

The company’s internal controls, Bimal notes, have also been aided by an “incredibly powerful IT system in the background.” Being hands-on has helped with the company’s flexibility, thus a very low bad debt ratio- nearly zero per cent.

“A lot of times when you let go of control, you can get yourself giving credit to the wrong people. We keep open credit, but we have no bad debt ratio because we are managing it ourselves.”

But, ultimately, the future prospects for Elgon Kenya will depend on a proper succession plan.

Perhaps, as David Brooks, a conservative political and cultural commentator, wrote in The Atlantic, the nuclear family structure that has been held up as the cultural ideal for the past half-century has been a catastrophe for many, including family businesses.

Bimal reckons that in India, families stay together - as extended families. And, even more critical, they work together. “My dad was here till last year. He was in business.