Developing a Business Plan for Cooking Fuels in Kenya's Cities
A leading energy company in East Africa was looking to enter the urban base of the pyramid (BoP) cooking fuel market in Kenya and hired Dalberg to conduct a comprehensive feasibility study and develop a business plan.
We began by examining what is needed for successful market entry: regulatory context, current and projected market dynamics, partnership opportunities, customer dynamics and willingness to pay, and potential distribution strategies to reach BoP customers. Through significant desk research and an energy diary experiment with those in urban slums, we compared prices of traditional fuels, tracked consumer behavior, tested product acceptance, and determined a competitive pricing point for cooking gas.
We then conducted a review of all operations and steps — of the product value chain from importation to customer delivery. This included analyzing players throughout the supply chain; their infrastructure as well as their technical and financial capacities to handle the product. Finally, we built a model to determine the financial viability of the project based on key profit drivers and risk factors. We also investigated the possibility of obtaining carbon credit to subsidize customers’ upfront investment in stove and cylinder equipment.
The company’s board approved the business plan we created. We also presented to a team at the International Finance Corporation (IFC) that decided to invest in this new project. The company started a pilot, which confirmed the viability of the business, and the pilot is currently being scaled across the nation’s major urban cities.