Speaking with DairyReporter.com in the midst of a takeover by Danone, Preben Sunke, chairman of Fan Milk International, explained why the company’s street-level distribution model has proved so successful in West Africa.
"Street vendors play a big role in business in West Africa," said Sunke.
"Ice cream, for example, is a very popular product in West Africa, but consumers don’t want to walk 10 miles to buy an ice cream. If you can walk down the street and buy an ice cream from a vendor on a bicycle or with a cart, you will. It’s easier.”
"Our distribution model has been developed to meet consumer demand,” he said. ”Put simply, you need to be where your customers are.”
"Unique" distribution system
Fan Milk, which boasts a presence in seven West African countries, relies on a fleet of more than 30,000 street vendors, operating push carts and bicycles, to distribute its growing portfolio of fruit juices and dairy products.
”The Fan Milk Group has developed a unique distribution system whereby frozen dairy products and juices are distributed to the consumer in the market place,” said Sunke.
”The products are transferred in refrigerated vehicles from the production facilities to major distribution centres that are located nationwide. From here the products are distributed to smaller centres that are responsible for the distribution of products to agents, franchisees, shops and supermarkets.” he added.
Evolving consumer demand
The company, which has its headquarters in Denmark, has been present in West Africa since 1960 when Danish entrepreneur, Erik Emborg, established the Ghana Milk Company.
It was renamed Fan Milk in 1962, and has since set up shop in Nigeria, the Ivory Coast, Liberia, Burkina Faso, Benin, and Togo.
In the early days of the company, Fan Milk distributed just reconstituted milk. But, like in many other regions of the world, West African consumer tastes have evolved. In turn, so has Fan Milk's product portfolio.
”Over the years, the Fan Milk Group has constantly adapted to consumer demand in respect of product range, taste and flavour,” Sunke said.
“Today, Fan Milk successfully manufactures and distributes a range of frozen and ambient products including yogurt, ice cream, flavored milk, drinking yogurt and juice drinks.”
On the back of its geographical expansion over the years and its product variation efforts, Fan Milk now boasts sales of around €120m ($160m), and has access to around 250m increasingly-affluent consumers.
And the company’s success hasn’t gone unnoticed. Impressed by Fan Milk’s distribution model, Danone recently decided to invest.
In October 2013, Paris-based Danone entered into an agreement with private equity firm, The Abraaj Group, to jointly acquire Fan Milk International. The deal, which is scheduled for completion later this year, will see Danone gradually assume a majority stake in Fan Milk.
Through the deal, Danone, which has an established presence in South Africa and several Maghreb nations, hopes to ”develop the dairy product market in West Africa” using Fan Milk’s ”unique business model.”
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