“We are selling one litre at Sh65, but a consumer can get as little as 77ml at a cost of Sh5. All one needs to do is key in the amount they require, and the product is dispensed,” Gitonga, who procures his machines from Italy, said.
Flexibility is the key to survival, indeed. This quote is from a Kenyan newspaper article titled “Dip in purchasing power drives demand for milk dispensers” which covers the increasing visibility of these milk vending machines in Nairobi and touches upon some of the demand drivers.
Mr Gitonga told Business Beat he shares the profits equally with supermarkets and retailers as he is protected from other expenses such as rent, water and electricity.
He said the demand for milk from the machines is being dictated by changing dynamics in the local market, including the need for quality milk, depressed purchasing power and a surging population.
The prices for processed milk have increased since the introduction of VAT last September, which has prompted consumers to turn to raw milk. Currently, a litre of raw milk in most estates costs between Sh50 and Sh55, while a litre of processed milk averages Sh85.
“We are giving consumers who frequent outlets in estates that sell raw milk that may not be inspected a safer choice.”
What strikes me is the fact that this shift back to one of the fundamental purchasing patterns observed among the lower income demographic is not only an obvious sign stretched household budgets due to rising price of food, but a classic example of the flexibility required by those managing on irregular income streams.
That is, this daily habit to purchase only what is needed and that too by cash amount (5 shillings) or quantity, is the same purchasing model for kerosene, another household staple.
Could this shift in buyer behaviour also be considered a signal of the fluctuating fortunes of the “floating class” identified by the African Development Bank as those who are part of the emerging middle class but their cash flow might not be as steady as for someone on a regular paycheck?
If so, then we’re seeing here an example of an innovative solution to providing a daily need – milk – to urban households without a cow in the backyard – by ATM entrepreneurs as a whole new market creation opportunity.
Not for milk per se, but for products and services which can offer the flexibility that volatile income streams require, and are still upwardly mobile or progressive consumables that the emergent middle class household needs for their shopping basket, in this case, pasteurized milk.
And the increase in demand might actually also be an increase in the population of those who are now part of “middle class with floating”… this could be one of the dividing lines. I’d keep an eye on the fortunes of these milk machines in supermarkets if I were interested in the African middle class market.