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SUPPLY CHAIN STRATEGY
Unilever Kenya to source US$50m-worth of raw materials locally by 2025
By our News Team | 2023
Strategic shift towards local sourcing primarily motivated by external shocks, including disruptions caused by the pandemic and Ukraine war.
Unilever Kenya recently announced an ambitious goal to source US$516.8-million (Sh7.6 billion) worth of raw materials from the domestic market by 2025.
The company says its ‘localisation roadmap’ outlines its commitment to sourcing approximately 70% of its raw material needs from the local market, in line with Kenya’s 2030 sustainable development agenda.
Unilever Kenya is seeking increased localisation of its supply chain. This photo shows the June 2023 opening of a new warehouse in Nairobi. Photo credit: Unilever
Unilever Kenya has already exceeded its 2023 target by achieving 49% local sourcing, four percent ahead of the set target of 45%. For 2024, the localisation target is 55%.
“This strategic shift towards local sourcing is primarily motivated by external shocks, including the disruptions caused by the Covid-19 pandemic and the Russia-Ukraine war, which have exposed vulnerabilities in the global supply chain,” the publication ‘Food Business Africa’ reports.
According to Unilever, the company aims to mitigate these challenges by building a more resilient and sustainable supply chain within Kenya.
In addition to its local sourcing efforts, the company has pledged to invest $68-million in supplier diversity.
It has formed partnerships with the likes of the SME Support Centre, aimed at delivering valuable insights through training in entrepreneurship, financial literacy, e-commerce, business mentorship and coaching.
Recently, during the launch of new variants of their popular Royco spices, Unilever Kenya partnered with Njoro Canning, engaging local farmers from sustainable sources.
Prospect of a larger free trade market
Comments Trendtype, the London-based emerging market consultancy: “In the background, the prospect of a larger free trade market in Africa promised by the AfCFTA also means that in major markets like Kenya and Nigeria, the focus is on making manufacturing competitive and scaleable – the so-called AfCFTA window.”
It continues its analysis: “A problem in Kenya is that the promise of becoming a regional manufacturing hub hasn’t quite turned out that way without complications.
“Some major FMCG companies have closed local factories (Cadbury’s in 2014, Colgate-Palmolive in 2006), while local manufacturers like Britania Biscuits and Proctor and Allan have also struggled.
“But in 2015 Unilever opened a state-of-the-art manufacturing facility in Nairobi for its Vaseline petroleum jelly brand. In 2019 Mars opened a large, flagship confectionery and chewing guy factory in Athi River, outside Nairobi.
“Kenya remains a key manufacturing site for Upfield (ex Unilever) and its popular market Blue Band spreads and consumer goods business. In 2021, Kimberly-Clark opened a flagship diapers factory in Kenya.”
Unilever’s strategic review, which has seen it cut certain operations in both Nigeria and Morocco, may mean some shrinkage in the portfolio in Kenya too. As with Nestlé, another major FMCG manufacturer explicitly looking to source more inputs locally, for Unilever to hit its target of local sourcing it may need to rationalise its portfolio.
In June 2023, Unilever East Africa inaugurated its newly constructed warehouse in Nairobi, to enable the flexible handling of diverse health and beauty products in the region.
Speaking at the time, Unilever’s Head of Supply Chain in Africa, Christian Byron, affirmed the importance of localising raw and packaging materials in its production processes.
“Seventy percent of raw and packaging materials that Unilever uses for production in the continent are made in Africa which has positive impact on access and affordability of our products,” he said.
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