7. Business model Scalability
MFE planned to expand their supply base to 8 more growers by the end of 2013. The target is to have 20 growers, each managing nearly 1,000 birds on average. If this target is met, egg production would fluctuate between 15,000-17,000 eggs a day, which would make MFE one of the largest fresh egg companies in Mozambique. Mirroring the factors that New Horizons considered for scaling up its business model, MFE has taken into account the following aspects:
- Desire for greater impact: MFE could have decided to simply increase the amount of birds that each grower is producing. Instead, the company is committed to reaching out to more families that could benefit from the activity. This measure finds its rationale in the vision of the business: a successful agri-business for and by the local communities.
- Market demand: The national consumption of fresh eggs oscillates between 8-10 eggs per capita per annum, well below other African countries’ standards. With regard to market competitors, low-quality eggs from neighboring countries (e.g. eggs from Malawi into Nampula) are the only competitive force at the moment and consumer acceptance is said to be dropping as fresh local eggs become available.
- No structural or capacity constraints to growing: As the business grows financing, logistics and data management issues set the limits to further development. At this early stage, however, an expansion of the supply base requires slight increases in overhead costs (investment on chicken runs aside) weighed against high potential benefits. Logistical and data management aspects are shown to be under control.
- Efficient commercialization: The company in charge of the egg marketing, Eggs for Africa, has years of experience in the sector. When approached, they showed willingness to handle a larger amount of product whenever feasible. Their diligence and market presence are instrumental to the success of the company.
Is this business model replicable?
Yes, although with exceptions. There are some technical challenges associated with the out-layer model that could prevent new schemes from having comparable success. Above all, the hatching and rearing process must be carried out by skilled personnel with suitable equipment. Anything that limits either the hatching or subsequent chicks’ growth will affect their ability to lay well. Both processes take place on the company’s premises, where personnel have been trained by professionals with extensive experience in the poultry business. Once laying hens have reached sexual maturity at 16-18 weeks, MFE proceeds to place them at the growers’ farms. This step precedes the other major challenge: making sure that birds lay close to their potential or laying curve. Growers must provide feed and water in a timely manner, as well as ensure the continued health of the layers. Any deviation from these practices will cause a drop in the number of eggs produced, which in turn will have an impact on business profitability. Also in an activity such as fresh egg production, side-selling should be handled cautiously. The company needs to trust the growers’ good will, although it should never be complacent in this area. In short, to successfully replicate the business model there must be a widespread belief that involved communities is the way to go, as well as technical knowledge, financial capital and the willingness to engage with small-scale farmers and local communities, although this is likely to be at the expense of short-term profitability.