Plastics and Furniture Sectors in Kenya: An Interview with Mehul Shah of Ashut Engineers

Interview with Mehul Shah, Director of Ashut Engineers Ltd

What is your assessment of the plastics sector in Kenya? What are the latest trends?

The plastics sector is growing every day. There are many different types of plastics: HTP, PET, and film. The film has caught a downturn but the PET sector and the HTP blow and injection are growing. Globally, the PET sector is moving faster because of its lightweightness and huge outputs. If you need 100,000 bottles a day, the PET sector can do that. Rigid packaging is still in line with the Kenyan market because of the recyclability aspect of the rigid plastics. People want strong plastic and PET is somewhat flimsy and lightweight. Edible oil sector containers are being used for water or milk as a second option.

Is there a lot of competition in the market?

We have a lot of players in the market. In the PET sector, there are about 4 or 5 players and about 4 or 5 more in rigid packaging. Competition is huge and the margins are very small. We are working on technology and energy efficient equipment to try and get an edge over our competitors.

What is happening in the furniture sector?

We go to quite an extent. We measure to your standards and then we customize. We deliver, we install, and we also maintain if there is an issue.

In the furniture division, we have the metal and wood segments. There is a lot of importation coming in for both sectors. Because of the volume of the products, the importation is more costly than those products that are local. Unfortunately, the local resources for metal and wood are more expensive which makes us less competitive compared to the imports coming from China or India or the Far East. For both sectors, looking at the developments going on in Kenya in terms of affordable housing, office blocks, many towers being built, every area will need an office or a house and all these furniture goods need to be consumed. We have a good market if we get the right raw materials and the right price. Then, we should be able to compete against the imported goods.

What do you bring to the market? What are your competitive advantages?

Ashut Engineers started in 1986. We have a lot of experience in terms of the Kenyan market. We are now looking at machines which are being used in first world countries and we bring them here and we get products which are made from those machines. We have CNC machines and automation is key. We also train local people. We have taken them to Europe to take a training course on the CNC machines and they are now able to make what the first world is able to make. The only area of concern is the high power costs that we have. If we can cut costs there, then we should be able to be more competitive. We are installing solar power in the plastics side and if it is successful, then we will do the same in the furniture side. Power is a huge cost for us. With automation, we should be able to make our products more affordable. We also provide the customers customization. Most of the imported products are generally one size fits all. We can measure your office and make your products to your requirements. If you need a table to a specific design, we will design it for you using whatever materials you want such as metal, wood, any texture, finish, color, stain. You do not have to order container loads, but you can order piece by piece. We also do home furniture where the fabric is based on the customer’s choice. If you go with imported goods, you are bound to whatever is available in the market, not what you want. On the racking and shelving side, we can make them all as high as the customer wants to suit a 2-ton or 3-ton load capacity. It is ideal for the way you want your office or your warehouse to be. Everything can be custom made.

What is one of your success stories?

We focus on innovation. We attend a lot of exhibitions. In October, there is the biggest plastics division exhibition in Dusseldorf, Germany called K FAIR. These technologies would typically not come to Africa for another 5 years. We have that advantage. We look at what is happening in the first world countries and bring it here almost immediately. In only 6 months down the line we could have those products here. For example, about 6 years ago we started producing labelled yogurt cups using IML which is a very thin plastic similar to PET. They are now a big hit in the market. Our competitors are even starting to copy us just now, but we were able to start years ago. Now, we have about 65% of the yogurt market share in Kenya. In the furniture sector, we offer shelving, racking, filing cabinets, etc. With our filing cabinets, they are disassembled so you do not have to waste money on shipping costs to the neighboring countries. We also do shelf fittings. These are all bulky furniture products and we have experts that go to Uganda and Tanzania and actually install it for you if you do not have in-house technical people. We go to quite an extent. We measure to your standards and then we customize. We deliver, we install, and we also maintain if there is an issue.

What do you supply for the government and how successful is that segment?

The government has an initiative called “buy Kenya, build Kenya” where they are promoting local manufacturers. Our products are made to last. They are very strong, sturdy, high-quality, and durable. They will last 5 to 10 years without any issues and if there are any problems, then we are here to resolve that as well. Most of the government offices we worked with still have the same furniture from 25 years ago.

What is your international reach?

We manufacture B2B and B2C. When we do B2B, our products are packaged by our customers and are taken as far as Zambia, South Africa, Malawi, etc. In our B2C customers, we send goods to Tanzania, Rwanda, Burundi. We supply shelving and office furniture to those neighboring countries. One of our big advantages is that while we are doing plastics, we have customers who also need furniture. They complement each other. We have long term contracts for three years and two additional options to extend. We are also working with international partnerships. We have developed Mazzican which is a 10L milking container developed under the Bill and Melinda Gates Foundation. They had a team who did a survey for almost two years and they came up with the product. They looked at who in the region could manufacture this. They vetted us and saw that we were capable. For the last 4 years, we have been marketing it for them under that umbrella. This product detects mastitis while the cow is being milked. While milking the cow, you can see the mastitis as yellow dots on the funnel. You can stop, treat the cow, then milk the cow again the next day. That funnel is very useful in the milking industry which is growing by the day.

Are you looking for partners to increase your efficiency and bring new products to the market?

We are always looking for new ideas, new technology, the way forward for the market, and how we can get first world machinery and products in-house to make our products better and longer lasting. We recently invested in European machines in the plastics division which are energy efficient and much faster. They can make products three or four times faster than our current machinery from India and China with very little labor involved. On the furniture side, we have CNC machines which are 6-way and 10-way. They do multiple jobs in one machine. Instead of one machine for punching, one for bending, and another for cutting, etc., everything is done by one machine. Because of the high cost of those machines, if there is a partner who is willing to promote their products here in the local market, we can partner long-term, get the technology here, they get an entry into this environment, and we get a better product to serve the customers.

What are your current projects?

For the plastics side, we are looking at making things more lightweight and reducing the plastic content in the market. We have several orders from multinationals who have their own standards. Whatever is happening in Europe, France, etc., or with companies like Total or Shell, they have global standards. To bring them to this environment with the infrastructure we have, the weights sometimes do not do well with the durability of the containers. But by having that technology here, we are able to match the product quality and make sure that the end user gets the same product they would get in first world countries.

What are the key success factors in this space to succeed?

You need to have innovation, new developments, customer focus, customer service, and pricing. Everyone is looking at pricing. They always think that an imported product will be better and cheaper. But they are mistaken because we are making good quality products which are as good as or even better than the products that are imported.

What are you doing in the recycling space?

Currently, the entire world is now environmentally savvy and looking at what is happening in the environment. Therefore, plastic is a major concern for everybody right now. The opportunity for recycling is very high. By having public private partnerships, we can actually save the environment and use a cheaper product instead of going to the more expensive resources like glass or metal or aluminum. We can still use plastic and make sure that it is recycled in a better manner. We also want to push for courses in schools from kindergarten up. The education system does not have a syllabus for the environment. If it starts from there, then people will become accustomed to how to collect, how to recycle, and how to use the product in a much better manner. As Ashut, we have done cleanups in Nairobi in the forest. We collect the plastic and then take it to the recyclers for recycling and using it in a better manner. But there is still a lot of work to be done. There is a lot of plastic. It is about how to promote our knowledge. We need to tell people not to litter and hold onto their plastic garbage to take to the recycling collection centers and then they will do the necessary processing.

Do you use that material again?

We use the same recycled materials to make our products. We have an inner layer which is food grade so the product inside is not contaminated. Then, the middle and outer layer can be non-food grade. That is how we help save the environment.

Are you involved in other CSR activities?

We are involved in tree planting in the forest. We have planted almost 10,000 trees in the last two years and that is an ongoing project for us.

Project yourself to the future. What do you want to achieve for the company?

Ashut Engineers must be known throughout Kenya and the neighboring countries. We employ over 1,200 people currently and we try to promote the local talent coming in. Our vision is to be in every city and town and be the leading manufacturer of plastics and furniture in the region. We want to give the best quality product. Whatever the customer wants we should be able to make locally instead of turning towards importation.

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