Developing business model for dairy microfranchising _ Orientation stage As a follow up of the partnership election that RFC won in cooperation with Agriterra, with their idea for setting up an innovative business idea in Kenya, this project gives an orientation of how to go about, in case we elaborate upon this concept that won the prize in the Partnership election. 

Approximately a third of the Kenyan population suffers from malnutrition. Dairy has the unique combination of local availability, low prices and high nutrition density, making it very suited for combatting malnutrition. Kenya produces about 5 billion kg of milk each year. About a fifth of this however is lost due to spillage in the journey from cow to end consumer. This amount equals two glasses of milk per Kenyan per week.
 
There is a plethora of small dairy cooperations which do not process milk themselves and which have insufficient market power to negotiate a good price with large dominant dairy processors (of which there are only a dozen or so). The market price for milk in Kenya is about 35% under world market price level, most likely due to this market structure. Because of this very structure, much milk is spilled, also due to haphazard contracting. &#8195;
Solution
In order to combat milk spillage in Kenya a micro franchise model will be developed and executed. FrieslandCampina possesses knowledge in all parts of the dairy chain; ‘from grass to glass’. With this international knowledge and the expertise of Agriterra on cooperative development, a good micro franchise model will be built where local distributors can join. This stimulates local entrepreneurship and creates employment. 
In the micro-franchise model  all important parts of the dairy chain: training of local farmers, quality assurance, CSR, support of local cooperations and the development of distribution channels. 

With this solution, farmers will be offered a guaranteed turnover whilst at the same time making goodness of dairy affordable for a lot of Kenyans. 

Feasibility and long term goals
Our goal for 2020 is to:
•	Have 16 million kilograms of milk processed to end product by local cooperations, which equals a market share of 3% of all milk processed in Kenya.
•	Pay a loyalty benefit of 2.5 cents per kg of milk to the participating cooperations.
•	Create jobs and employability for 5.000 Kenyans in the form of distributors and sales representatives, earning a year income which is higher than the national mean income. 
•	Offer a branded dairy product for a price per kg which is on par with or slightly below the current non-branded market price of approximately € 0,80/kg
•	Generate an EBIT for FrieslandCampina of € 1.2 mln on a yearly basis.

Local dairy farmers and sales(wo)men do not bear any financial risk in this franchise model and for distributors an earn-back period of approximately one year was calculated. The threshold for participation for locals is therefore quite low. FrieslandCampina bears the major part of the financial risk with a projected earn-back period of 5 years. 

We will use the years between now and 2020 to steadily grow to the volumes and turnovers mentioned. In the meantime, both Agriterra and FrieslandCampina will report progress on a yearly basis to their stakeholders via the annual report. The underlying project only covers the orientation stage, ending on 1st April.

Stage	s

Report literature study & expert interviews
Detailed analyses of available literature and expert knowledge is needed in order to specify the right questions to be answered by the dairy market survey and the dairy supply chain survey  (estimated.effort: 10 days)	01-02-2013

Report Kenyan dairy market survey
Locally conducted survey to get answers to questions leading to right project assignment (estimated effort: 15 days) 	01-03-2013

Report Kenyan dairy supply chain survey
Visit of FC - Agriterra team to Kenya for conducting survey to get answers to questions leading to right project assignment (estimated effort: 15 days)	01-03-2013

CSR & Talent Management Plan
Report specifying approach to secure both CSR and Talent Management objectives of this project (estimated effort: 6 days)	01-04-2013

Project Assignment 
Assignment signed and supported by all parties involved (estimated effort: 14 days)	01-04-2013

The Farmer2Farmer program aims to train and advise dairy farmers in Asia (Vietnam, Indonesia, Malaysia and Thailand) on aspects of dairy farming, such as feeding and watering, calf-rearing, milking hygiene and practice, milking machine maintenance, hoof care and housing & barn design. The main goal of the Farmer 2 Farmer program is to improve milk quality and increase milk production on farms in the Asian countries.