Billionaire Jaswant Rai is the chair of the Rai Group, a chain of companies that produce sugar and other fast moving commodities. He controls approximately half of Kenya’s sugar output. His aggressive expansion in the sugar industry was one of the reasons he lost the bid to take over Mumias Sugar. It was argued that Rai’s big forays would create a dominant sugar baron which would not be healthy for other competitors.
Jaswant Rai did not just take over the business empire of his late father Tarlochan Rai, he came in with the strategies that his father had used to build a multibillion empire.
Tarlochan migrated to the DRC (then Zaire) at a time of political volatility and acquired valuable coffee and tea estates from Belgian settlers who disposed of the same at low prices. Acquiring strategic assets and building an efficient machinery out of them has been a long held family strategy.
In this article, we tell you why it is difficult to compete against Jaswant Rai. This is not only in business, but also in sports where Rai funded Kabras Sugar RFC and Menengai Oilers have been giving opponents a hard time on the pitch.
1). Brutal vertical integration:- In the manufacturing field, the Rai Group produces its packaging for sugar, soap and water. This gives the company a tight control over costs while shielding it from disruptions that comes with outsourcing. Ultimately, this gives them a sustained competitive edge.
2). Operational excellence – The Rai Group is far much ahead of other industries in a game where efficiency wins. Their sugar machineries for example, run faster and are able to turn this into larger volume output. This also minimises the production costs.
Even on the roads, while other industries use old tractors that consume high fuel, the Rai Group uses trucks and turbo-charged Mahindra Haul Master, Mahindra 9200 tractors that move way faster and handle larger volumes of cane.
Have you ever realised that most of the tractors used by Rai Group are 4wd hence improving on haulage efficiency during rainy seasons?
3). The strategy of supply chain control: In the sugar industry, Rai has effectively integrated the entire value chain. By supplying farmers with inputs, offering extension support and making prompt payments for delivered cane, he wins over farmer loyalty and is assured of raw materials. It is for this reason that the zoning politics have always been a hot potato in the sugar industry.
4). Circular economy and revenue diversification: Rather than disposing by-products, Rai turns the waste into wealth. Molasses is processed into ethanol while bagasse is used to generate electricity. This diversification creates new revenue streams while cushioning the business in times of poor sugar prices.
5). Logistics optimization through backhauling:- Rai’s trucks ferry palm oil from Mombasa to factories in Nakuru and are then deployed to transport finished products back to Mombasa. The trucks rarely travel empty hence reducing transport costs and creating a significant cost advantage over competitors.
6). Value proposition strategy: The Menengai bar soap has over the years been a leader in the market despite not being aggressively marketed. And there is a reason for this – Menengai entered the market with a proposition that it is multipurpose and gentle on the skin. The word in the villages, mother-to-mother believed that Menengai also cured various ailments. When I was young, I remember my mother insisting on Menengai when sending me to the supermarket – she claimed it was long lasting (haiishi haraka) and so was the case for many other women. This is the reason the bar soap commands a big share of the market.