Low profit margins, panic buying fuel unga shortage

Business Daily Kenya:  A panicky urban consumer and low profit margins from selling subsidised maize flour at Sh90 are emerging as major im...

Business Daily Kenya: 

A vehicle gets fueled. Photo/File

A panicky urban consumer and low profit margins from selling subsidised maize flour at Sh90 are emerging as major impediments to absorption of the commodity.

It also explains why most shops still do not have the subsidised commodity after government introduced it as unga prices shot above Sh165 per 2kg packet.

Retailers in estates say while it is difficult to stock the commodity because of high demand, fixed prices also make it difficult for them to maximise profits, making the product less desirable to the sellers.

Depending on the retailer’s buying point and before including transportation costs and any other logistics, profit margins range between Sh3 and Sh5 per two-kilo packet according to Retail Traders Association of Kenya (RETRAK).

Most shopkeepers who spoke to People Daily said that there is nothing that uniquely motivates them to stock the subsidised unga which is selling at a fixed price of Sh90.

“We scramble to get supplies and most times I am not even assured of the supplies. If I get it, it is fine, otherwise I will sell whatever I have in stock,” says Lillian Meso, a shopkeeper in Tassia estate. “I would rather sell the ‘normal unga’ which is available in the market.

People will understand it is not easy to get the subsidised unga, and in any case they must eat, so I will continue selling the normal stock at the old market rates of Sh160,” said Joseph Muia, shopkeeper in Buru Buru.

Most large retailers say empty shelves are a result of the high demand for the low-priced maize flour but claim that aggressive buyers are to blame.

According to RETRAK chief executive Wambui Mbarire, panic buying is causing a surge in the market. This is escalating pressure in the value chain as aggressive buyers gobble up whatever is on shelves.

“People even know vehicles that bring the flour to retailers which sustains the argument of panic buying as the longest queues remain those with people buying unga,” she said.

Buying in panic is a result of the fear that the scarce commodity will run out leading to a situation where aggressive shoppers scramble for the product piling stocks in the house.

Cereal millers say they have been milling and releasing all the maize to the market. They are waiting for more maize to be imported amid hopes that the situation will normalise immediately the early maize crop is harvested in Kenya’s bread basket.

The post Low profit margins, panic buying fuel unga shortage appeared first on Mediamax Network Limited.

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