East African Business Week

KIGALI, RWANDA - Inyange Industries, Rwanda's largest food processing company is replacing independent distributors with direct sales depots to increase profit margins.
The decision announced on February 8, 2011 by General Manager Rama Kent Pandey has raised questions over the young company's future in a looming competition from local and regional food processors.
The decision puts at risk Inyange's plans to penetrate highly competitive markets in other East African Community (EAC) member countries and Democratic Republic of Congo (DRC).
The elimination of independent distributors follows unconfirmed reports that the company is making losses because profit margins are too small to be shared with its chain of distributors.
According to Media reports, Inyange has been dealing with 16 large distributors employing over 400 people countrywide.
Inyange Industries processes juices, mineral water, yogurt and fresh milk.
Since January this year, the company has been increasing prices to cater for high operating costs because of rising prices of raw materials.
The price increase left Inyange distributors with little profit margin.
In addition, the company is said to have forced distributors to sell its products at uniform prices across the country.
Distributors called for revision of the decision but the company declined to accommodate their demands.
In reaction, some distributors could not purchase the company's products and this created supply shocks in some parts of the country.
The company reacted with a new strategy to eliminate distributors and directly distribute its products to customers.
Mr. Rama said that the decision aims at enabling the company to 'courteously and effectively serve our customers all over the country'.
He however does not indicate the means the company will use to implement the new strategy.      
With direct sales depots, the company will choose to either build depots or hire them in order to distribute products across the country.
The company will also be required to purchase vehicles or lease them in order to transport products from its US$35 million Kigali based posh plant to the depots across the country.
Inyange, which towards end of last year laid off 80 employees will also have to hire additional employees to manage the depots.
The whole distribution chain is expected to come with heavy investment in order to succeed.