Maji Milele Purified Water ATMs, Business Model

Some facts 19 million Kenyans suffer to some extent from Fluorosis* Fluorosis causes: stained dental enamel ease of bone fracture, especially old people reduced IQ, especially for children** Number of people that drink salty water: unknown to Maji Milele Health effects of drinking salty water: not very clear to Maji Milele Conscience about importance of save water is growing -> demand also grows * Source: Kenya Society for Fluoride Research ** Source: http://fluoridealert.org/articles/iq-facts/

More facts Most people in towns get water from centralized water treatment plants Population in affected rural areas only have two options: Drink water with high fluoride/salt levels, typically 2-5 Kes per 20 liter Drink bottled water, typically 400-500 Kes per 20 liter Decentralized water purification is is very expensive, RO units >500 liter Is big business in other countries. Example: Manilla has 3,000 businesses Kenya has only very few of such businesses: Africaqua, Purefresh, …

Aquaya research and recommendations (1) Purified water presently targets the upper 20%. Yet, the other 80% is increasingly aware and willing to pay for pure water To reach the 80% prices are required of Kes 40-60. This business is about high fixed costs and low variable costs. Demand for purified water in new communities starts slow, but then grows quickly TAP 21 businesses are very successful in Asia. Success can be copied to Kenya. Need for safe water and demand for safe water are not the same. Salty water <---> high fluoride levels

Aquaya recommendations (2) Successful water treatment business are: Early movers Volume driven, hence: open 7 days a week and long opening hours (tap 21: open 24-7) Have a very good location!! Close to customers and space for upgrading. Develop trust from clients: show treatment plant / offer free cups of water / KEBS Have trained staff with financial motivation Realistic about market penetration. Often initially only 1%. Then 6 months 20/60% growth. Keeping initial fixed costs low is very much recommended. Most businesses have cash-and-carry model. Delivery services: be careful with costs.

Aquaya recomendations (3) Kenya market for bottled water: Kes 12 billion in 2010. In 2017 15 billion? 10% is 150 million. Pure fresh recommendations - Taste of water is a very sensitive thing Pricing is tricky. New entrepreneurs start best with promotion prices before setting a final price. Losing trust of customers is fatal. Hence quality control and KEBS are key.

TAP 21 – water purification business concept (1)

Purified Water ATMs –business concept (2) Water quality report determines water purification system Market size determines business model: *1 purifier, one water point (population > 4,400) *1 purifier, several water points (population > 8.000)

TAP 21 – business concept (3) Prepaid water meters with mobile topping up Every liter is paid for – NRW 0%? Remote monitoring – 100% control Water points are open 24/7 Chlorine dispensers or online chlorination/Hadex Big villages: distribution via pick-up tuk tuks. Low capital investment – Aqua Etiam purification

Financials (1) Capital Expenses -Water Point expenses, borehole drilling if not existent, storage tanks -Prepaid water meter - Purification machinery, chlorine dispensers - Distribution carts/tuktuks or trucks Operational Expenses Labor Raw water 60% yield Purification machinery operational costs – Power, membranes replacemnet. Water point and Record keeping

Financials (2) Marketing - Distribution plan – Prepaid dispensing, transportation etc Household demand per day: 1-1.5 liter per person per day (purified water is not for cleaning and washing) Very competitive pricing: about Kes 70 per 20 liter (US$0,70) Currently price for 20l purified bottled water average at Kes 400 Variable pricing: prepaid dispensers can automatically charge higher rates for low volumes of water -> profit margins go up. People are generally aware of the importance of drinking safe/purified water Bring your own clean container or cleaning services at a fee can be offered Well groomed staff

Financials (3): Example of pricing structure and profit calculation Pricing example in Kes for selling purified water Liters Price bottled water Price purified water (dispensed) Estimated costs per liter of purifying water Costs of purified water (dispensed) Profit Profit margin 20 350 70 1.1 22 48.0 118% 10 220 44 11 33.0 200% 5 140 28 5.5 22.5 309% 1 50 8.9 709% 0.5 30 6 0.55 891%

Business Strategy – 2 phases 1) pilot phase: entrepreneurs set up their own company, Maji Milele provides: Market research support – with external research partner Marketing support Technical support Subsidy/recoverable grant up to 60% Learning and feedback cycles – with external research partner Franchisee fee depends on agreed conditions 2) Commercial scaling up ambition: 1,000 franchisees.

Thank you Let’s do business!