Manufacturer of Paints Is Looking for an Investor

Opportunity Snapshot

  • Country: Kenya Kenya
  • Industry: Manufacturing
  • Stage: Start-up
  • Investment size: $850,000 / min. $590,000

Investment Opportunity

We would like to present the investment project to manufacture paints to supply to local markets and COMESA region. We aim to produce all paints products. The finance will be used to buy land, setup the plant and factory in the next five months.

There will be a wide variety of products and services. The products made will be categorized into:
1. Interior wall Paintings and Linings
2. Exterior Paints and Primers
3. External Thermal Insulation Composite
4. Exterior Decorative Coatings
5. Silk Plaster
6. Effects Paints
7. Putties, Vanishes and Insulation materials.
8. Wood and Metal Groups

The cash payback period is expected to be 15 years and the Return on Investment expected to be between 15 to 25% per annum after the first five years.

We target the upcoming development within East Africa region eg Kenya, South Sudan, Rwanda, Uganda, Burundi and Ethiopia. The veteran paint manufacturers are not dynamic to meet the market demands. There is a section of economy market that the veteran manufacturers have completely ignored. We target to reach this market and align ourselves to compete for the premium market. We have new innovations of products that are not locally available and are highly marketable products.

The project is at its initial stages of development and we are only challenged to mobilise financial resources to make it a reality.

Interested investors can establish contact with us on Merar.

Competitive Advantage

Our competitive advantage is to offer new products which are not locally available.

We are targeting real estate developers, contractors, residential consumers and Government.

Analysis of competition
We have used Michael Porters’ 5 forces to analyse the competition in the paint manufacturing industry;
1. Supplier Power: the suppliers are the price setters in this market. Although there is stiff competition in the market, there are only few major paint manufacturing plants giving them higher power in the market over the buyers. The suppliers have a wide variety of products that meet various construction needs for beautification and perfect finishes. The introduction of colour mixing machine points and network of dealers has reduced the threat of forward integration since it is more efficient for the manufacturing plants. It has also increased the accessibility of a wide variety of the products to the customers. There is limited differentiation in the market since most competitors produce similar products. The switching costs of firms in the industry are high.
2. Buyers Power: The bargaining power of the buyer is low in this market. The volumes of purchases vary depending on the type of buyers. Big construction companies make very large volumes and may have a higher bargaining power. The buyers are loyal to a particular brand depending on the level of advertising done by the brand. The price sensitivity of buyers depends on the types of market. The premium market is less sensitive to price changes than the economy market. There is low product differentiation but there is a high variety of similar products to choose from various producers.
3. Threat of New Entrants: there are high barriers to entry. This is due to the high capital requirements involved and the market monopoly by the major paint manufacturing plants. The consumers’ identity to particular brands reduces the threat of new entrants. However, the access to distribution channels is possible for the new entrants due to the introduction of colour mixing points and dealers in distribution. The possibility of retaliation by the existing firms to the new entrants is low.
4. Threat of Substitute: The threat of substitutes is very high since most firms produce similar products. Buyers are inclined to substitutes depending on how the products suits their individual needs. A lot of Jua Kali artisans have started producing paints for a low economy customer. Small developers might run towards what is affordable at the moment with no focus on quality. Silkcoat East Africa Ltd will bridge this gap by producing quality paints with affordable prices.

More analysis has been carried out and can be provided upon request.

Rationale for the deal

The market is a gold mine. The existing players have accumulated a lot of wealth albeit leaving out a big proportion of untapped market. This is an opportunity to also make wealth for us, investors and future generations.

Use of financing

The investment is needed to be able to:
1. Buy land in a suitable location
2. Buy, install and set up plant for paint manufacturing
3. Build a factory and a warehouse
4. Buy delivery vehicles
5. To buy other assets necessary for the production.

Opportunity for the investor

We are looking for equity investment to take up approximately 45%. A dividend policy will be formulated to take care of investors' return.

We do not mind a hands-on investor or a silent investor.

We expect an ROI of between 15 to 25% after the first five years of operation.

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