Cooling milk on cow manure: Increasing the value of milk and biogas along the dairy value chain in East Africa
Biogas-powered milk chilling enables off-grid dairy farmers to store, deliver and sell the highest possible quantity of milk.
I confirm that I am fully aware of the eligibility criteria, and based on its description, I am eligible to apply to the CSV Prize 2017.
SimGas Kenya Ltd
Start-Up (a pilot that has just started operating)
Annual budget in 2017 (USD)
Number of beneficiaries impacted so far
Secondary Focus Area
Headquarters location: Country
Headquarters location: City
Location(s) of impact
Kenya: Eldoret, Karatina
Problem: What problem is this initiative trying to address?
With our biogas digesters SimGas currently serves 2,500 East African dairy farmers, who now cook on clean biogas instead of wood. Biogas can also be used for chilling. This solves another problem dairy farmers face every day: uncooled evening milk does not survive the heat overnight and cannot be sold the next day. Post-harvest milk losses are estimated at 30-50% (FAO 2003), and only 15% of milk in Africa reaches the formal sector (IFC, 2014). This creates a lost income opportunity for >2M East African dairy farmers.
Solution Summary: What is the proposed solution? What do you see as its most promising aspects for creating shared value?
The milk chiller provides off-grid, biogas-powered milk cooling on-farm, enabling smallholder dairy farmers without access to electricity to store, deliver and sell the highest possible quantity and quality of raw milk. It is the missing piece in the cold chain and benefits stakeholders throughout the chain.
Here’s how: Every day, dairy farmers put cow manure in their biogas digesters to generate biogas. Every evening, dairy farmers put their churn with fresh milk into the chiller, which cools it down fast. It is kept cool until the next morning when it is delivered and sold to the dairy cooperative. Dairy cooperatives collect more milk, attract more members, and can meet supply targets set by processors. Processors receive more milk at more consistent volumes, enabling them to meet consumers’ increasing demand.
Dairy farmers pay for the chiller with milk: monthly payments are deducted from monthly milk income, using the existing financial infrastructure of dairy cooperatives.
Impact: What is the impact of the work to date? Specify both the social and the environmental impact of your work
To date, 21 dairy farmers in Kenya and Tanzania have benefited from using our milk chiller models throughout 3-month test periods (see attached qualitative impact results). One of the dairy farmers, Paul Macharia (featured in video), said: “With the milk chiller they [dairy cooperative] say my milk is better than the rest!” Paul’s cooperative is associated to Kenya’s largest dairy processor, which is now testing our chillers to analyse its impact on milk quality.
FAO/GIZ’s cost benefit analysis on our chiller (2017*) shows an EIRR of 112% and NPV of 8.9k USD, taking impact on food loss reduction, household income, GHG emissions, energy access, employment and time saving into account.
In 2018 we will do a pilot with 200 dairy farmers. Each user is expected to: 1) gain 700-900 USD additional milk income per year; 2) pay back the chiller within a year; 3) gain a better social position as ‘model dairy farmer’ within the dairy community as well as the biogas community.
Financial sustainability plan: How is this initiative financially supported? How will you ensure its financial sustainability long-term?
The project is financially supported by a consortium of SimGas, SNV, Mueller and BoPInc (corporate contributions: 36%), by donors EEP, USAID, OFID (grants: 58%), and http://IDEO.org (prize: 6%).
SimGas Kenya has built up a very local organisation with 90+ Kenyan FTE working in our 35 sales & service hubs (83 hubs by 2022) throughout rural Kenya. Our core business is selling and installing biogas digesters, now profitably at 200 per month.
The milk chiller targets the same customer; once in the commercialisation phase, SimGas will sell the milk chiller through our existing network of 60+ partnered primary dairy cooperatives and associated dairy processors in Kenya, followed by Tanzania and Rwanda. At break-even, revenue from sales is invested in new sales for a growing number of customers.
Unique value proposition: What makes your initiative innovative? How does your project differ from other organizations working in the same field?
1) No alternative solutions are available at this scale that cool milk fast enough to keep its quality (FAO/GIZ, 2018*). Refrigerators cool 21x slower, electric chillers require reliable electricity, which is not there in rural East Africa (UNDP, 2016).
2) We cater to farmers with <10 cows. With only 2 cows, our milk chiller is already viable.
3) We use biogas. We proved that daily cooling & cooking on biogas is feasible.
4) By partnering dairy coops, we enable farmers to pay with milk money.
Founding story: Share a story about the "Aha!" moment that sparked the beginning of this initiative.
SimGas was approached by Mueller (global market leader in milk cooling equipment) as they were looking for a partner to realise cost-effective off-grid milk cooling at micro-scale. Mueller had already evaluated milk cooling on solar power: it would not be cost-effective. Maybe biogas could?
SNV (>50y experience in the emerging dairy and biogas sectors) soon joined the table and confirmed the untapped potential of cooling milk on-farm.
We locked ourselves up in a room for a week to share ideas. Our “Aha!” moment was the thought of a wine chiller: 1. Make ice (to store the cold) with an absorption chiller on biogas; 2. Release it fast (like a wine cooler) through conduction in water to cool the milk super fast.
Since then, we assessed East African dairy markets, developed our own cooling technology, proved the concept in the field, and started a range of pilots in Kenya and Tanzania.
Where did you hear about the Nestlé Creating Shared Value Prize?
Upon recommendation from others
Program Design Clarity: We are hungry to know more about what exactly your model consists of. Succinctly list a) what main activities are you doing with your beneficiaries, b) where you carry out the activities? c) how often? d) for how many hours? e) who delivers the services? and f) any other brief details
The model: Dairy farmers who own a biogas digester (to date 56k in East Africa, 265k in S-E Asia, 4.7M in India, 43M in China) are notified by their dairy cooperatives about biogas-powered milk chillers. Farmers are invited to demos to ‘see and believe’ the product. Vetted farmers sign a contract with SimGas and the dairy cooperative to pay off the milk chiller in monthly milk instalments (just like they did for their biogas digesters), using the cooperative’s existing financial infrastructure. SimGas’ technicians install the chiller at the farmer’s house, train the user for optimal performance, and connect a monitoring device. This collects performance data remotely and wirelessly, providing insight into how the chillers are used, and notifying technicians in case a technical problem arises. Impact data is visible on a live dashboard (SimGas is the only one in the biogas sector that can do this).
Project status: a) We have tested 21 milk chiller prototypes at SimGas customers, at Brookside’s farmers, involving dairy cooperatives and experts. Through interviews, co-design and value chain mapping, we learned more about its value to each stakeholder; b+c) 3 key testing periods: Dec ’16 - now 14 prototypes in Eldoret and Tanga; May ’17 - Sept ’17 3 prototypes in Karatina; Sep ’17 - Mar ’18: 4 final prototypes in Karatina; d+e) One of our best hub managers, George Mwangi (in video), spends 8-12h/week on providing trainings, customer support and gathering feedback from the field.
We are interested in learning more about your initiative's broad impact on sustainable development. Please reply ONLY to the question(s) related to your above focus area.
Access to market: Cooling milk on-farm can provide 1.3M farmers (in Kenya alone) access to formal markets (FAO/GIZ 2018*), with up to twice as much milk, adding value down the value chain.
Economic dev't: More milk supply down the value chain results in more milk income up the chain. More milk collected by cooperatives results in more milk transported to milk processors who increase the utilisation of their installed processing capacity (FAO/GIZ, 2018*).
Gender equality: >70% of East African smallholder dairy farmers are women (Makoni, 2014); more women have sole control of the income from their milk sales or make joint decisions with males about how to spend money. At scale, increased household income from milk has the potential to economically empower a large proportion of poor rural women and improve their standing in society (FAO/GIZ, 2018*).
Water management: The water fed daily into a biogas digester exits the digester daily in the form of organic fertilizer, used directly on the farmer’s land. This leads to 25-200% of crop/fodder yield increase (FAO/GIZ, 2017*).
Nutrition: Aside sales, more milk is available for home consumption and feeding calves. The increased crop/fodder yield provides nutrition for the household (and for cows, producing more milk).
Health & wellness: Next to cooling, biogas is used for cooking, replacing wood and charcoal. No indoor smoke prevents lower respiratory infections: the 2nd main cause of death in Kenya (WHO, 2015).
Creating shared value: How does your initiative create value for different stakeholders?
The milk chiller is a new-to-the-world product with which SimGas creates commercial value by creating social value: preventing milk spoilage, providing access to formal markets, and empowering women.
The dairy farmer gains potentially twice as much milk income, experiences increased benefit from having a biogas digester, and has his/her creditworthiness assessed while paying off the chiller, providing access to more investment opportunities.
The dairy cooperative collects up to twice as much milk (of higher quality) from farmers with a milk chiller, can meet supply targets set by dairy processors and can reduce their energy costs of cooling tanks (as the collected milk is already cool). Offering milk chillers and biogas digesters leads to more members, and subsequently to more milk supply.
The dairy processor receives more milk of higher quality, and are better equipped to meet the consumer’s increasing demand for more and higher quality milk products (IFCN, 2015).
How is your initiative funded, now and over the next 5 years?
Our own investment and grants from donors covered the development phase. Further grant investment is sought to cover the next pilot. Over the next 5 years, we plan to include the milk chiller in our product portfolio, next to our biogas digester, stove and rice cooker - all sold without subsidies. The target customer is the same, which enables us to use our existing sales and marketing channels in East Africa. This model is EBITDA positive in Q2 2021 at 3,500 milk chiller sales per quarter, assuming no grants. Greater impact and an earlier break-even point can be reached by partnering with dairy processors (Brookside), milk cooling equipment distributors (Mueller), and for example Nestlé’s Dairy Development & Biogas Project in Indonesia.
How do you plan to influence your field of work if you are a winner of this edition of the CSV Prize?
Winning the CSV prize would enable us to do a pilot with 200 milk chillers running on biogas from 200 biogas digesters currently owned by 200 Kenyan dairy farmers, providing the necessary quantitative impact data to convince emerging dairy sectors that 1) on-farm milk cooling can bring milk losses down to a bare minimum, potentially double milk supply and milk income throughout the dairy chain, while using the most sensible clean energy source for dairy farmers: biogas; 2) this solution, specifically catered to the >80% of dairy farmers with up to 10 cows, limited budgets and without access to reliable electricity, is feasible, desirable and viable; 3) introducing a premium price for cooled milk would induce mass adoption of this solution.
How will you leverage an investment from Nestle to expand the impact of your work?
Upon proving the milk chiller’s impact in our home markets in East Africa, we aim to offer this solution though a wholesale model to emerging dairy sectors worldwide (see next question). With Nestlé being a market leader in dairy sectors worldwide, their expertise, experience and network will be of tremendous value in 1) creating worldwide awareness about the value of cooled milk, 2) evaluating product-market fit for different regions, 3) helping us find suitable distribution partners, and 4) helping us find further investment for growth. We believe that specifically with Nestlé, the chances of expanding the impact of on-farm milk cooling on millions of dairy farmers, their cooperatives and processors, could not be greater.
Spread Strategies: Moving forward, what are the main strategies for scaling impact? What’s the projected impact for the coming years? Are you planning to expand your programme into new locations? On what assumptions do you build your scale-up plans?
Market potential for the plug-and-play, mass-produced milk chillers is assumed the same as domestic biogas digesters: 5.4M in East Africa, 3.8M in Central Africa, 10M in Nepal, Bangladesh, Pakistan, 2.7M in S-E Asia, 85M in India, 100M in China. Strategies for scaling impact are:
1. 2018: Within Kenya we partner with >60 dairy cooperatives, each with access to thousands of dairy farmers. Brookside is interested in doing a pilot with us.
2. 2019+: Beyond Kenya, SimGas Tanzania and SimGas Rwanda can replicate the retail model of SimGas Kenya. SNV aims to promote the chiller in their Africa Biogas Programme. 2019-Q1: 200 units/Q
3. 2019+: Beyond East Africa, Mueller has interest in selling the milk chiller to their distribution network in Uganda, Rwanda and Vietnam. Royal FrieslandCampina has interest to include the milk chiller in their Dairy Development Programs in Nigeria. Nestlé’s Dairy Development and Biogas Project in Indonesia would be an ideal partner. 2020-Q1:1000 units/Q
Team: What is the current composition of your team (types of roles, number of full-time vs. part-time staff, board members, etc.)? How will this team evolve as your initiative grows?
SimGas Kenya Ltd. has 95 (100% full-time) FTE including CEO Mirik Castro, Country Manager Moses Ogeto, COO Oliver Kynaston, Finance Manager Carlos Johnson, Head of Business Development Dorine Poelhekke, Head of Sales Josphat Musenze, Head of HR Pauline Tanui (combined experience: 30y entrepreneur/BD, 60y finance, 30y operations), 2 BDers, 5 hub managers, 26 sales agents, 48 technicians, 4 customer support, 3 accountants and 1 quality officer.
SimGas Kenya is 100% owned by SimGas Holding BV: founders Mirik and Sanne Castro, Engie-RDE, private shareholders.
Allocated to the pilot are: 1 project manager, 1 M&E officer, 3 sales agents and 6 technicians. In the first year of commercialisation, we will allocate 1 BDer, 8 sales agents and 30 technicians fully dedicated to the milk chillers.
Awards: What awards or honors has the initiative received?
Winner of http://IDEO.org Amplify Challenge 2016: "How might we improve the livelihoods of small-scale farmers by reducing food waste and spoilage?" The prize included 10 weeks of human-centered design support in the field from a team of four http://IDEO.org (business) designers;
Winner of Lettinga Award 2015 for innovation in anaerobic digestion technology.
Organizational leadership: How are you influencing your field of work in the present?
SimGas thinks of biogas as much more than a clean cooking fuel, continuously trying to increase the value of biogas for our customers. We therefore invest heavily in research and development, with an in-house R&D department of 5 full-time FTE. It is to no surprise that our product, service, and customer financing innovations are carefully being watched by competitors and stakeholders in the sector. We show the world what we do and how we do it as grantee of renowned donors, by being active partners of the Africa Biogas Partnership Program and Global Alliance for Clean Cookstoves, by speaking at international impact forums, universities and startup incubators, through open-source platforms, and by participating in challenges like this. :)
Should you be successful, please confirm your availability to attend the Ashoka Impact Boot camp and Creating Shared Value Prize Live Pitch Event at the World Water Forum 13-16 March 2018
Yes, I am available to attend the events on 13-16 March 2018