EthioChicken

EthioChicken sells day-old chicks (DOCs) to low-income households throughout Ethiopia. The company has increased food security throughout the country and other countries in East Africa through partnerships, persistence, and innovation.

The problem

In 2013, 28 million people in Ethiopia could not afford or grow enough food to live on, and 6.5 million children under five were stunted from hunger. Roughly 85% of people in Ethiopia earned a living as smallholder farmers, but they could not feed their families.

Right behind most houses lay a potential solution: Two-thirds of Ethiopian households raise chickens, mostly in their backyards. Unfortunately, those chickens do little to address food security. Indigenous breeds produce only 60 eggs per year and take 12 months to reach market weight. Their survival rate is alarmingly low: one expert estimates that only 40% of chicks survive to three months. As a result, Ethiopians consume less chicken than any other country in Africa.

The solution

EthioChicken sells day-old chicks (DOCs) to low-income households throughout Ethiopia. These chicks are an improved dual-purpose breed, and help increase farmers’ poultry productivity four-fold. They produce 200-250 eggs per year, reach market weight in three months, and have a survival rate of 85-95% in village conditions.

EthioChicken works through an Agent-driven distribution network to bring DOCs to households:

• EthioChicken breeds/sells: The company breeds the “parent stock” chickens and produces baby chicks.
• Farmer agents raise: At one day old, the chicks are sold to agents along with high-quality feed and vaccines. EthioChicken also offers these agents training and after-sales field support. The agents raise the chicks for 40-45 days and administer six vaccines, growing them to the point where they can withstand a rougher village environment.
• Farmer agents sell: The agents sell these chicks to customers either directly or through another government agricultural extension agent. Smallholder farmers, the customers, then keep the chicks to maturity and harvest the eggs to eat or sell. Additionally, they can sell the mature chickens for meat thereby generating income.

The “farmer agent” model that EthioChicken uses solves three problems:

• Risk: The agents protect smallholder farmers from the risky first six weeks of a chick’s life, when they require constant care and management. The average smallholder farmer doesn’t have the time to care for baby chicks, so they often die. The agents reduce the mortality rate of chicks from 80% to under 5%.
• Sales: Accessing smallholder farmers in remote areas, and low trust are two key challenges in agricultural sales. The 10,000 agents use their local networks and credibility to reach smallholder farmers – completing the last mile of distribution, and increasing adoption for EthioChicken.
• Cost: The agent model brings down the price of chicks because their proximity to customers reduces transport costs.

The origin

In 2010, American entrepreneurs David Ellis, Joe Shields and Trent Koutsoubos quit their jobs, sold their belongings, liquidated their savings, and moved to Ethiopia looking to invest in a business with a strong social impact. They started with acquiring Mekelle Farms – a failing government poultry farm in the northern Tigray region of Ethiopia – on a 20-year lease, and increased the farm’s production more than thirty-fold within a year. The team then expanded and formed EthioChicken as a nationwide enterprise, which is now the leading producer of day-old chicks in Ethiopia.

The impact

In the four years prior to Acumen’s investment, EthioChicken had sold just over 1 million DOCs. In the four years after Acumen’s investment, EthioChicken sold almost 30 million chicks, reaching over seven million people in Ethiopia. At the time of Acumen’s exit from EthioChicken, 73% of its customers were living under $3.10 a day, and 52% felt that their quality of life had “very much improved” because of the company’s operations.

“They are easy to sell when you face any immediate problem, you can’t do this with larger animals.”

Customer of EthioChicken

The investment

In 2014, Acumen lent $750,000 to EthioChicken, to help finance the switch to a new breed of chicken. The investment was a loan, but had certain equity-like features: it had a longer repayment tenor, and entitled Acumen to 2.5% of the company’s annual pre-tax earnings. This was meant to compensate Acumen for the additional risks, without unduly burdening the company with debt.

By 2017, EthioChicken’s fortunes had rebounded. The company had attracted new investment and was able to repay Acumen’s loan ahead of schedule. Our investment was repaid in full and leveraged up 23x: EthioChicken had raised $18 million by 2018.

The story

The story of EthioChicken is one of scale. It has to be: Ethiopia is home to 120 million people, and EthioChicken was designed to reach across the country. Through critical partnerships with state-level governments, an ability to raise and deploy capital, and its distributed agent model that allowed for rapid expansion, EthioChicken became by far the largest seller of day-old chicks in the country.

At the time that David and Joseph took over Mekelle Farms, the government operation was producing 10,000 DOCs per year. By the time Acumen exited its investment, that same farm in Mekelle was producing more than 10,000 chicks a day, and Ethiochicken had four other farms just like it.

EthioChicken’s partnerships with various state and national governments have been instrumental to its success. One of the founders, Dave Ellis, called government, “the tip of the spear”. The company has been able to establish trust and rapport with local governments, then leverage their knowledge and expertise to scale operations. In early years, EthioChicken relied extensively on state-employed agriculture extension agents to sell its DOCs at the village level. Now, less than 20% of EthioChicken agents rely on government extension workers to reach farmers, as they have developed their own private linkages into the last mile.

The story of scale does not stop in Ethiopia. Over half the population of sub-Saharan Africa, almost 700 million people, are food insecure. And so Hatch Africa, the parent company of EthioChicken, has replicated the Ethio model under a new name: Uzima Chicken. With investment from the Acumen Resilient Agriculture Fund (ARAF), Uzima Chicken has expanded into three other countries in the region: Rwanda, Uganda, and Kenya, and Hatch Africa also recently launched in Ghana and Ivory Coast.

The scale continues to grow. Uzima Chicken has reached over 600,000 farmers in those four countries, with the help of over 5,000 farmer agents. Data from 60 Decibels shows that the company has been exceptional at creating increased incomes and climate resilience. All across East Africa, households are seeing higher incomes, better nutrition, and greater opportunities – one chick at a time.