Liquid ethanol is a great cooking fuel. It is clean-burning, safe and gives instant heat – something which can greatly reduce meal preparation times. Strong customer demand for ethanol cooking fuel has now been proven in Mozambique, Haiti and Kenya. But for an ethanol cooking industry to take off at scale, the challenge has always revolved around how to get it efficiently and safely to customers in a way that can also deliver real savings on their monthly fuel bill, compared to the dirty fuels that dominate the urban cooking fuel market.
Proximity is one of the key factors here. In most sub-Saharan African cities, charcoal is available within 50 – 100 metres of every front door. In order to compete on proximity, ethanol must be safely available within a short walk of all customers.
So put it in bottles, right? Wrong. Experience tells us that the “V1.0” approach to ethanol cooking fuel – involving centralised bottling – is not the answer to delivering ethanol cooking fuel to customers at lowest possible cost.
Centralised bottling is a viable approach for liquids that consumers drink – such as beer and soft drinks – where the actual production cost of the bottled liquid is just a small fraction of the retail price. Coca Cola’s extensive and impressive distribution system relies heavily on this fact. Their bottled fizzy water-based liquid is so cheap to produce, that they can afford to provide many players in the distribution chain with attractive margins in moving it to the far ends of the earth. The bulk of the retail price is used to fund the distribution chain. The beer companies have a similar process: produce a cheap and desirable liquid that is mostly water, and then retail it at a price that enables heavy investment into distribution.
Liquid ethanol, however, is fundamentally more expensive to produce than soft drink or beer – even when considering the very large plants globally that produce at the lowest cost. When bottling a flammable liquid, safety standards dictate that very thick (and expensive) plastic must be used in order to enable bottles to drop from 6 feet and not rupture. These packaging costs are significantly more expensive than, for example, bottles used for water. The bottling facility itself is expensive to build and run. Trucking around crates of bottles involves a lot of unutilized space on trucks, when compared to bulk liquids trucks.
Adopting the distribution approach of the beverage industry might sound intuitive when considering how to get fuel to within a short walk of every home, but in reality the significant costs involved in the bottling facility, packaging and distribution must all be passed onto the customer. This drives up costs and makes it difficult for bottled ethanol to undercut dirty fuels like charcoal and kerosene.
Depending on geography and scale, the cost of safely running a “V1.0 Centralized Bottling” approach to ethanol cooking fuel adds between USD 0.40 to USD 0.60 of additional cost per litre. In a fuels business!
What if there was a way to completely eliminate the bottling facility and associated packaging costs? What if there was a way to safely move and store fuel in small bulk form, within a short walk of everybody’s home, and somehow safely dispense it to customers into their own canisters?
These were some of the questions that intrigued KOKO’s founders after their experience as investors and board members in the the world’s first proof-of-concept venture on liquid ethanol cooking fuel in Mozambique, which utilized the “V1.0 Centralised Bottling” approach and incurred heavy costs in urban distribution as a result.
Ultimately, it was the milk industry in India that provided some inspiration. Milk is also an expensive liquid to produce, and milk companies in emerging markets have encountered the same dilemma when trying to figure out how to get the milk to the people at lowest possible cost. Billion-dollar companies like Mother Dairy and Amul cracked the code decades ago: rather than package the milk, they developed the notion of Milk ATMs. In cities like Delhi, customers bring their own clean canister, a Mother Dairy token, and buy clean refrigerated milk that is dispensed from a Mother Dairy ATM.
KOKO has taken this proven decades-old model for urban distribution of expensive liquids, and combined it with modern IoT and machine learning technologies that dramatically increase the efficiency, visibility and control of the urban liquid flows. It’s the “V2.0 Smart ATM Network” approach to ethanol cooking fuel.
KOKO’s fleet of “Smart MicroTankers” undertake the last-mile “milk run” between bulk fuel stored in dedicated tanks at petrol stations, and distribute it to the nearby Network of KOKOpoint “Fuel ATMs” located inside small shops owned by our KOKO Agent retail partners.
Our sturdy “Kibuyu Smart” canisters are customer-owned refillable vessels, fitted with an NFC chip and unique smart dock technology, enabling customers to safely dispense fuel from the KOKOpoint into their canister. Back home, customers dock their canisters with their KOKO stoves to safely refill the stoves.
No bottling facility capex or opex. No packaging costs. Dramatically reduced costs of distribution, inventory management, retailer management and customer engagement. All of these savings are passed onto the customer, enabling liquid ethanol to easily undercut dirty fuels. It’s working in Nairobi, and allows ethanol cooking fuel to be retailed to customers at about 50% of the price that a “V1.0 Centralised Bottling” approach requires.
When you hear or read about ethanol cooking fuel, remember to ask yourself: is that using the expensive “V1.0 Centralized Bottling” approach, or the “V2.0 Smart ATM Network” approach?
V1.0 can compete with charcoal and help serve a strong niche in the urban middle-income market.
V2.0 can undercut charcoal and become the mass-market fuel of choice. It’s that simple.