Smart Solar, a Kenyan subsidiary of Barefoot Power, an award-winning company that has distributed more than 300,000 lanterns and lighting kits to the rural poor in across Africa, is one of the leading distributors of solar power in Kenya. Started in 2009, Smart Solar aims to provide affordable lighting and phone charging products to low income Kenyans who do not have access to electricity. In a country where only 18% of the population has access the electricity, there is great market potential for solar solutions.
The primary mode of lighting for poor Kenyans is kerosene, which provides a low intensity light and is highly flammable. The World Health Organization estimates that there are more than 195,000 deaths annually from burns, with women and children from low and middle income countries making up the majority of the victims. Kerosene smoke is laden with particulate matter and causes chronic eye and respiratory issues. Inhaling fumes from a kerosene lantern is equivalent to inhaling smoke from two packs of cigarettes per day.
Smart Solar aims to combat these issues by selling a range of solar powered lamps to low-income and Bottom of the Pyramid customers. Products range from the basic Firefly lamp with 5 LEDs that create 55 lumens of light to the Powa Pack with an LED tube light that creates 172 lumens of light. Each product comes with a warranty and lamps have a lifespan of four or more years.
Smart Solar does not sell its products directly to customers, but uses distributors, microfinance organizations and NGOs, faith-based organizations, and community-based organizations (CBOs) to distribute its products. Barefoot Power’s suggested retail prices are to be honored by the distributors and products are priced based on number of units sold. According to Nancy Muthee, Accounts and Administration Manager, 1 firefly lamp costs 2280 Kenya shillings ($28.50), 2-19 lamps cost 1900 Kenya shillings ($23.75) each, and 20 lamps or more cost 1650 Kenya shillings ($20.60) each. If a village buys in bulk, individuals get a better price.
But even at a cost of 1650 Kenya shillings per lamp, can those at the bottom of the pyramid (those who make less than $2 per day) afford to buy in to solar power? Smart Solar believes they can. According to Nancy, the average Kenyan spends between 30-40 Kenya shillings per day on kerosene, exclusive of travel costs. At that rate, a family will have spent the same amount as a single Firefly lamp in about two months. But what if families can’t afford full payment up front? The representatives at Smart Solar also mentioned that distributors may work out payment plans with customers, but that is at the sole discretion of the distributor.
Are Barefoot Power’s products unique?
By no means are Barefoot Power’s products unique. Smart Solar estimates that there are six or seven companies with very similar products, sold at very similar prices, operating in Kenya and East Africa. Competitors vary from an investor-based model where investors receive a share of the profts to one where 100% of the profit is invested back into the business. Some competitors, such as the Use Solar, Save Lives program, has a goal to distribute 10,000 free lanterns in 12 months. Others, such as Solar Sister, are social enterprises. Solar Sister provides working capital, business training and marketing support to women so that they can start their own businesses selling solar lamps. As a registered 501(c)3 non-profit, all of Solar Sister's profits are reinvested in the company to help support more women. While Solar Sister is small, with only about 171 women entrepreneurs so far, it has a goal to build a network of 5,000 entrepreneurs in 5 East African countries in the next 5 years.
To get ahead of the competition (since the competitors' products are so similar), Smart Solar is always looking at ways to keep the cost of the products down, such as finding new distributors and keeping the supply chain as sort as possible. Barefoot Power’s products are designed in Australia and mass produced and assembled in China, which is cheaper than assembling the products in Kenya. Smart Solar claims that assemblage in China, which allows the products to be zero-rated for taxes, keeps the company from passing along extra costs to the consumer.
Smart Solar also provides community training that includes product demonstrations for consumers. This training provides time for question and answer sessions and allows the company to distribute the warranty info. Ten service centers located across Kenya train technician to fix the lamps and battery packs. If a village or region buys in bulk, Barefoot Power requires that one person from the area volunteer for training on how to fix the products. Barefoot Power provides the needed tools.
Is Barefoot Solar a viable solution for the BoP?
Nancy admitted that people of the BoP would probably purchase the firefly lamp since it is the least expensive option, but even at a cost of 1650 Kenya shillings, that is a lot of money for a family to spare. Yes, kerosene costs more in the long run, but it has a lower daily cost. Some NGOs and faith-based organizations subsidize a portion of the cost of some products, but not everyone has access to these organizations. Barefoot Power has a commendable social mission, but even its most basic model may seem financially out of reach to people of the BoP. Persuading people that the long term benefits of the lamp far outweigh the financial burden will be a real challenge. Also, some of barefoot Solart's competitors, while smaller-scale, give away free or heavily subsidized lamps. Barefoot Solar currently has a larger market share, but the company must be able to provide affordable products to the BoP to stay competitive.
What do you think of Barefoot Power and its business model? How can it stay ahead of its competitors and better serve the BoP?