Consuming liquefied petroleum gas (LPG) is becoming increasingly essential in Nigeria, particularly now

that the government is advocating for the use of Autogas. Previously, LPG was only used in the kitchen
and for other large-scale industrial applications. There is a desperate demand for it right now. There is a
money-making potential in this entire situation, and you cannot afford to pass it up. If you've ever
considered establishing a LPG business, you should give gas distribution business a go today, at least on
a modest scale. This is due not just to the fact that everyone cooks, but also to the fact that next-
generation automobiles are built to use it. Kiakiagas is a company that has vast experience in the
building of gas projects in quick time. Our platform provides data to support infrastructural
development in the gas value chain. Our management platform allows you to monitor the progress of
your project in real time with our real time project monitoring. We offer a variety of services that cater
for every stage of your project development.
 

You can apply to become a super distributor for LPG or a minor LPG distribution business which will
include sales of LPG cookers, fittings, and site installation in a specific location. LPG is supplied from the
depot with full LPG tank in bulk at a reasonable wholesale price. This will then be redistributed and sold
at a reasonable profit margin to the consumers. Challenges in LPG distribution have prompted the
existing distributors out of the market while the prospective distributors are prevented having acquired
wrong information from wrong source about the LPG business. Kiakiagas are well informed about the
LPG business through the stages of chain of distribution. With our team of business and data analysts,
we calculate your prospective strength, weaknesses, opportunities and threats in the business based on
our existing data before you venture into the business. In other words, we conduct a feasibility study
which represents a snapshot information to guide you through the business so as to maximize the profit
in the located area. Below are the challenges that you are likely to face as a prospective distributor of
LPG:
 
CHALLENGES
 
LPG Tank/Cylinder Management Issues: As a super dealer, you must ensure that you have enough
complete gas cylinder stock at all times to meet client orders immediately. To ensure effective supply, at
least one supply truck should be present. The basic truth is that the initial money required to establish
an LPG wholesale distribution firm is substantial. However, with an excellent business plan and
feasibility study, it is much easier to secure the assistance of both investors and financial institutions.
The chances of becoming a successful LPG distributor are increased if the feasibility assessment of the
location is carried out by a team of our experts in the LPG rather than doing it alone or inviting a non-
competent instructor If you're thinking about beginning a liquefied petroleum gas distribution business,
it's a good idea to see if there are any suitable franchise possibilities available that could help you get
started faster. Kiakiagas will get you cleared from the relevant authorities that regulates the LPG
activities in the oil and gas sector. This is a cogent reason why you should book a session with us through
our website to have discussion on how you can set up LPG distribution businesses.
 
Government Regulation: Another risk in the business is government regulation. Should government
decide to increase the price of LPG today, some consumers may find it difficult to take and have to go
back to using kerosene or firewood. If that happens, you lose some customers and your sales will drop.
However, government is always trying to reduce the price of cooking gas to encourage its usage and
discourage deforestation.
 
Competition: The company is at a competitive disadvantage as an emerging liquefied petroleum gas
wholesale business startup since the company brand is just beginning to create an identity in the
marketplace. Unless you are really committed to the idea of a startup, you can avoid the time required
to build a brand identification by purchasing a business with an established name. As a startup, your
best bet is to gradually build brand awareness over months and years. A LPG wholesale business
acquisition, on the other hand, can place one at the helm of a brand that is already well-known in the
target market.
 
Choice of Location: As a retailer dealing in the distribution of LPG in a certain location, you have a better
chance of reaching more customers because services are closer to end consumers. Kiakiagas will equip
you with proper strategies to make you the best alternative for them when it comes to proximity to the
Gas market. In essence, the retailer serves as a profitable link between a huge gas plant and its buyers.
Before starting the LPG distribution business, it is necessary to go through training to at least obtain the
fundamental safety precautions. Some of the topics covered include, but are not limited to, how to
detect and repair leaks in gas cylinders, how to weigh cylinders of various sizes using a scale, how to
properly refill gas cylinders such as 3kg, 5kg, 6kg, 12.5kg, 13kg, , 25kg and 50kg and how to charge for
prices of any custom quantity that customers may request. The Retail sub-division is rapidly extending its
reach and client base across the country, with the objective of being the preferred market leader in
delivering refined petroleum products to consumers across the country.
 

 
Safety: Risks in LPG business According to Darlinton Omeh, an investment analyst, every business has its
peculiar setback and the biggest risk in cooking gas business is fire explosion, which is very common due
to the high inflammable nature of liquefied natural gas. That isn’t much problem though since it can
easily be mitigated or even avoided. ‘‘To be able to curtail this, you need to be alert at all times to detect
when there is leakage in those cylinders as leakage is one of the major causes of fire and explosion. You
also need to buy good fire extinguisher that can be very handy in time of minor fire outbreak,’’ he said.
Kiakiagas will engage you with safety training which will aid in the selection of a safe location for the
LPG distribution business. Because gas can cause environmental risks, launching in a cool, dry location
with strong demand is critical. Training with Kiakiagas will help you to acquire accurate measurement of
gases in tons, kilos, or litres. LPG purchased for resale is stored in tanks or 50kg cylinders before being
sold in smaller quantities to customers who keep it in 12.5kg, 6kg, or 3kg cylinders.
 
Funding: A typical LPG distribution business may incur expenses such as funding to establish a new
business, renting a shop, and purchasing operational materials such as tanks, cylinders, scales, transfer
hoses, and other tools. A significant sum of money will be required to purchase the product (gas) and
transfer it directly to the retail business. In any case, the typical cost of beginning a retail LPG
distribution business is between 290,000 and 390,000 NGN. Some people may be put off by the
prospect of starting a gas refilling business because someone they know has failed miserably. People are
smiling to the bank functioning as LPG Suppliers, despite the fact that it may be depressing.
 
OPPORTUNITIES
 
Gas companies, both the suppliers and retailers are making good money in the business. It is good news
that more Nigerians are beginning to use cooking gas for various domestic cooking purposes. That will
help decrease the problems of deforestation and help conserve the nation’s natural forests and prevent
potential disasters inherent in desert encroachment such as erosion. Apart from the environmental
benefits, the increased number of people, especially in urban areas, who are using cooking gas has
created good business opportunity for smart entrepreneurs who can now trade on cooking gas and
cooking gas equipment to make good profits.
 
Push by the federal government: Cooking gas business is very profitable and you don’t have to break
the bank before you can start. This is a big business that anyone who is into it can be proud of. Gas
cylinders How exactly can one start cooking gas business in Nigeria? Before we go into the details, let us
first take a look into the profit potential in this business as well as the risks involved. If you have been
observing the news lately, there is a push by the federal government of Nigeria to deepen the usage of
LPG in the country.  And this push will start yielding results soon. If you have been procrastinating about
starting your own LPG distribution business, this maybe the reason to revisit that plan and put it back to
work. 
 
Cooking gas value chain: Opportunity inherent in the cooking gas value chain is the sale of cylinders and
accessories, which can be managed alongside the gas plant, offering a one-stop service for customers.
“This is relatively the lowest profit you can make in cooking gas business if you are in respectable
position where you get good patronage. Most people make much more than what I calculated here. So,
it’s not in any way by exaggeration. “For a business you started with N300,000, N150,000 profit is a
super profit by all standards. Imagine if you invest more resources and take it higher, your profit will be
much more mouthwatering.
gas
 
 
 
 
 
 
 
Understanding LPG Demand Curve: Now imagine if we can switch another 25% of our population from
House Hold Kerosene to cooking gas in the next 36 months 50% of annual consumption= 600million kg
(1.54billion Litres).  Cooking gas business is a very profitable business, but just like every other en-
devour of life, it comes with its own challenges. Most of the energy used for domestic cooking in
Nigerian homes comes from traditional forms of energy like HHK (kerosene) which accounts for 65-70%
of the energy consumption in Nigeria, LPG stands at 25%, while other fossil fuels like firewood and coals
accounts for the remaining 5%.
 
Nigeria's average household size: Another opportunity is that Nigeria's average household size is six
people, according our existing data. When you split 200 million by six people per family, you get 33
million people who buy cooking gas on a monthly basis. Because the demand curve is still expanding,
many people are unaware of it. Positioning oneself in the market now is equivalent to purchasing Bitcoin
at a price of 0.0003 dollars. Remember that this is a moving market. Exponential growth is possible.
Though demand does not change on a daily basis like fuel usage, consider the demand curve if every
household in the country utilizes cooking gas.
 
Way Forward
Locating business closer to customers and then increasing advertising budget will help solve the issue.
Whether they realize it or not, the majority of Nigerians in metropolitan areas (if not all) use LPG to
cook. That number is steadily increasing, and now is your time to profit. All you have to do is do a
market study (research) to find out when LPG is in great demand, who or what class of individuals
requests it, and where they are concentrated. The information you've gathered thus far will help you
choose a profitable site, one that will provide you with a constant market for gas and its accessories. In
reality, it is preferable to locate in a virgin place with a good level of daily demand and then utilize
advertising to fill in any gaps. Advertising is never-ending and never-ending. Some clients have yet to
form a strong bond with any LPG provider. It is your responsibility to approach them with enticing offers
such as first-time purchase discounts or an offer to pick up their cylinders, refill them, and return them
to them. The working class would fall for it, and you'd be laughing all the way to the bank.
Conclusion
There is money to be made in the gas distribution business in Nigeria right now, this advantage can be
taking with a little hard work. It all entails learning the ropes of the business, get the help of specialists,
conduct research and analysis, secure funding, and conduct feasibility study. Most aspiring gaspreneur
are intimidated by the prospect of obtaining a LPG feasibility study. A solid LPG feasibility study acts as a
reality check, comparing your business instincts to those of your competitors. The backend of business
planning requirements is a feasibility analysis of the LPG company strategy.
In most cases, tracking tools are incorporated into the company's launch plan in order to run a
successful LPG business. It is a wise decision to learn as much as possible from a respected company that
has created a landmark in the industry as part of due diligence on launching a LPG depot, wholesale, and
retail business. You're being overconfident if you believe your local competitors will provide you
technical advice. Why would they want to educate a competitor in the future? As long as they do not
perceive a competitive danger, an owner of an LPG business in another town, city, state, or country may
be more than pleased to provide thorough advice.
KiakiaGas Limited is a leading Gas business in Lagos, Nigeria with expertise in LPG retailing, New Gas
Market development, Building of Gas Plants and Gas strategy advisory. Supply by KiakiaGas provides LPG
products and equipment for corporate and institutional clients for the project and operational needs. If
you need a partner with hands-on local expertise in the Nigerian and African Gas space or any of our
bespoke solutions/services, kindly visit www.kiakiagas.com to learn more.
WALKING THE TIGHT-ROPE: THE CHALLENGES FOR A NEW LPG MARKETER
IN KENYA

— January 7, 2016 Comments Off on WALKING THE TIGHT-ROPE: THE CHALLENGES

FOR A NEW LPG MARKETER IN KENYA 6003

“Retail is detail”- is one of the famous principles in retail business.

For majority of marketers who have joined the domestic LPG (Liquefied Petroleum Gas)
industry in Kenya in the last seven years, this statement is one that they have learned the hard
way.

Owing to various challenges that led to intermittent supplies of cooking gas some years back, the
government of Kenya, through Legal Notice no.121 of 2009, ‘liberalised’ and regulated the
market for domestic LPG market segment. The new rules standardised the LPG cylinders sizes
and valves, and made it mandatory for suppliers of domestic LPG to supply a full cylinder to
consumers irrespective of the brand the customer would be having.  The new regulation also
requires that all LPG marketers (brand owners) can only sell filled cylinders of their own brand,
and all empty cylinders of other brands received from customers must be given back to the brand
owners, in exchange for their own cylinders or a deposit refund at a pre-determined rate.  This
exchange and payment is coordinated through the LPG Cylinder Exchange Pool (the ‘Pool’),
whose membership is compulsory for all domestic LPG marketers.

The exchange arrangement was well received by the consumers, who no longer have to go
without gas if their brand is not available. Furthermore, there is no need to change regulators
when a different brand is bought, unlike the past when consumers with more than one brand of
cylinder had to keep a regulator for each one. The retailers, who buy filled cylinders at wholesale
price and sell to individual consumers, also welcomed the change, as they could no longer lose a
sale merely for not having a particular brand of cylinder held by a customer. 

For new marketers, the rules looked attractive as they allowed quick entry into the market. A
new marketer introducing their  own brand does not have to wait to grow their own brand by
selling to new customers, a slow and expensive process.  All one has to do is sell a filled cylinder
of the new brand in exchange for empty cylinders previously held by the consumer or retailer.
Many new marketers came up with their own brands of domestic LPG, and became members of
the ‘Pool’. The number of ‘Pool’ members has dramatically grown from the original seven to
nearly thirty in only seven years, while the actual volume of gas usage has grown only slightly.

Many of the new marketers are finding the role of the marketer to be a bit murkier than they had
expected. The business challenges include too many low value transactions, increased
competition from legal and ‘illegal’ marketers, cylinder management issues, cost of setting and
maintaining a network, and high ‘exit barriers’.

Too many transactions; low value

Most of the trading in the petroleum business involves a handful of transactions per day.  In the
early days, marketers of domestic LPG used to sell a minimum quantity to the retailers, who
would go to the depot after making the payments for their requirements in the bank. The new
market entrants found that they had to go out and seek the customers, making them flex the
minimum quantities and sell as per the customer demand. Indeed, it is not unusual to find
retailers, particularly in the residential areas, buying one, two, five, etc., number of cylinders
when the delivery truck calls. The sales executives have to make many deliveries and move long
distances to make substantial sales, increasing the cost of doing business. Daily reconciliation of
sales and cash handled becomes another long process, and employee supervision adds to the cost
of business. Furthermore, the vessels (gas cylinders) are valuable whether full or empty, and one
has to take care of both filled cylinders, for the gas, and empty cylinders.

Cylinder Management Issues

Cylinder management issues range from operating stocks, cylinder turnaround time, and timely
re-ordering until optimum level is reached.

Although the minimum quantity to be licenced as a brand owner is 5,000 cylinders, this number
is far too small for a sustainable business venture. This is because once a consumer buys a gas
refill (a filled cylinder), it takes time to finish using the gas in the cylinder. A pedestrian view of
cylinder utilisation can be misleading; many urban and middle income earners use one cylinder
per month, but annual LPG sales and practice in Kenya indicate that on average, a cylinder
comes back to the brand owner after about four months.

Apart from the time taken by a consumer, another factor that adds onto the cylinder turn around
time is the ‘Pool’. If a customer chooses to buy another brand for whatever reason, the cylinder
will be picked by the marketer that has supplied the new gas requirement. The empty cylinder
lands at the competitors depot (or warehouse), and may take many weeks before the brand owner
is able to collect it. Although the marketers give the weekly stocks to the ‘Pool’ coordinator, it
makes commercial sense to wait for the cylinders due for return, to accumulate such that it is
economical to collect them. With so many brands in the market, a marketer without enough
cylinders spends a lot of time and money collecting whatever cylinders held by the competitors.
And since most marketers do not allow vehicles to get into their compounds when they are
carrying competitor cylinders, the marketer collecting their own cylinders has to make multiple
trips. If the cylinder numbers are few, then the trips end up being uneconomical, eating into the
small profits. 

Another challenge from the exchange is new phenomena of ‘fake’ cylinders.  Some marketers
have received cylinders believing they belong to certain known and respected brands, only to
establish that the cylinders do not belong to the brand owners indicated. Some of these cylinders
include brands that have gone out of the market for various reasons, but also cylinders rebranded
possibly to give unsuspecting customers their preferred brand. Since those cylinders will not be
exchangeable under the ‘Pool’ rules, a marketer who receives such a cylinder is left ‘with a dead
baby’, as it were. Moreover, since they will have given their new cylinder in exchange for the
‘scrap’ cylinder, they incur a loss that may take years to recover, considering the refilling
frequency.
Competition – Legal and ‘Illegal’

A new marketer expects and embraces competition from established brands.  What many do not
expect is the brand loyalty that the older brands possess, and some newer well marketed brands,
that are favoured in the customers’ minds. In many cases, customers are willing to pay a higher
price for their preferred brand. Retailers will insist on lower prices for new brands, or ask the
new marketer to fill for them the empty cylinders of the preferred brands.

Indeed, refilling of brands by other people than the brand owners is now a thriving business,
affecting both established and new marketers. While a new marketer may consider their brand
safe from illegal refillers, it soon becomes clear that even new brands are affected. Retailers will
entice sales executives and drivers to sell them empty cylinders of popular brands once they have
sold the gas. In some cases, the sales executives sell all the popular brands and pretend that they
have sold cylinders with gas. Moreover, retailers are usually reluctant to give empty cylinders of
popular brands, and even other empty cylinders that are new, preferring to have them refilled
illegally where the margins are better.

In some cases, illegal refillers will buy a few hundreds of cylinders of a new brand and negotiate
a low price. Since they pay cash, the new brand owner will be excited to make the huge sale, but
will realise something is amiss when the ‘big customer’ keeps coming back only for new
cylinders and no refills.

An unanticipated consequence of the illegal refillers is promoting brands as they have good
networks in residential and rural areas, taking the brand out and deep inside faster than a brand
owner can do by themselves, at least initially. However, this is costly to a brand owner without
adequate cylinders or finances to keep buying back from the other marketers, and also new ones
from the cylinder manufacturers.

Looming Crisis

The unexpected crisis arises when a marketer has gas for sale but lacks the cylinders to fill the
gas. Needless to say, most of the gas to domestic consumers is still sold in cylinders, and it is not
practical to collect cylinders and ask customers to wait for refilling. Customers expect to find
filled cylinders in their retail outlets, whether it is the neighbourhood kiosk, estate supermarket
or the petrol station. If they do not find the preferred brand, they will quickly make another
choice from the variety of options available.

If a marketer does not have enough cylinders and the brand runs out in the existing retail outlets,
the customers buy other brands; implying that the marketer will have to buy back their own
cylinders from those brand owners. Depending on cash flow, personal ethics, directions from
financiers, etc, some brand owners may start to fill whatever cylinders they have, irrespective of
the brand ownership. The problems then multiply; they have to wait for their own new cylinders,
then buy their own cylinders back, and consequently lose brand loyalty (if any was developing),
by supplying these other brands.  Since the new marketer is now filling competitor cylinders,
they no longer give the weekly report to the ‘Pool’ coordinator regarding the number of
competitor cylinders they are holding.
The other marketers note the sudden change in weekly report; the new marketer has no
competitor cylinders to exchange, and neither are they paying for the cylinders that were
collected by other marketers. The other marketers advise their dealers not to accept empty
cylinders of the particular brand. The consumers get to learn that the brand is no longer accepted.
They look for the fastest way to dispose of the cylinder brand, fearing the collapse of the brand.
Retailers too start avoiding that brand, and not even low gas or cylinders prices will entice them.
Very soon, the owner of the new brand notices a dip in their own sales even with all of their
efforts to increase sales.  The new marketer is then forced to focus on giving the customers what
they want, which is the well known and respected brands. He starts to operate in a clandestine
manner to avoid harassment from police and other authorities who specialise in making money
from illegal business activities.

Extracting a gas business from this situation is a long, slow and painful process. In addition, once
a customer’s trust is broken, it is nearly impossible to rebuild it. Selling the brand is then
considered, but it appears nobody is keen on buying a tainted brand.

For the marketer, the major issue is to ensure cylinder availability, maintain a reasonable
cylinder turn-around-time, share an amicable relationship with competitors and patience to wait
for the returns which can take up to several months or even a few ye

(LPG Business Review)