VidaGas

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Overview

Bringing cleaner cooking fuel to Mozambique

 

Overview

Headquarters: Nampula, Mozambique
Established: 2002
Impact Areas: Mozambique
Type: For-Profit
Energy Sectors: Power Source: Other Power Sources
Power Use: Cleaner Cooking
Business Model Types:
Staff Size: 35
Annual Budget: N/A
Major Funders: PATH, World Bank, Gates Foundation, Skoll, Dutch bilateral DGIS, Oasis Fund, Mozambique Ministry of Health
Awards: 2003: World Bank Development Marketplace
2004: UNDP Global Business Award
2009: Tech Museum of Innovation Award 2009 (Villlagereach)

ABOUT

 

Energy Products/Services

  • Propane tanks and fuel

Target Market

  • Mozambique Ministry of Health, hotels and restaurants, individual users in Northern Mozambique

 

VidaGas

Revenue Streams

  • Sale of propane gas

Value Proposition

  • VidaGas was created by VillageReach, a non-profit working in Mozambique’s health sector, and a Mozambican non-profit, Foundation for Community Development, as a way to improve the capacity of the Ministry of Health’s clinics in the underserved north of the country by giving them a reliable source of propane.
  • In order to develop a sustainable business, VidaGas has also targeted other users of propane in northern Mozambique, such as hotels, restaurants and retail buyers.
  • Institutional buyers of VidaGas’ propane spend significantly less than what they spent on charcoal, and individual retail buyers gain convenience and affordability.
  • VidaGas became profitable in 2009 and recently received a US$1.4m equity investment to expand.

Problem Addressed

  • While there are two large propane companies in Mozambique, the opportunity cost of selling in the less-accessible north, rather than close to the capital, Maputo, in the south, is too high for them to be interested.
  • This has meant a severe shortage of propane gas in Northern Mozambique.
  • The Ministry of Health’s northern clinics have lacked reliable fuel for refrigeration and sterilization, and both institutional (hotels and restaurants) and individual customers lack alternatives to expensive, inconvenient charcoal.

Where They Are Now

Impact to Date

  • Largest propane provider in northern Mozambique, delivering approximately 370 tons annually.
  • Supplies propane to over 260 remote health centers which support over 5 million people.

Milestones

  • 2002: VidaGas founded by VillageReach and Mozambican charity Foundation for Community Development
  • 2009: Profitability
  • 2010: First equity investment
  • 2011:  Shipping 370 metric tons [35% year on year increase]

Growth Plan

  • Currently conducting market development program for Nampula City, the largest city in northern Mozambique, with objective of reaching approximately 2,200 new households and supplying 12 tons of propane over a period of 12 months.
  • Within 3-5 years will expand to serve three additional provinces within Mozambique.

How They Deliver

Product Sourcing

  • VidaGas’ propane, like most propane in Mozambique, is bought from South Africa (Mozambique does not have a port that can receive propane shipments).
  • Importing petroleum products required becoming a shareholder in a government holding company, IMOPETRO, which does all importing in bulk.
  • VidaGas trucks its propane from the capital, Maputo, to a storage facility in the north, where it is packaged into canisters for sale.

Distribution

  • Initially the Ministry of Health was VidaGas’ anchor customer, but now a large percentage of its sales are to commercial buyers, such as retailers and large hotels and restaurants.
  • B2B sales are direct to companies and household sales are through retailers.
  • Household users put down a deposit at a retailer for a tank, which they use until it is empty and then exchange for a full one.
  • Retailers often see propane sales as a way to bring in customers who will have to return every month to fill their tanks and potentially buy other products.

Marketing

  • VidaGas has found it easy to sell to business buyers and the Ministry of Health, because of the money they save.  Sales are made directly by VidaGas employees.  Business buyers also typically do not switch back once they have started using propane.
  • Selling to household buyers has been more challenging, and marketing is primarily focused on increased convenience and lower health risks from smoke.  VidaGas markets to households through radio, murals, promotions, and music events.

Revenue & Affordability

  • Affordability is not much of a problem for institutional customers, since they use so much fuel that the up-front cost of tanks is very little compared to the money they save.
  • For household customers, the price of the initial deposit is often a significant barrier, and VidaGas has had more success when they have done promotions to lower the deposit required to obtain a tank and the initial cost of other equipment such as an LPG stove.

Financing

  • VidaGas was started with grant financing from PATH and several other major donors such as the Gates Foundation, Skoll, and the World Bank, but was designed from the beginning to operate as a self-sustaining entity, and broke even after 8 years of operation.
  • The US$1.4m in equity financing received in 2010 from Oasis Capital will allow VidaGas to expand into more consumer sales and eventually to reach new markets.
  • Despite its profitability, it was difficult for VidaGas to find equity financing at a level below $5m, due to high transactions costs.

More Resources

Online Resources

Contact Information

VidaGas
c/o VillageReach
601 North 34th Street
Seattle, Washington 98103
USA

( +1 (206) 925-5200
* john@villagereach.org