Shega Shero Eatery in Ethiopia's capital city was at risk of failing because the restaurant scene in Addis Ababa was already saturated with similar businesses with almost identical menus. Not only was there no room for expansion, but owner Fitih Tesfaye felt increasingly threatened by competitors opening up comparable eating establishments nearby.
If she wanted to succeed and thrive in the food industry, Ms. Tesfaye knew she would need a unique, in-demand product.
This was the problem she brought to the 2012 entrepreneurial workshop hosted by the Sauder School of Business's Arc Initiative, a program run by the school which provides business tools to advance African entrepreneurial business ventures.
Fitih Tesfaye, owner of Shega Shero Eatery and Yana Sweets, had a steady job as a junior manager at the Commercial Bank of Ethiopia, but she wanted to work for herself and believed she had the original ideas to make this happen and put more money in her pockets in the process.
"I wanted to start my own business because I was tired of being employed by someone else and making a small salary – just enough for survival."
In 2010, Ms. Tesfaye left her full-time bank job to open her own restaurant, Shega Shero. She featured indigenous food on her menu and her specialty became a traditional chickpea stew called shero. Her food was familiar and accessible. "People of all ages, across all classes eat shero," she said.
At first, it was an easy market to tap, but in fewer than two years, competitors had overshadowed Ms. Tesfaye's establishment, putting the future of her business in jeopardy.
At the Arc Initiative workshop, Ms. Tesfaye was inspired by a talk given by Daniel Gad – owner of his own food production business in Ethiopia – on the future of food production and its importance in the country. She decided to expand into this market and carve out her own niche.
Ethiopia's food packaging industry remains a fairly untapped market and there are many areas to explore, but Ms. Tesfaye saw a future in sweet treats. Hard-to-come-by desserts provided the perfect product for her new business venture, Yana Sweets, which she started in 2012.
To procure her supply of sweets, Ms. Tesfaye travels 500 kilometres every two weeks to the small, eastern town of Dire Dawa. There she purchases between 3,000 to 5,000 pieces of traditional desserts wrapped in newspaper that include items such as baklava and her top-selling mushbek, a sweet and crunchy treat sold only by Ms. Tesfaye in Addis, which makes up the majority of her profits.
Her products are made more appealing to the customer by replacing the newspaper with designed plastic packaging and customized labels.
Ms. Tesfaye used a strategy map tool learned at the Arc workshop to identify the challenges facing her restaurant business and then leveraged it to pursue a new startup in which her points of differentiation were significant. She moved from a very competitive business environment into a previously untapped sector of the Ethiopian food industry, one in which she has quickly dominated the market, selling her sweets to 50 stores in Addis.
Ms. Tesfaye's monthly income from Yana Sweets ranges from 9,000 Birr ($505 CDN) to 15,000 Birr ($842 CDN). In comparison to the yearly GDP per person in Ethiopia of $420 (CDN), Ms. Tesfaye is achieving tremendous success. Contrary to her restaurant business the business model for Yana Sweets does not incur fixed costs and thus reduces her risk.
She is currently planning new, improved designs for her packaging, as well as developing a website and catalogue for her product.
Ms. Tesfaye is still running her restaurant, but the majority of her income now comes from her packaged dessert business.
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.