Tech targets vendors to lower prices
Dar es Salaam, Lagos and Addis Ababa could be the next stop for a Kenyan fresh-produce distribution platform in its quest to disrupt food-supply chains in Africa.
Twiga Foods aggregates farm produce and distributes it to vendors at street corners or market stalls in the Kenyan capital, Nairobi, through a cellphone-based supply platform. In the country's fragmented retail market, where 90% of food is sold through informal outlets, the tech start-up is trying to create efficiency to lower food prices.
"A banana in a Nairobi supermarket costs more than a banana in London, while the average income of a consumer in the UK is 30 times that in Kenya," said Peter Njonjo, Twiga's co-founder. "This is true for many African cities, and our vision is to leverage technology and organise a more efficient value chain that lowers food prices."
Many Kenyans in Nairobi spent an average of 45% of their disposable income on food, Njonjo said, and many African cities faced similar challenges. "If it works here, the key thing is we would want to find a way to scale and get into those cities and offer the same products and services," he said.
Nairobi is becoming a tech hub creating solutions for problems common in the developing world. In the past six years, Kenya received 58% of reported investment deals in East Africa, according to the Africa Private Equity Venture Capital Association.
Twiga is first eyeing Dar es Salaam in Tanzania and the Ethiopian capital, Addis Ababa. It plans to then move on to Africa's most populous city, Lagos. "For us the icing would be Lagos," said Njonjo. "We will remain very centric to big urban cities because that's where the problem is biggest."
Twiga sources fruit and vegetables from 17,000 farmers and delivers to 180,000 informal retailers daily in Nairobi, creating a predictable market for growers and reducing transport costs for the vendors.
In other markets, Twiga will look for companies with distribution networks in informal sectors already in place.
Gerald Muriuki, a tech analyst at the Nairobi investment bank Genghis Capital, said Twiga would face a "formidable challenge" integrating logistics systems in the other countries it targets, and uptake could be slow in markets that did not embrace change quickly.
Twiga is also working with farmers to modernise food production and expects dispatches to increase from about 120t a day to up to 300t a day by the end of the year.
The company has raised $35m (R489m) from venture capital and convertible notes since its inception in 2013. This year, Twiga will conduct a second round of financing to fund expansion in Nairobi and another round in 2020 for growth outside of Kenya.
Existing investors include Wamda Capital, which had invested in the Middle Eastern ride-hailing company Careem Networks, which Uber bought for $3.1bn last month.
"We have a good captive audience of investors we can walk this journey with," Njonjo said.