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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 Ltd. aggregates farm produce and distributes it to vendors at street corners or market stalls in the Kenyan capital, Nairobi, through a mobile phone-based supply platform. In the country’s fragmented retail market, where 90 percent of food is sold through informal outlets, the tech startup 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 U.K. is 30 times compared to Kenya,” Peter Njonjo, Twiga’s co-founder, said in an interview in Nairobi. “This is true for many African cities and our vision is to leverage technology and organize a more efficient value chain that lowers food prices.’’
Many Kenyans in the Nairobi metropolitan area, which has about 6.5 million people, spend an average of 45 percent of their disposable income on food, Njonjo said. Many cities on the continent face similar challenges — urbanization outpacing infrastructure development, inefficient agriculture and a fragmented retail industry, he said.
“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 growing into a tech hub creating solutions for problems common in the developing world. In the past six years, Kenya received 58 percent of reported investment deals in East Africa, according to the Africa Private Equity Venture Capital Association.
Twiga is first eyeing other East African cities, such as Dar es Salaam in Tanzania and the Ethiopian capital, Addis Ababa. It plans to then move on to Africa’s most populous city, Lagos, where Njonjo worked for three years as Coca-Cola Co.’s regional head for West and Central Africa before becoming Twiga’s chief executive officer.
“For us the icing would be Lagos,’’ he said. “We will remain very centric to big urban cities, because that’s where the problem is biggest.”
Twiga sources the fruits and vegetables from 17,000 farmers and delivers directly to 180,000 informal retailers daily in Nairobi and its environs, creating a predictable market for growers and reducing transport costs for the vendors.
To beat Nairobi’s notorious traffic, the firm dispatches its trucks early in the morning so they are at its neighborhood depots where it distributes to kiosks.
Twiga will face a “formidable challenge” integrating logistics systems in the other African countries they target, and uptake may be slow in markets that don’t embrace change quickly, said Gerald Muriuki, a technology analyst at Nairobi-based investment bank Genghis Capital.
In Nigeria, they’ll have to contend with perennial power shortages, according to Eric Musau, head of research at Standard Investment Bank in Nairobi. “It boils down to cost and how soon they can turn profitable,” he said.
Other than distribution, Twiga is also working with selected farmers to modernize food production and expects dispatches to increase to 200-300 metric tons per day by the end of the year from about 120 tons currently, he said.
The company has raised $35m from venture capital and convertible notes since 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, Njonjo said.
Existing investors include Wamda Capital, which had invested in the Middle Eastern ride-hailing company Careem Networks FZ that Uber Technologies Inc. bought for $3.1bn in a cash and stock deal last month.
“We have a good captive audience of investors we can walk this journey with,” Njonjo said.
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