Kenya’s Twiga Foods goes bananas on the Nairobi market
“Why does a banana cost more in Nairobi than it does in London?” asks Peter Njonjo, recently appointed as chief executive officer of Twiga Foods.
We’re sitting in a conference room in the food transport start-up’s massive pack house in Nairobi. “It costs too much to feed yourself in this city,” he adds.
To answer that, Njonjo quit his job as president of the Coca-Cola’s West Africa business unit to run Twiga Foods, a start-up that is revolutionising the food supply chain in Kenya and making food cheaper in Kenya’s capital city. The idea behind the company is to formalise the supply chain and get rid of the uncertainty that drives up food costs.
It started out hauling bananas, one of the country’s most important fruits. Between 2017 and 2018, the per capita consumption of the fruit increased by 82.1%. The next biggest increase for vegetables and similar products was less than half of that.
The numbers game
The numbers matter. Since Njonjo and co-founder Grant Brooke launched Twiga Foods five years ago, it has grown in size and stature. Twiga Foods now transports more than just bananas. The crates in its pack house contain everything from potatoes to onions, and it recently branched out into transporting dry foods.
Twiga’s business model is simple: it buys produce from a network of farmers and delivers it to thousands of informal vendors. The logistics, however, are massive. By the end of the year, if everything goes according to plan, the company will haul more than 130tn of food a day from a network of more than 15,000 farmers.
The benefit to the farmers is a predictable rate for their produce, timely payments and release from the hassles of delivering to the market and the demands from the network of middlemen – both of which increase post-harvest wastage. Vendors, on the other end of the supply chain, are assured of a reliable supply of produce, knowing that the delivery trucks form part of a large network with multiple back-up systems in place.
The business model is not only attractive to the people in the supply chain but also to investors. Since its inception, Twiga Foods has raised more than $35m in nine rounds of financing, making it one of the most funded start-ups on the continent.
In June, Njonjo announced that Creadev, the evergreen investment arm of the Mulliez family, had bought an undisclosed stake in Twiga for $5m. The investment confirmed the strength of Twiga Foods’ business model and, more importantly, enabled early investors such as Omidyar Network, Index Ventures and Crescat Limited to exit profitably.
Njonjo said that that was the big winner of the latest investment round. Providing a profitable liquidity event for early investors proved that the company was no longer the bootstrap operation it once was.
Exits and fundraising
“Investors don’t have many exit opportunities, especially profitable ones, on the continent,” he says. “The initial rounds of financing were tough to come across because everyone wants you to get to a certain stage before people feel you’ve de-risked the model enough to warrant external financing.”
Njonjo recalled that to fund the start-up, he and Brooke initially pooled capital from their savings. Eventually, Njonjo and his wife sold their family home to keep the company going.
At the outset, the idea was an export model, but they soon realised it was not only an expensive but also an almost impossible goal.
“The global markets’ extensive certifications for fresh food made us rethink the whole idea,” says Njonjo, who still worked for Coca-Cola at the time.
They then looked at the internal market, focusing on supplying small vendors who serve approximately 95% of Kenya’s food needs. They started with bananas, but the vendor’s demands drove the growth in the portfolio of products.
“Before Twiga, most of the vendors would wake up at 4:00a.m. to go buy supplies for the day,” Njonjo adds. “By fixing the supply chain, we were not only improving their quality of life, we were also raising their income levels and providing quality food.”
Njonjo pointed out that the company began hauling dry foods because the vendors asked if Twiga could deliver, and the response from the market was positive. Twiga Foods is also partnering with financial institutions to offer small loans to vendors to provide working capital. He added that the response to that initiative “was promising”.
The company’s focus now is to provide absolute traceability of the supply chain by March 2021. Absolute traceability would be a revolutionary change for the Kenyan market, where fresh foods are sold mainly through informal networks with insufficient oversight. Njonjo says that the company already demanded, from itself and its supply chain, “requirements that are way above the regulatory requirements in the country”. Although the plan is going well, he points out that it had not yet achieved absolute traceability because “when [a product’s] harvested, it’s already too late”.
When Brooke resigned in March, he remained an executive director. Njonjo said at the time that Brooke’s skill-set was “starting new ventures, while proficiently running institutions was mine.”
Njonjo plans to use his 21 years of experience with Coca-Cola, which has one of the largest supply chains in the world, to grow Twiga Foods. Apart from formalising the supply chain, the company is also considering moving to a bespoke pack-house to better meet its expanding needs. It is considering regional expansion and has in its sights the two most populous countries on the continent, Ethiopia and Nigeria.