According to reports, consumers in America spend just over 6.2% of their disposable income on food, while in the European Union, it is between 13%. But here in Africa, the average household budget for food is between 50% to 60% of their disposable income.
This has put a lot of pressure on African consumers to earn more to satisfy their basic needs. Sadly, while food production is a big problem on the continent, the lack of an efficient supply chain mechanism is the bigger problem. The result is that a lot of what is produced on farms across the continent ends up being wasted, and the ones that make it to the market attract a high price tag.
Peter Njonjo Business Failure
This realisation gave birth to what is now known as Twiga Foods in Kenya, a B2B food distribution company using technology to simplify the supply chain between fresh food producers, FMCG manufacturers and retailers, and cutting out many intermediaries that contribute to the high cost of food.
Twiga is one of the few African tech startups that have secured the best funding. In 2017, it raised US$10.3 million in Series A funding. The startup got an additional US$10 million in 2018, US$34.75 million in 2019, US$29.4 million in 2020 and US$50 million Series C round in 2021.
Explaining how the company was formed some years ago, Peter Njonjo, a former Coca-Cola executive, said it was at a point he decided to venture into banana export to the Middle East. His feasibility studies showed a huge export market for bananas in the Middle East.
After making the initial contacts and making orders for the banana in preparation for export, Peter and his business partner Grant Brooke encountered a major problem which led to the failure of the business.
“We thought it would be very easy to put everything together, but sadly, we couldn’t export a single container,” Peter recounts. The pair found the local food industry lacking. The farmers couldn’t offer any traceability, there was no record-keeping, and agricultural practices were substandard – if they were present at all.
“Everything was super informal. People didn’t even know the types of varieties they were growing,” Peter says. Confronted with this reality and burdened with seemingly worthless stock, a decision was made to pivot,” he explained in disappointment.
Fragmented Retail Food Market in Africa
Encountering disappointment was a frustrating experience for Peter and Grant, but they did not allow their experience to stop them; rather it became a springboard for success.
Seeing they could no longer export the loads of bananas they ordered, the duo decided to sell the products in the local markets from the boots of their cars in a bid to cut their losses.
In the course of doing that, they were confronted with another problem – the retail market was so badly fragmented; this retail fragmentation made the food selling business more clumsy and less profitable.
To put this in proper perspective, the entire Europe food market is controlled by about ten big retailers. But in a city like Nairobi, one could count no less than 180 retailers.
Realistically, this led to a lot of inefficiencies in the supply chain architecture and, of course, massive wastage.
Another important discovery that the partners made was that by cutting off the wholesale market, they significantly increased their chances of making a profit from the sales of the bananas. So rather than recording losses, they actually made a profit. It was a major eye-opening moment for them.
How Twiga Foods was founded
This discovery was indeed the beginning of a new journey. “I couldn’t believe that the pricing at retail was higher than the wholesale market to the point that by bypassing wholesale, we could sell at a profit,” he explains.
“That’s what led us to understand why Africans in urban cities are spending a fortune on food in this day and age.” This realisation also led to the formation of Twiga Foods, a business-to-business food distribution platform based in Kenya.
Socio-economic changes start with food
Twiga Foods aims to organise the supply chain in Africa’s food industry to align with global best prices and ensure affordable prices for consumers. This is done by sourcing fresh foods from the farmers and delivering them directly to the retail market at a fair price.
Peter’s conviction about his line of business is rooted in the fact that the greater social and economic changes in Africa begin with food.
“But if you produce food efficiently, you can significantly reduce the amount of money being spent on food; money that’s then available to be spent in other sectors of the economy.”
Partnership with Goldman Sach
For several years, Twiga Foods has stayed focused on its objectives of providing fresh foods to households in Kenya and growth has come as a result. Every month the company serves 50,000 retailers.
The company, which now boasts 700 employees, supports over 800 farmers. “That’s a testament that we’ve managed to find a model that works in terms of recruiting and retaining customers,” he says.
Twiga has also signed major partnership deals with global brands like Backers and Goldman Sach to the tune of $60million.
Experts believe that if the company sustains its growth projection, it is on track for a $1 billion valuation in 2025.
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