Years ago, Americans spent most of their disposable income on food but consistent investment in retail infrastructure has changed that. Now, they only spend 6% of their household income on food and beverages.
Africa still battles with this and it is not hard to see why. The continent’s retail markets are highly fragmented and mostly made up of small and informal retailers and intermediaries, which is why a ton of tomatoes that costs around $100 in the U.S., for instance, costs about $400 in Kenya.
Since 2014, Twiga Foods has been using technology to build supply chains in food and retail distribution on the continent, starting with Kenya. Today, the seven-year-old company is announcing a $50 million Series C round to scale its efforts in the East African nation and other neighbouring countries.
This funding comes after the company’s $30 million Series B round — $23.75 million equity and $6.25 million debt — in 2019. Per Crunchbase, Twiga has raised over $100 million in both debt and equity financing rounds.
For most of Twiga’s operational history, it connected vendors and outlets with farmers via an app to access different agricultural produce.
But in 2019, the company began to connect FMCGs and manufacturers with retailers in Kenya in a bid to increase revenue, thereby dipping its hands into a space with regional players such as Sokowatch and MarketForce.
“We see ourselves as building a one-stop-shop for the informal retailer and all their needs. So that’s what we’re evolving into as a business,” CEO Peter Njonjo said to TechCrunch in an interview.
The B2B e-commerce food distribution platform claims that over 100,000 customers use its services across Kenya while delivering more than 600 metric tons of product to 10,000+ retailers daily.
Njonjo affirms that smallholder farmers remain at the core of Twiga’s operations. But having worked with them at scale and distributing fresh produce over the years, the Kenyan company has identified some challenges, especially in the traceability of some produce like tomatoes.
Twiga can effectively track food and produce from processing to distribution. However, there’s bound to be some lapses in the production end of things where for instance, farmers can apply a lot of pesticides to crops without Twiga’s knowledge, thereby creating food safety problems for the end consumer.
To avoid situations like this in the future, Twiga plans to personally handle the value chains of some produce where traceability can be an issue.
“For us, it’s choosing value chains where you can manage the traceability issue while there are some value chains that will be harder to manage,” the CEO said, “The key thing is that we now have a more blended approach. It’s not just about working with small farmers; we still work with them but on some value chains. But we’re looking at having large commercial farms integrated into our supply chain.”
Njonjo says Twiga is investing in a proof of concept to develop an alternative way of producing food on the continent and cover both ends of traceability and mass scale.
According to the company, the proof of concept aims to reduce the price consumers pay for popular domestic plant-based food products by over 30%.
Once the company manages to set it up, Njonjo says the model might be spun off as a separate business to maintain a more asset-light approach to expansion.
The funding will be used to test the concept out. Twiga also plans to use part of the funding to roll out low-cost manufactured food and non-food products under its brand before the end of the year.
Most of the investors from Twiga’s Series B round in 2019 took part in this recent fundraise. This time, however, Paris- and Nairobi-based family office and private equity firm Creadev led the Series C round.
Africa-focused firms TLcom, IFC Ventures, DOB Equity, and Goldman Sachs’ spinoff Juven, wrote follow-on checks too. First-time investors OP Finnfund Global and Endeavor Catalyst Fund participated as well.
“We are deeply convinced in Twiga’s potential to revolutionize informal retail across Sub-Saharan Africa,” said Pierre Fauvet, Africa director at Creadev, in a statement.
“Tapping into a $77 billion urban market on the continent, Twiga has gained significant traction since inception, leveraging on technology to optimize the food supply chain in African cities and constantly innovating to better tackle logistics, commercial, social and environmental challenges.”
The round also presented a consolidation of Twiga’s cap table where earlier investors got some liquidity via a $30 million secondary sale.
When CEO Peter Njonjo spoke with TechCrunch in an interview in 2019, Twiga was targeting a pan-African expansion by Q3 2020. But the pandemic and resulting lockdowns stalled those plans, yet Twiga made good use of the situation and quadrupled its revenues within that time — from April last year to August 2021.
Two years on, the company, which now has more than 1,000 employees, is ready to make those moves and is expanding to other East African markets, Uganda and Tanzania, before the end of the year.
It is currently working with development finance partners to figure out how to scale its proof of concept where it will act as an off-taker to sell horticultural crops from February 2022 across East Africa.
“We’ve been fairly successful in Kenya. So, we want to consolidate our dominant position, clear out our proof of concept and expand to the neighbouring countries,” remarked Njonjo, who founded the company with ex-CEO Grante Brooke.
Hitting these targets would set Twiga up for a bigger fundraise sometime next year, according to Njonjo. After that, Twiga will look at other markets — Cote d’Ivoire, DRC Congo, Ghana and Nigeria. Njonjo adds that Twiga’s expansion into Nigeria might involve some M&A action.
Originally published at techcrunch.com