A few weeks back, Facebook CEO Mark Zuckerberg made an impromptu visit to Nairobi on a mission to learn. In an interview with Techweez, Mark said he was keenly interested in how M-Pesa was helping small businesses scale their operations. One of the companies he mentioned was a startup, Twiga Foods, which he said was using the mobile money solution in collapsing the value chain in agriculture.
If you are an avid user of Twitter in Kenya, you probably have stumbled upon Grant Brooke’s Twitter handle. Grant Brooke is known for his humour and commentary on practically everything but not many are aware of his story as a startup co-founder. We had a sit down where we spoke in-depth about Twiga and how Technology can solve Africa’s problems in agriculture.
“I am originally from Texas and came to Kenya in 2008 to do graduate work on markets for my masters research,” says the Princeton and Oxford University alumnus. “My research was on how religion affects small business owners in terms of credit, purchasing decisions and the like.” Upon completion, Grant was looking for a reason to remain in Kenya as he did not enjoy being in England. “I came to Kenya as a 20/21-year-old and was looking for a reason to remain here longer,” he says. “There were two paths for me either in the startup scene or in consultancy. I looked at a bunch of projects available at the time in everything from restaurants to produce-export business and even international development agencies.”
Around the same time, Grant was approached by a Dubai group to research on banana exports from Kenya and his research for the group showed that it was impossible to export bananas as the price of bananas in Nairobi was the same as that in Dubai. “This made me look at the value chain in a complex way and felt there was a need to address this problem,” he said. “I looked at the market not just from the export side of things but from the local consumption perspective and based on my background felt this is a problem I could solve,” he added.
“The problem with the agricultural value chain is that the market is disorganized. Brokers are the largest beneficiaries and not the farmers…”
The problems facing agriculture have been some of the most well-funded projects with hundreds of millions of dollars in donor aid channeled towards its resolution. Grant, however, felt the approach used by these organizations in Sub-Saharan Africa was off the mark. “The problem with the agricultural value chain is that the market is disorganized. Brokers are the largest beneficiaries and not the farmers meaning you cannot solve any problem without fully restructuring the market,” he said.
So who is Twiga Foods?
Twiga Foods begun around 2 years ago with the goal of solving the fragmentation in the produce market. “We started off with tuk-tuks and were distributing bananas in Eastlands as a pilot”, says Grant. “We also got cold rooms on Mombasa Road to store these bananas. As we grew, we realized that Mama Mbogas (grocers) loved the idea of having goods delivered to them.” This allowed for Twiga to pivot into a tech platform allowing the company to quickly scale. “Technology allowed us to create a replacement market for the wholesale market which is the Marikiti and Wakulima market and taking all this aggregated demand from our customers and organizing supply based on their needs,” he says. According to Grant, the company has managed to become one of the largest banana buyers and suppliers in the last 18 months, with 15.2 Million bananas sold and 1,500 vendors involved. Twiga foods is also expanding to other produce like potatoes.
“The cost of a banana in Nairobi … from Meru or Taveta is the same price in London, which has come from Guatemala ….. This fundamental flaw points to an inefficiency that only technology can solve.”
“The main reason markets do not work here is because there lacks a proper market infrastructure to support the 5 million population in Nairobi. As a result, produce goes bad and there are massive delays at the markets. This means that the cost of the same gets passed to the customer,” he says. “The cost of a banana in Nairobi which has come from Meru or Taveta is the same as the price of a banana in London, which has come from Guatemala,” he says. This fundamental flaw points to an inefficiency that only technology can solve.
Most startups in East Africa have been taking physical problems from education to logistics, power, and even healthcare and using technology to add value. How is Twiga Foods doing this?
Twiga is essentially building a commodities marketplace to connect farmers with customers using a business to business model. “The problem with the supply side (the farmers) is futures. The farmer does not know the value of their produce prior to selling it. For instance, the price of tomatoes in Nairobi was Kshs. 36 a kilo, a month ago. The price of the same is Kshs. 18 owing to oversupply,” he says. “What Twiga wants to do is use technology to fix this and make it more predictable,” he adds. Farmers send SMS to alert Twiga of their produce while the staff in the field make bookings on the produce when its ready. Twiga then uses this data to create a profile about the value of a certain commodity at a certain point in the future thereby creating an organized farmers market.
“On the market side of things, the vendors face a problem with liquidity which leads to food inflation,” says Grant. “Add other market bottlenecks and the price of food stuff will keep rising. This can be solved by an oversupply, where the vendor will not at any one time lack the necessary foodstuffs to sell to their market,” he said. However, the mama mboga does not have enough cash for risk capital and so Twiga solves this by first ensuring a constant supply of the necessary vegetables and secondly offering trade credit to the customers. “Our average client orders their goods three times a week. So we give most of them a 48-hour line of credit until the next delivery. This not only allows them to sell more but helps them deal with liquidity issues,” he says. The startup primarily uses technology to score the vendors before deciding how much credit to give the vendor and this is still at the pilot stage.
M-Pesa has also been a big boon for the company, which was the main interest of the Facebook CEO when he visited the firm. “There are 9 steps between the farmer and the vendor side of things which is the mama mboga and kiosk that buys from Twiga and mobile money has been a major facilitator of these transactions and processes. “We perform 700 transactions a day on the vendor side of things and have more on the farmer end and mobile money has allowed for the completion of these transactions,” said Grant.
“We are able to eliminate leakages while optimizing the value chain process owing to M-Pesa. We are also looking to become a full stock M-Commerce platform for small businesses in 2017, serving all business needs from groceries to toilet paper and the like and at the very center of this will be the deployment of proper solutions,” he says. “If we solve this problem, then we shall have solved most of the problems associated with agricultural economics.”
Twiga Foods currently employs 140 employees both in the field and in operations. “We have been looking to recruit top talent, so its mostly a bunch of 20-something coders and 40-something guys with background in logistics and warehousing at Twiga. We also employ agronomists to help us deal with quality control and tell farmers what we want and which are the best practices,” he says. Grant says most of his staff has come from global organizations such as Google, IBM, Coca Cola, G4S and others. “So we pay most of our employees international rates, besides me, all others are Kenyan”, he added.
Where is Twiga Foods at with Funding?
Grant says that over $2 Million has gone into Twiga with $400K in founder’s finance and the rest in seed capital. The startup will in March 2017 have its Series A round of funding looking to raise between $7-10 Million at an undisclosed valuation. Grant says most of this will go towards exploring new markets and expanding into the FMCG market. He says most of the capital goes towards staffing capex in terms of warehouses, with the company looking to retain its top talent.
In the short term, Twiga will look towards increasing the number of vendors “We are in a race to get to as many vendors with the full goods basket not just bananas as soon as possible,” he says. “We also hope to keep our current vendors happy,” he added. The company is also looking to expand their current infrastructure to keep up with the growing demand.
Grant says that 80% of food produced in rural areas gets consumed in urban places but the market is disorganized. At the same time, Africa is importing 100 Billion Dollars worth of food stuff and the donor class is not doing a great job of resolving this problem meaning there is a huge task ahead of trying to organize the market across the African continent. Twiga will also take a stub at the Fast Moving Goods and Commodities segment, using its already built infrastructure and market know how. “We shall keep doing what we are doing and strive to do it better,” he says.