Americans used to spend most of their disposable income on food years ago. But, consistent investment in retail infrastructure has made this a reality. They now spend only 6% of their household income on food, and just 4% on beverages.
This is a problem that Africa continues to face. A lot of the continent's retail markets are fragmented. They are mostly run by small, informal retailers and intermediaries. This is why a ton worth of tomatoes costs only $100 in the U.S.A, but about $400 in Kenya.
Twiga Foods, which began in Kenya, has been using technology since 2014 to create supply chains for food and retail distribution across the continent. The seven-year-old company today announced a $50 million Series C round in order to expand its efforts in East Africa and other neighboring countries.
The funding follows the $30 million Series B round $23.75million equity and $6.25million debt rounds in 2019. Crunchbase reports that Twiga has raised more than $100 million through equity and debt financing rounds.
Twigas was a platform that connected farmers and vendors via an app. This allowed them to access various agricultural products.
In 2019, however, the company started to connect FMCG manufacturers and retailers in Kenya to increase their revenue. This was in an effort to expand its reach and compete with regional players like MarketForce and Sokowatch.
We envision ourselves as a one-stop shop for informal retailers and all their needs. In an interview with TechCrunch, CEO Peter Njonjo stated that this is what we are becoming as a company.
B2B ecommerce food distribution platform claims over 100,000 customers use it in Kenya. It also delivers more than 600 tons of product daily to 10,000+ retailers.
Njonjo says that Twigas's core business is still smallholder farmers. The Kenyan company has worked with them on a large scale, distributing fresh produce, and over the years, they have identified challenges, including in the traceability of tomatoes.
Twiga allows you to track food and produce, from production to distribution. There will be lapses at the production end. Twigas may not know that farmers apply pesticides to crops, which can cause food safety issues for consumers.
Twiga will personally manage the value chains for some produce that is not traceable in order to avoid similar situations in the future.
We choose value chains that can handle traceability issues while others are more difficult to manage. The CEO stated that the key is that we now have an integrated approach. We are not only working with small farmers, we also work with them on some value chain. We are looking to integrate large commercial farms into our supply chains.
Njonjo reports that Twiga has invested in a proof-of-concept to create an alternative method of producing food on the continent. It will also cover both ends of traceability as well as mass scale.
The company claims that the proof of concept will reduce the cost consumers pay for popular plant-based foods products by more than 30%.
Njonjo suggests that the company set up the model to allow for more expansion flexibility and asset-lightness.
The funds will be used for testing the concept. Twiga plans to also use part of the funding for low-cost manufactured foods and non-food products to be launched under its brand by the end of this year.
This fundraise was attended by most of the investors in Twigas Series B round 2019. Creadev, a private equity firm and family office based in Paris and Nairobi, led the Series C round.
Follow-up checks were also written by Africa-focused companies TLcom and IFC Ventures as well as DOB Equity and Goldman Sachs spinoff Juven. OP Finnfund Global, Endeavor Catalyst Fund were also first-time investors.
Pierre Fauvet (Africa director at Creadev), stated that Twigas has the potential to transform informal retail in Sub-Saharan Africa.
Twiga taps into the $77 billion African urban market. It has seen significant growth since its inception. Twiga leverages technology to optimize food supply chains in African cities. They also invent to address logistical, social, and environmental issues.
This round also saw a consolidation at Twigas' cap table, where investors who had previously invested $30 million received liquidity.
Twiga's CEO Peter Njonjo stated to TechCrunch that the company was aiming for a pan-African expansion in a Q3 2020 interview. However, the pandemic and subsequent lockdowns put a halt to those plans. Twiga nevertheless made the most of it and increased its revenues by fourfold between April 2017 and August 2021.
The company now employs more than 1,000 people and will expand to East African markets in Uganda and Tanzania before the end.
It is currently working closely with partners in development finance to scale up its proof-of-concept, where it will be an off-taker for selling horticultural crop from February 2022 across East Africa.
We've been quite successful in Kenya. We want to consolidate and clear out our proof-of-concept, and then expand to neighboring countries," said Njonjo, who co-founded the company with Grante Brooke.
According to Njonjo, Twiga would be eligible for a larger fundraise if she hits these targets. Twiga will then look at Nigeria, DRC Congo and Ghana as potential markets. Njonjo says that Twigas's expansion into Nigeria may involve M&A.