A Kenyan startup is digitally enabling informal traders and optimising their supply chains, to improve food quality, availability, affordability, service levels and sustainability.
The Twiga Foods story was a highlight of the recent SAPICS virtual conference, hosted by The Professional Body for Supply Chain Management. It was shared with the SAPICS supply chain community by Twiga Foods CEO and co-founder, Peter Njonjo, together with Gary Benatar, CEO of Relog, the supply chain and logistics consulting firm that is working with Twiga to optimise its supply chain and logistics infrastructure.
Challenges faced by food vendors
“If you visit most African cities, you will notice at least two things – the marketplaces and informal retailers that line the streets and the abundance of arable land that the continent is blessed with. However, despite the presence of these two things, food production and distribution are challenges across the continent,” Njonjo says. “Most of the consumer spending in Africa happens in informal, roadside markets, even in those countries with the most well-developed retail and distribution markets. For many people, these vendors are the main channel by which they access the food and drinks they consume.”
Njonjo outlined some of the challenges faced by vendors and their customers: “If you take the average vendor in Nairobi as an example, their day often involves waking up before dawn to get a head start on liaising with brokers (middlemen) who source directly from farmers and sell to vendors. There is often no standardised pricing so vendors have to negotiate the best deal they can on the day. Once that deal is negotiated, they then have to find and pay someone to transport the goods to their stall. In many cases, vendors source their goods from multiple brokers, which means they have to go through this process repeatedly. This fragmented marketplace inevitably leads to increased costs for vendors which are then passed on to consumers,” he explains.
“As a result, spending on food in sub-Saharan African countries is substantially higher than in other parts of the world. According to World Bank Data, 55% of disposable income in Kenya and 60 percent in Nigeria is spent on food, compared to 8% in the UK.”
The informality in the retail structure is mirrored in the local food production sector, where 70% of Kenya’s food comes from the small holder farmer. “The African continent has some of the most ideal conditions for food production in the world; but outdated techniques and poor materials handling means farmers are not getting the maximum returns from their efforts,” Njonjo states.
Low-cost, high quality food across Africa
Twiga’s vision is to provide access to low-cost, high-quality food across African cities. It is doing this in Kenya by using mobile technology to aggregate demand in the informal retail sector. Njonjo elaborates: “We are using a mobile-based, cashless platform to aggregate the demand of thousands of small and medium-sized retailers in Kenya, enabling them to order fresh and processed food, as and when needed. We source quality fresh and processed food from thousands of farmers and food manufacturers and deliver from our pack house to more than 35 000 vendors. As a result, farmers and food manufacturers have guaranteed access to a fairly-priced, transparent, mobile marketplace and retailers can consistently source lower-cost, higher-quality produce, which is conveniently delivered to their doorstep within 18 hours of ordering.”
Benatar says that working with Twiga Foods was an opportunity to learn and develop solutions that progress food distribution methodologies and supply chain philosophies to the informal sector, which has been overlooked in Africa in the past.
“The emphasis on the inbound supply chain was an opportunity to rationalise and gain efficiency that previously wasn’t focused on in this market. Opportunities to improve quality and speed to market, as well as gain economies of scale, were critical,” he notes.
The solution designed and developed by Relog and Twiga Foods is unique to Kenya and Twiga. It is delivering lower food costs, less waste and improved sustainability. The facilities developed for Twiga are also a world first, Benatar adds. “The design of the distribution centre incorporates FMCG products, other fruit and vegetable products that require grading, weighing and size categorisation into smart crates,” he explains. “The facility incorporates smart battery charging for equipment, full returns operations, recycling, and crate washing.
One of the challenges was also to meet Twiga Foods’ commitment to sustainability and the circular economy,” he notes.
“Investments in the supply chain and materials handling technology have reduced food waste by 70%. The recent roll out of dynamic logistics has resulted in a 50% saving on fuel costs. The implementation of world class logistics, physical distribution infrastructure and operations are major contributors to bringing costs down, enabling Twiga Foods to grow at an amazing rate, service and capture an ever-growing portion of the market,” Benatar says.
“When we look at the Twiga volumes and projections, these outstrip the scale and extent of work we have done for some major retailers in South Africa and around the world,” he reveals. “For example, we had to look at developing banana ripening facilities that can produce up to 300 tonnes of ripened bananas per day (roughly 500 pallets per day). Assuming a five-day ripening period, this required a 3 000-pallet capacity in the banana rooms. To maximise efficiency and minimise the costs, significant value engineering was undertaken. The facilities developed for Twiga Foods are a world first.
“The banana rooms designed have up to 80 2.4m high pallets, stacked four pallets high in two rows at 10 pallets deep. They required the largest airtight doors ever produced. The combination of a new Inventory Management System, RFID enabled assets, radio shuttle technology and state-of-the-art banana ripening software reduces the overall handling cost per pallet.”
“By helping to reduce what consumers are spending on food as a percentage of their disposable income, companies like Twiga can help to boost the growth of other sectors and contribute to the acceleration of economic growth that will help lift millions out of poverty,” Njonjo concludes.
Twiga Foods was recently selected from among hundreds of candidates as one of the World Economic Forum’s “Technology Pioneers”, in recognition of the company’s success in leveraging new technologies and innovations to make a significant impact on business and society.
The Twiga story is also on the line-up for the annual SAPICS Conference that takes place in Cape Town from 22 to 25 November 2020.