Making B2B e-commerce work in Africa: Twiga, a new distribution model
Twiga is a tech-enabled food distribution company based in Nairobi that connects smallholder farmers to SME retailers in Kenya’s urban centres. Founded in November 2014 by Peter Njonjo and Grant Brooke, the company is on a mission to consolidate the highly informal and fragmented retail food distribution sector in Africa. Twiga’s distribution system aims to earn farmers higher returns for their produce while offering consumers higher quality produce at a more affordable price.
In just five years, Twiga has built a solid distribution network comprising of 13 collection centres, a distribution centre with cold storage facilities, 12 depots, trucks and vans for collecting and distributing food, over 400 permanent staff and a similar number of casual staff, an represents more than 17,000 farmers across 20 counties in Kenya, supplying over 8000 vendors in Nairobi and its environs with 200 tonnes of produce daily.
How Twiga works
Twiga’s system uses mobile technology to aggregate demand from SME retailers, and then using a low-cost supply chain to transport food items from contracted farms to the doorsteps of the retailers. The product range includes fast moving fruits and vegetables such as avocados, oranges, mangos, passion fruits, pineapples, watermelons, pawpaws, cabbages, potatoes, onions, tomatoes, carrots and capsicum.
Produce from farmers is aggregated at collection centres located in different parts of Kenya and then transported to Twiga’s packhouse for processing, grading and dispatch to over 60 sales routes for delivery to retailers in Nairobi and its environs. Twiga has invested in material handling technology that reduces post-harvest losses by close to 70%.
- Twiga representatives visit identified regions in Kenya to scout for farmers;
- When they find a farmer who meets Twiga’s requirements, a Twiga representative registers the farmer via Twiga’s mobile app - their name, telephone number, location, land size and the products they can supply;
- Twiga issues a purchase order to book the produce and the expected date of harvest is noted;
- Twiga maintains the GPS coordinates and maps of each farm’s location;
- When the produce is ready, Twiga weighs and records the produce;
- Twiga sends farmers an SMS receipt - farmers only need a feature phone to receive harvest receipts;
- The farmer receives payment within 48 hours via mobile money.
- Twiga sales representatives identify and register retailers onto Twiga’s database via a mobile app;
- Retailers place their orders on Twiga’s USSD platform;
- Twiga delivers the products directly to a retailer’s shop within 18 hours of the order and records the delivery details on the mobile app;
- Retailers pay for products using mobile money and Twiga sends them a receipt by SMS.
Benefits for Farmers
With majority of farmers located in remote villages, they have traditionally been unable to sell their produce beyond their immediate market centres. As a result a lot of produce either went to waste or was bought by brokers at low prices. Twiga has provided farmers a guaranteed market for their produce.
By linking farmers with retailers, Twiga has eliminated several layers of brokers who contributed to reduced revenue for farmers. This has resulted in as much as 40% higher prices for farmers’ produce compared to what was previously paid by brokers.
Quick and convenient payments – Twiga pays farmers via mobile money within 48 hours of collection of produce. Reliable payments help farmers to plan their finances. Their mobile wallet transaction history also enables them to access credit from digital lenders.
Twiga’s agronomists leveraging big data/internet of things solutions to provide technical advice to farmers which leads to improved productivity. Through Twiga’s partners, farmers now have access to credit to support expansion of their production capacity.
Benefits for Retailers
Retailers enjoy fast, and reliable supply of farm produce delivered at their shops. This saves time and money previously spent going to open marketplaces. Retailers can also use Twiga’s digital system which has helped introduce digital technology to the retail sector. Quality and safe produce is guaranteed since Twiga does the harvesting and grading to ensure that safety standards are observed.
Retailers can also access soft loans from Twiga repayable within a day to purchase produce and repay in the evening after making sales. Using the data that it collects, Twiga is evaluating partnerships that can provide other value-added services to retailers, such as financial institutions to offer more credit to support expansion of their businesses as well as micro insurance.
Future growth potential
One of the challenges faced by Twiga is seasonality of supply. The majority of Twiga’s suppliers are small holder farmers who rely on rain-fed agriculture thus supply changes with seasons. Most farmers are in rural areas with poor transport infrastructure. Some areas become inaccessible during rain seasons. As at July 2019, Twiga Foods had an oversubscription of orders from retailers, and only met two thirds of demand. To supplement existing supply from small holder farmers and address the challenge of seasonal supply, Twiga has set out to contract larger, well capitalized, irrigated and efficient farmers with minimum land size of 50 acres.
Internet reach in rural areas has reduced the possibility to use more sophisticated mobile internet solutions to link farmers to Twiga, however as connectivity is extended this will provide the company with the ability to communicate better with its farmer clients.
The company has also set sights on other cities in Kenya including Mombasa and Nakuru, as well as other major cities in East and Western Africa.
In the early stages of its business, the main challenge for Twiga was access to credit, but as the company became more established, it attracted funding from lenders such as IFC and GAFSP. In 2019, Twiga raised about US$30 million in a series B round from lenders and investors led by Goldman Sachs, having previously raised close to $10 million in a series A round. This latest funding will support Twiga’s growth ambitions across Africa including the establishment of a new distribution centre and development of its revolutionary digital platform.
Stay tuned! There are more case studies coming about B2B e-commerce businesses in Africa coming on ecomConnect in the coming weeks!