Entrepreneurship Zone: 23 March 2023 :: Entrepreneurs seize opportunity in Egypt’s fruit and veg market

Thu Mar 23 03:39:38 CAT 2023

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Entrepreneurship Zone: 23 March 2023 ::   Entrepreneurs seize opportunity
in Egypt’s fruit and veg market

*          

FreshSource acquires crops directly from farmers, then transports them to a
warehouse using refrigerated trucks, before distributing them to end
clients.

FreshSource Global, founded in 2018, is an Egyptian B2B agricultural supply
chain platform that buys fresh produce directly from farmers and delivers it
to businesses such as restaurants, retailers, hotels and food manufacturers.
Clients place orders through an online platform. By controlling the entire
supply chain, FreshSource can offer its clients better prices as well as
ensure reliable supply.

The company provides a variety of perishable crops, with the top ones being
citrus, followed by bananas, potatoes, onions and tomatoes. Crops are
graded, with their destination determined by quality; the lowest grade goes
to jam and juice manufacturers, while the highest grade is supplied to
luxury hotel groups, for instance.

Last year, FreshSource raised an undisclosed seven-figure amount in its
seed funding round, backed by 4DX Ventures and Wamda.

Origins of FreshSource

FreshSource was founded by siblings Farah and Omar Emara. Farah, CEO of the
business, began her career at Endeavor, a non-profit supporting
entrepreneurs, before working at Procter & Gamble in Egypt while pursuing a
master’s degree at the London School of Economics. Her brother Omar, the
company’s COO, worked at Goldman Sachs in London after completing his
bachelors in computer science and business from the University of Bath.

In 2018, the pair came across a UN Food and Agriculture Organisation (FAO)
study revealing that nearly 45% of Egypt’s food production was lost due to
supply chain inefficiencies. With some knowledge of the industry from their
family’s large agricultural cold chain logistics business, and their
combined education and experience, they decided to establish a company to
streamline the agricultural supply chain.

First steps

The co-founders began by researching and analysing similar business models
and companies tackling the same problem in the Middle East, Africa and
globally. They then reached out to the entrepreneurs behind these companies
to learn more about their experiences. To comprehend their potential
customers’ needs, the founders engaged with restaurants, hotels, and other
stakeholders, working their way back through the supply chain to the farm
level.

With a suitable initial business model for the Egyptian market in mind,
Farah contacted an investor she had met during her time at Endeavor. “He
gave us our first cheque,” she recalls, adding, “It was actually his first
cheque ever given to a company that was pre-revenue, pre-name, pre-logo,
pre-everything.”

Cutting out the middlemen

FreshSource purchases crops directly from farmers and transports them using
refrigerated trucks to a warehouse for distribution to end clients.
Initially, Farah says their pitch to farmers was that FreshSource would
offer better prices for their produce, in contrast to the traditional model
involving numerous middlemen between the farmer and the end consumer. Each
player in this model adds their own margin, and each step of the supply
chain involves food losses, resulting in a significant overall reduction in
product. Traditionally, many of the crops were transported in unrefrigerated
trucks and with poor packaging, further increasing waste. “This long and
inefficient supply chain is what causes the high prices and high food
losses,” Farah explains.

Farah Emara, CEO of FreshSource

Apart from the fairer prices FreshSource offers to farmers, the company
also provides them with support services through its network of agricultural
experts. In addition, FreshSource has partnered with the Central Bank of
Egypt to offer financing to farmers at low interest rates, as part of a
government-led initiative.

Farah explains the company initially bought from small-scale farmers, but
now focuses on medium-sized producers who cultivate approximately eight to
20 hectares. She notes that, due to logistics costs, the unit economics
simply did not make sense when working with smaller farmers.

Challenging the status quo

Agriculture is a major industry in Egypt, contributing more than 15% to
GDP. Historically, Egypt was known for its agricultural innovations. Its
farming practices had a significant influence on other ancient
civilisations. However, Farah says there has been little innovation in the
farming sector in recent years. When she began their research in 2018, she
was surprised to find that no company in Egypt was focused on streamlining
the value chain. In contrast, smaller countries like Kenya and Uganda had
several such solutions in place.

As a result, one of the main challenges FreshSource faced was convincing
stakeholders, such as farmers and customers, to buy into their model and
mission. Initially, Farah and her co-founder were often dismissed during
meetings as “kids” who didn’t understand what they were doing.

A woman in a man’s industry

Farah personally also faced many hurdles as a female entrepreneur in a
male-dominated industry. “I remember one guy told me, ‘Why are you wasting
your time doing this? Why don’t you go do make-up or dresses?” Literally,
word for word, that is what he told me.”

As CEO, Farah faced challenges from her own employees. She recalls an
instance when she requested documents from a male employee. When the time
came to hand over the documents, the individual blatantly ignored her and
gave them directly to a male colleague, even though Farah was also present
in the shared office. “He literally pretended that I wasn’t there and that I
wasn’t the one who asked for the documents. I asked him, ‘Are these the
papers I requested?’ But he didn’t even look me in the eye. Culturally, when
a man and a woman are in the room, respect is given to the man and he is
addressed, while the woman is often disregarded.”

Operating in a tough economy

Over the past year, Egypt’s economy has faced significant pressure,
characterised by a plummeting Egyptian pound, shrinking foreign currency
reserves, and surging inflation. One key factor in Egypt’s struggles is its
heavy reliance on imported food instead of domestic agriculture to support
its roughly 105 million people. The falling currency has led to a spike in
import costs.

The Russian invasion of Ukraine last year further affected Egypt’s economy.
As the world’s largest wheat importer, Egypt depended on both countries for
supplies, and the conflict disrupted imports, resulting in soaring wheat and
bread prices. Moreover, a decline in Russian and Ukrainian tourists, who
were once a mainstay, negatively impacted Egypt’s tourism sector.

Although Farah acknowledges the tough economic situation, FreshSource
hasn’t experienced a decline in demand. “People will continue to buy fruits
and vegetables. As long as we remain competitive with our pricing, we will
be good,” she says.

Growth opportunities

Farah notes that the business currently processes approximately 400 tonnes
of produce monthly. With plans to expand from its single warehouse to an
additional three locations across the country, the company aims to further
penetrate the Egyptian market. As part of its growth strategy, FreshSource
intends to acquire more customers, diversify its product offerings, and
eventually expand into the broader Middle East and North Africa region.

- Howwemadeitinafrica

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