Entrepreneurship Zone: 26 March 2024 :: Building a food distribution business in Rwanda and beyond

Tue Mar 26 11:19:57 CAT 2024

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Entrepreneurship Zone: 26 March  2024 ::  Building a food distribution business in Rwanda and beyond

 <mailto:coordinator2 at zitf.co.zw> 

GET IT has been operating in Rwanda since 2014; first as a fruits, vegetables and dry goods distributor and later adding primary agriculture and processing. In 2019, just before the pandemic hit, founder Lauren Russell Nkuranga moved into the position of chairman and Mark Sproston was appointed CEO. Jeanette Clark spoke to him about adding revenue from home deliveries to get through the Covid-19 slump, logistics challenges and growth opportunities in the region.

GET IT was founded in 2014 by American entrepreneur Lauren Russell Nkuranga, after moving to the country two years prior to work for the Nike Foundation. She has since built the company into a sizeable distributor of fruits and vegetables in Rwanda.

In early 2018, GET IT invited Mark Sproston – a South African businessman who had over 25 years’ experience in the food distribution industry – to do an analysis of the business and make recommendations on what it could do to become more efficient and identify opportunities for growth.

“The original request was for a detailed assessment of the business, which I did. They then asked that I assist in implementing some of these changes. I also stepped in as interim CEO when Lauren was on maternity leave.” A year later, he was asked to join the team permanently as CEO.

Up to this point, GET IT had shown healthy growth within the borders of Rwanda. The board appointed Sproston with the purpose of growing operational capacity and sales while Russell Nkuranga would focus on fundraising, governance and building the road map for expansion.

Things were going well – the company was actively looking for funding to grow its operations and take the leap into regional business – when Covid-19 hit.

The company cultivates its own chillies in Rwanda.

“It was horrendous,” he says. “April generally shows poor revenue because it is genocide memorial month. However, we lost close to 90% of our turnover in April 2020 when Rwanda went into lockdown. Borders were closed; every single establishment was shut. We needed to diversify, and quickly.”

That was when the company, which primarily did food procurement and distribution for hotel and hospitality clients at the time, went into home deliveries.

An additional revenue stream

Home deliveries was originally one of the founder’s goals; customers would place orders via SMS and receive the products the next day. However, large restaurants began to use the service and GET IT adjusted its business model to fill the clear gap for a commercial food distributor.

During the lockdown in 2020 home deliveries boomed. GET IT received a permit from the government as an essential service provider under Covid-19 restrictions. “Within a period of about three months, we picked up 500 home delivery clients,” says Sproston. “In the following three months, we managed to recover around 70% of our revenue.”

As economic activity gradually recommenced during 2020, the company still serviced home deliveries and it makes up about 20% of its domestic revenue today.

Sproston admits home deliveries on its own would never make the company viable; only when it’s combined with bulk deliveries to hotels and restaurants.

Produce in cold storage.

Growth in uncertain times

According to Sproston, the company adapted well to the changed business environment. They learnt to operate in difficult conditions and it achieved its highest monthly turnover for five months in a row during partial lockdown. “We have continued on this upward trend.”

Originally, the company procured only from smallholder farmers, but later started its own managed farms to ensure security of supply. They kicked off with ginger and now also cultivate chillies, turmeric, garlic and French beans. Exports of the produce from these farms – to markets like South Africa, the US and India – have grown significantly.

“Bearing in mind I didn’t come from an agricultural background, I had to learn about farming quickly,” Sproston remembers about the time when he joined. It’s been a steep learning curve, considering the pandemic’s impact. In fact, GET IT could not complete its first export consignment of ginger because of pandemic restrictions. “The borders closed on the day we delivered the product for export.”

Yet, GET IT still managed to export eight tonnes of produce in the first year. In 2022, it has already sent 50 tonnes abroad and is aiming for another 60 tonnes before the end of the year. Our target is 300 tonnes in 2023,” he says.

Cold chain and its challenges

The goal is for GET IT to become a food distribution service, which caters for all products, no matter the temperature required when transporting the goods.

“Currently, if you look at the region, there is nobody of substantial size providing distribution services for fresh, refrigerated produce, frozen products and goods that must be kept at room temperature. We want to be that player.”

GET IT manages its own farms and also buys from smallholders.

He believes their biggest challenge is managing the products’ cold chain effectively and extending the shelf-life. The company uses a combination of third-party providers, as well as its own cold storage and refrigerated vehicles for distribution.

Getting the produce from the farms (its own or the smallholder farmers’) remains challenging, particularly for fragile fruits and vegetables, like lettuce and cherry tomatoes. “For these products, we send a refrigerated truck, which brings them to our processing facility in Kigali to be washed, sorted, cut and trimmed. We are also investigating various shelf-life extension options such as gas flushing or better packaging,” says Sproston.

The country has a severe shortage of commercial refrigerated vehicles and this presents a business opportunity. “At one point there were only six refrigerated trucks available for commercial rental in Kigali. While there are more now, it is still not enough, and we often have to rent directly from private operators. I have been approached by various players in the region who are considering a business to address this shortage. I expect a large player on the ground very shortly,” adds Sproston.

Growth opportunities through processing and new markets

For the future, GET IT has its sights set on Kenya and on new opportunities in even more value-added processing, such as solar drying. “If you are drying or producing concentrated extracts from ginger and chillies, your margins are a lot better than if you export the fresh product,” he explains. “If you can export at high value and lower weight, it’s more profitable to export from a landlocked country.”

The company benefits from the work done by the National Agricultural Export Development Board, a government agency that assists in facilitating export linkages between domestic companies and importers abroad.

“We work with government and also actively search for opportunities and new markets ourselves. For example, export into Kenya is a direct result of our initial imports from there. It was inefficient to send empty trucks to collect the imported products and we searched for a client on that side of the border to whom we could supply goods.”

GET IT produce being loaded onto a delivery vehicle.

-HowwemadeitinAfrica

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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