How Agriko attracted $250,000 three months after starting
Many Nigerian start-ups are not privileged to attract investment funds few months after operations.
However, Agriko has broken this jinx by attracting $250, 000 from investors three months after starting. Agriko started in July this year and got this fund in October.
The fund will enable the agro-based distribution company to increase the number of vendors it serves, diversify its product portfolio, grow its direct sales force and enhance its product delivery capabilities.
The start-up fund was provided by private local investor groups as a hybrid debt-equity with guaranteed fixed returns from the first year. This is similar to the features of a redeemable and cumulative preference share capital.
Of course such funds can only be attracted at an early stage of business if there is a clear-cut business plan, knowledge of the market, good record-keeping and accounting process as well as an organised management.
Agriko plans to formally raise additional funds in 2018 to support the development of its energy-efficient storage facilities that will be powered with off-grid solutions, and to fund the development of its market aggregation tool, while also pursuing grant funding opportunities to support financial inclusion and domestic food safety initiatives.
The agro-based firm promotes healthy living, sustainable agricultural practices and a 100 percent ‘natural’ culture through sourcing, packaging, processing, warehousing and distribution of fresh farm produce and healthy natural fruit drinks that are made directly from natural raw fruits, says the firm.
The company supports leading brands for healthy and nutritious fruit drinks such as Wilson’s Lemonades, FarmPride juices and FarmFresh Yoghurts as a leading distribution partner. The firm says it is desirous of helping smallholder farmers and local food processors who are the backbone of the Nigerian economy.
The leadership at Agriko appears well positioned to achieve this goal as it has over 100 collective years of agriculture, supply chain and finance experience.
Wole Oluyemi, founding director, is a chartered accountant and a doctoral researcher in Corporate Political Strategy at Cranfield University in the UK. Oluyemi has garnered diversified experiences from several projects across Nigeria, Ghana, Cote D’Ivoire, Congo, Angola and the USA and has held several roles at Arthur Andersen, KPMG and Chevron. He is a Fellow of both the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN). He is also a director at Roedl & Partner (Nigeria) and CorpERM Inc. He is an alumnus of both the Obafemi Awolowo University and the Lagos Business School. As a farmer’s son, Oluyemi grew up learning the ropes of farming from his father at the family’s poultry farm in Ijebu Igbo, a town seen as having the largest landmass in Ogun State.
Oluyemi is the board chairman at Agriko and heads the board committee on strategy development and investor relations.
Agriko currently supplies about 33,000 litres of natural fruit drinks every month in the Lekki area of Lagos. Over the coming months, it aims to increase its distribution capacity to about 250,000 liters of natural fruit drinks across Lagos and expand its product line to include agricultural produce such as banana, potatoes, plantain, pineapples, mangoes, tomatoes and onions.
The ultimate goal of Agriko is to control the distribution chains for food and healthy fruit drinks in the Sub-Saharan Africa, starting from Nigeria with a population of over 180 million people.
Agriko understands that the Nigerian low- and middle-income classes spend 40 to 80 percent of their monthly income on food and drinks. Unlike in the Western world where grocery shopping can quickly be done at nearby large convenience stores, the agricultural value chain in Nigeria is highly disorganised. Hence, about 80 percent of food and drinks transactions occur at one of the city’s local markets or neighbourhood marts or kiosks, rather than at the big structured modern retailers.
“Every retailer is worth about N15,000 ($50) every day—and it is estimated that there are over 25,000 in Lagos alone. From platform perspectives, the metrics are off the charts regarding the potential revenue per customer,” Oluyemi states.
The other major challenge is the absence of a proper market infrastructure to support a population of about 25 million people in a city like Lagos. As a result, about 40 percent of produce gets spoilt before reaching the final consumers due to poor transportation network and inadequate storage facilities.
“This means that the cost of these losses gets passed to the customer,” Oluyemi says. “The price of potatoes produced in Jos and sold in some Lagos stores is usually higher than the price of potatoes in London, which has come from South America,” he says. This is a market inefficiency that can only be solved through innovation in storage and distribution.
Agriko has a vision for a reliable food and drinks distribution network throughout Sub-Saharan Africa. The company aims to be a leading supplier of food and drinks in the region by deploying a set of unique solutions to address the inherent inefficiencies in the delivery of food and beverages in Nigeria with significant positive impact for both producers and consumers.
The food distribution firm aims to use technology to capture the supply patterns of urban retailers (whom the company founder usually refers to as the ‘Abokis’, ‘Mama Nkechis’ and ‘Baba Mile 12’ neighbourhood mart) and their stock movement patterns, saving them a trip to the market by delivering better quality and better-priced stock to their doorsteps.
The platform can then allow them to access stable markets at better prices while minimising post-harvest losses through efficient logistics.
The firm seeks to manage the distribution chain all the way from the farm to the shelves, and ultimately to the food plates, cutting out costly intermediaries and formalising what has been, until now, a very informal market. For agricultural produce, Agriko buys directly from the farmers and ensures they receive the technical support to increase production levels, meet global quality standards and seek credit to expand their operations.
From the commencement of their operations in the Lekki area of Lagos, Agriko has been offering lower product prices and uses the famous ‘Keke Marwa’ (tricycles), trolleys and mini-buses (small ‘danfos’) to reach the small neighborhood shops.
Jumoke Adeleye is the company’s head of central business services with responsibilities spanning administration, HR, external affairs, regulatory compliance, sourcing, warehousing and distribution, including trade support for the company’s distribution channels.
“Our average customer orders their goods twice a week. So we give most of them a 3-day line of credit until the next delivery. This not only allows them to sell more but helps them deal with liquidity issues,” says Adeleye.
Agriko uses technology to track and evaluate the vendors’ performance and history before deciding how much credit to give the vendor.
“We promote healthy eating as natural fruit drinks, fresh fruits and vegetables are known to have high nutritional value,” she states.
This is Agriko’s conscious strategy to attract the attention of the health-conscious consumers into trying out its products.
Jumoke says that about 80 percent of the employees are either women or U-30 employees, something that excites the company.
“If you empower women and the youth in Africa, you are making a great contribution towards growing the African economy. Apart from employing women, most of our already contracted farmers are also women,” she adds.
Agriko helps contracted farmers to improve farm yields through regular trainings, provision of high-yield inputs and other support services, including assistance towards accessing financing support.
This vision of Agriko—to disrupt the distribution chain for the entire Sub-Saharan Africa region, changing the way that agricultural produce reaches customers—starts with natural fruit drinks. That’s the story Oluyemi told the various investor groups, and that’s what the funding partners saw to conclude that this is a company that could drive the future of food and drinks distribution in Africa.
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