Posted on October, 16, 2024 at 09:59 am
Few startups have cracked the code for how to build a sustainable business securing and growing the livelihoods of 500 million smallholder farmers and their families. For Yi Li, founder of Nairobi-based Farmworks, the answer is a relentless focus on operational costs.
“We are really good with cost control,” which includes scrutinizing the number of kilometers each of its trucks travel per liter of fuel, Li told ImpactAlpha. “That’s how you build a profitable business in this market.”
Farmworks supports more than 4,000 Kenyan farmers to improve growing practices and increase sales of harvested goods. The company sells about 1,100 tons of onions, tomatoes and other local staples monthly in Kenya, and exports high-value crops like French beans and snow peas.
It raised an undisclosed amount of equity financing from Truvalu Group, a Netherlands-based impact investor for small agribusinesses and farmers in emerging markets. Truvalu’s Peter Owaga said Farmworks is “building the next generation of regenerative, climate-smart farmers.”
Farmers bring their harvested produce to Farmworks’ drop-off centers, from which the goods are trucked to local sellers. Farmers that own trucks can earn extra as pick-up and delivery drivers.
For export products, Farmworks contracts with buyers and manages growing processes, like crop spraying, to ensure the products meet international standards.
“It’s a much higher-touch model, but we have high enough margins to maintain a bigger workforce on the contract farming side,” explained Li.
High-touch agribusinesses, even tech-enabled models, are costly and resource-intensive because of the remote communities they serve, the perishable nature of the goods, natural growing seasons, lack of reliable infrastructure and, increasingly, climate change. The market is littered with startups that have pivoted, such as Nigeria’s Hello Tractor and Kenya’s Twiga Foods, or shut down, like London-based WeFarm, Kenya’s iProcure,India’s Doodhwala, and Peru’s Favo.
Farmworks itself began as a farm in 2020, growing local staples and export crops. It soon moved to support, rather than compete, with local farmers.
“If I compare our partner farmers’ costs and yields with our farm’s from that time, theirs are better, because they’ve been doing this for much longer,” said Li.
The company is digitizing its field operations as it scales.
“I don’t believe you can easily digitize farmers,” Li said. “But I can digitize my own employees so we get accurate and timely information from the field.
Source: Impact Alpha