SunCulture Annual Letter 2014
(Published on April 30, 2014. Added to Medium in 2017.)
To Family, Friends, Advisors, Mentors of SunCulture Kenya Limited:
This is the first of many annual letters that I hope to write. However, this letter is of particular importance as today we mark SunCulture’s official one-year anniversary. Good ideas evolve in stages, and although it has been more than a year since Charlie and I relocated to Nairobi from New York, today marks one year since we sold the first AgroSolar Irrigation Kit.
The year at SunCulture
Charlie and I feel confident about the company’s progress during the last twelve months. Farmers currently using the AgroSolar Irrigation Kit are (annually):
- Saving 350,838,000 liters of water
- Generating 36,135 kilowatt-hours of renewable energy
- Reducing 96,543 kilograms of carbon dioxide emissions
- Growing 2,162,700 kilograms of fresh fruits and vegetables
- Realizing $671,590 in savings and increased yields
What Charlie and I find even more impressive is that SunCulture farmers are producing enough food to meet the FAO’s minimum required fresh fruits and vegetables consumption for 14,813 people. These numbers are increasing quickly – our first 10 sales occurred in 131 days, and our last 10 sales occurred in 35 days.
As a young, agile, and innovative company, we believe in constant growth, whether it is the form of professional development, sales targets, physical locations, or product development. One year ago, SunCulture only offered one pump (SP-300) and drip irrigation systems only above 1 acre. Now, we offer five pumps — SP-100, SP-300, SP-700, SP-1400A, SP-1400B — and offer drip irrigation systems as small as 1/16th of an acre. We believe that constant innovation will fuel exponential growth, and we have the track record to prove it.
Not only have we continued to develop our product line, we have also reduced costs, making our systems more affordable. We have released a Starter Drip Kit for only $115 which will enable farmers to grow around $500 worth of vegetables per growing season, and our SP-100 Solar Pumping System is ½ the cost of our SP-300 Solar Pumping System.
However, to become a regional powerhouse, we must still overcome some challenges. One challenge we faced in the past year was the inability for the majority farmers to afford the AgroSolar Irrigation Kit, despite our SP Solar Pumping Systems and our Drip Irrigation Systems being the most affordable in Kenya. We focused our efforts on targeting “telephone farmers”, farmers who use a farm manager to operate their farm while they continue working middle-class jobs in the city, rather than managing the farm themselves; but the AgroSolar Irrigation Kit is a solution for all farmers, and in Kenya, many of these farmers require financing. Often, smallholders receive financing through export value chains, usually in the form of aggregation. This means farmers receive financing through producer organizations, which makes sense because value producer organizations are organized, well managed, and reliable. However, this is problematic because less than 10% of the world’s smallholder farmers actually participate in aggregated collectives. And when farmers get financing, 90% of the financing is on a short-term basis — less than one year. This means that a farmer does not have the capability to invest in any products that will help generate income, such as a tractor, more cows, or an irrigation system.
What does this mean for SunCulture? We have given the matter of smallholder financing much thought and are taking steps to bring our technology to them, as they stand the most to gain. As such, we are very excited to announce our partnership with Equity Bank Limited to combat the lack of capital smallholder farmers face. Through this partnership, Equity Bank Limited provides loans to farmers to purchase the AgroSolar Irrigation Kit. This will help us reach many more farmers in many more areas.
The state of the world
There is a global water crisis caused largely by irrigation, as irrigation claims about 70% of the freshwater withdrawals worldwide. Though irrigation multiplies yields of most crops by 2–5x, and irrigated land currently provides 40% of the world’s food from only 20% of all agricultural land, 60% of water diverted or pumped for irrigation is wasted due to inefficient irrigation methods. Further, potentially increasing the crisis, the worlds water will have to support the agricultural systems that will feed and create livelihoods for the estimated 9 billion people in 2050, all while competing for water usage with urbanization, industrialization, and climate change. The solution is increasing efficiency in irrigation. Doing so will increase global water availability, reduce soil erosion, and lead to increased agricultural yields. All of this will augment our ability to feed a population projected to reach 9 billion by 2050.
Now what? Where do we put these efficient irrigation systems? Sub-Saharan Africa has 25% of the world’s arable land, yet it only generates 10% of global agricultural output. It has 60% of the world’s uncultivated land, yet it has the lowest yield of any global region. This is because less than 4% of farmland in Africa is irrigated, compared to 33% in Asia and 20% in the rest of the world, and when land is irrigated, current irrigation systems are cost-ineffective and labor intensive. With high petrol prices and the average price of electricity being 3x what it is in South Asia and 2x what it is in the United States, there needs to be a more cost-effective and efficient way to irrigate.
SunCulture is in an interesting place because the company is at the stress nexus of food, water, and energy. We are in a position to increase global food production while reducing the use of fossil fuels, labor, and chemicals. We are at the forefront of agricultural transformation, and the AgroSolar Irrigation Kit will lead that transformation.
Thoughts on our business model
Our business model is designed in a way that enables us to improve lives by focusing on sales — this is the way we like to approach social and economic impact. Each system we sell increases farmer income, saves water, generates renewable energy, and produces highly-nutritious fresh fruits and vegetables. This enables us to operate with purely commercial intentions, while embodying the principles of improving the livelihoods of farmers by revolutionizing the way smallholder famers grow crops, promoting a transition from subsistence farming to commercial farming.
However, being a for-profit, socially aware company in Kenya brings its frustrations. We are in a region where numerous products are being designed and given away for free to people who don’t want them. We run the risk of being priced out of the market by donated low-quality copycats. I think Ehsan Noursalehi says it best: “It is time to put an end to useless products designed for people in crummy situations.” The reason we have been able to see early successes is because we focus on providing functional products and services that our customers want. This has been our philosophy throughout our journey, and it is the principle on which SunCulture’s mission was founded. Charlie and I are confident that keeping true to our values will ensure SunCulture’s future success.
Where the company is going
Since May 2013, SunCulture has grown from a “figure it out” phase to a “processes in place” phase. Having processes and systems in place will help us scale across Kenya, East Africa, and the entire continent. Charlie and I think about scale as a problem of access to three things: information, product, and finance. In order to enter a phase of rapid growth, we need to make sure that the right people know about us (marketing), we provide the highest quality products (AgroSolar Irrigation Kit), and we have the right financing partner (Equity Bank Limited) and hit the right price point (most affordable in Kenya). We have established the framework to ensure that we can manage growth while offering the best irrigation product at the best price in the market. This framework consists of proven operational, technical, and sales procedures that will help us replicate successful models in other cities and countries.
Our physical location growth plans are as follows: we plan to grow into two new offices in Kenya, one in the Western province and one in the Coast province, in the next ten months. We have demand in both regions, and are looking forward to being able to provide more farmers with high-quality products and services. We have found that most of our sales have come from within a 120km radius from our Nairobi office, and operating from these two aforementioned locations will give us stronger countrywide footprint. We are exploring international expansion into East Africa, and we expect to enter our second country in the next 14 months. We are already building relationships with partners on the ground and are excited to share more about our expansion as we grow.
One thing that Charlie and I are extremely grateful for are the people that we work with. We work with intelligent, talented, and driven individuals that make our lives easier. Without them, SunCulture would not be where it is today, and we are very excited to grow the company with them.
To our family, friends, mentors, and advisors, whether Charlie and I met you yesterday or we have known you for our entire lives, words cannot describe how grateful we are that you have supported us in our mission to feed the world. Thank you.
If you’d like more information on what we’ve done, be sure to check out our media page linked below.
Charlie and I are looking forward to an even better second year.
Samir Ibrahim, CEO