30 days in

2 things change the life of man, the books he reads and the people he meets. In the last 30 days, Farmula has been no different. Even though “Farmula” can't read, we have learned a lot from our customers and it’s the only reason we’ll continue to do what we do.

Farmula is built on one solid foundation; pricing. But why?

The 3 pillars which rely on this foundation are :

• Ability for farmers to price their harvests
• Ability for businesses to source produce at affordable prices
• Investment into futures of agro produce via our price predictor

Introduction from the source

The African agricultural tech industry according to a report by CTA has a value of over $5 billion and a more interesting annual growth rate of 44%. Most of the solutions in this space are making investments in farming easy, digitizing the supply chain, providing market access, digitizing the use of farm machinery or in the words of the NYTimes article making agriculture sexy.

However, the core is still flawed; sourcing of produce.

1/3rd of all food produced globally is lost. This we understand is largely due to post-harvest loss such as damage by pests, bad harvesting techniques, lack of storage and cooling facilities, improper handling during packing and transportation. But deeper than that, farmers lack finances, infrastructure and market visibility required to move their harvests to where it is needed. We are conversant with the saying

“If Muhammed doesn’t go to the mountain, the mountain would go to Muhammed”

but in this story, farmers cant move the produce and neither can we move to get the produce we need from them, the solution was brokers.

Brokers were introduced into the system to solve the problem. They go to farms in the most remote areas, assess produce quality and quote prices. As much as they solve the farmers problems, they come with downsides. They place excess premiums on produce, their quotes are majorly unreasonable and they do not factor in the cost of production farmers incur.

Julius on his farm (courtesy: Farmula)

Farmers we have spoken to like Julius tell us they have no choice but to settle for brokers quotes. Others like Kip have tried to sell at urban markets by self transporting their produce but still face restrictions from brokers at the market.

In the end, brokers are the pipeline through which we are able to access produce and hence they maintain a very strategic position. But still, they themselves are no magicians and can only be in so many places at once thus the solution resides in the source, and not the pipeline.

So how do we change the narrative on sourcing of food?

By empowering farmers with the right tools.

Some illegitimate actions along the chain just reveal the inefficiencies we encounter (courtesy: Farmula)

The real custodian of the food we consume is the farmer. Food leaves the farmer and moves from actor to actor, sometimes even interacting with up to 8 actors along the chain, revealing the highly fragmented nature in which our chains currently operate. For every step the food takes, the farmer becomes more absorbed. With each new actor, a markup is placed on the produce and buyers pay more up to 50% more as a result of the markups placed. Statistics show that for every sack of food sold, farmers earn the least; anywhere between 18 to 30% of the produce selling price.

To change this narrative, farmers need to be given the right tools to enable them change the way we can source food from them.

Assumptions

To build a solution that touches the pain points of our customers, we had to verify some key assumptions which were

• “The market is ready”. We simply threw our solution into the market and watched potential customers interact with it and the results were impressive. Over the first 30 days, we were able to help a farmer sell at 43% more while the buyer spent 20% less than she normally would. We selected Kenya as a primary market because they have a higher adoption rate of tech solutions when compared to other African nations.
• “No matter how complex our solution needs to be, it has to live on USSD”. This was true, statistic showed that 9 in 10 Kenyans had mobile phones. Most farmers use what are known as mulika mwizi which cant access the internet but are solid for USSD services.

Abdul’s lettuce farm (courtesy : Farmula)

Another was that “farmers produce food of low quality”. This is not true. At Korle-Bu community in Ghana, during our first product iteration, we met lettuce farmers like Abdul who were producing great quality lettuce. Abdul was of the opinion that he wanted to always ensure his produce had terrific quality. Further research in Kenya with more farmers revealed that farmers produce quality food because they knew their margins would be significantly better.

We built a USSD service *483*016# which enables farmers to

1. Calculate production costs per hectare
2. Price produce per sack (size of sack varies between 50Kg to 120Kg)
3. Notify us of the availability of produce each time we send them a prompt

With the information we get, Farmula can achieve its goal of empowering farmers to meet demand allowing them focus on readily delivering quality supply.

On the other end of the chain is where we lie, where consumption is 10 times faster than production per capita.

If you look critically, there are 2 main purchasers of farm produce; businesses and households. The major difference, however, is the penchant for quality which is relative. A 5-star hotel wants top-notch quality and if possible, traceability. This is not necessarily the case for a low income earning household. However, one factor is constant for both personas; both want bang for buck. The common question they ask themselves is “Am I getting the value I need?”

Customers easily perceive more value as more cost but foremost, convenience. Is this service affordable, is this service worth my money and, is paying for this service convenient for me?

To deliver value, our discussions with customers are centered on the best value that can be provided for our customers at an affordable rate?

We also had assumptions here

• “Buyers have reliable sources of produce”. False. Buyers are always looking for more suitable alternatives. Most businesses like Carol who runs a Kibanda in the central business district complains that her suppliers fail her from time to time so, she has to maintain multiple relationships to ensure her Kibanda always has chips to serve her customers. Even those who are working with tech-enabled suppliers complain that, in times of scarcity, their suppliers become more unreliable. Apart from this, most suppliers don’t have produce prices in real-time. So, buyers have to make multiple calls to get access to prices from different markets. Yet, getting the price information doesn’t mean the produce would be accessible at that amount.
• “The requirement for quality is relative”. Very true and this varies from crop to crop. For potatoes, it is large-sized potatoes which don’t have any getting rotten in the sack. Then there is service delivery quality which for most businesses is consistency, good packaging, and timely logistics.
• “Commissions are better than subscriptions”. The market has not been able to tell us which is better. Most businesses are used to transacting based on commissions. However, subscriptions make it possible to keep the price of a sack of produce constant and charge the customer for our service.

Our USSD and chatbot solutions on this end enable businesses to

1. Check for daily produce prices at different markets in Kenya
2. Access produce at prices from farmers registered to our platform
3. Post one-off or recurrent requests for produce
4. Get access to future prices via our price predictor

Farmula has been able to provide buyers and farmers an organized marketplace where both can transact and derive value. Like other successful market places, we aim to focus on pricing and use that to drive supply and demand through our platform.

We aren’t middlemen. We simply provide the tools for seamless transactions.

The last bit;

In a sector where we are using tech to empower stakeholders, data is key. Hence, we gather data much faster than we have use for. Using gathered data points, we have been able to predict future prices of produce. Currently, in beta, our price predictor will be used to avail price fluctuation insights to stakeholders. Once our solution is rolled out, we would be updating all members of our community, including you. You can test it out here.

Traction

During our test phase, we were able to successfully move 2 Tonnes of produce to Nairobi and secured a partnership with a logistics company. We are also in talks with supply-driven agri-tech startups in Kenya and are looking to secure partnerships with them.

Kipruto aka Kip (courtesy: Farmula)

Kip who has been our resident test farmer was able to achieve 25% more revenue while Carol spent 20% less for her produce which was delivered to her doorstep.

Pilot

Over the next 120 days, we would run a pilot phase with 10 small sized restaurants aiming to drive more value for them. If you are interested or have any inquiries, you can send a mail to info@farmula.io or hit us up on our social media handles (facebook.com/farmula.io, @farmula_ on twitter and Farmula on LinkedIn).

Closure

Over the last month, this is what we have been able to learn from our customers. Join us on our journey as we aim to redefine how produce is being sourced in Africa.