Tanzanian entrepreneur Elia Timotheo’s company, EA Fruits Farm & Co, is a processor and distributor of fruits and vegetables grown by smallholder farmers. Timotheo speaks to How we made it in Africa about his business.
What was the motivation for starting EA Fruits Farm & Co?
More than a third of all crops harvested in Africa goes to waste between the harvest fields and the market. Our idea is to bring food to the market with zero waste and increase income for smallholder farmers. We aggregate fruits and vegetables from smallholder farmers in remote areas of Tanzania – mostly in the northern and southern highlands.
We do processing by cleaning, packaging and distributing to local markets. We use the most advanced technologies, including solar-powered cold storage facilities to store the fruits and vegetables to increase the shelf-life, and refrigerated trucks to distribute to customers. The most traded produce on our portfolio includes pineapples, mangoes, tomatoes, cucumbers, melons and onions.
We are offering farmers support with greenhouses and irrigation systems so they can grow high-value produce – like cherry tomatoes and red and yellow peppers – that are in high demand. We have a rapidly-growing number of customers that includes hotels, restaurants and supermarkets in Dar es Salaam. And we also pay middlemen a commission to sell our produce.
Most people would like to remove middlemen from the supply chain. Why do you work with them?
We too would like to completely remove middlemen from the supply chain, but we don’t have enough storage capacity. We can’t keep all the produce we get from farmers, and if we don’t sell it in good time, it can rot and go to waste. Our current storage facility can hold 30 tonnes, which is very small and puts pressure on us to sell to avoid losses from spoilage.
Working with middlemen has a significant impact on our margins. Middlemen take produce at very low prices, which leaves us with very thin gross profit margins. But if we do all the distribution ourselves we’d still have to spend more on trucks, increasing our operating expenses. Last year we made a loss of about US$20,000 – and that’s because we are distributing almost 50% of our produce through middlemen and spending money on renting both trucks and storage facilities.
But we are constructing a 1,000m2 storage facility in Dar es Salaam that can hold up to 400 tonnes of produce. We also want to have our own distribution trucks, motorcycles and bicycles to be able to serve a larger number of customers and slowly remove middlemen from our supply chain. We have been doing business in the most challenging environment in the last two-and-a-half years.
By when do you plan on being profitable?
It is normal for a start-up company to make losses in the early years. We see a huge opportunity ahead. We want to be the AmazonFresh of Africa. (AmazonFresh is a subsidiary of the American online retailer Amazon, involved in grocery delivery). We will grow slowly using a lean model. In a few years every pineapple or mango you eat at a restaurant or buy at a supermarket in major cities in the region will be distributed by EA Fruits Farm & Co.
We serve a real need in the market – we save our customers time and the hassle of finding quality produce and we help them get a consistent supply of fresh produce. My mother operates a chain of four restaurants in northern Tanzania, just under Mount Kilimanjaro, and growing up I saw her constantly struggle to access produce during the off-season. So there are many businesses and individuals who need our service. We reduce food wastage, we pay farmers better, and it is only a matter of time before we also become profitable.
What challenges does the business face?
We need a lot of funding, especially for cold storage facilities. We have a couple of investors on board helping us with the expansion. We have received about $200,000 in funding and some investors have committed about $500,000 that they could inject in the business in the future. We also need technical expertise in terms of putting in place systems we can use to monitor the incoming and outgoing volumes. Finally, we need experienced staff at a reasonable cost, especially as we expand.
Tanzania’s retail sector is still very informal. Are shoppers starting to adapt to formal retail?
Traditionally, people would go to a local market, perhaps on the weekend, to buy fruits and vegetables and they basically walk around and try to select what looks good and ripe. The disadvantages with local markets is they are often dirty and there is shortage of some produce in certain seasons. But with the entry of large retailers – like Nakumatt and Uchumi, and the expansion of local brands like TSN Supermarket – people are adapting to the idea of buying everything they need from the supermarket.
But this is still the growing middle class and affluent people – they don’t want to go to the local market. By the end of the year we will start doing home deliveries to serve this market because we can see demand for that. There is no dedicated fresh produce formal retailer – a shop that sells just fresh produce – in all Tanzania. We plan to launch such a store in September.