Kenya: Entrepreneurs spot opportunity in fish and poultry value chains
Keep IT Cool is a Kenyan food distribution and decentralised cold chain company. It provides cooling as a service to businesses that purchase fresh fish and poultry, and links the supply to demand through a B2B e-commerce platform called Markiti. Jeanette Clark speaks to co-founder and managing director Francis Nderitu.
March 2020: the month most people will remember as the official start of a global pandemic after the World Health Organisation declared Covid-19 more than just another virus outbreak.
It is also the month Francis Nderitu and his co-founder, Abigail Gachigi, started their company, Keep IT Cool, in Kenya. The business links white meat producers (fish and chicken) with buyers such as restaurants and butcheries, and provides a decentralised cold chain solution. The freezers are solar- or grid-powered, preventing the fish and poultry from spoiling as a result of inadequate cooling, thereby increasing profit margins across the value chain.
While others might see the timing as unfortunate or an insurmountable obstacle, the Keep IT Cool team found a way to swiftly pivot the business model. “The company was initially developed to service a B2B model. When restaurants and butcheries closed owing to lockdown restrictions, we realised we would need to supply directly to consumers as well,” says Nderitu.
“Changing our model helped us better understand the entire value chain and consumer behaviour. Of course, we did not reach the volumes we planned but we could increase our margin as we sold directly, helping us to weather the storm.”
As the world settles after the pandemic, B2B sales have picked up to around 90% of what they were hoping for initially. The company supplies over 560 shops, butcheries and restaurants with fish and poultry through its e-commerce website and app, Markiti.
Cooling as a service
Cooling as a service (CaaS) may not be as recognisable an acronym as SaaS or IaaS in a growing cloud environment, but it perfectly describes one element of Keep IT Cool’s operations.
Nderitu previously worked for a Finnish cold-chain solutions provider and Gachigi for Coca-Cola. They realised there was a gap in the market for cooling and refrigeration. Small shopkeepers and restaurants often faced losses because they could not keep meat products cool until they needed them.
The idea is simple: improve the market channels for the farmers by connecting them to buyers such as restaurants and butcheries, and then ensure less waste by providing a cold chain solution for the transport of the meat and at the point of sale.
The co-founders knew they had to start with proper research. “We wanted to understand the market first but found access to reliable data problematic and undertook our own studies,” reveals Nderitu. The company used surveys to test the need of the different stakeholders, determining the size of the market, before approaching potential supplier farmers.
In the farming communities, Keep IT Cool has aggregation centres where the fish and poultry farmers take their products. The company does basic processing – such as cleaning and scaling the fish – before delivering it to customers who have placed orders. The cold chain remains intact with the help of its fleet of three four-tonne trucks, two vans, five petrol bikes and five electric bikes.
“We handle all distribution and logistics in-house as the transport of raw meat is highly regulated in Kenya and quality is of the utmost importance,” says Nderitu.
If a restaurant, butchery or shop agrees to a minimum purchase of 20kgs per week, Keep IT Cool provides the necessary freezers for free. If they cannot guarantee this volume, they pay a subscription of US$5 or $10 per week, depending on the size of the freezer.
The freezers come in two sizes: 158 litres, used mainly by butcheries, that can hold upwards of 20kg; and 358 litres, which can store between 50–100kg, depending on the protein. The boxes are powered by solar, battery or the grid. Keep IT Cool designs the freezers but has an agreement with a factory in China that makes it to specification.
The company places a markup on the products that it currently has on the Markiti platform and this, along with the subscription fees for the freezers, is how it makes its money.
Solving a capex problem
For most of Keep IT Cool’s customers, freezers were simply out of reach. Nderitu explains using the CaaS option improves the buyers’ cash flow.
“Working capital is a big challenge for these smaller enterprises so funding refrigeration equipment is not feasible. An estimated 90% of the business transactions in Kenya are done by these SMEs, yet they don’t have access to credit because of their size.”
The freezers are energy-optimised and self-regulate. They utilise whichever power supply is available to reach the set temperature and then switch off until the temperature has dropped to a point where further cooling is required.
Growing the inventory and demand
Keep IT Cool will focus on the local market for the foreseeable future. “Our plan is not to grow geographically until we have exhausted the existing opportunities in our area and Kenya. We aim to add more products to our existing distribution system and stimulate demand by increasing the number of businesses that stock our products or use our freezers,” he says.
The company has developed a 10-tonne-per-day sales pipeline in Nairobi and surrounding areas. “Over time, we will expand the variety of deliveries to these clients.”
“In terms of growth, there are so many opportunities, there are so many products that require affordable cold chain solutions,” he says.
Keep IT Cool managing director Francis Nderitu’s contact information
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