South Africa: Naspers-backed company spots gap to streamline the food service supply chain
To grossly simplify a complicated sector, the food service industry essentially consists of buyers (restaurants, for example), distributors and food manufacturers. These three parties are intricately linked and mutually dependent on the other; if one slips up, it immediately impacts the others. This is where South African based Food Supply Network (FSN) comes in. Through its digital marketplace, the company aims to eliminate the inefficiencies inherent to this communication chain.
For example, if a café owner wants to buy 100 loaves of bread, they log in to FSN using their free subscription and search for a bread manufacturer. A full description of the manufacturer is displayed along with its products, current deals and loyalty rewards, together with a link to distributors.
FSN recently received investment from Naspers Foundry, the South Africa-focused start-up investment unit of global internet group Naspers.
Sven Hugo talked to FSN CEO and co-founder Gert Steyn about building an ecosystem for the food business.
How did FSN start?
In 2015, co-founder Stuart Hazel and I were discussing the issues he was having at his job in the packaging industry and I realised we could solve these problems by introducing clear communication channels.
I’m an engineer with 20 years’ experience in building enterprise resource planning (ERP) systems and it was obvious to me that what he was describing came down to a lack of communication, which I thought would be relatively easy to fix using technology. The trial included a handful of suppliers after which we formalised Food Supply Network in 2016.
What are the main issues in the food industry that you address?
It depends whether you’re a buyer, distributor or manufacturer but the issues in the industry are underpinned by miscommunication between the buyers and sellers, who are struggling to convey what they actually want and then not knowing for certain whether they will receive what they ordered.
A real-life example of this miscommunication goes something like the following: A restaurant owner wants to buy 2,000 takeaway cappuccino cups and places an order with a packaging distributor, but the buyer has no idea that the packaging distributor has a list of 10 different coffee cups to choose from, and simply lists “cappuccino cups” on the order form. This puts the packaging distributor in a bind as they now have to guess which cups the buyer would prefer. And this happens daily. Sometimes they get it right, often they get it wrong and the wrong order of cups arrives.
Our aim was to instil confidence in the ordering process. In other words, we fix the inefficiencies and foster communication.
All of these players – the manufacturers, distributors and buyers – have an important role to play but the process is often blurred. The manufacturer wants to promote their products but they don’t know who their end users are, and the distributors sit in the middle of all of this uncertainty. FSN gives them the platform to speak directly to each other, while the distributor remains the logistics partner. We merely align these roles. We often refer to it as having created an ecosystem.
Who are your biggest clients?
Most of the larger fast-moving consumer goods manufacturers and many of the alcohol manufacturers. Our clients also include quick-service and independent restaurants and we’re slowly moving into retail.
You’re the broker between the buyer and seller?
No, a broker sits in the middle between the buyer and seller and influences price and dynamics, which we don’t do. FSN is also not a price-comparison system, which would rank products of the same nature on a screen from cheapest to most expensive, for example.
In speaking to buyers over the years, we realised they are more concerned with stock and delivery reliability than the price of the stock. This is why we monitor service delivery on a five-star rating system by integrating with the ERP systems of all our clients and tracking the system. Our platform looks at the seller’s response time, stock level accuracy and fulfilment of every order and generates a live rating that both sellers and buyers can see.
Explain how FSN’s costing model works.
The buyers’ subscription is free and they can place orders through the platform at no cost, but we do offer other solutions to buyers, such as order automation, which comes at a monthly cost. Sellers pay an order processing fee based on the size of the order.
With our order automation offering, we look into their purchases and factor in anonymised sales data from related companies. We know, for example, that the industry in Stellenbosch is currently up by 20% and that a buyer in this area will also have to increase their orders by 20%. We use this intelligent forecasting model to better predict stock needs. Based on this, we draft orders that managers of restaurants or stores can give a quick once-over and approve.
Tell us about your marketing strategy.
When we were engaging with the manufacturers, word of mouth worked fine but we now have to engage the buyers, which is largely a social media-focused strategy – especially on LinkedIn – as this is where you will find the business owners. We are a bunch of engineers so we’re working with a good PR company to steer this strategy.
If you had to start from scratch, what would you do differently?
We’ve learnt a lot, so there would be many shortcuts but when you start, it is with a minimum viable product to test the waters. We initially focused all our energy on building a product and we let the product grow organically. Only now, five years later, are we actively marketing our products. I would definitely have concentrated on our marketing efforts much earlier.
Beyond South Africa, in which other African countries do you operate?
We operate in Zambia, Namibia and Angola. That expansion happened organically through Hungry Lion, a South African fast-food chain, which operates in these countries. Its distributors and manufacturers heard about us and we have been onboarding them over the last year.
From your experience in African countries outside of South Africa, what would you say are the major opportunities in the food industry that entrepreneurs can take advantage of?
Stock availability is key. As I’ve mentioned above, when we talked to restaurants, most of them indicated availability is more important than price. If your food orders do not arrive, the price is almost irrelevant. It’s crucial that the food arrives on time every day.
Our numbers show this stock availability and dependability is lacking in the rest of Africa. There are various reasons for this but there is an opportunity for distributors who can supply on time without fail.
Describe some of the food industry trends in South Africa.
The lockdown upset the normal trends but, in response to this, we have seen an increase in dark kitchens, a delivery-only restaurant with no public-facing kitchen. Grocery deliveries have also increased and many of these delivery businesses have approached us for access to manufacturers and product lists.