Africa now has a substantially increased number of food technology companies, the majority of which are still going strong, while others are folding.
Anyone can start a food business with careful planning and desire, but these days, luck is very hard to come by because the industry is so competitive and there is such a severe economic downturn.
While some firms are doing well, others are battling with multiple issues, making it difficult for them to get traction, gain awareness, secure funding, and remain competitive.
Recently, the founder of Kune, Robin Reecht announced the shutting down of the Kenyan-based food tech startup via his LinkedIn page.
“Since the beginning of the year, we sold more than 55,000 meals, and acquired more than 6,000 individual customers and 100 corporate customers. But at $3 per meal, it just wasn’t enough to sustain our growth.”, Robin said.
“With the current economic downturn and investment markets tightening up, we were unable to raise our next round. Coupled with rising food costs deteriorating our margins, we just couldn’t keep going.”, he further stated.
He ended by requesting for any interested buyer in Kune’s IP or assets to reach out to him. What could have gone wrong, a year after raising a $1 million pre-seed funding?
Robin admitted on his page that many could have been done differently, “The coming months will allow us to reflect on Kune’s failure, and I hope to share about it when the time will be right.”
However, beyond Robin’s reflection, Some Kenyans have complained that the startup was an unnecessary food delivery platform in the country.
In an article shared by Quartz Africa in June 2021, Kenyans had said that the solution to the challenge Robin had spotted in Kenya’s food delivery is non-existent and it was only Robin’s white privilege that got him the $1 million funding.
Why did he get so much backlash? Robin in an interview with Techcrunch had mentioned how challenging it was to get both cheap and quality food in Kenya, after spending 3 days.
One may encounter a variety of issues while building a startup that either directly or indirectly influence the entire company. From the backdrop of Kune’s shutting down, this article explores some challenges food tech startups tend to encounter
Lack of funds
Startups in the food-tech industry need a lot of money to get off the ground. Lack of f funds is a severe issue because it makes it impossible to satisfy client demands. The majority of companies are one- or two-man bands driven by enthusiasm, yet they fail for a lack of resources (money and labor).
Therefore, having enough finance is crucial, and acquiring money from investors who are interested in other tech ecosystems is challenging given how competitive the food-tech industry is in Africa.
But was funding Kune’s challenge? Probably not, They raised money, and sold food to both individuals and corporates, however, the meal charge couldn’t sustain Kune’s growth.
Competitive Environment
Startups are comparable to a child in a large market, due to competitors having been in the market longer and are more familiar with it, they must deal with competition as a significant obstacle.
Food tech startups must always exercise caution and stay one step ahead of the competition to gain the attention they need to survive.
Therefore, remember that issues exist everywhere, but only those who are able to manage them and develop solutions can achieve lasting success.
As the saying goes, if things are failing, you’re not innovating enough. Since the market is cutthroat, new innovations must be introduced to stay relevant and provide the greatest possible client experience.
There were lots of local food delivery platforms offering what Kune was doing. What was kune doing differently?
Special deals and offers
Customers respond quickly to discounts and incentives. Customers no longer buy unless they are receiving a great price because of changes in the culture of purchasing.
However, for a startup, this is not sustainable, therefore, it is challenging for startups to offer discounts and operate on low-profit margins.
Customers are continuously looking for a food tech startup with either free delivery or a discount on the purchase price, even though it is not advisable to offer discounts all the time.
As stated by Robin, the $3 offering price for Kune, was already unsustainable, from all indications, the startup couldn’t afford to offer special deals and offers.
Variable profit margins
There is fierce competition on the market, as numerous producers battle with one another to draw in clients and increase profits. As a result, many businesses sacrifice quality for low-profit margins.
Maintaining quality while competing on pricing is a difficult task for entrepreneurs. Additionally, this puts food-tech in a challenging position where they must decide whether to offer clients a good quality for a high price or low quality for a low price.
Robin admitted that the rising food costs had deteriorated Kune’s margins, thus it couldn’t keep going.
Technology
Technology is advancing rapidly right now. As more and more people become digitally savvy and educated, those who use food tech do not want to struggle to place their orders; as a result, food tech with decent technology is likely to quickly lose clients.
To better serve their clients, food technology businesses must ensure that their technology is improved and most especially their delivery time.
Bottom line
Robin had also stated that, with the current economic downturn and investment markets tightening up, Kune couldn’t raise its next round. Robin had tendered his apologies to his team, fellow entrepreneurs, kune’s investors and its partners.
Beyond this, we hope that upcoming startups would learn that sustainability goes beyond raising funds. After you have acquired customers, can you make sales and acquire a reasonable profit margin?
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