Euler Bropleh, founder and managing director of investment firm VestedWorld, Speaking at the recent African Private Equity and Venture Capital Association conference in Dakar – Senegal mentioned that successful agribusiness ventures in Africa often require vertical integration whereby the supply chain of a company, or parts of it, is integrated and owned by that company. He mentioned Tomato Jos and Victory farms as an example of VestedWorld’s portfolio companies.
Tomato Jos: Ensuring raw material supply.
In 2020, VestedWorld participated in the €3.9 million series a funding round of Tomato Jos, a Nigeria-based producer of tomato paste. Nigeria is a large consumer of tomato paste but most of it is imported. Bropleh explained how the trick to running a successful tomato-processing venture is to first ensure a consistent supply of high-quality tomatoes at the right cost. If a tomato paste factory doesn’t have an adequate tomato supply, it won’t be profitable.
“They had to farm themselves to prove that you can get those yields, and then they had to start working with farmers to show them how to grow crops to achieve those yields,” Bropleh explained. Tomato Jos began construction on its facility in 2021 after determining that it had a sufficient high-quality supply.
He singled out one of Tomato Jos’ competitors for constructing a tomato paste factory without first assuring it had the raw resources to feed it. “They anticipated they’d be able to buy those raw materials from farmers after it was harvested.” The price of tomatoes was higher than they were willing to pay when harvest season arrived. They were unable to obtain all of the necessary raw materials.”
Victory Farms: Owning the distribution and retail network.
Fish farming company Victory Farms, which produces tilapia in Homa Bay, Kenya, also has a vertically integrated business. In addition to running its own hatchery ponds, deep water cages, and a processing plant, Victory Farms has established an in-house distribution system and retail network.
Victory Farms sought to employ third-party refrigerated truck suppliers, but the driver would switch off the refrigeration mid-way between Lake Victoria and Nairobi to conserve gasoline, according to Mr Euler Bropleh. “You simply cannot have it.” As a result, a lot of their fish would deteriorate. Due to that, they began transporting their fish themselves… That simply goes to illustrate how important it is to be present at all times.” he added.