In June 2022, Kune Foods, a Kenyan food delivery start-up that was seemingly doing well and with proper funding and intentions to raise $3.5 million in its second round of funding, closed down unceremoniously.
Kune had sold more than 55,000 meals and acquired more than 6,000 individual customers and 100 corporate customers since the start of the year 2022. Its $3 per meal price point wasn’t enough to sustain its growth.
Though not entirely a food delivery start-up, in August, Kenyan end-to-end fulfilment start-up Sendy shut down and announced a fire sale of assets (it didn’t call it that).
Reports said reduced order volumes and fuel price increases meant it was making deliveries at a loss, and had a monthly burn rate of $1 million.
Sendy raised US$20 million in capital as recently as January 2020, but further funding was not to be found.
Uber Eats, a food delivery offshoot of global ride-hailing platform Uber recently started a strategic diversification into commodities.
From these cases, the question is: how hard is it to run a food delivery business in Kenya?
“So, the Kenyan food and food delivery business is not entirely easy. And just like any other business, the food delivery business is not easy. Locally, we have itinerant food traders in the estates, street kitchens, and the like. The start-ups on the other hand are leveraging technology to distribute,” Chris Odongo, the chief executive officer at Wilde International, a business and start-ups consultancy based in Kenya, explained.
“If you ask me, the Kenyan food business is difficult compared to other economies, with that background. Where the likes of Kune Foods lost it, Kune Foods wanted to sell food by delivery and also be in charge of its production. Now they missed an important component of basically providing the platform that creates the network between the buyer and the seller, just like the taxi and ride-hailing businesses do.”
Mr Odongo enumerates that this model used by companies like Bolt Food, Uber Eats, and Glovo has kept their businesses going and somewhat separated them from the rest of the food delivery and logistics businesses
“You need to have a network. The network is what enables you to have many vendors and many buyers, which now allows you to even subsidise the price of delivery of the food to the consumer. The consumer must not feel that the price of delivery of the food is inflating his food bill and how he’s getting it,” he added.
Packed lunch
The reality of harsh economic times coupled with food price inflation has also pushed many Kenyans to cut back on eating out, opting for packed lunches.
As a means to stay afloat, delivery apps and start-ups in Kenya are also going the commodities way, listing multiple products on their sites for buyers to purchase.
Case in point is Uber Eats as mentioned earlier, now listing other household goods that can be accessed on its app.
Despite the seemingly tumultuous nature of the food delivery business, it presents a massive opportunity in the country and new entrants need to identify consumer needs that normally gravitate around cost and convenience.
According to Mr Odongo, there is a need to understand consumer purchasing power based on disposable income, pricing models, and growing the number of existing buyers in a network to reach an underserved market.
