InspiraFarms provides agribusinesses, exporters and food distributors with solutions for handling their fresh produce, that significantly cut energy costs, reduce food losses and meet international food safety certifications. The company designs, develops and supplies modular and energy-efficient on-farm and close-to-farm cold rooms and packhouses for the horticultural sector in emerging markets, with a focus on African countries.
In Kenya there is an ever-growing demand on small-scale producers to increase the supply of fresh produce for international markets. These growers have very small plots and little access to capital loans and cannot afford their own cold storage solutions. Instead, the growers aggregate produce at central collection points, where it often sits for up to 72 hours before being collected, cooled, graded, packed and then shipped to final market. This is where most of the post-harvest losses occur.
With support from PREO, InspiraFarms set out to test a business model with corresponding technology to provide pay-per-kilo cold storage, on or near the farm, and packhouse solutions to small and medium growers of fresh produce in Kenya.
PREO interviewed Michele Bruni, InspiraFarms’ chief commercial officer, to find out which lessons were learned from this pilot project.
Q: Which challenges did you seek to address through this project and how did support from PREO help?
A: The PREO support enabled us to identify the gap in the cold chain, between production and delivery to final market, and identify a niche product that fills this gap. After several meetings with exporters and focus groups of small-scale producers, we identified the market challenges and devised appropriate client-focused, affordable solutions that meet the needs of agribusinesses, exporters and food distributors.
The horticulture export supply chains in Kenya increasingly rely on production from small scale farmers. These farmers have plot sizes as small as a quarter of a hectare and no more than 2 to 3 hectares. These growers have formed groups in their areas with central collection points for fresh produce. Produce is then sold to an exporter who has a central pack shed and cold chain infrastructure where the product is cooled, packed and exported to the UK, Europe and Middle East. Small-scale growers have very limited access to finance to invest in their own infrastructure and limited land to build on. They do, however, play an important role in the supply chain. The produce that is gathered at the collection point can wait for 24 to 72 hours before reaching the central pack shed, which is the first point at which the cold chain could be started. This means that product remains at ambient temperatures for up to 72 hours and, as a result, is exposed to high post-harvest losses (both physical and commercial). For berries and other soft fruits, every hour of delay from picking to cooling represents more than one day less shelf-life .
This means that the A-grade product is deteriorating and the growers cannot earn a revenue for their hard work. Post -harvest losses not only result in reduced revenue but losses on finance spent on inputs and labour. It was very clear that an intervention was required at the first-mile of the supply chain at the small scale grower collection points to protect the growers from these losses.
To deal with the constraints in land size and the fact that many different farming groups produce in different harvest windows, InspiraFarms designed a compact and mobile first-mile cooling solution.
The limited access to finance meant that growers themselves were not able to invest in the out-right purchase of these units. PREO’s support enabled InspiraFarms to put together an offer where cooling would be charged based on throughput. This means that cooling would become a direct cost to the supply chain and only a cost to small-scale growers during the harvest windows.
Q: Can you explain your business model of offering first-mile cooling through ‘mobile pre-coolers’? Why did you choose a B2B model over B2C?
A: Our focus is on providing cold chain infrastructure solutions, so it made sense to find a commercial partner whose core business is aggregation and marketing fresh produce. The B2B model also allows a more streamlined approach as there is just one billing party rather than trying to recover payments from 25 to 50 growers. By the end of the project, we identified and partnered with one of the largest horticulture exporters in Kenya.
Q: What were the main challenges that you faced during the project implementation phase and how did you overcome them?
A: Unfortunately, since the first mobile pre-cooling unit was installed in November 2020, no further units have been deployed. One of the main reasons for this was COVID-19 and its impact on the stability of the export supply chain. Reduced flights had a major impact on the cost of freight, which in turn led to uncertainty in affordability and demand in final destination markets. This meant potential commercial partners were reluctant to make a decision on trialling this new concept.
During the search for a committed commercial partner it became clear that the cost and long payback period could be reduced by developing a simple, functional and cost effective range of products, which could achieve the minimum standard results for cooling at the first mile. “Nice-to-have” extras such as humidifiers, remote monitoring systems and weather stations, would be marketed as “optional add-ons”.
The new units would be made from interlocking polyurethane panels and profiles (polystructures) which are light and easily transportable. Three units could be shipped in one container, reducing the shipping cost from $12,500 to $4,100 per unit. This would enable us to reduce the CAPEX cost from $66,950 to $26,076 and in turn reduce the payback period from 64.5 months to 25.1 months.
Q: What are your key achievements and impact from the project?
A: The first mobile pre-cooling unit started operating in November 2020. Since then, we’ve seen the following:
- Buyers’ rejection rates dropped from 35% to 15% for peas and from 80% to 20% for baby corn
- Sale price increased by 14% for peas and 50% for baby corn thanks to better quality and longer shelf life
- Exporters witnessed an average 16% increase ($12 166) in net monthly earnings – around 11 times the lease amount
- Large exporters have capacity to achieve maximum utilisation rates every month; 95% were witnessed in the PREO project.
Q: As well as demonstrating a B2B model for offering mobile pre-coolers, you successfully reduced the CAPEX by 60% during the project. Can you tell us how these gains were achieved, what it means for your further offerings and how it impacts the business model?
A: The unit, deployed with PREO support, allowed us to go through a “feature reduction” process. In other words, we identified a basic model offering with optional add-ons, as mentioned above. We have consolidated a more affordable range of products for smallholders with manufacturing lead times reduced from eight weeks to four to six weeks.
We focused on reducing the CAPEX for structures, reducing the mobility of the units but making the cost of rebuilding the structures, in case of relocation, comparable to the cost difference between the previous version and the current range. This refers to the change from a completely mobile container structure which can be moved by a truck with a crane to a polystructure which could be manually assembled and disassembled as needed.
Additional work was done in making some of the features (humidifiers, remote data monitoring and weather station) optional. These features add value but are not fundamental to carrying out the basic process. This way the customer can ask for additional features once the returns with the basic set of features have been generated. Lastly, by swapping the automated cooling cycle function for a manual start and stop we minimised the need for our team to create the complex automated programming to cool each different crop at different temperatures and cycle length.
