Cold storage innovation landscape in Africa
The Product Insights Series is the evolution of our flagship market mappings. It offers insights into the startups driving selected product markets across Africa’s technology ecosystems. The series builds on our #InnovationMaps with data from Briter Intelligence as well as interviews with startups to offer deeper information on each product or cluster. The fifth edition of the series examines some of Africa’s leading cold storage startups.
The (changing) cold storage landscape in Africa
Temperature-sensitive products struggle to maintain their quality and efficacy. This is a particular issue for products vulnerable to spoilage, such as food or medicine, as they must be stored in consistent temperatures throughout the supply chain to prevent wastage. It is estimated that more than one third of food produced in Africa is lost to spoilage or waste. Cold storage or cold (supply) chain products can help reduce spoilage and maintain quality and efficacy, but require sufficient electricity to work effectively.
In Africa, where according to the African Development Bank (AfDB), electricity is out of reach for more than 640 million people, the ability to sustainably maintain constant cold temperatures remains a challenge. This applies to agricultural produce as well as the distribution of medical supplies. To store perishable products such as food, fruits, and vegetables, farmers and agricultural traders have often had to rely on makeshift coolers or generic cold rooms that are unreliable, outdated, poorly maintained, and have high operational costs. Likewise, health centres lacking medical fridges have seen their supplies like blood and pharmaceuticals go to waste due to improper handling.
These losses have a tremendous social, economic, and environmental impact on Africa. Around 246 million Africans suffer from hunger and malnutrition , according to the AfDB. Furthermore, food loss contributes to undernourishment in Africa affecting about one third of the continent’s population. Food wastage also causes temperatures to rise when they decay in waste landfills and emit methane, a potent greenhouse gas. To make up the deficit in the food supply, Africa forks out about $43 billion yearly on food imports to feed its people according to the World Bank. In the health sector, the impact has been felt by the inability of several African countries to administer life-saving Covid-19 vaccines to their citizens. Vaccines need to be stored and distributed at extremely low temperatures.
This is beginning to change. A host of digital innovations are stepping in to offer cold storage products that are affordable, energy-efficient, compliant with the highest export standards, and have temperature and performance monitoring capabilities. While the products and services that they offer might differ, common trends can be identified in the business models that they adopt. In the remainder of this #ProductInsights Series, we take a look at cold storage startups, the solutions they offer, the challenges they are responding to and the financing gaps and opportunities for investors.
Cold storage startups and their product offerings
Cold storage startups provide cooling systems that ensure continuous refrigeration of perishable products. Cold chain startups go beyond storage to assist companies to manage and transport perishable products in temperature-controlled supply chains. Startups that offer cold storage and cold chain solutions in Africa are addressing financing barriers, energy gaps, inefficient supply chains, food losses, and medical supply wastages through their product and service offerings in the following ways:
Reducing post-harvest losses
“One of the challenges that we see is post-harvest losses happening from the farm, during transportation, as well as at the point of sale,” Samuel Imanishimwe, Chief Operating Officer, KivuCold.
In Africa, food loss occurs predominantly during and after harvesting periods as farmers lack the facilities to store their produce adequately. Samuel Imanishimwe, Chief Operating Officer at Kivu Cold a Kenyan cold storage solutions provider, notes that there are several points after crops have been harvested until they are sold to consumers where farmers suffer losses. The Covid-19 pandemic increased the amount and rate of food loss in Africa as countries imposed movement restrictions that interrupted, and in some cases, halted the transportation of food from the farm to the tables of consumers. Cold storage companies like Kivu Cold and Solar Freeze are offering innovative solutions to help smallholder farmers reduce post-harvest losses. In the case of Solar Freeze, they are building solar-powered cold storage facilities for farmers in rural Kenya. Users can pay as little as $0.1cents per day via MPESA to cool a crate of fruits in a mobile Solar Freeze cold room. They also receive training on best practices to reduce post-harvest losses.
Lowering the barrier to owning efficient cooling systems
“What we found is that with a lot of customers, there is an inherent greater perception of value derived from being able to own the asset,” Natalie Casey, Chief Business Officer, Koolboks.
In Africa, there is a need for access to affordable energy-efficient and climate-friendly cooling systems. However, investing in this kind of equipment and infrastructure requires significant capital and many businesses cannot afford the costs. Enter Cooling as a Service (CaaS). CaaS is a business model that lowers the upfront cost of investing in an efficient cooling system and allows farmers and retailers to pay for the unit of cooling that they consume. Koolboks, a Nigeria-based provider of solar refrigeration across Africa has piloted this CaaS model to offer its cooling products on a lease-to-own basis to small businesses that can’t purchase the assets outright. Kooklboks finances the asset initially and the businesses typically have up to 24 months to repay. This lowers the barrier to accessing and owning efficient cooling systems which is preferred in the long run by small businesses, according to Koolbok’s Chief Business Officer Natalie Casey. Other cold storage companies in Africa that have piloted the CaaS model in their businesses include Nigeria-based ColdHubs and Kenya-based SokoFresh and InspiraFarms.
Curbing medical supply wastage
While the majority of cold storage startups serve smallholder farmers and agro traders, a number of companies offer cost-effective cold chain solutions to enable healthcare providers to deliver life-saving medical services to patients. Cold chain products extend the shelf life of highly perishable medical supplies like insulin, vaccines, blood, organs and tissues, and pharmaceuticals that require great care and precision when transporting. Last year, Nigeria’s National Primary Health Care Development Agency (NPHCDA) partnered with Gricd, a Nigerian provider of cold chain solutions to curb vaccine wastage after the country struggled to administer doses of the COVID-19 vaccine before its expiry date. Nigeria-based Ecotutu and LifeBank are other examples of digital actors offering solutions to maintain the viability and efficacy of temperature-sensitive health products in Africa.
Facilitating last-mile supply chain
With COVID-19 accelerating the adoption of online shopping habits, the last mile supply chain is one area that cold chain companies are addressing challenges for small and medium-scale businesses in Africa. For example, Lagos-based cold chain solution provider Ecotutu offers cooling-on-the-go services that preserve temperature-sensitive food and health products for up to 48 hours in cold boxes that can be retrofitted on motorbikes (or okadas or boda bodas).
Enabling proper storage and monitoring of food and medicines
“The most common pain points we have noticed from our clients include customer complaints, claims and rejections because of produce not meeting the minimum fresh produce requirements regarding pulp temperature,” Julian Mitchell, Founder and CEO at InspiraFarms.
Some fruits, vegetables and flowers have specific temperature, pressure, relative humidity, and airflow requirements and need customisable solutions to keep them fresh. Businesses need the right equipment to monitor the storage of fresh produce and medicines to reduce losses, extend produce and medicines shelf-life, reduce operational expenditure, and increase revenue. Cold chain startups addressing this need offer remote monitoring systems that provide access to insightful data about the storage conditions of perishable products. For example, Kenya’s InspiraFarms enables cold chain operators “to know, in real time, the health of their fresh produce and to trace irregularities through access to data readings and reports on cold room parameters such as temperature, energy, door openings, humidity, and more,” according to Julian Mitchell the startup’s CEO. Similarly, Cape Town-based PharmaScout helps businesses store their medicines correctly.
Helping farmers meet required export standards
“Many times, (even) farmers with cooling infrastructure in place often struggle to reach optimum and high-quality cooling, following the international standards regarding temperature, humidity and cooling time required by each crop and under export quality standards,” Julian Mitchell, Founder and CEO at InspiraFarms.
Cold chain is almost non-existent in sub-Saharan Africa and infrastructure gaps are particularly felt at the farm level by smallholder farmers. Faced with sub-optimal choices, they are unable to perform pre-cooling of delicate produce like fruits and vegetables which improves their shelf life and prevents dehydration. “This dehydration means a loss of produce weight, and the need to overpack each pallet to meet the minimum weight requirements, in turn resulting in selling way less than what was harvested,” Mitchell explained. Cold chain startups like InspiraFarms offer solutions that enable farmers to comply with the required export standards for the sale of their produce.
Providing access to income-enhancing opportunities for agro traders
“Even after hours, if there’s no electricity, they [agro traders] can keep their store open. They can keep their business going after hours by providing lighting and they can also charge phones,” Natalie Casey, Chief Business Officer, Koolboks.
A few cold storage solutions provide access to lighting and charging for agro traders through an off-grid solar lighting system. These solar-powered products are often referred to as productive use leveraging solar energy (PULSE) appliances. Not only do they enable cold storage solutions, but they also provide electrification to growers and traders to keep their stores open for longer at night.
The emerging innovation and investment ecosystem for cold storage startups
Briter Intelligence counts at least 15 companies offering cold storage solutions operating in Africa and over $13m in startup funding into 6 of these companies in Kenya and Nigeria - several of these are highlighted in the map above. Funding into Africa’s agricultural sector has traditionally been provided by foundations, development finance institutions (DFI) and non-governmental organisations (NGO) over the past years. However, with the growth of Africa’s private sector and venture capital landscape, cold storage startups have received backing from investors and initiatives such as Energy Access Ventures, Google For Startups, and All On. Africa’s leading cold storage startups include:
Koolboks, a Paris- and Lagos-based cold storage company providing access to affordable solar refrigeration for agro traders to enable them spend less and sell more;
Solar Freeze, a Kenyan startup offering energy-efficient mobile cold storage products to help smallholder farmers reduce post-harvest losses;
InspiraFarms, a Kenyan cold chain startup providing energy-efficient pre-cooling and cold chain solutions for smallholder farmers;
Gricd, a Nigerian IoT company providing real-time cold chain monitoring for temperature-sensitive products;
ColdHubs, a Nigerian company offering access to affordable solar-powered cold stations for storing and preserving perishable foods;
Sokofresh, a Kenyan startup providing smart cold storage solutions and market linkages for farmers;
Raino Tech4Impact, a Kenyan social enterprise democratising access to affordable, reliable, and efficient cold chain solutions for farmers, fish producers and traders;
FreshBox, a Nairobi-based social enterprise providing solar-powered cold storage systems for farmers and retailers;
Ecotutu, a Nigerian company providing access to off-grid cooling solutions for businesses in the food and health sector;
Coldbox Store, a Nigerian company building and operating solar-powered cooling solutions for storage and distribution of temperature-sensitive agricultural products;
PharmaScout, a Cape Town-based company designing and building remote monitoring solutions to store medicines in correct conditions;
LifeBank, a Nigerian company guaranteeing the safe delivery of medical supplies to healthcare facilities; and
Freezelink, an Accra-based company building cold chain infrastructure for farmers and pharmaceutical players.
Cold storage startups have room to play a more critical role, especially as more investment is being made to improve infrastructure, connections, and transportation. They also have an opportunity to enhance their service and grow, particularly in the manufacturing and maintenance of their own products. For example, Ecotutu develops its own phase-change storage solution and also offers its design and manufacturing capabilities to its customers. Also, Koolboks is building preventive maintenance systems for cold storage products that allow automatic temperature adjustments, alert notifications by SMS, and self-corrections to happen. As Natalie Casey from Klookboks highlights, maintaining cold chain assets can be a hassle “if you have to send an engineer each time to make fixes.” Another area that offers growth opportunities for cold storage startups is in providing a marketplace to connect farmers and agro traders with buyers of fresh produce. An example is SokoFresh’s market linkage platform which enables access to markets for farmers, helping them increase their income. Yet, despite their importance, cold storage startups have received only 0.1% of the total investment into startups in Africa. More financing is needed for cold storage to pilot innovative models that can address important problems for Africans.