LAHOR: Tazah, a B2B agrotech marketplace connecting farmers directly to retail fruit and vegetable vendors, announced the raising of $ 2 million in pre-seed funding to repair the broken and inefficient agricultural supply chain that is increasing fruit and vegetable prices and leads to post-harvest waste.
The pre-seed round was led by Global Founders Capital and co-led by Zayn Capital. Other participating investors included Ratio Ventures, Walled City Co, i2i Ventures, Suya Ventures, Globivest, Afropreneur Syndicate, +92 Ventures, Sunu Capital, Musha Investments and others.
According to a company statement, the round was oversubscribed and saw participation from local business groups, including Mezan Foods, and notable angel investors, including senior executives from Careem and Swvl, among others.
The problems Tazah seeks to solve
In a mostly offline agricultural supply chain from farmer to retailer, fresh produce such as fruits and vegetables from farms are sold by farmers to middlemen, who then sell them to wholesalers. Individual retailers buy from wholesalers at an inflated price due to the margins generated by the two players: middlemen and wholesalers.
Retailers then sell it to end consumers, deciding their margins based on where they sell.
According to our own research on the agricultural supply chain, staple vegetables are produced and sold by the farmer at a very low price, while for the end consumer, say in Lahore, the purchase price is inflated. of several multiples. Onions, for example, are sold by the farmer to middlemen at a price of 4-6 rupees per kilogram. The final retailer sells it to customers at around Rs 30-40 per kilogram, which is an 8-10 fold increase.
The massive rise in farm-to-retail prices occurs due to multiple players taking reductions in the form of margins at every stage these products are marketed. There are multiple handling and logistics points for goods of a perishable nature.
Handling and deliveries are done through an inefficient and archaic infrastructure which increases costs, further raising prices. It also results in post-harvest waste and affects the quality of products which are perishable in nature.
Intermediaries and wholesalers are the ultimate winners as they are able to exploit the farmers and enjoy better margins. As farmers lose on those margins while relying on predatory loan sharks to finance their working capital needs.
On the other hand, the retailer must pick fruits and vegetables from wholesalers at the start of the day at prices that fluctuate daily. Product quality is also not great due to inefficiencies in the supply chain.
The end customer naturally suffers from the prices he has to pay for basic vegetables and fruits, which have a very low price at the start of the supply chain. Also in terms of quality, the retailer and possibly the customer pay a high price for a product that has lost quality by the time it reaches these stakeholders.
Tazah, the B2B marketplace, aims to solve these problems by connecting farmers directly to fruit and vegetable retailers, thereby eliminating traditional middlemen and wholesalers. In turn, the prices at which retailers can buy from farmers are better.
Tazah also has a parallel storage and delivery service whereby it is able to deliver directly to retailers instead of forcing them to go out and buy at the start of the day, and the quality of the product is also better.
“Tazah buys from the farmer and sells directly to businesses, reducing farmers’ dependence on traditional middlemen. On the retail side, he can buy at a better price through Tazah, and we also deliver fruit and vegetables to these retailers, ”says Abrar Bajwa, co-founder of Tazah.
Abrar and Mohsin both have firsthand knowledge of how agriculture works in Pakistan and saw the need and opportunity to disrupt the agricultural supply chain by bringing a new perspective.
“The agricultural and food supply chain in Pakistan represents a $ 60 billion opportunity, but it is extremely inefficient and unrewarding for its main stakeholders – the farmers and the businesses that sell and consume fresh produce. The extreme fragmentation of supply and demand, the geographical dispersion and the perishability of the product create information and power asymmetries leading to poor outcomes for producers, businesses and consumers.
Pakistan’s post-harvest losses are 30 to 40 percent, according to an Asian Development Bank report. This means that 30 to 40 of the crop is lost at different stages after harvest. According to the report, about 10 to 12 percent of post-harvest losses occur during the transport of these products. The inefficiencies in the supply chain that lead to such food wastage lead to food price inflation, forcing consumers to spend a large portion of their income on food.
At the macro level, this has a great impact, and if such losses can be avoided at different levels, the impact will be more pronounced on prices. And Tazah is helping to avoid these storage and logistics losses by creating a parallel supply chain that they believe is more efficient and streamlined. Currently, the startup has custom storage facilities and uses third-party logistics to make deliveries.
As the farmer sells his produce to middlemen, middlemen pay for the harvest on their own payback cycle, creating cash flow problems for farmers that hamper their ability to grow. Intermediaries make payments in advance to farmers but charge interest on these payments. On the other hand, predatory loan sharks that farmers can turn to for short-term financing needs also charge arbitrary interest rates, which are added to the farmers’ long-term debt.
Much of Pakistan’s agriculture is cash-based and undocumented, preventing formal financial institutions like banks from lending to farmers. With these issues in mind, Tazah plans to move towards lending for these farmers in a more organized manner.
Visibility into the transactions of farmers and retailers will provide Tazah with solid data points to assess the creditworthiness of these stakeholders and provide them with loan services.
“By adding financing solutions in the near future, Tazah aims to be at the center of the lives of farmers and businesses where they do most of their financial transactions on the Tazah platform. On a large scale, Tazah’s B2B marketplace will reduce food prices and waste, improve access to fresh produce for all and lead to the social upliftment of farmers, ”the company statement said.
Less than two months after starting operations in Lahore, Tazah says she has already amassed nearly 300 small and medium-sized fruit and vegetable vendors carrying several trucks of produce per day. Taazah’s plan with the funding is to consolidate its position in Pakistan’s second largest city, Lahore, while simultaneously expanding into two other cities.
The startup also said they are improving their technology for a better experience for stakeholders, and the plan is to add more products to the market; Tazah currently buys and sells six products on the platform and plans to include more after the recent funding.
As I’ve learned, startups in this space have only headed south in trying to digitize the agricultural supply chain using technology. Mandi Express, based in Karachi, which delivered fruit and vegetables to end consumers, has closed. This naturally postulates that while it looks good so far for Tazah, he’s going to face some serious challenges when scaling up. And if Tazah is able to scale, it could affect prices at the consumer level.
At present, even if Tazah is able to sell to retailers at a lower price, the overall market is largely offline and the drop in prices through Tazah would not be visible enough to cause an overall drop in fruit prices and vegetables. It will only come with the ladder, and Abrar said Profit that they are ready to grow in this direction.
Investors are confident
“We are delighted to partner with the Tazah team in their mission to transform the Pakistani agricultural supply chain,” said Tito Costa, partner at Global Founders Capital. “Tazah’s platform will unlock savings and create opportunities for farmers and small businesses by eliminating current inefficiencies and waste. “
“Abrar and Mohsin have the right combination of experience and scaling vigor to tackle the problem of asymmetric prices in the fresh produce value chain. Tazah will enable farmers, retailers and consumers to discover fairer prices, ”said Faisal Aftab, co-founder and managing partner of Zayn Capital.