South African grocery delivery startup Yebo Fresh has raised an undisclosed amount from a Series A funding found to enable it to expand nationally in the country. The company, which serves lower income communities and retailers in Cape Town, has grown sharply during the COVID-19 pandemic.
Yebo Fresh had its second seed funding round in 2019. The company was founded in 2018 and now has 35 employees and a 1,200m² warehouse. It delivers fresh, frozen and ambient and groceries to predominantly lower income black areas in Cape Town. It serves consumers and also acts as a wholesaler to township businesses such as fast food restaurants and traditional retailers.
In June this year, Yebo Fresh received R2m ($0.13m) from the Scheinberg Relief Fund to help it expand its distribution capacity and food relief efforts in disadvantaged communities during the height of the COVID-19 pandemic. Yebo Fresh partnered with charities, community action networks and other NGOs to help distribute food parcels into the townships. The donation effectively provided scale up funds to the startup, allowing it to investment in a new refrigeration unit and a barcode scanning system. Yebo Fresh increased its capacity from 400 to 2,000 food parces a day and recruited an additional 20 people.
Yebo Fresh provides a low-data customer interface for ordering, assisting township business owners. Its investment looks to be based on the company’s ability to mirror startups such as Twiga, Copia, TradeDepot and MaxAB to reach into the informal trade, especially in rural areas and poorer communities. Those startups have seen significant investment based on the size of the traditional trade in Kenya, Nigeria and Egypt.
In South Africa, traditional grocery retail still accounts for 30%+ of overall sales. Attempts by market leaders Shoprite and PicknPay to open up their buying platforms for franchised spaza shops in townships have been little more than trial empowerment programs. While consumers might welcome lower prices and better stock availability, there are considerable political sensitivities around the South African supermarket chains extending their reach into the townships and effectively outcompeting the many small traders that exist precisely because of the lack of modern retail.
For that reason, the growth of a buying platform that helps bring some of the benefits of modernisation but isn’t seen as a Trojan Horse for a takeover by supermarket chains is less politically controversial but still brings the opportunities of targeting 30% of the grocery market. Furthermore, because successful South African businesses often reach into neighbouring markets such as Namibia, Botswana, Malawi, Mozambique, there is additional room for expansion into those markets as well.
