On June 23, 2022, Kune Food, a Kenyan-based online kitchen that had been unable to raise funds to maintain its operations going, shut down. Claiming that it was difficult to continue growing with low food costs, the entrepreneur blamed the global economic downturns and investment markets tightening up for the failure.
How it Started
The French entrepreneur claims he couldn’t find good food at affordable prices when he landed in Kenya. Finding food could go either of two ways: eat street food of low quality at an affordable price, or order from startups like Glovo, Jumia Foods, or Uber Eats, which went for at least $10 but are of great quality.
After this experience, he founded Kune Foods, in December 2020, to fill the niche. Kune Food is a food-tech startup whose goal was to provide tasty ready-to-eat meals at affordable costs and distribute them to individual consumers and businesses. The Nairobi-based food tech startup charges between $2 – $3 for a freshly made meal via Kune’s website or App, Canteens, Fridges, and Vending Machines to their clients and partners.
The project quickly raised $1 million in its pre-seed funding and an additional loan from a Kenyan bank, which sparked some controversy among Kenyans. They took to the streets of Twitter to express their criticisms of what they felt was a solution to a non-existent problem. To many, Robin Reecht was enjoying white privilege in Kenya to get funding for a business that wasn’t even operational yet, and without a clear problem statement.
But the entrepreneur was determined to change the landscape of food delivery in Kenya. He told Quartz Africa about his plans to expand and apologized for his enthusiasm that may have come out wrong. He described the plan to establish a factory and hire 30 employees in production, 100 delivery personnel, 10-15 user experience experts, and 10-15 marketing professionals due to the labor-intensive nature of the industry.
How it’s Been Going
Kune Food did a trial in the first few months of 2021 before formal operations were launched later that year. Kune Food was officially launched in August 2021, beginning its on-demand meals service. Until the day of closure, Kune had acquired 90 employees to run its business.
Kune Food utilized a hybrid cloud-kitchen business model, mixing cloud and dark kitchen ideas. Dark kitchen, also called virtual, cloud, or ghost kitchen, is a concept revolving around exclusively producing food optimized for delivery. Thus, there are no storefronts or sitting capacity.
The clients could order food via the Kune Food app or website. The company boasted of its capacity to make over 5,000 meals per day two months before its launch, which were to be delivered within 30 minutes time frame.
After the controversial $1 million pre-seed funding, the firm developed a food factory that could produce 13,000 meals per day and employed its first founding members.
The business model was unlike most delivery food services that distribute meals from third-party restaurants or supermarkets.
Instead, the business prepares fresh meals from the company’s factory. The staff then packages them before delivering them on-demand, straight to online, retail, and corporate clients at arguably low rates.
Some of Kune’s investors that added to the funding include Century Oak Capital GmbH, Consonance, and Launch Africa Ventures– a pan-African venture capital corporate. Pariti, a Kenyan community-led marketplace, invested in the company as well.
The Fall of Kune
Kune Foods handled the whole supply chain, from meal production and packaging to delivery. The company even had plans to develop its own fleet of electric motorcycles.
In a past statement, the company planned the second phase of fundraising to raise $3.5 million to ramp up its production capacity and nationwide impression beyond the capital city by 2024. Kune had invested in research and development to advance its menu to satisfy the ever-changing consumer demands and preferences, while still closing the gap between nutrition and price.
The firm also wanted to include microwave meals, weight loss foods, and retail meals for American and European clients. The CEO planned to extend operations into other areas of the continent as well.
On June 23, 2022, the embattled CEO and founder of Kune Food took to LinkedIn to announce of the company’s insolvency, barely a year after its launch. Kune Food intended at insolvency when it started utilizing third-party delivery services like Glovo, Jumia Foods, Bolt Foods, and Uber Eats to make deliveries.
It raised concerns as it was contrary to the business model and the company’s promise to consumers. From 7th June, there were no more orders taken from the Kune app or website. This meant it had lost control of its supply chain.
This follows the hike in food prices that has plagued the Kenyan population, with the costs hitting all-time highs. Other goods have also doubled in price over the past few months, as inflation in the country reached a 27-month high last month. As a result, living costs have continued to rise, reaching 5.6% in March and over 7% in May.
“Since the beginning of the year, we sold more than 55,000 meals, acquired more than 6,000 individual customers and 100 corporate customers. But at $3 per meal, it just wasn’t enough to sustain our growth,” Reecht wrote on his LinkedIn wall.
“With the current economic downturn and investment markets tightening up, we were unable to raise our next round. Coupled with rising food costs deteriorating our margins, we just couldn’t keep going.”
He expressed his concern for his team and urged entrepreneurs to help recruit them despite the difficult times. Kune’s collapse has left over 90 employees jobless and a gap in the industry. While putting up Kune assets and intellectual property (IP) up for sale, he expresses his concern for the customers that will remain unserved, supplied and backers.
In the statement, he revealed that the business had grown “into a foodtech startup with a tech platform [Kune app and website], a factory, a kitchen studio, 7 distribution hubs, 6000 customers, and a team of 90 people.”
The Startup Ecosystem in Kenya
Kune shutting down operations in Kenya has caused disquiet in the Kenyan technology startup ecosystem. Kune Food has joined Swvl and SafeBoda in the list of startup companies that closed shop in the Kenyan market.
Many people are wondering if these startups make unrealistic promises and then abandon ship when things don’t go as planned. Clearly, Kune did not calculate long-term risks before entering the market.
According to the CEO, the company could have done countless things differently for a different outcome. Hence, other startups should learn from Kune’s mistakes and be more realistic in their planning and projections. They should also have better risk management strategies in place to protect themselves from unforeseen circumstances.
Kune’s collapse is a huge blow to the Kenyan startup ecosystem. The company’s failure to consider long-term risks such as inflation and market saturation is a lesson to other startups in the country.
What do you think of the Kenyan startup ecosystem? Leave us a comment below.