Investor ActivityKenya

Why We Invested in Mama Gas — Leveraging Data and Last-mile Delivery Service for Cooking Gas in Kenya.

3 Mins read

Why We Invested in Mama Gas — Leveraging Data and Last-mile Delivery Service for Cooking Gas in Kenya.

Consumption of Liquified Petroleum Gas (LPG), also known as propane gas or cooking gas, is lower in Africa and other emerging markets due to affordability, low safety standards, and easy access to solid fuels such as kerosene, wood, and charcoal. In Kenya, there are over 1500 kerosene dispensing points in Nairobi alone, with most people estimated to live within a 50–200 meter walk from a charcoal vendor.

However, LPG consumption in Africa has continued to grow each year. In Kenya, the Energy and Petroleum Regulatory Authority (EPRA) report indicates that LPG consumption has grown exponentially from 77,000 tonnes in 2007 to 400,000 tonnes in 2020.

Founded by Bernard Rono in 2018, Mama Gas is an EPRA-licensed LPG wholesaler & retailer leveraging last-mile delivery service for cooking gas in Kenya.

Impact

In 2016, the Kenyan government lowered tax on LPG. This, in addition to the establishment of an exchange pool that allowed customers to exchange different LPG cylinders from any point of sale, increased cooking gas consumption in the country. It also led to the establishment of an informal gas cylinder supply chain.

Traditionally, mainstream brand owners such as Total Energies served as the main point of sale for cooking gas, often selling out of their petrol stations. However, they could not keep up with the convenience brought on by informal gas traders, which included small kiosks and ‘mom and pop’ shops located within residential areas, retailing cooking gas in small stocks.

Additionally, these kiosks combined selling cooking gas with Fast Moving Consumer Goods (FMCG) products such as cooking oil, rice, and other home products and enabled remote ordering and delivery using applications like WhatsApp.

A Mama Gas rider delivering gas to a customer in Nairobi Kenya

The industry’s unprecedented growth outpaced policy, leading to unscrupulous independent gas refillers mixing unsafe gas and often selling counterfeits that put consumers’ lives in danger. Gas explosions have been reported across Kenya, including a gas explosion in August 2018 resulting in the death of a 2-year-old boy.

Mama Gas is an innovative startup solving these challenges for its customers in Kenya. “I saw an opportunity in the market to provide clean cooking gas while working directly with trusted suppliers, and delivering to homes,” says Mama Gas CEO Bernard Rono. “The idea behind MamaGas was simple: we wanted to build a central distribution center where customers could conveniently purchase clean, safe cooking gas.”

Mama Gas started as an online B2C business selling clean cooking gas to homes before quickly scaling to B2B, supplying wholesale cooking gas to hotels and restaurants in Nairobi.

Today, Mama Gas is an online last-mile delivery business and fulfilment center for LPG gas and FMCG products in Nairobi, enabling its customers access, safety, and convenience.

The Mama Gas team and their in-house motorcycle riders who deliver cooking gas across Nairobi.

Smart Asset Financing with Mama Gas

According to Untapped Global Investment Officer Caitlin Craig, “Mama Gas drew in our team from our first conversation with Bernard. He has an energy and excitement for his business that, as investors, we love to see.”

Mama Gas’s cooking gas refill business offers a service that has the potential for massive scale, targeting a large B2C demographic and moving aggressively into B2B. “It’s all because they’re utilizing multiple sales channels and going where their customers are,” says Caitlin.

Through Untapped’s Smart Asset Financing, Mama Gas has steadily increased its customer base and now supplies businesses, schools, and hospitals. “Untapped’s investment allowed us to pilot into restaurants and include FMCG products in our offering,” says Bernard. “Initially, we were scratching the surface, we’d have one cylinder, and if someone ordered four cylinders, we’re done! But now we own stock. We’re not relying on a third party, and we have stock on demand when our customers need it.”

The Mama gas warehouse in Nairobi, Kenya.

Additionally, Mama Gas tracks the location and consumption of all its LPG cylinders. “This helps us understand how much gas is being consumed and forecast the food they’re using to inform our FMCG offering,” says Bernard. “This means we are more informed on our customer’s needs than anybody else in the industry. Now that we’ve proved the concept, we’re looking at how we can scale and where we can scale to.”

Mama Gas’s business model fits Untapped’s Smart Asset Financing model perfectly. “We can track the movement of the gas cylinders we financed as they’re filled, distributed, collected when empty, and refilled again,” says Caitlin. “We can see transactions happen and watch the money move. All these data points allow us to tell the story of the growth of Mama Gas through data. It’s Smart Asset Financing at its finest!”

Source: Medium.com
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