Two startups walk into an FMCG...
How Flour Mills of Nigeria invested in OmniRetail and Alerzo
“It's time to admit that Jumia-fatigue is real,” said last Sunday’s newsletter.
Welp! It was this year’s most popular edition, outpacing even the Open Banking one. Maybe I should just stick to writing about Jumia and regulation.
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Flour Mills of Nigeria and a Tale of Two Investments
In 2024, Flour Mills of Nigeria (FMN) reported ₦2.29 trillion ($3 billion) in revenue. Fewer than seven Nigerian companies earned more, making FMN the country’s largest fast-moving consumer goods (FMCG) company by some distance.
When you’re that big and generating ₦20.58 billion in free cash flow, you eventually start thinking bigger. You’ve already squeezed every efficiency play your core business can offer. So you go looking for bets that are less operational and more exponential.
So, like many legacy companies, FMN found its way to venture capital investing.
Not the kind that requires reinventing the wheel, but the kind that understands how the wheels already turn. For FMN, that meant backing companies trying to fix wholesale distribution: a problem it understands deeply.
Post-pandemic, a wave of B2B e-commerce startups raised over $470 million across Africa. Their pitch? That distribution could be smarter, faster, and digital-first. FMCGs like FMN, Nestlé, and Unilever had long relied on analog distribution chains: they sold to a handful of big, old-school distributors, who in turn supplied the corner stores. The FMCGs stuck to manufacturing while others figured out how to move product.
But FMCG insiders who knew how the sausage was made spotted cracks. Distributors were inefficient and lacked data. Cue the pitch decks. Suddenly, distribution was a tech play.
So FMN got in on the action. One of its bets, OmniRetail, was revealed last week in a TechCabal article. The second, never before reported, was Alerzo.
Let’s start there.
The Lesser-Known Bet
Through its investment vehicle, FMN invested in Alerzo across multiple rounds, according to three people with direct knowledge of the matter. The FMCG invested around $8 million. A part of that investment was a product-for-equity deal.
Alerzo doesn’t enjoy the same name recognition as its Lagos-based peers, partly because it began with a strong Ibadan focus. Its CEO rarely courts the press, and the company hasn’t poured money into PR. It’s mostly made headlines for funding rounds and layoffs.
Here’s TechCrunch again, from August 2021:
“Today’s news is from Alerzo, a little-known B2B e-commerce retail startup based in Ibadan, Nigeria. The company is announcing a $10.5 million Series A round…Alerzo has raised more than $20 million since its launch.”
That figure only tells part of the story. According to sources, Alerzo raised money in at least two additional rounds after 2021. The company no longer discloses funding publicly, and details of those later rounds remain closely guarded.
Its model is straightforward: ensure informal retailers outside Lagos can restock their shops using an app. It has warehouses, managed logistics in-house, and focuses on cash-based retailers. It sounded like the kind of high-friction problem venture capital was born to solve.
But friction cuts both ways.
Distribution Is a Margin Game
Here’s the first problem: distribution is a brutally low-margin business. The old-school guys know this and are pragmatic.
They focus on warehousing and rarely offer delivery unless the retailer is buying in bulk.
They run lean. Many have fewer than ten full-time staff.
They avoid adding costs like delivery or tech unless absolutely necessary, because every extra layer eats into already thin margins.
Now contrast that with Alerzo:
“Alerzo owns and operates its full-stack tech-driven supply chain….The company provides warehousing and fulfillment solutions to suppliers and storefront delivery to informal retailers. It currently owns over 200 vehicles and 20 warehouses to serve its thousands of customers.”
It’s difficult to make the math work because margins in the FMCG restock business hover between 2–5%.
A 2023 industry piece summed it up bluntly:
“Key players…turned on a firehose of FMCG products aimed at small retail across Africa...Their hoses are all connected to the same hydrant and there is little differentiation in the current product mix. The bulk of these products are commodities supplied by one of a few multi-national and local corporations (e.g., Unilever and Dangote) who have little incentive to share a bigger cut of the margin with new platforms.
To their credit, some B2B startups saw this coming. So they layered in working capital loans. TradeDepot’s $110 million raise was anchored on Buy-Now-Pay-Later (BNPL) for five million SMEs. Alerzo launched its lending product around 2021.
The logic was solid: if you know what retailers buy and how often they restock, you can lend with confidence. But the reality was different.
At least two major players in the space suffered significant losses from lending and paused the credit programs entirely to regroup. It is unclear how Alerzo’s lending business fared.
By 2023, the industry was in retreat. Distribution margins were thin, lending was bleeding, and the boom that began in a frenzy of VC decks had tapered quietly, leading to cost-cutting and consolidation.
The Winner in FMN’s Portfolio
While others scrambled to stay afloat, FMN’s other bet—OmniRetail—was thriving.
With $120 million in 2023 revenue, it was named Africa’s fastest-growing company by the Financial Times for the second year running. In April 2025, it announced a $20 million Series A round.
OmniRetail often talks up its asset-light approach, but what does that mean?
According to TechCrunch:
“Retailers use the app to order inventory, access working capital, and make digital payments. In the background is a third-party logistics network of over 1,100 vehicles and warehousing capacity managed by 85 local partners.”
In its words:
“OmniRetail’s asset-light strategy has been important in hitting profitability. In 2023, the platform became EBITDA positive. In 2024, it turned net profitable.”
CEO Deepankar Rustagi had previously worked at Tolaram Group, makers of Indomie, and brought those lessons into OmniRetail. And this time, Tolaram wasn’t just a model; it was a backer.
Tolaram is one of OmniRetail’s strategic investors. And unlike most FMCGs, which have little incentive to share margin with new platforms, Tolaram has reason to boost OmniRetail’s success.
Two people familiar with the matter say OmniBiz—the company’s flagship B2B ordering platform—handles distribution for around 25% of MultiPro’s (a Tolaram subsidiary) product volume and collects payments through OmniPay.
OmniPay, the fintech engine of the business, has become its standout performer. It enables collections, transfers, and credit access. It processes around $95 million, lends around $4 million monthly and claims default rates of less than 1%.
Here’s Rustagi in a March 2024 interview:
“Just buying from distributors and selling to retailers did not have enough margin and benefits, but engaging with distributors on the platform and embedding working capital tools like OmniPay increased the value chain margin for us to hit profitability.”
At a time when there’s relative quiet in the industry, OmniRetail is grabbing headlines for all the right reasons.
Alerzo has kept a lower profile, with little visibility into its recent performance beyond layoffs. OmniRetail has soared. What explains the difference?
Some point to partnerships. As one expert put it: “Alerzo would have expected FMN to back them like Tolaram is backing OmniRetail.”
For FMN, it won’t make a world of difference. Venture investing is about finding an outlier in your portfolio. It looks to have done that here and won’t be losing sleep over its other bet.
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That’s it. See you on Sunday! Don’t forget to leave a comment.