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“Vertical integration and geographical spread the key to success”Although being a vertically integrated organisation comes with certain risks, it is also the key to success. That’s what Greg Reinauer (Tom Lange Company) and Greg Thorne (Seven Seas) argue. The same is true for being a global company. For example the Russian ban had a negative impact, but a positive one as well for the US based company.
“It is important to have a vertically integrated organization,” argues Greg Reinauer, President of Tom Lange Company Inc. , the parent company of Seven Seas . “That’s the key to success. We strive to control the entire chain from field to fork which enables us to supply our customers with the exact produce they want, when they want it and also to give our growers a premium on their product returns.” Seven Seas represents the international arm of Tom Lange Company Inc. an employee owned American produce distributor in business since 1960.
Big 5 is a registered trademark to Seven Seas.
Risks and opportunities
“Our business comes with risks as well,” admits Greg Thorne , CFO of Seven Seas. Many of the risks are controllable to a certain degree but other risks such as the weather and general market risk are not controllable . The current drought in the South African Cape region is an example. “We can’t influence the weather but we can mitigate the risks we face by having a diverse portfolio of interests which cover production, logistics and marketing,” says Thorne.
The Russian boycott did had a negative impact on the business of Seven Seas, but offered opportunities for them as well. “Since Russia closed its borders during the summer of 2014 for, amongst others, European fruit and vegetables, we have seen a decrease in exports from Europe to Russia, but having our own office in Russia, also created some opportunities for us,” explains Reinauer. “Domestic greenhouse production is growing rapidly as a result of the ban and our presence in this market allows us to take advantage of such opportunities. Our presence in other sourcing countries such as South Africa , Peru and Argentina has also created additional sourcing opportunity for us into Russia,” says Reinauer. Thorne adds: “Thanks to our global network, we are somewhat protected from the adverse effects of events in any one particular market . As they say: we don’t have all our eggs in one basket.”
So many markets, so many demands
“Volume wise North America is our biggest market, that’s where our group has its roots ,” says Reinauer. “But our entire portfolio is equally important. We market our products on a global scale.” The portfolio consists of North America , Asia, the Middle East, Russia and Europe, amongst others. “We have offices in several countries and each market is affected by different factors such as consumer preferences, domestic production patterns and the unique economic circumstances in each market,” explains Reinauer.
Asian markets for example are becoming increasingly important, but demands are specific. “This market is known for its high quality demands and the specific requirements for packaging,” says Reinauer. “Asian consumers are willing to pay more for quality produce, but they demand a specific size, pack and appearance of the fruit. If one cannot cater to these specific demands, then it does not make sense to export to this market.”
New sourcing countries on the rise
The same is true for the sourcing regions. Seven Seas uses multiple sourcing countries and is continually looking for new sourcing opportunities. “Latin America and Africa are important developing sources of supply for us,” says Greg Reinauer. “We have had our own office in South Africa since 2001 and we have excellent long standing grower relationships in place like the Dominican Republic and Morocco for example.”
“The World population is growing, while the available arable land is decreasing in the face of competition from other industries such as the biofuels industry,” signals Thorne. He sees this as the biggest challenge facing the industry. “Our industry is being challenged to grow more produce on less land” Reinauer summarises the biggest challenges in three words: “Land, labour and water. Effectively tackling these challenges requires vertical integration and a geographical spread of interests.”
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