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Coffee beans make room for avocados

The Kenyan company Kakuzi is majority owned by British investor Camellia Plc. Originally, Kakuzi was a sisal plantation which then diversified into coffee production. Coffee was the main activity when Camellia invested money in the company. Over the years, the coffee plants were grubbed up, and they’ve made way for avocados and macadamia nuts. Additionally, the company grows pineapples on a small scale and has activities in forestry and livestock.

“They saw opportunities to grow other products besides coffee, and that’s why Kakuzi decided to diversify its production,” says Graham McLean, Managing Director Agriculture for Camellia. The international market for coffee became less and less profitable for large commercial growers in Kenya over the years. In general 80 percent of the global coffee production is produced by 25 million smallholder farmers, which sell at any price and thereby make it more difficult for large commercial production. “We’ve phased out coffee, in favour of avocados and macadamias.” The transition was gradual. First the avocado trees were planted, and eventually, the final coffee plants had to make room for the macadamias. “We now have multiple crops at Kakuzi.”

Hass for international market
The company harvested 7,100 tonnes of avocados on 515 hectares last year. Last year, 1,800 tonnes were packed for small growers that have joined Kakuzi. “Hass avocado is the variety most in demand on the avocado market, and demand is rising, so it was definitely a good decision to start growing avocados,” Graham continues. The Kenyan company markets Hass and Fuerte avocados. About 90 per cent of Hass export is meant for France. The remaining volume is distributed among other EU countries, UK, Switzerland and Scandinavia.

Only a small percentage that doesn’t meet export requirements is sold on the domestic market, although the Kenyan avocado market isn’t very large. It’s different for the cultivation of pineapples, a small production compared to the avocado cultivation. “For pineapple the focus is on the domestic market. Kakuzi markets all its pineapples on the Kenyan market.”

Growing market makes it interesting to invest
The fruit cultivation is an attractive market to invest in. “Demand for fruit continues to rise, due to growing demand from growing world population regardless of where the fruit is grown,” Graham explains. “There appears to be an endless market for superfoods such as avocados, berries and nuts, and with Asian markets emerging, that demand will only continue rising.” Besides horticulture being attractive from the perspective of investors, interest from consumers is also increasing. “There’s more interest in the origins of products, that’s why it’s important to have everything in order.” Graham means the necessary certificates for the cultivation and social circumstances for the cultivation companies.

Not a quick profit

An investment in agriculture, however, requires a long-term vision. “We have a long term philosophy regarding investments. We see ourselves as custodians of our assets for future generations. The goal is to continuously improve these projects for the next generation. We truly have a long-term vision.” Graham continues: “You don’t invest in agriculture with the idea of a quick profit, sharp exits don’t fit with our philosophy at all.”

The risks of investing in agriculture are mitigated as much as possible by spreading the investments. Camellia has interest in the cultivation of tea, rubber citrus and soya among other products, and also invests in winegrowing and production (Linton Park Wines). Additionally, the company invested in various engineering and food service/logistics companies. “We have a ‘global footprint,’” Graham explains, “to mitigate the consequences of climate, prices, exchange rates, political risks and other risks that are connected to investments in agriculture.”

Politics and agriculture are always connected, Graham says. Whether a grower is located in the US, Europe or Africa, political issues always play their part. “That’s part of life. It’s like the weather, there are good and bad political circumstances, and they alternate.” Camellia’s African operations can be found in Kenya, Malawi and South Africa. These are all relatively stable countries on the African continent.

More information:
Graham McLean

More on this topic:
African agricultural land more attractive to investors
Investing in horticulture requires a patient investor

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