Kakuzi ltd which is listed in Nairobi exchange and deals in farming is planning an exit on pineapple farming. After growing pineapples for over two decades now, it is signaling a shift in its products. Kakuzi Ltd is increasing acreage under avocados whose demand has skyrocketed globally.
Kakuzi Ltd while announcing that decision in March 2018, they also announce a 5.2% increase in net profit to Sh561.6 million for the year ended December 2017. The profit increase according to the company is attributed to the higher international avocado and macadamia prices.
Although the company which owns more than 25,000 acres of land has been growing tea, forestry, livestock , pineapples and other fruits, it has now decided to focus its efforts on growing hass avocado whose returns per-acre are much higher than that of pineapples.
In a statement produced by Kakuzi, the decision was reached to discontinue with fresh pineapple operation in favor of planting pinkerton, hass and fuerte avocado varieties.
The major pineapple producers in Kenya include Kakuzi, Del Monte’s in Thika and Ndemo farm in Kilgoris. For the years now, Kakuzi has become synonymous with the crop.
While some of its harvest is exported to countries such as France, Germany, Italy, Belgium and the Netherlands – mostly in canned form – Kakuzi has always sold its produce in the local market. The fruit is also used to make concentrate for juice products.
Over the past several years, macadamia and avocado have become choice crops for agricultural firma in Kenya with Kakuzi, Sasini and other major players reaping heavily.
In 2017, according to their statement, the company closed with 1,500 acres of land under avocado from which it harvested 7,282 tonnes of fruit. At its peak, Kakuzi had over 120 acres of its own land under pineapple and another 1,100 acres under a joint venture with juice maker Del Monte.
However, in 2017, the company closed with just 60 acres of its land under pineapple and the partnership between Delmonte is set to be terminated in future years.
According to Kakuzi, the increase in profit is as a result of continued market demand for avocado and macadamia throughout the year. The company also attributed profitability within the Tea operations has continued to reflect the difficult trading conditions and significant inflationary pressure on labor and other production costs.
Kenya is frequently cited as a “bright spot” in African agriculture. Conducive government policy, strong donor support and private-sector leadership have helped to create success stories in exports to the EU. Policy changes supporting this growth include the liberalization of the fertilizer market. Following the removal of price controls and subsidies, increased competition led to lower fertilizer end-prices, triggering a 14 percentage-point increase in adoption rates among smallholders. Today, agriculture amounts to half of Kenyan GDP and employs 75% of the Kenyan workforce. Kenyan policy-makers and agribusiness players continue to prioritize the growth of agricultural exports, both in green beans and other cash crops like avocados. be
Kenya is one of the world’s largest producers of avocados, with production of 200,000 tons in 2017.For comparison, the largest producer is Mexico with about 1 million tons produced annually. Local varieties dominate Kenyan production (about 70% of total), whereas Fuerte and Hass, the varieties suitable for export, make up approximately 20% and 10%, respectively.
Kenyan Avocado Export Supply Chain
An estimated 70% of Kenyan avocados – even those for export – are produced on smallholder farms. When not linked to exporters through an out-grower scheme, farmers market their avocados through middlemen, either legally government-certified agents or unofficial brokers. These middlemen typically harvest avocados themselves and organize transport to Nairobi packhorses. This initial leg of transport is usually done with small pickup trucks. Once at the factory, avocados are quality-checked, sorted, washed, waxed, pre-cooled and packed in cartons. Once packed, exporters stuff the cartons into refrigerated containers (“reefers”) outside the processing gate, and shipping companies then transport the reefers to the Mombasa port. There, the reefers, which are controlled-atmosphere-treated, are loaded onto a ship and later trans-shipped in Salalah, Oman. Finally, the reefer containers are unloaded in Europe and delivered to importers
Most often vertically integrated with exporters, packers procure and package a 4-kilogram (kg) carton of avocados at a cost of about US$ 4.10. An additional US$ 1.60/carton is required for shipping to Europe by sea in a reefer. With the import price fluctuating around US$ 7-8/carton, the supply chain overall is profitable. This situation was enabled by government-led infrastructure investments, followed by private-sector investment in reefers, which helped to reduce transport costs versus expensive air shipments. Once this tipping point of profitability was reached, investments started to naturally flow into the sector.
Impacts of Supply Chain Barriers and Potential Solutions
Successful initiatives to overcome supply chain barriers are presented, as well as some remaining opportunities to overcome challenges to future growth.
Transport and Communications Infrastructure
Mombasa is the pivotal port for East African countries and is accessed via the main corridor, the Nairobi-Mombasa highway. By the early 1990s, the quality of this road had deteriorated due to high traffic. The Kenyan government, with the help of the World Bank and the EU, decided to invest in rehabilitating the highway. Investments were made over approximately a decade, ending in 2005. Travel time from Nairobi to Mombasa was reduced by 40%, from 12 to 7-8 hours, and costs decreased as well. Typically, road rehabilitation projects in East Africa drive operational cost reductions of 15%. Although this saving has a marginal impact on the Kenyan avocado industry – less than 1% of the European end price – the incremental benefit is applied to many different value chains. The overall benefit for Kenya and Kenyan agricultural export value chains is thereby important.
Introduction of reefer container technology has made Europe accessible for Kenyan avocados.
One of the major challenges previously faced by this industry was the lack of suitable transport equipment. If not cooled, avocados ripen faster than the time it takes to ship them to Europe. Exports to Europe, therefore, were only possible through expensive air shipments. Alternatively, transporting by sea was only feasible for the more proximate Middle East, where avocados sell for much less than in Europe.
Recognizing this opportunity, exporters first engaged temperature-controlled, break-bulk vessels to replace expensive air freight. They then approached A.P. Moller-Maersk to present the business case for refrigerated container transport. Shipping companies consider a number of factors when evaluating a value chain for reefer investment. Most importantly, they look at the economics and growth potential of the value chain. In this case, if Kenyan avocados were able to be sold profitably when transported by air, there was a clear case for investment in sea freight, provided quality could be maintained during the journey. In addition, key enablers must be in place to ensure sustainable operations. Fortunately, the Kenyan government had invested in the Mombasa port and was able to provide the necessary infrastructure (e.g. specific plugs, berth capacity) to support reefers. Continuous investments are being made to accompany the growth of reefers in the Mombasa port, including a new berth to open this year.
Early packing of containers ensures an uninterrupted cold chain. When dealing with perishable produce, maintaining an uninterrupted cold chain is critical for food quality and safety. When reefers were first introduced, exporters preferred to transport avocados to Mombasa in regular trucks and pack the reefers at the port. Over time, exporters realized that they could command a price premium in EU markets if a cold chain was begun as close to the farm as possible. This price premium outweighed the costs of bringing an empty reefer to Nairobi and loading it at the pack house gate. This extended cold-chain-arrangement also simplified logistics by eliminating one touch-point at the port, and is now common practice.
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Kenya is known to support its budget through agriculture majoring on exports of tea, coffee, flowers. However, Hass avocado is now getting a lot of attention. Kenya is in an ideal location for Avocado production since it’s in subtropical climates and avocados do well in such conditions.
South Africa and Kenya are major exporters of Avocados in Africa, with hass, fuerte, and pinkerton varieties. There is a countless potential for hass avocado production in Kenya due to its climatic conditions especially in central Kenya, upper eastern and rift-valley areas. Most avocado farms are near Nairobi, where packing factories are located for export.
Main avocado seasons for the Kenyan avocados is march to September but the fuerte one starts as early as February while the Hass is normally available from May. Nonetheless, due to the difference in climatic conditions and different avocado growing zones in Kenya, there are fruits throughout the year although in smaller quantities which are mainly sold locally.
Also, Kenya enjoys a competitive advantage over other exporting nations mainly because the hass avocado variety harvesting period extends later in the year than Peru’s, thereby granting Kenya a window of opportunity in the global market. Hass avocados from Kenya sell in European markets at roughly three times their domestic price, making the export options extremely very attractive.
More than 115,000 metric tons of avocado are produced in Kenya annually, where 70% are normally grown by small-scale farmers. Sometimes back, most avocados were traded locally, however, this trend has tremendously changed over time where now over three quarters of the produced avocados is exported overseas.
This drastic change can be attributed to technological advancements called `reefer` introduced by Maersk lines has made it possible to transport Kenyan avocados beyond the middle east to Europe markets.
Most farmers who grow Avocado are commonly found in Muranga, Kiambu, Nyeri, Kisii, Meru as well as Mt. Kenya regions. Over the years, Kenya has seen a sharp increase in the number of counties interested in Kenyan Avocados, and these countries are, Hong Kong, Russia, Singapore, Belgium, Germany, Netherlands, France, Egypt, Spain, Iran, Libya and many more. Leading exporters from Kenya include Mt. Kenya Avocado Farms.
The nutritional benefits of avocado are another boosting factor to its demand. All over the world people knows about its benefits and the wide variety of its uses. Guacamole food, with avocado as its main ingredient is very popular especially in America, greatly increases avocado consumption and importation.
Muranga county government through its Governor Mwangi Wa-Iria has started an initiative of encouraging its residents to embrace farming of hass avocados as a way of eradicating poverty as well as boosting their health. The national government of Kenya has also initiated programs that help in boosting the avocado industry to fully comply with the global requirements. Bodies like KEPHIS are actively involved in monitoring as well as educating farmers and exporters. In addition, other county governments are also helping farmers get good market rather than struggle with brokers who offer them low prices.
As you read this article today, more and more farmers are compelled to start growing Grafted hass avocados, which will triple the country’s production rates for exportation. The sky is not the limit for our esteemed farmers. The future belongs to you farmer who is willing to make your hand dirty!