Operating an agricultural firm in an emerging economy, to meet the expectations of customers in developed economies, can be a tough juggling act—but one at which Sundays River Citrus Company is excelling, as Andrew Pelis finds out.
Ken Nieuwenhuizen, the recently-arrived managing director of Sundays River Citrus Company (SRCC), had taken early retirement last year, after spending many years working around the globe with Coca-Cola. However, just over six months ago, the lure of joining SRCC, based in South Africa’s Eastern Cape—the very region he hails from—proved irresistible.
For one thing, SRCC has maintained a steadfast commitment to Black Economic Empowerment initiatives throughout the global recession, as well as successfully tackling the many challenges of managing a business in an emerging economy that serves customers and consumers in developed ones.
Formed in 1924, SRCC originally operated as a citrus packing facility. “Back then, it was totally controlled by the Government and produce was sold by the Control Board,” states Nieuwenhuizen. “Then, in the early nineties, deregulation meant that the business had to fend for itself. This was good for the farmers but it made marketing a much more important part of the process. Today, we are fully fledged, from the orchard to the fork,” he adds.
The company’s strategy for international marketing has changed significantly since deregulation. It deals with roughly one quarter of its volume itself, and uses selected agents, including Capespan and Dole, for the rest.
SRCC was formerly run as a co-operative but now operates as a company limited by guarantee and owned by 120 members. Located in the Sundays River Valley in the Eastern Cape, which is regarded as one of the poorest provinces of South Africa, it is roughly 65 kilometres east of Port Elizabeth, in an area which is rich in agriculture.
There are three primary crops: lemons, navels and valencias, and each contributes roughly a third of turnover for SRCC. Having packed 20,000 cartons in its first year, the company and its grower shareholders managed to increase production to the record of 8.5 million cartons packed and exported during the 2006 season—almost 12 per cent of South Africa’s total citrus crop that year.
SRCC has firm customer roots in the UK, supplying high-profile supermarkets such as Asda, Sainsbury’s and Tesco, and also has numerous important customers across Europe, Russia, the Middle East and the Far East. While the company does not supply to the US market, it is active in Canada. Approximately 70 per cent of SRCC’s total produce is exported.
At present, the company serves some 170 production units owned by its 120 members and owns three pack houses in the Valley. With 180 permanent staff, one of the challenges it faces is the sudden influx of workers in the peak season of July and August, when the workforce can rise to 3,000.
“Our picking season starts in March and runs through to October each year,” states Nieuwenhuizen. “Many of our seasonal workers return each year which is something we encourage, as it reduces the need to constantly train new staff. Training still plays an important role in the operational side, however, and in our busy season we will run double shifts every day and require well-trained staff able to cope with the high number of changeovers resulting from the increasing complexity in the marketplace, our processes and of course, the operation of the machinery and equipment.”
One other big challenge the company faces is time, due to the pressures of delivering perishable goods over long distances in excellent condition for a demanding marketplace. “As soon as we’ve packed the fruit we need to get it into refrigeration; fortunately we have one cold storage facility next to our operations and Port Elizabeth provides easy access to the others. Our challenge is to ensure that the produce is packed and refrigerated properly for the whole duration— our objective is not to break the cold chain,” Nieuwenhuizen asserts.
The company closely monitors cold chain performance based on ‘dwell time’. “This is measured in terms of hours—we do not want our fruit in local refrigeration for more than 48 hours before it gets to port. We are currently managing our dwell time to less than 24 hours and are very happy with this year’s performance. The company has also outsourced its transportation requirements; we tender all these contracts each year as the performance and reliability of suppliers is essential to our customers and our business.”
Experienced workers also inspect all the fruit, grading its quality in one of two classes, according to the product’s suitability for export. “We keep an enormous number of statistics on each day’s work to monitor and record the various classes of fruit that we are producing,” says Nieuwenhuizen. “Traceability has become a requirement of many of our customers and we are able to trace produce back to every orchard.”
Traceability and close relations with each farm are an integral part of SRCC’s success. As such, it runs a technical department that provides weekly advice to its members on good farm practices, farm management, pest control and irrigation. The latest initiative has been educating its farmers in the virtues of using the high-quality organic compost produced by the recently-established SRCC compost production facility to improve their soil quality, in the interests of long-term production sustainability.
SRCC is also very excited by the progress of its Black Empowerment programme. “We are aiming to increase the number of black farmers that are members of our company through a government-assisted project that purchases farms, educating and preparing the farmers to run operations. Our structure allows us to do this successfully, by retaining these black farmers as members of our organisation and providing them with all the support services that we offer, so we are now actively looking for more farms that are up for sale.”
Indeed, Nieuwenhuizen cites farm management as one of the big challenges the future will throw up. “The packing and shipping is, relatively speaking, pretty straightforward; our challenge is going to be producing consistently the top quality fruit that meets our customers’ increasingly high standards on a profitable and sustainable basis.”
SRCC has also found it must continue to adapt to technological advancement in a labour-intensive environment—another big challenge. “One of the things we wrestle with in South Africa is the issue of labour versus automation,” he explains. “We have to balance our desire to offer employment opportunities with the need to be more efficient.
“We are currently very labour-intensive but there comes a time when you have to also look at equipment to improve the quality and efficiency of your operations. This is certainly a very different type of business to the one I came from, particularly given the agricultural focus,” he admits.
“To stay in the race you have to be able to run it, so we are actively looking at how we can upgrade our operations to ensure that we remain South Africa’s citrus leader for the overseas market. To achieve this, we will need to keep up with technological advancement in order to continuously meet the exact needs of our customer base,” he concludes.