Lona by East Coast Promotions

COMPANY PROFILE

2013

Lona Citrus

The benchmark in citrus

CompANY PROFILE

The benchmark in citrus

Editorial: Christian Jordan Production: James Clark

Cape Town based Lona Citrus has been exporting quality South African citrus for the past 17 years. General Manager, Irving Davelaar, tells IndustrySA that the company is committed to working with local farmers to continue to raise the profile of this important South African export.

Now is a good time to be operating in the South African citrus industry. The South African product is highly desirable in international markets and is often regarded as the industry benchmark. CEO of the Citrus Growers Association, Justin Chadwick, said in a recent newsletter: “The soft citrus sector exported a record 8.4 million cartons in the 2013 citrus export season,” suggesting that the demand for the product in foreign markets remains strong. For most farmers, getting their product to international markets requires a reputable exporter. Fortunately, there is a company that is partnering with citrus growers across the country and assisting with the development of their farms and distribution of their product. That company is Lona Citrus and General Manager, Irving Davelaar tells IndustrySA that Lona was in fact started in a garage in Cape Town.

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“The company was started in 1996 preceding the chaotic deregulation of the export industry and up until that point Capespan was a single channel distributer and getting an export license was very difficult,” he says. “Our founder and MD, Spencer Johnson, spoke to a few farmers and realised there was a large degree of discontent about the way business was being conducted in the industry so he started a marketing company in his father’s garage with a R30,000 loan.” In the early days, the company was not only a citrus exporter but focussed on a range of different fruits and vegetables. However, Davelaar says that this made it difficult to give full attention to each commodity as the seasons overlap. “As export volumes increased, Spencer recruited a few more people to manage logistics, marketing, procurement and other functions across all the commodity groups.”

Lona Citrus

“At the end of 2002, a management decision was taken to focus on Citrus. At this point citrus was doing very well and covered 70% of the commodities being traded. Obviously, domestically, it is geographically well spread so it limits risk when it comes to natural disasters, macro-economic impacts, pests and diseases, and fruit flies etc. Also, from an international marketing point of view, the market is huge. It spreads from Canada right across to Japan and this is why the company decided to divest from everything else we were doing and focus more on citrus. From then on we became a citrus export specialist,” he says. “A milestone in Lona’s history came when the company decided to integrate into primary agriculture in 05/06,” says Davelaar. “We invested in our first farm and this gave us further credibility with the likes of retailers such as Tesco, Sainsbury’s and Marks and Spencer. This gave the company

a sustainable advantage as it was now seen as a grower and exporter/trader supplying to some of the largest retailers in the world. “We have since invested in a couple more farms, to secure the sourcing of the fruit and gain more control of the supply chain. We are involved in all areas, from the farm all the way to export. In-between that we help farmers develop; we finance them, we aggregate their fruit and then we export it. This has given the company solid ground to stand on.”

PREVIOUSLY DISADVANTAGED Early on in Lona’s life, the business had a simple set-up, purchasing fruit from local farmers and exporting that fruit. However, today the set-up is very different. Lona, either fully or partially, owns five farms – two in the Limpopo, two in the Eastern Cape and one in the Western Cape. The company’s product portfolio is complimented by

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CompANY PROFILE input from independent farmers and also farms that it manages and mentors. “Of our total product” says Davelaar, “we own around 20%, we get 50% from independents and 30% comes from farms that we manage and mentor and these are previously disadvantaged farms.” Through the Land Redistribution Programme farmers have received land with a lot of potential for citrus growing but the hand-over wasn’t always done correctly with sustainability in mind. There is a lack of skills and knowledge and this has been hampering progress. Fortunately, Lona offers assistance in numerous areas. “Lona has played a big role over the last nine or ten years in mentoring these farmers. Assisting and facilitating these farmers in the process to obtain the relevant knowledge such as what fertilisers to use, when to use them, how to plant trees, how to manage admin and finance etc. “The main areas that farmers need support with is admin and finance. There is often a lack of paperwork, audit trails and the knowledge of financial management. It’s very admin intensive on our side and it’s important to act in an advisory capacity and not boss people around. It’s a challenge but it can be very interesting and it’s amazing, the feeling you get when you’ve been working at it for a

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couple of years and you see the improvement on the farms because of your input,” explains Davelaar. The impact of Lona on these farms is clear and evidenced in the statistics, especially the number of cartons exported. Davelaar details one example in which, thanks in part to Lona, the producer was able to increase their output by 430,000 cartons. “We have seen massive changes, sometimes in just a short amount of time,” he explains. “For example, there is a farm in north that we got involved with. In the beginning they were exporting around 20,000 cartons of citrus. In 2010, they did around 450,000 cartons. This improvement was over just four years.” Of course this is not the only example of the value that Lona brings to its partners. All of the relationships that the company has built have seen positive results. “In the Eastern Cape, we’ve seen the same thing,” says Davelaar. “We partner with a group of farmers, the Landbank and the IDC where we do all of the ground work to get these growers up and running and this year for the first time they broke the 100,000 carton mark. An increase from 70,000 cartons in 2012 to 180,000 cartons in 2013. Exceptional achievements, considering some of these farms were not even producing just a couple of years ago.” No matter whether the fruit comes from an independent

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grower, a Lona farm or a farm that the company is partnering with, Davelaar emphasises that the most significant factor is quality. “The quality of the fruit is what’s important to us. If it’s top quality we can send it to more attractive markets like the Far East and produce a better return for the grower. It doesn’t matter which of the farms it comes from, if it’s up to quality standards then it is consolidated with similar quality fruit and it goes to the customer,” he says.

LOCAL & INTERNATIONAL Being an export focussed company, Lona obviously has its finger firmly on the pulse of all of the important international markets but, interestingly, the company is keen to expand into the local market in South Africa and build its presence in the valuable African market. “We do operate in domestic markets but it’s a negligible amount at the moment,” explains Davelaar. “Domestic markets are different to export markets. In export markets, you pack the fruit at the pack house and send it to the cold store which is the central distribution point at either Durban, Port Elizabeth or Cape Town. So that’s a limited amount of high-volume locations to manage.

“Everything that doesn’t make it to export is for the local market and stays at the pack house. Now you would have to coordinate the 40-50 farms and pack houses and get the product to a central distribution point and then get it to a retailer so the logistics and coordination with local markets is a little more complex but it’s something that we are definitely looking into. We are trying to partner with a couple of local players and looking at the other African markets as well but it’s something that’s developing. “Logistics is expensive an often the infrastructure is not there so it’s an on-going process. “There are a billion people to the north of us, that’s a billion person market right there. It’s definitely something we are pursuing but there are a lot of macroeconomic and socio-political issues to navigate on top of infrastructural constraints,” he says. While citrus will remain the focus for exports, the company may diversify as it makes inroads in domestic markets. “In the local markets we may look at some level of diversification from the products we farm, but in terms of exports, our intention is to stay focused on citrus,” says Davelaar.

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CompANY PROFILE

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Lona Citrus

PREMIUM COLD STORE IN DURBAN Ethekwini Cold Stores provides a consistent, premium, high quality service to clients. In order to achieve the most efficient storage solutions (cold and ambient), Ethekwini Cold Stores continuously explores the latest technology that contributes to protecting the environment, improving efficiencies, and reducing cost. Our clients are our primary concern and we strive to deliver whatever it takes, especially in times of extreme pressure. This commitment is what distinguishes our service from our competitors. We source the highest calibre of professionals for our team and maintains the highest professional, ethical and business standards. The company is managed hands-on by experienced professional Directors, who observe good corporate governance.

CITRUS SPECIALISTS

Irving Davelaar

Over the 17 years of its existence, Lona has become an industry leader, not just in the citrus farming market but the export market more generally. Davelaar explains that today Lona is one of the leading export companies of fresh produce in the whole country. “We focus on citrus so that is quite specialised and quite niche. If we look at the market, we are the fourth largest exporter, when it comes to citrus, in South Africa and we are the eighth largest company in the export industry and that’s all commodities included. “Lona remains privately owned and is one of the largest citrus exporters in the industry.” Being an organisation of size, influence and experience, Lona uses its position in the market place to great effect when it comes to social initiatives. Its work with developing farmers and community projects is admirable and Davelaar says that upliftment is embedded in the culture of Lona. “In Limpopo and the Eastern Cape there are significant challenges and this happens to be where our two biggest farms are located so we are trying to build the businesses that we engage with in those provinces so that we can continue to develop the rural economy sustainably. “Citrus farming is very labour intensive but in order for people to be able to work, they have to be able to leave their

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CompANY PROFILE children somewhere and that is the idea behind one of our day care facilities funded through the Fair Trade program. Employees know their children are going to get fed and educated and this allows them to balance their life. It’s not something we see as an obligation; we see it as a necessity. “Internally, we have a slogan – you work at Lona, you change lives for the better. We are very passionate about building up the economy because there is a lot to be done, especially in rural areas as the government alone cannot do this,” he says.

THE FUTURE There is huge scope for expansion for a company like Lona. Increasing their involvement in the farming process, entering new markets, potentially increasing the product range – there are many options available but Davelaar suggests that the focus will be on the markets in the Far East as well as strengthening relationships with current farmers and developing new relationships with new farmers in the South African market. “We would like to take a balanced approach to international markets. We separate them into three main segments; Canada and the UK and Europe, Russia and the Middle East, and the Far East. “If you look at the demographics of the world, you would be short-sighted not to increase focus and strengthen one’s presence in the Far East with its large consumer base. However we do want balanced exposure in all markets. “We would definitely want to partner with the Development Finance Institutions like the Industrial

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Development Corporation, Landbank, Department of Rural Development and Land Reform, Development Bank of South Africa and the Public Investment Corporation to be a key development partner in their economic development strategies as we have a good track record,” he says. How is the company able to consistently build on its impressive track record? Davelaar puts the on-going success down to a commitment to both customers and producers. “We fight to get the best returns for our producers and we fight to keep our customers happy. There is a fine balance between the two. “We see the producers as one of us and we place huge importance on the customer because if you have no home for the product you have nothing. “We manage to consistently find a balance between the two and that is one of our key success factors,” he says. Without doubt this is a company that will be at the forefront of the market, raising standards and setting benchmarks, for some time to come. And, of course, behind all the fantastic work is the people and Davelaar concludes by saying that Lona has the best. “We have a passionate group of people who are in the industry because they want to be, not because they have to be.”

“We have a passionate group of people who are in the industry because they want to be, not because they have to be”

Lona Citrus

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+27 21 481 8200 www.lona.co.za

(0)1603 618 000 info@industrysa.com East Coast Promotions Ltd, Ferndale Business Centre, 1 Exeter Street. Norwich, Norfolk NR2 4QB