Rising demand for healthy foods is emerging as the key driver of Kakuzi Plc’s growth and profitability. The publicly-listed firm’s diversification of its portfolio over the decades offers an interesting look not just into the company and agriculture in Kenya but global industry trends as well.
Its agricultural portfolio includes avocados, macadamia, blueberries, commercial forestry, livestock and a tea farm in Nandi Hills. However, a bigger problem threatens its continued success.
In the past year, Kakuzi’s reputation has taken a beating as cases of human rights abuses were uncovered – after 79 Kenyans filed a legal claim in the High Court in London against the firm’s Kent, UK-based parent, Camellia Plc, for alleged rapes, assault and harassment by security guards employed by Kakuzi. Camellia Plc holds a controlling 50.7% stake in Kakuzi.
On its over 30,000-acre land parcel leased in Murang’a County, a large community lives on private property. Kakuzi’s history can be traced back to Kenya’s brutal colonial occupation by the British, to 1906 when settlers took over 10,117 hectares (24,999 acres) of land there.
Soon after the human rights case was highlighted in the UK’s Sunday Times, supermarket chains in the country including Tesco, Sainsbury’s and Lidly stopped Kakuzi’s supplies of avocados to their stores and joined other voices in demanding accountability.
Since then, the company has been introducing a raft of new measures and structures to improve its human rights credentials in a bid to boost investor confidence and its bottom line. It appointed an Independent Human Rights Advisory Committee chaired by former Attorney-General Githu Muigai, established a two-tier operational grievance reporting mechanism and engaged an international monitoring group. It also introduced more community initiatives – including opening up more access roads, offering fruit maturity testing services for smallholder farmers and employing female safety marshalls.
Away from the case, the company has remained profitable and continues to be a market leader in segments of agriculture in Kenya.
The company has been gradually increasing the acreage for cultivation of avocados – the biggest contributor to its profits. From around 300 acres in the early years, Kakuzi had 2,179 acres planted with avocados in 2020 as noted in its annual financial statements.
The development of its avocado operation has been consistent with rising global demand for avocados over the past decade. In the Western world, avocados have become a cultural phenomenon with avocado-infused food products from sandwiches to coffee proving popular, in addition to other products such as oils.
In the US the consumption of avocados has risen from 220,000 tonnes in 1985 to 1,323,000 tonnes in 2019. The consumption of avocados in Europe grew on average by 8% in three years (2017-2019) and the consumption in 2019-20 was 73% higher compared to 2015-16. Consumption in both markets is only expected to surge further in coming years. It is therefore no surprise that, in 2018, Kakuzi discontinued its pineapples operation to focus on avocados which continue to fetch higher prices in the export market.
The Kenyan government also recently struck a deal with China to export avocados, and Kakuzi hopes to be among key players once the arrangement is fully operationalized.
Kakuzi primarily grows the Hass avocado, although the Pinkerton avocado also features in its portfolio.
Avocados are among healthy foods that have come to be considered ‘superfoods’ – a marketing term for foods with high nutritional density including leafy greens, nuts, legumes, berries and green tea. The global marketing hype around the benefits of healthy foods has been a major contributor to the rising demand for agricultural products such as avacados, nuts and berries – something Kakuzi duly noted while devising its diversification strategies.
Kakuzi commercially grows, cracks and sells macadamia nuts and has over 2,535 acres allocated to the nuts. It is another of the company’s fast-growing operating segments. In 2020, Kakuzi recorded macadamia sales of Ksh654.7 million up from Ksh502.4 million in 2019.
Yield ranged between 609 and 641 kilograms per hectare. Saleable kernel fetched a net price per kilogram of around $14 (Ksh1540).
Among the biggest markets for Kakuzi’s macadamia nuts are Western Europe, China and the United States.
Blueberries are another of the so-called ‘superfoods’. Blueberries are high in anti-oxidants, fiber and nutrients. They’re good for skin, preventing heart disease and regulating blood sugar.
These health benefits have made blueberries grow increasingly popular in East Africa and the world at large.
Kakuzi’s Manager for the blueberry operation, Laban Koima, told Business Today in an interview on Wednesday, September 1 that they were surprised by local demand for blueberries after they began growing them on an experimental basis in 2018.
The local and regional market, he disclosed, accounted for about “25-30%” of the overall market for blueberries which Kakuzi grows, packs and sells.
Kakuzi is keen on expanding the blueberry operation provided they continue fetching good prices in the market.