20 years on from its founding, Cape Town-based Lona Citrus is today one of the largest citrus fruit exporters in South Africa. Recent times have thrown up new challenges but Lona’s carefully thought-out business model has allowed it to thrive.
Lona Citrus is one of the leading citrus fruit export businesses in South Africa. The company moves more than 4.5 million 15 KG equivalent cartons of citrus each year and takes this well-established, much-loved South African product to important markets all over the world. The UK, Canada, Germany, France, China, Japan, Russia, Saudi Arabia, the Netherlands, Norway, Malaysia and many other countries bring in fruits from Lona every year and with demand growing, the industry is in a good place.
However, like any industry, the citrus business has its own set of unique challenges, especially in South Africa where some of the worst droughts in generations have decimated farming operations and the ongoing citrus black spot (cbs) debacle continues to frustrate.
The droughts which were exacerbated by the powerful weather effect known as El Niño, where warming in the Pacific Ocean sea surface temperatures causes differing weather effects across many parts of the world, reportedly cost the South African agriculture sector R16 billion.
Problems arising from the droughts came about towards the end of last year and some subsequent water restrictions were imposed by the government. The result on the citrus industry is that the harvests will be reduced and the actual fruits will be smaller than normal and therefore harder to sell.
Justin Chadwick, CEO of the South African Citrus Growers Association (CGA) said in a recent interview: “We anticipate a reduction in our export volumes because of the drought conditions and extreme heat. The big concern now is we have small amounts of small fruit and a lot of markets don’t like small fruit. They like big fruit.”
This news is a blow for the industry which employs an estimated 100,000 people and where exports account for 80% of the industry’s R9.4 billion in annual revenue.
Lona Citrus is an integrated exporter and owns, or partially owns, a number of farms across the country. The business helps farmers to grow and is a part of joint ventures where knowledge and financial advice is shared with partner farmers. Lona is also involved in the transportation and packaging of fruits, and has a part in production all the way through the value chain, from growth to export.
Lona’s farms are Imibala, Mimosa, New Dawn, Riverside and Zalo. These are located in the Eastern Cape, Limpopo and the Western Cape. Its ventures alongside other farmers allows them more cost efficient terms with suppliers. The prices and payment terms negotiated by Lona are naturally better than what the individual farms are able to achieve and Lona also takes care of marketing all crops produced.
Despite the damaging drought conditions, Lona has an expansion and development program on its existing operations that will enable it to grow substantially in the next 10 years, with a particular focus on its core export market as well as the local markets in Africa.
Today, the company is a totally different operation compared to when it started in 1996. Managing Director, Spencer Johnson had only a garage in cape town, a R30,000 loan, and a can-do attitude. There was disgruntlement in the industry as deregulation made people’s lives chaotic and this made for the perfect conditions for starting what was then a marketing company, selling many different fruits and vegetables. After some time, it became clear that the focus was citrus, with 70% of fruit exported being citrus. Today, the company’s main product lines Navel oranges, Valencia oranges, Soft Citrus (Clementines, Mandarins and Satsumas), Grapefruit and Lemons and the portfolio is bolstered by mangoes, grapes, pears, plums, avocados, pomegranates and various vegetables.
The business model is unique as it encourages profitable business and commercial success but also sustainability and the development of previously disadvantaged farmers.
The company says of its success: “Compared to similar firms operating in the South African citrus industry, the Lona Group possesses key characteristics that enable it to occupy a growing and unique space within the sector. As mentioned, agriculture needs to encompass sustainable and environmentally responsible farming and operation practices as well as ensuring profitable yields, a growing business and farmer and farm-worker well-being.
“Lona manages to achieve this through our unique transformative business model which combines: participating at each level of the value chain right up to export ensuring greater control and reliability of internal company operations and supply security; development of strong relationships with suppliers and final market; socio-economic development of farming communities; support and mentoring to emerging black farmers which results in increased returns and markets; and commitment to innovation and research and development with regards to solutions to reducing energy consumption and improved business practices.”
But even with the success that the company has seen over the past 20 years, there’s never time to rest of laurels. The drought, the cbs, the economic climate, the ongoing energy issues and labour all create hurdles.
By focussing on key markets, Lona can maximise its income, and the UK is becoming an increasingly vital market, despite EU laws around cbs.
“The bare facts are that in 2015, the UK usurped Russia to become the single biggest country to receive South African citrus, with just over 11 million cartons (11,046,000 cartons) arriving on our shores,” said Produce Business UK in December.
Deon Joubert, the CGA’s special envoy to the EU, says that South Africa is still spending R1 billion each year trying to navigate and mitigate the risk of cbs, and hopefully a concrete solution can be agreed at some point, sooner rather than later.
However, the CGA is confident about the future of the industry, especially in the UK.
“The UK is a massive part of our success story. The UK is by far the most dominant in terms of soft citrus market share and I expect it to grow,” Joubert told Produce Business UK.
“There’s still more planting going on,” said Chadwick. “So the probability is that our export volumes will continue to grow. There’s work [being done] on varieties for [production in] different regions – looking at soft citrus that can grow in warmer climates where we’ve battled before. We’re constantly looking at new products and improving the yield and the brix level, improving colour and the like.”
Lona calls Tesco, Sainsbury’s, Marks and Spencer and other large-scale UK fresh produce retailers some of its most important clients so the continued development of trade between the two countries looks set to be vitally important for the continued growth of the company.
One thing that is certain is that Lona will continue to mature but in a sustainable and considered manner, following one of its key values “Growing in harmony with nature”.