MACAZINE
December 2022
Volume 6
Market update from Brian Loader, Green & Gold Macadamias CEO
It has been a long time since I have had the opportunity to talk in person about the market with Green Farms Nut Company (GFNC) growers in South Africa. I hope to change that soon and plan to attend as many of next year’s 2023 offer meetings as possible.
The next few years see the macadamia industry having serious challenges. Most of us have experienced one, or if you are like me, several market interruptions during our careers in the macadamia business. This time is different and of greater consequence for the entire industry.
Simplistically, the current market reduction is caused by an imbalance of supply and demand, and the factors impacting both sides of that equation are far from simple.
Demand for macadamias is down. This was initially suppressed in 2020 by the pandemic, but now economic factors like as high inflation and interest rates, and geo-political factors in eastern Europe. The unprecedented combination has severely impacted consumer confidence.
Supply keeps growing. This has been anticipated – 2020 and 2021 season increases remained moderate (5-7%), and the 2022 season came along with a whopping 22% increase. The World Macadamia Organisation (WMO) predicts supply to grow by 15% per annum for the next 10 years.
Green & Gold Macadamias (G&G) is focussed on three core tenants to ensure it remains competitive:
Kickstart demand through the right product mix
There is a sales challenge with “ingredient grades” (e.g., style 4, 5, and 6), particularly with the volume of 695 variety plantings. The reality of establishing a presence in the ingredients sector is complicated and will require considerable investment from the industry’s processors to meet the needs of modern large-scale manufacturers.
G&G has planned for this trend and is implementing strategies to place the group in the strongest possible position.
Consider that the 22% global crop volume increase translates to approximately 4,500 MT of additional whole kernel volume to sell this year by comparison to the 2021 season. This makes it apparent that this is not just a 695 and halves style problem. We should not underestimate the barriers ahead of us and with that the impact on short to medium-term prices.
Motivate new product development (NPD) for all grades
Up until 2020, the industry’s long-term supply shortage meant that NPD has not been a focus. Our industry “traded” macadamia kernel to its existing customer base, cheered as China consumed more of the 695 variety, and took pride in the prices achieved through leveraging outstanding work in global nutritional research.
Market forces have brought about a fundamental change, switching from a seller to a buyer market. We do take some comfort in knowing that these are changes typical of a maturing industry.
Price alone will not drive demand as required. Innovation in new products, sophisticated sales, and marketing teams will contribute to future success. Other important determinants are driving efficiencies on the farm, and best-in-class capability in factories.
G&G has actively engaged in some major NPD projects. However, as with most NPD, these projects will take time to come to market.
Build a future-fit business through market segmentation and price
Macadamia’s contribution to the traditional snack market segment is unique. It is undoubtedly premium and typically consumed on special occasions. The statistics show us that people purchase macadamias only 1.5 – 2.5 times per year.
This frequency is now at a five-year low. Macadamia’s price relative to our largest premium snack competitor is around 2 – 3 times more expensive on the shelf. Bragging rights – maybe. But this strategy is not fit for purpose, or sustainable given the future increase in supply forecast scenario.
A comparable situation applies to the ingredient segment, although with one exception in that it presents an opportunity – that is to grow a meaningful share of the ingredient segment.
Macadamias are special too and elevate any occasion or product, and G&G is confident that we can achieve growth in this space with a well-thought-out strategy.
Factories must invest in technology and infrastructure to meet the demands of global manufacturers, and focus attention on the development of macadamia products for the future. In this regard, GFNC is ahead of the curve, and we thank Jill, Allen, and their team for their enduring efforts.
In summary, it is not “business as usual” at G&G or any of its macadamia processor partners.
We are growing our team and are deliberately implementing a range of short- and longer-term strategies in all major markets to build confidence in our industry, support new product development and raise consumer demand.
Our best to all of you and on behalf of the entire G&G team, all the best for the holiday season and we look forward to seeing you soon.
Whole kernel recovery innovation keeps farmers in the pound seat
The imperative of innovation in the macadamia industry is now. Farmers, and other players in the sector, are aware of that, and focusing on this brings some good news during uncertainty.
Green Farms Nut Company (GFNC) is proud to share that whole kernel recovery for the group has improved by approximately 13% in the last three years, translating to around an additional R20 million back to farmers this year, despite lower prices this season.
In our ongoing commitment to preserve and drive financial value for our growers, this improvement is delivered through several in-factory processing initiatives like intensifying cracker modifications, and frequent measurements to ensure optimal performance in real-time. Creating capability like this beyond just chasing prices shows how to remain competitive and profitable through difficult times.
This positive change in the factories is shared with farmers who are working hard to implement technical advice to deliver a best-in-class product. The whole kernel has always fetched superior prices to their ingredient grade counterparts and this divergence is set to grow as the sector matures and switches to being buyer-led.
We have looked at performance for the GFNC group, and at our factories across key growing regions including White River, Levubu, and the Coastal Macadamia factory over the past four years. The Beaumont variety results have been separated from the other varieties (like 344, 816, 814, Nelmak 2, and A4) due to their distinctively thicker shells which adversely impact style spread and distort outcomes for other varieties.
Improvement in whole kernel recovery for integrifolia and hybrids (excluding Beaumont):
White River | Levubu | Coastal | GFNC group | |
% Improvement | 11% | 6% | 18% | 11% |
Improvement in whole kernel recovery for Beaumont:
White River | Levubu | Coastal | GFNC group | |
% Improvement | 33% | 18% | (12%) | 40% |
The Coastal Macadamia factory experienced a small improvement (2%) overall in whole kernel recovery, while the only decline across the group was in Beaumont at this factory. It should be noted that this decline is almost insignificant as KZN processes nuts with the highest crack out in the group (thinner shells), and whole kernel recovery is already high at close to 60%.
In addition to these pleasing results, as an average across the company, the quality of products delivered in terms of unsound has improved by 17% over the same time frame, one of the key components to navigating current market conditions. We remain focused on driving positive change for the industry and our farmers to make sure we all stay in the game for the long run!
Farmers stand together in festive solidarity at the GFNC year-end functions
The Green Farms Nut Company (GFNC) annual end-of-year functions recognise great farmers and employees alike where growers and team members get to know one another better and spend time together to mark the end of the macadamia season and share Christmas cheer ahead of the festive season.
Notwithstanding a variety of market-related challenges this past season, people came together in typically jovial fashion at all three of GFNC’s functions held on 18 November at the Coastal factory, 24 November at the White River Country Club, and 2 December at the Levubu factory.
Company founder and chair, Jill Whyte, as well as CEO Allen Duncan joined all events demonstrating their passion and ongoing commitment to the industry and its farmers. Allen addressed growers with an honest and realistic perspective of where the sector is at and is likely to go.
Perhaps most importantly the events pay homage to the year’s top growers in each region, in three categories including the fellowship award, lowest unsound kernel, and highest kernel recovery categories.
At Levubu and White River these are awarded to growers in two segment sizes: 10 – 100 tons farmers, and farmers who delivered 100 tons or more. KZN structures its awards a little differently, categories are awarded by variety, and it does not have a fellowship award category. All winners are detailed below:
WHITE RIVER:
Category | Position | 10k-ton – 100k-ton | >100k-ton growers |
Fellowship award | 1 | Deon Viljoen | |
Lowest unsound kernel | 1 | Mabota Investments | Ilala Boerdery |
| 2 | RN Stevenson | Avomak Boerdery |
Highest sound kernel recovery | 1 | Ora Farms PL | Barry Jacobs Boerdery |
2 | Kiaat en Rots | Long Creek Farming | |
LEVUBU:
Category | Position | 10k-ton – 100k-ton | >100k-ton growers |
Fellowship Award | 1 | Chris James | |
Lowest unsound kernel | 1 | SJ Potgieter | JJ van Rensburg |
| 2 | Bergheim Estates | Oor die Muur |
Highest sound kernel recovery | 1 | JVE Properties Farm | Molozi Trust |
2 | Bassan Farm Ltd | Alvier Boerdery | |
COASTAL:
Category | Variety | Position | Winner |
Lowest unsound kernel |
| 1 | Kalafatis Farming |
|
| 2 | SA Treated Poles & Timber |
|
| 3 | Greater Heights Farm |
Highest sound kernel recovery |
| ||
| Integs | 1 | D.R. Mattison Farms |
|
| 2 | Outlook Farm |
| Hybrids | 1 | Clearwater Farm |
|
| 2 | Doveton Farm |
| Beaumont | 1 | TGK Farming Trust |
|
| 2 | Bushy Vales Farm |
Well done to all our farmers, we wish you a very merry Christmas and look forward to seeing you next year. May the rains continue and have a blessed and safe festive season!