Egypt: Replicating USA success
By Vinayak Narain, Senior Vice President, Olam SVI
Establishing a strong presence in Egypt was strategically important in the context of increasing weather and water risks in California. Our acquisition of Dehydro Foods Egypt, a leading producer of high quality onion dehydrates in 2012, catalysed our growth in this origin that is known for its high quality onions and competitive cost of processing.
Egypt also enjoys close proximity to Europe and Africa and preferential duty-free access for its exports to the EU. The EU consumes about 100,000 MT of dried onions a year and Egypt supplies about 15% of its requirements. As produce from competing origins, predominantly India and China, ranks lower than Egypt in terms of quality and consistency of output, there is significant headroom for growth in Egypt.
Olam SVI has a strong customer franchise from Egypt that provides very strong potential for growth in exports into Europe, Africa, Brazil and Japan. Along with our assets and product lines from our acquisitions in the USA and China, we consolidated our leadership position in the global dehydrates space where we could bring about synergies in sourcing, value-added processing and distribution.
We have increased our annual capacity from 8,500 to 10,000 MT with enhanced processing capabilities. However, the value proposition for expanding into Egypt was more than just processing. To realise its full potential, we set out to achieve two targets. The first was to establish a strong supplier base for native Egyptian yellow onions, which are prized for their consistency and flavour. The second was to develop a fully traceable and sustainable source of white onions – the ability to reproduce our proprietary, high solids white onions which accessed from California and produced on Egyptian soil.
We started a smallholder farmer programme through which we provide training on best agricultural practices and yield improvement for capacity building. This programme, which now involves 500 farmers, has bridged our access to the supplier base directly and reduced dependence on the middlemen while also providing knowledge on the crop and its growing conditions. We are working to enlarge this supplier base to 1,000 farmers who will potentially be supplying other products such as herbs and garlic to Olam SVI in the future.
Growing high solids white onions in Egypt the sustainable way
Backed by two years of trials and our proprietary USA seed, in 2015 we initiated contract farming relationships with large, organised farmers and corporate farms in Egypt for the production of traceable, high solids onions over an eight-month harvest season – November to March in winter and April to June in summer. Our objective is to replicate our USA model that has been proven to work well with large farms as it utilises mechanised farming techniques and equipment, while maintaining our IP on high solid onion varieties.
The development is spread across six production areas covering four different latitudes which have been identified to be closest to those in the USA. The project is supervised by agronomists from our Hanford farming headquarters in the USA to ensure that we achieve the world’s highest yield and highest solids onion variety in Egypt.
After one year the farms successfully developed 1,500 acres and grew 2,500 MT of traceable, high solids white onions using half the amount of water and energy for each tonne of output compared to growing conventional onions. Our target is to expand planted area to 2,500 acres and grow 6,500 MT of these onions by 2018.
Having pioneered the production of the world’s highest yield and highest solids content onions, our European and Asian customers now enjoy the cost advantages we created by bringing together the best of USA seed and Egyptian production. To mitigate any liquidity risk that may arise from customer perception that these onions are new and unproven (despite being very similar to USA onions), we are actively conducting product trials with customers to increase their acceptance rate.
Following these achievements, Olam SVI is now Egypt’s largest dehydrated onion processor and exporter with a lion’s market share of 54%, and is a global low cost leader in this product category, putting us well ahead of the competition.
Click here to watch our video on Olam SVI in Egypt.