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Sustainability

Realising shared growth in India’s spice market

Background:

With demand for spices on the rise, Olam acquired a spice processing facility in Cochin, India, in October 2011 marking its entry into India’s US$2 billion spices and seasoning export market. Recognising the social and economic benefits that could be brought to the local subsistence farmers and their families, the International Finance Corporation (IFC, a member of the World Bank Group) awarded part of a US$120 million loan in August 2011 to upgrade and expand the Cochin facility.

The investment focuses on enhancing employee safety, quality control, food safety and capacity of the facility – by June 2015, the chilli grinding and steam sterilising capacity is set to double.

Objective:

In order to procure the volumes and quality of chilli for the plant to run at optimal levels and meet international standards, Olam recognised that the need to support not only the 400 workers employed in the processing unit itself, but also the 900 small-scale farmers who supply the factory.

Three main goals were identified to support smallholders:
• Improve farm profitability
• Enable and empower environmental stewardship
• Improve quality of life for farm families and rural communities
Specifically, goals were set to reduce cost of cultivating chillis for farmers by up to 15%, to reduce the use of pesticides by over 30%, to improve controls over the naturally-occurring fungus aflatoxin in humid conditions, while simultaneously continuing to improve crop yields and therefore farmers’ livelihoods.

Approach:

Through a team of 52 employees on the ground, Olam provides comprehensive, regular training in Good Agricultural Practices (GAP), embedding sustainable agriculture through training on labour practices, land use, efficient application of pesticides and fertilisers and crop drying techniques, among others.

The focus on Integrated Pest Management (IPM) helps farmers produce chilli that is free of pesticide residues and aflatoxin and meets all major food safety norms in the EU and US – better for the farmers, customers and end consumers.  Training focuses on natural methods of pest control, such as planting maize as a border crop, using other crop and pheromone traps, and deploying hygienic drying techniques that minimise contamination of the harvest.

Olam’s support is not confined to smallholder suppliers. It also assists plant personnel, both on and off the job and delivers services to the wider community. In addition to international employee safety standards in the facility, employees receive transport to and from home, meals and snacks each day, and access to an on-site medical assistant. In the community, Olam participates in church activities and sponsors blood donation camps, and works to improve local infrastructure with road repairs. We call this support ‘unlocking mutual value’ because it benefits communities and is crucial for the success of our business model by having a healthy and thriving community who want to farm spices or work in our facility.

Results:

Just two and a half years since the plant was acquired, bulk processed spices sold from the facility have risen dramatically, and with investments refurbishing the plant to improving employee safety, food safety and capacity.

For farmers, costs have declined by 15% and pesticide use by 30%, while average crop yields are up by 10%.  With this increase in yields, Olam is helping to grow India’s spice export market and was recently recognised as Cochin’s second largest exporter by the Indian Government.

Olam’s investment in the Cochin facility and increased production will continue to generate new jobs. It will scale up to include approximately 1,500 smallholder chilli growers, plus an additional 100 farmers supplying other spices such as turmeric, while doubling the chilli processing capacity of the Cochin plant. These operations will continue to provide a platform for supporting the welfare of employees, smallholder farmers and neighbouring communities.

The operation now forms a significant part of Olam’s global Spices and Vegetable Ingredients (SVI) business, which is already a global leader in the capsicum market, as well as in several other key categories.

Please click here to view our Spices Sustainability page.