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Fair-Fruit Guatemala Grupo CEIS

Guatemala

Fair-Fruit Guatemala links Guatemalan smallholder vegetable farmers to export markets

2012

Fair-Fruit Guatemala is maturing as a company and reaching financial stability. Paying farmers a fair price implies that financial margins for the exporter remain thin. The company has invested heavily in training and certification of smallholders which has led to an increasingly reliable supply base of good quality product. Efforts to increase presence in the North American market are starting to bear fruit and will hopefully be visible in sales volumes in the next season

Key Figures

  • 2.280 tonnes:
  • 6,482 M: Sales
  • 0,557 M: Workers FTE
  • 1.350: Smallholders
  • 295:   
  • XX : Workers headcount
Description

Fair-Fruit Guatemala works with approximately 1350 smallholder farmers that are organized in farmer organizations (cooperatives). The company provides technical assistance and training to these farmers, and pre-finances agricultural inputs such as seed, fertilizers and pesticides. Fair-Fruit Guatemala works with fixed prices and production programs which allow farmers to plan their production and to make an educated decision about investing their time and resources in the production of vegetables. In its packing plant the company employs up to 300 workers, mainly women. Vegetables are graded, trimmed, washed and packed for export. In addition, Fair-Fruit Guatemala has a small nucleus farm that serves as an experimentation and extension centre and that provides volumes of exportable product early and late in the Guatemalan season. 

In 2010, Fair-Fruit Guatemala created ADISAGUA as an independent organization for training and certification programs for smallholders. ADISAGUA receives funding from Fair Fruit Guatemala as well as from other Guatemalan and international donors to invest in pre-competitive training programs and in infrastructural improvements for farmer organizations. In 2010 ADISAGUA accompanied the first vegetable farmers in Guatemala in obtaining their FLO Fairtrade certificate, and continues to be involved in efforts to scale up fairtrade certification programs. 

Volume

  • 2009 : 434
  • 2010 : 1505
  • 2011 : 1893
  • 2012 : 2280
  • 2500
  • 2000
  • 1500
  • 1000
  • 500
  • 0
tonnes vegetables
Year

Sales

  • 2009 : 2.46
  • 2010 : 3.70
  • 2011 : 5.17
  • 2012 : 6.48
  • 6
  • 4
  • 2
  • 0
M€
Year

EBITDA

  • 2009 : -0.09
  • 2010 : -0.03
  • 2011 : 0.04
  • 2012 : 0.56
  • 0.6
  • 0.5
  • 0.4
  • 0.3
  • 0.2
  • 0.1
  • 0
  • -0.1
M€
Year

Workers

  • 2010 : 180 224
  • 2011 : 257 224
  • 2012 : 295 247
  • 300
  • 200
  • 100
  • 0
  • 300
  • 200
  • 100
  • 0
Number
Low. sal. (€/month)
Year
  • Number of workers
  • Lowest salary in the company

Smallholders

  • 2010 : 1137 0
  • 2011 : 1144 0
  • 2012 : 1350 2008
  • 1500
  • 1000
  • 500
  • 0
  • 2000
  • 1500
  • 1000
  • 500
  • 0
Number
Av. rev.
(€/season)
Year
  • Number of farmers
  • Average revenue per farmer per season

Peas & Beans value chain

Production
Packaging & export
Repacking
Sales & marketing
Market
Smallholders Guatemala
not neccessary
US
Europe
not neccessary
Other providers worldwide
Other providers worldwide
  • Durabilis Business
  • External
  • Market

Challenges and opportunities

  • Blue flag
  • Green flag
Status
Explanation
Investors
Status
Explanation
Challenge

Agricultural production and the export of perishable products have certain inherent risks which may result in periodic low productivity or quality problems. These risks imply that budgets must anticipate and be able to absorb unplanned setbacks.

Opportunity

The ability to export fresh vegetables with sea freight to Europe has allowed Guatemalan produce to compete on the European market. 

Challenge

Contract farming is inherently vulnerable to practices of side selling, which can only be prevented and mitigated by building long term relationships and trust with farmers. Whenever side selling takes place, it may jeopardize production planning and exportable volumes.

Smallholders
Status
Explanation
Opportunity

Smallholders receive higher prices in formal and transparent supply chains

Opportunity

Smallholders receive training and participate in certification programs, improving their competitiveness and future market opportunities

Challenge

Strict requirements regarding export quality and pesticide use mean that farmers have to participate in training and certification programs. This requires an extra effort which should be recuperated in terms of better market opportunities.

Workers
Status
Explanation
Opportunity

The fresh vegetables sector is a good source of employment.

Opportunity

Workers receive a fair wage and good working conditions

Challenge

Workers in the packing plant work in cooled areas. Agricultural workers on the farms are handling agrochemicals that are potentially dangerous. It is crucial to control worker health and safety by appropriate training programs, the right clothing and infrastructure and adequate follow up in case of incidents. 

Environment
Status
Explanation
Opportunity

Farmers are trained in responsible use of agrochemicals, waste handling, integrated pest management and improving soil fertility. These practices reduce the potentially harmful impact of farming on the natural environment.

Challenge

The production of fresh vegetables requires the application of chemical fertilizers and pesticides which – if applied incorrectly – may cause pollution in the natural environment.

Opportunity

Export requirements and increasingly strict legislation on pesticide residues create a trend in which pesticides are increasingly replaced by less harmful alternatives.

Challenge

Many smallholders in the Guatemalan highlands produce on slopes that are highly vulnerable to erosion. The adoption of soil conservation practices is crucial in order to mitigate this potentially negative effect.

Consumer
Status
Explanation
Opportunity

The introduction of social certificates such as Fairtrade provides the consumer with a responsible buying option 

Opportunity

Increasingly strict control on pesticide use decreases the risk of the presence of harmful pesticide residues on fresh produce

Community
Status
Explanation
Opportunity

Access to markets and employment for workers are an economic boost for rural communities

Evolutions

Fair-Fruit Guatemala has been operational as an exporter of fresh vegetables since 2007 and has gone through the difficult process of starting up and maturing as a company. As a new buyer of vegetables for export, the first few seasons have been crucial to establish solid relationships with farmer organizations in the Guatemalan highlands. While at first farmer organizations would come and go, the last few seasons have shown a remarkable increase of stability in the relationship with farmer groups, making long term visions of growth, training and investments in infrastructure possible. At the same time, relationships with new farmer organizations are continually being made as part of the company's growth strategy in new areas of the Guatemalan highlands.

A major challenge for Fair-Fruit is the seasonality of the production and trade in fresh vegetables. The rainy season from July until October is weighing heavily on the financial results and the company has been looking for ways to diversify into other crops and activities that may valorize the company’s assets while there’s little export of peas and beans. So far, this has led to the export of a diverse set of vegetables to the US market, but expanding these activities remains an important goal for the company.

While the focus for Fair-Fruit Guatemala has always been on creating access to markets for smallholder farmers, a decision was made in 2009 to establish a small nucleus farm to ensure stable volumes early and late in the Guatemalan season. In addition, the nucleus farm serves as a training and experimentation centre in which new production technologies or crop protection methods can be tested. The nucleus farm has also taught the company important lessons about the importance of crop rotation and integrated pest management in order to guarantee sustainable production processes.

Outlook

After a first few years of rapid growth in sale volume, Fair-Fruit Guatemala is consolidating its operations and focussing on improving product quality and process efficiency in order to optimize her sales margins.

Markets

Fair-Fruit Guatemala is looking to increase her presence in the North American market. This market has been difficult to penetrate so far because of its traditional focus on commodities and open prices, and limited opportunities to work with sales programmes. Recently, efforts to acquire new clients in the US have been intensified, which should lead to increased sales volumes in the next season.

Smallholders

Fair-Fruit Guatemala is increasing efforts to train and certify farmers through ADISAGUA. Collaboration with the Guatemalan ministry of economy has provided funding for the construction of processing facilities in 5 producer organizations. Construction of these facilities should commence in 2013.  

Processing and logistics

Fair-Fruit Guatemala continues experimenting with new processing, packing and transporting protocols in order to improve product quality upon arrival. Improved temperature control and new packing protocols have allowed to reduce the percentage of product graded out by clients, contributing directly to better sales margins.

Commitment tracker

  • Work in Progress
  • Reconsidered
  • New
  • Achieved
Commitment
Due Date
Status
Comment
New Due Date
Investor
Commitment
Due Date
Status
Comment
New Due Date

Implement more transparent reporting structures, including a Balanced Score Card

2012
Work in progress

Reporting of financial and operational parameters has improved, but efforts are still ongoing to make a Balanced Score Card fully operational and to improve data management of operational parameters

2013

Improve transparency in impact-relevant data

2013
New

The availability of data on contracted workers and smallholders needs to be improved in order to allow reliable and routinely reporting on impact.

2013
Workers
Commitment
Due Date
Status
Comment
New Due Date

Reduce peaks in overtime hours

2011
Work in progress

Significant reductions in overtime hours have been achieved, but it remains difficult to stay within the limits established by Guatemalan labour legislation. A close follow up of every incident of excessive overtime hours should allow for a further control and reduction of overtime hours.

2013

Reduce use of subcontracted labour

2011
Work in progress

An improved planning of required capacity in the packing facility has brought down the need to use subcontracted labour, but it hasn’t been eliminated completely yet. Current efforts will focus on a further reduction of this type of hiring, in combination with a guarantee that the rights of subcontracted workers are respected.

2013

BSCI Compliance (‘Business Social Compliance Initiative’)

2012
Work in progress

The company is registered as a BSCI member since 2012 and has received its second audit in 2013. Full compliance hasn’t been reached because of issues with subcontracted labour and overtime hours. These will be addressed as soon as possible in order to obtain a good score in BCSI.

2013

Fair Trade USA certification of the nucleus farm

2013
New

Fair Trade USA allows the certification of farms with the aim to improve worker empowerment and working conditions. Preparations for this certification have been started; an audit is foreseen in the course of 2013

2013
Smallholders
Commitment
Due Date
Status
Comment
New Due Date

Improve timely payment to farmers

2011
Work in progress

A shortage of working capital occasionally leads to delays in the payment of farmers. The solution depends on a better access to working capital, which is being foreseen for the 2013-2014 season.

2014

Decrease sourcing of middlemen

2011
Achieved

Sourcing of middle men has been all but eliminated and only takes place when additional volumes are requested at the last moment.

Improve quality of technical assistance

2012
Work in progress

Improving our technical assistance to smallholder farmers is an ongoing commitment. 

Set up a price differentiation system to reward best-in-class suppliers

2012
Achieved

A more rational pricing system has been set up that creates incentives for good product quality and certification grade. 

FLO Fairtrade certification of five farmer organizations

2011
Achieved

Currently, eight producer organizations have obtained FLO Fairtrade certification

Environment
Commitment
Due Date
Status
Comment
New Due Date

Eliminate avoidable direct emissions

2011
Work in progress

Refrigerant leaks are reduced significantly and a gradual transition to a non-ozone-depleting refrigerant has been started. 

Establish a run-down plan for the farm’s environmental impact.

2012
Achieved

The environmental risks previously identified on the nucleus farm have been resolved by GlobalGAP certification. 

Consumer
Commitment
Due Date
Status
Comment
New Due Date

Improve the quality management system to secure food safety

2012
Achieved

An intense monitoring program has been launched to routinely test for the presence of pesticide residues, leading to an improved control

Community
Commitment
Due Date
Status
Comment
New Due Date

Create local employment

2013
New

Opportunities are being explored to attract more workers from the directly neighbouring village of San Lorenzo.

Improve facilities for the community school

2011
Achieved

A donation to the school in the nearby village of San Lorenzo allowed the school to bar its windows against burglary.