17 MAY 2022

Kakuzi Banking On Product Diversification Strategy To Boost Shareholder Value

Kakuzi Plc shareholders have begun to enjoy the company’s diversification fruits even as plans to broaden revenue streams continue to be scaled up, Chairman Nicholas Ng’ang’a has said.

Speaking at the 94th Kakuzi PLC Annual General Meeting (AGM) held virtually, Ng’ang’a assured the firms’ shareholders that strategic plans had been activated to accelerate and enhance shareholder returns by diversifying the variety of produce delivered to both the domestic and international markets.

At the AGM, the firm's shareholders unanimously voted for a KSh. 22 dividend per share, representing a 22% growth from the KSh. 18 per share paid out the previous year, continuing to make Kakuzi PLC one of the best performing return on investment firms at the NSE. This increase in dividend payments from Ksh 352 million to Ksh 431 million reflects the Company’s strong financial position whilst accounting for the future investments in key long term strategic developments. 

The diversification strategy features production of superfoods such as Macadamia and Blueberries and is now being complemented with rearing of goats for meat, agro forestry and a range of retail products for the domestic market.

Focus on a diverse variety of agricultural produce, Ng’ang’a told the firm’s shareholders will further insulate Kakuzi’s dependence on traditional produce such as avocado and tea.

The diversification strategy, he added will be underpinned by the strict adoption of climate smart agricultural (CSA) practices aimed at increasing productivity, enhancing resilience, and reducing emissions. Kakuzi, he said has adopted CSA for its natural resource utilization including water use and crop production including use of climate-smart bee-keeping technologies that play an important role as pollinators are indicators of a healthy environment. The bees pollinate crops, pastures and trees, thus contributing to food security and environmental conservation.

In the last financial year, potentially poor shareholder returns, he said had been mitigated by the positive income realized from some of the firm’s diversification strategy crops. Diversification he said was not new to Kakuzi.  In the past the firm derived its income from coffee and tea sales and then moved to avocados in the 1990’s.  We are now enjoying significant revenues from Macadamia crops as well as forestry products with further contributions coming from blueberry, livestock and value addition opportunities coming in time. 

“We are part of a global marketplace and the products we produce often face stiff competition from producers in other countries. We therefore embarked on a very significant diversification program several years ago to ensure that Kakuzi is not dependent on any one crop,” Ng’ang’a said. He added that, “The results of this revenue diversification strategy have played out in the 2021 financial year as we experienced a difficult market for avocados but a greater contribution to the company’s profitability from the macadamia revenue stream.”

While Kakuzi’ Hass avocado volumes were lower than the previous year by 17.5% as the orchards entered a low production year, the firm recorded greater profits from macadamia. Notably, macadamia sales increased to 513 tons from 320 tons delivered to market the previous year.

To sustain the value contribution of its flagship Hass Avocado crop, Kakuzi is also undertaking an 18% expansion for the popular fruit. The ongoing field developments will see the expansion of avocado trees from the current 980 ha to 1160 ha in the next four years.

“By the end of 2021, our avocado and macadamia orchards covered 927 ha and 1,032 ha respectively. In 2022 a further 60 ha of avocados and 100 ha of macadamias will be established. We anticipate that by 2026 all the land previously under pineapple production will have been converted to these two crops and the variety of cultivars planted will also give us a good spread of supply into our key and emerging markets,” Ng’ang’a assured the shareholders.

He added that, “Our Avocado extension program for small and medium sized farmers has been enhanced to provide technical training through both our online platform and our extension officers. Despite the lower market prices last year, we were able to offer farmers a total payment for their fruit of Kshs 335 per carton exported which represented 87% of the net return. This was only 12% lower than the previous year despite tough trading conditions.”

The firm’s diversification strategy, he assured will also focus on deepening the value of domestic sales. Local sales, he disclosed will be undertaken through strategic partnerships with leading local retailers and supplies to the medium to large Hotel/Restaurant/Café (HORECA) market.

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