Teragro Commodities Limited: Scaling up Teragro Benfruit processing plant
Through this initiative, Nigerian agribusiness Teragro Commodities Limited aims to source the fruit required for its fruit juice concentrate processing plant from local smallholders. This is the first plant of its kind in Nigeria, and with it Teragro aims to reduce Nigeria’s dependency on imported concentrate, relying instead on competitive, locally sourced inputs from farmers in Nigeria’s Middle Belt.
The inclusive business initiative
Teragro’s business model aims to engage smallholder fruit farmers as suppliers for the company’s large fruit juice concentrate processing plant, which was commissioned in March 2012. The plant is designed to process oranges, mangoes and pineapples and has the capacity to process five metric tonnes of fruit concentrate per hour and produce 5000 metric tonnes of concentrate per year. It is estimated that these farmers currently lose about 60% of their outputs due to lack of processing facilities, limited demand and logistical challenges, such as transporting the fruit to big urban centres. A majority of the fruit produced in Nigeria is domestically consumed as food with little processing activity in the sector. Despite the high rate of fruit production and a thriving juice market, Nigeria mostly imports fruit concentrate, leading to an estimated loss of $1 billion a year.
In light of this opportunity, Teragro has established the first fruit juice concentrate processing plant in Nigeria in Benue State, in the Middle Belt of Nigeria, where over 800,000 metric tonnes of citrus fruit are produced per annum, mostly by small and medium scale farmers. The plant is geared to cut the loss of fruit through waste, and give farmers access to a more secure market.
As the only local fruit processing facility in the country, the primary commercial driver for this venture is to gain first-mover advantage and act as a catalyst for the growth of a larger fruit processing industry in Nigeria. The plant operates in a fruit drinks market growing by 10% each year, so its primary consideration is to ensure quality at prices below the cost of imported concentrate, which can be achieved by engaging smallholders into the value chain as suppliers of fresh fruit.
Development impacts are likely to be high for the smallholder farmers engaged as suppliers to Teragro who will no longer suffer post harvest losses on a significant scale given the secure demand for fruit generated by the plant nearby. An estimated 800 orange farmers have been listed as direct and indirect suppliers, who have previously experienced losses as a result of logistical challenges, surplus supply and pre-harvest damage resulting from poor cultivation practices. As a result of this venture, farmer incomes are likely to rise.
Teragro plans to expand the venture to increase production capacity from 30,000 metric tonnes to five times that. This involves setting up an additional plant next to the existing one and scaling up the number of farmers directly engaged as suppliers to about 2,400. Assuming each farmer has a family of around four persons (a moderate estimate), it is likely that over 10,000 low-income people will benefit directly from the venture.
Innovation and scale
Leveraging on technology, Teragro has built and is operating the fruit juice concentrate plant in Nigeria. It provides a viable example and catalyst for the establishment of similar plants, which will bring more benefit to smallholder fruit farmers. This is against the backdrop of many failed attempts over the years to establish such plants.
Objectives of Facility engagement
Support from the Business Innovation Facility is aimed at:
-Delivering an analysis of the supply chain for oranges, mangoes and pineapples in Benue state.
-Developing a cost-efficient transport and logistics system for fresh fruit to be delivered from the farm to the plant at a reasonable cost.
-Developing a sustainable inclusive model for Teragro and other actors to support farmers towards increasing yields and improving skills and capabilities.