LONDON (Alliance News) - African agriculture company Obtala Resources Ltd on Friday said it has formed a strategic relationship with the former owners of Del Monte Fresh which will lead to the pair forming a marketing and sales entity.
Obtala has signed a memorandum of understanding with an international exotic fruit trading company that is part of Grupo Cabal, one of the largest producers and exporters of tropical fruit in Mexico. Grupo Cabal formerly owned one of the world's largest suppliers of fresh produce, Del Monte Fresh.
Through that strategic partnership, Obtala and the Grupo Cabal subsidiary will form a marketing and sales entity, splitting the revenue derived from that entity. Details of the revenue split or the stakes held by each company under the partnership were not revealed.
The Grupo Cabal subsidiary deals in agricultural commodities from the Americas to the European and Middle Eastern market and will be able to provide its expertise to Obtala for its fresh produce division, Obtala said.
Obtala stressed it will have "direct involvement" throughout the supply chain from production to logistics and distribution channels to ensure it can deliver the "highest quality standards" in the industry.
"The future partnership with a division of a major international fruit trading company and the benefit of the downstream revenue share is an exciting development," said Obtala Managing Director Simon Rollason.
"The expertise that they will bring in terms of marketing and distribution, together with hands on farming expertise can only be beneficial to the company," he added.
Obtala will initially supply 500 tonnes of cantaloupe melon in 20 containers and will establish a new banana plantation to supply the joint entity.
Obtala can harvest cantaloupe melon after three to four months of planting them, and said the 500 tonnes of melon will be dispatched in the first quarter of 2016. The company can grow 20 tonnes of melon per hectare, suggesting that plantation is around 125 hectares.
In addition, the pair plan to establish a 150 hectare banana plantation. Obtala said it can yield over 40 tonnes of banana per hectare, suggesting the plantation will produce around 6,000 tonnes.
Each tonne is comprised of around 1,800 bananas, suggesting those 6,000 tonnes will be yield around 10.8 million bananas.
Each hectare costs around USD5,000 to set up, and the company believes it can get around USD1,000 per tonne of banana. That suggests each hectare containing around 40.0 tonnes would generate revenue of around USD40,000, meaning the 6,000 tonnes to be provided to the joint entity should generate around USD6.0 million in revenue.
That plantation should be ready in the second half of 2016 and will be sold to the Middle Eastern market.
Both the melon and banana plantations are on a "plant to order" basis, meaning the produce is only planted once an order for that produce has been received.
Obtala's farming asset is the Morogoro farm in Tanzania which is 530 hectares in size and located 230 kilometres from Dar es Salaam, a major city and port that the company uses to export its produce around the world.
Obtala said in its statement that it would produce the melon, suggesting it will be planted at Morogoro, but said it would establish the banana plantation with its partner. A spokesperson from Obtala was not immediately available to confirm whether the banana plantation will be planted at Morogoro.
The produce from Morogoro is sold under its Mama Jo's brand, which was set up in 2014 and was initially focused on UK and African markets. Obtala said previously that it planned to expand the brand further in Africa, and into European and Middle Eastern markets - with the deal signed Friday suggesting the company has furthered that aim.
"Company representatives recently attended a major fresh vegetable exhibition in Dubai which has resulted in strong demand and interest from eight Middle East based trading companies. The company is currently finalising packaging requirements for the end users and is in discussions with Emirates Airlines about acting as our carrier of choice for the products," Obtala said.
In another boost, Obtala has been awarded an "AA" certification grade from the BRC Global Standard for Food Safety for its dried fruit and vegetables being produced from its Morogoro plant.
"In the last 12 months, Obtala has undertaken additional capital expenditure on the processing unit, infrastructure upgrades, extensive staff training and project management in order to receive this standard," said Obtala.
The company said the award will allow it to market its produce to a wider market, some of which require a compliance rating from BRC Global Standard as standard.
"Obtala looks forward to delivering enhanced orders and sales from its agri-business in the near future given the platform we now have to conduct sales globally," said the company.
In addition, Obtala is in discussions about reducing the size of its dried fruit packages sold in the UK to make them suitable for airlines, fast food outlets and convenience stores. Obtala plans to reduce its dried fruit bags sold under the Mama Jo's brand to 40 grammes.
"We continue to grow, dry and package our range of tomato, chilli and peppers in bulk size, and it is anticipated that orders for these products will escalate now that we have the BRC global standard," said Obtala.
However, Obtala also has pulled out of its joint venture in Lesotho that cans and packages produce, because it believes it should focus on the Morogoro farm.
"The BRC certification is the result of much hard work on the ground, significant investment and good working relations with our local workforce and is an important milestone achievement for the farming operation," said Rollason.
Obtala shares were down 1.1% to 8.53 pence per share on Friday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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