Agro-processing is part of the manufacturing sector that processes raw materials and intermediate products derived from the agricultural sector. Nigel Jacobs, co-founder of Jacobs Jam, walks us through five of the fundamental elements you need to know before starting an agro-processing operation.
Despite its simple definition, agro-processing encompasses a large number of industries, all of which have their specific infrastructure and export requirements, and even differing legislation.
This article by the Agricultural Research Council. (ARC) points out that agro-processing is a great way for farmers to expand their farming businesses and increase their turnover, and can include primary processing like cutting, washing, and peeling their produce. It could also include secondary processes like heating, cooking, and layering their produce into a more complex product.
Of course, agro-processing is not just limited to farmers. Jacobs, who has a marketing background in the fruit industry, started Jacobs Jam in 2018 with his wife Christynn, a food technologist. Their products are made at the factory level, and stocked across the Western Cape.
He gives us insight into five agro-processing elements involved in the fruit industry.
Sourcing your raw materials
According to Jacobs, one of the primary elements of making food products is getting the right suppliers that are able to meet your needs.
“We researched and assessed whether the suppliers can supply our demand in the long term, from a zero base to a forecasted high or medium-high usage. [So,] make sure that you familiarise yourself with the suppliers, that your supplies are reputable, and your suppliers are also the direct manufacturers or the direct importers of the raw material or supplies.”
Direct supply is important, he says, as sourcing from a third party or multiple third parties can increase your costs.
“Our advice would be to take your time and familiarise yourself with the suppliers. Get to know them, build the relationship.”
Another important aspect Jacobs points out is that you may need to get your raw supplies on credit, but that suppliers do not easily provide credit to newcomers in the industry.
“Make sure that you have sufficient cash flow to service suppliers. It took us about a year before the first supplier gave us 30-day terms. So, we had to build a track record of cash payment up front, where the product is delivered a few days later and we use it, and then we had to generate cash again before we could make our next purchase. Under the current circumstances, suppliers are very reluctant to just give out credit items without a clear cut record.”
In agro-processing, the storage infrastructure you need is product-specific. Jacobs says that it was this element of agro-processing that made them decide to process jam instead of any other product.
“Most of the ingredients that you use in jam manufacturing are shelf-stable, ambient, and have 18-to-36-month shelf life. The items that are not stable we purchased from the supplier that guarantees the quality of the product throughout the year, and we basically buy just when we need it.”
This strategy he calls the “just-in-time” method and says it is one of the most important aspects aspiring agro-processors need to consider before starting.
“[Know] what the storage and what the distribution value chain would be. Is it ambient? Is it cold chain? Because those two differences have a significant impact on costs. When we decided on jam, we knew that the product is ambient-stored. In other words, there is no refrigeration. This took out significant costs for us. Wherever you can ensure that your supplier carries the storage, and you use as you require, the risk is then with the supplier and not with you.”
Producing food products, even in the same industry, often requires need-specific equipment, Jacobs explains. For his operation, the primary infrastructure includes cooking pots, and other cooling and heating vessels.
“Our production line is bespoke and custom-made just for our process. We designed it with the engineers, and it took us about two years to finalise the design. It took about one year to build, so it’s a very long and lengthy process. There are other ways of doing it, which are quicker and that is called an ‘off-the-shelf’ production line.”
Jacobs warns against an off-the-shelf production line, as it often cannot meet specific needs or requirements.
“By buying off the shelf, you may be investing and paying for something that you don’t need, and then things that you need, you don’t have. So, our advice would be the rather go the long route, get a reputable supplier of processing equipment, work with them and design and build a production line and infrastructure that is specific to your own needs.”
He adds that, since buying agro-processing equipment is really expensive, it is imperative to get customer references and testimonials from existing food processors to avoid costly mistakes.
“After we purchased the main equipment, we bought smaller pieces of equipment from smaller companies, and every time we did it, it was an issue or it was a mistake that cost us thousands and thousands of rands. So, we’ve decided in our company rather to save up and buy from the right reputable supplier. It’s going to be more expensive, but it’s going to save you time and energy and stress by buying the right item the first time around.”
Biosecurity is paramount
Ensuring that your food products are safe to eat is a primary element in any food processing business, but it need not be complicated when you start out, says Jacobs.
“The most important items are the basics, so that’s the training of the staff, which doesn’t cost any money. If you can train your staff to be hygienic and clean and work in a systematic process, then the rest you can always add on.”
When they started their operation, they educated their staff on the fundamentals like using soap, sanitiser, and the right equipment to clean and wash their hands, Jacobs explains.
“Then we progressed to a more formal system where we have a third-party company come in. They service our entire factory with hygiene equipment. Of course that is expensive, and it costs a few thousand rands per month to have that service executed, but when starting out, it’s important just to do training and then continue on with the training.”
Jacobs says that the biosecurity policies in your company can be expanded as you grow and that it probably makes more sense to map it out once you are up and running.
“Build your hygiene system modular as you grow your company. I wouldn’t advise to include it in the capital layout in the beginning as you don’t know how your process will run.”
Exporting your product
Like many other aspects of agro-processing, exporting requirements are industry-specific, and sometimes market-specific. In the case of Jacobs Jam, it was fairly uncomplicated.
“We started exporting six months after we started up production, and the process was fairly straightforward. If you have all your SARS compliance documents in place, CIPC documents in place, bank accounts and you’re tax compliant, then normally the bookkeeper or the accountant will do the application for you on your behalf.”
Exporting licences are only issued by the South African Revenue Service (SARS), and require a number of documents, including your operation’s Companies And Intellectual Property Commission (CPIC) documents.
“It takes about 21 days before you receive your export licence. That’s if everything goes well. In our case, we waited about 30 days, but you must have all your compliance documents in place. And our advice would be that a professional does the application on your behalf because if you do it yourself, it’s going to take too much time and you probably won’t be successful.”
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