The “Two-A-Day” Cooperative, a Grower-Owned Packinghouse

In my first article chronicling the YGA trip to South Africa, I tried to fully set the scene and describe a snapshot of the landscape of the apple industry there. Naturally it follows that from this different environment, arises different kinds of businesses that are a good fit for the needs of the industry. Out of this unique environment was formed the Two-A-Day Cooperative--a grower-owned packinghouse that meets the needs of its grower members and the South African apple industry.

The Two-a-Day Group was started in 1948 as Elgin Fruit Packer Cooperative (Elfco), going public in 1993 as Two-a-Day Group (LTD). All the shareholders of Two-a-Day are current producers of fruit and all are required to sign a marketing agreement. As of February 2016, the numbers included 55 growers, accounting for 2500 ha (just under 6200 acres) of apples and 600 ha of pears. Each grower's fruit is packed and assigned to their account and the company offers no dividends to members. The relationship between the growers and the packinghouse allows for clearly defined roles. The growers can focus on producing high quality fruit and the Two-A-Day group focuses on adding maximum value through storing, packaging and marketing the fruit.

These goals are achieved in a variety of ways, much of them through cost sharing opportunities for their growers. There are a few tradeoffs in this relationship, but let's start with the ways Two-a-Day provides a lower cost of production to their members.

Regardless of where in the world you might grow apples, there are a few expenses that are universal when it comes to apple production. While the labor issue is a whole other ball of wax, South African growers still pay for the diesel fuel that keeps tractors running and the spray material to protect the marketability of those apples. For Two-a-Day growers, those expenses are bid out by the group and bought at a "group rate" or bulk discount for the growers. There may have been other expenses that were bid out for cost savings but those two were noted specifically. On at least one occasion, growers in one remote valley pulled their resources together to have the lane paved from the highway to their farms - not Coop related, but notable.

Meanwhile, off the farm, the Two-a-Day group has established cost sharing measures to reduce the packing cost of fruit to their growers. The Coop owns 100% of the Elgin Fruit Juices company, ensuring a market for packinghouse culls. To sell their packed fruit, the coop purchased a 50% share in the Tru-Cape marketing firm - the brand their fruit is marketed under (the other half being the Ceres Fruit Group, who also hosted our group). When it comes time to print that logo on boxes in preparation of packing season, the marketing charges are discounted and the boxes are purchased at cost - the coop has a state in the local box company. These relationships keep the cost of packing the fruit lower, allowing for increased returns to growers. When those packed boxes need to make it to port for export, the coop owns a stake in a trucking/logistics/distribution firm that further reduces the costs to the coop and its members.

However, in contrast to the independence growers in the US enjoy, members of this coop often have elements of their production under coop supervision. While each member bears the responsibility for the fruit delivered, much of the decisions regarding spray programs, plant health and nutrition (fertilizer), and harvest dates are determined by senior management - a four person team of technical advisors. Each has his area of expertise: postharvest physiology, fertilizer/nutrition, young trees/preplanting/nursery, and a fourth overall manager. Each grower's farm is also assigned one of the advisors to help manage the day to day.

Through cooperation, Two-a-Day offers their grower-members increased profit margins by means of bulk materials acquisition and a vertical integration strategy downstream from the packinghouse, reducing costs and increasing grower returns. In exchange, the Coop takes better control on how the fruit is grown and harvested. They make suggestions about what to grow and have some expectation that you won't be selling apples and pears through other means. From a distance, this seemed to be a functional and beneficial relationship for both parties.

I want to thank Misas, Nico, and all the participating growers in Elgin Valley for showing us around in the first part of our trip.