Stories from the landscape

Baviaanskloof Part III: The untold challenge of regenerative farming

Although the essential oil project we helped kickstart in the Baviaanskloof has transformed agriculture for a community of farmers there, it has failed to translate into significant income. Today, the farmers in the Baviaanskloof are still struggling.

By Thekla Teunis edited by Hailey Gaunt

26 November 2020

Blog artwork

Turning a field from fallow to productive is different from turning a profit. Although farming in the Baviaanskloof has come a long way, business is flagging.
Photo by Gareth Hubbard

This is the final story in the Baviaanskloof blog series, where we take one last look at a group of farmers who began to embrace regenerative agriculture techniques, trading fields of lucerne and grazing goats for regenerative rosemary and lavandin crops. In our first post, we examined the complexity of finding the right crop alternatives for the soil and the farmers; in the second, we unpacked the mistakes we made in the transition. In this last story, we delve into the difficulty of bringing products to markets at a fair price for producers. We hope to share what we’ve learned, our mistakes and insights, so we can begin to shift toward a food system that works better for people and landscapes.

Where we are now

After just over two years of trying to restore life in the extremely degraded soils of the Baviaanskloof, the positive effects of regenerative farming are undeniable: over 120 hectares of arable land are now farmed using regenerative practices—about 15% of the arable land in the valley. The landscape is in much better shape, which means many added benefits for this sensitive ecosystem. But healthier soils don’t necessarily pay the bills. You can have excellent soils and thriving crops, but when you don’t have a way to sell your produce at a profit, you’re losing.

You can have excellent soils and thriving crops, but when you don’t have a way to sell your produce at a profit, you’re losing.

Even after overcoming challenge after challenge and successfully replacing fields of lucerne and grazing goats with rosemary and lavandin crops, today, the farmers are struggling.

To understand this issue, we take a closer look at markets, and why it is so difficult for farmers to access the right ones. Whether it’s the niche or bulk market, there are often huge disparities between what is promised and delivered, each carrying its own hidden costs.

Dried Rosemary in Baviaanskloof

Inspecting the dried rosemary process
Photo by Gareth Hubbard

Essential oils is a niche industry in South Africa, with very little knowledge available about the right crops, growing methods and varieties

The global essential oil market is worth an estimated USD 17.2 billion, but South Africa’s share in it is less than 1%. By comparison, other emerging markets, like Brazil and India, are some of the world’s biggest producers of essential oils. Even with the number of indigenous plants in South Africa and a variety of climates conducive to growing different essential oil crops, South Africa is lagging behind its competitors. Some brands have managed to establish their products successfully on the South African market, but they are few and far between.

The essential oil producers in South Africa today are pioneering an industry. These are exciting times for them, but also extremely risky. Farmers are forced to operate with scarce knowledge of their potential market, making tough calls and investments and chasing down opportunities with little insight. Good, sound advice is hard to come by.

The essential oil producers in South Africa today are pioneering an industry. These are exciting times for them, but also extremely risky.

The farmers in the Baviaanskloof were told to plant lavandin (a variety of lavender), which was supposed to grow easily in their soils but struggled to produce sufficient yields. They were also advised to plant rosemary, which grew well, but had another problem: when it came time to sell, the farmers discovered the particular variety holds much less market value. For the same effort and resources, they could have gained a much higher margin.

Fields of lavandin

Though initially promising, the fields of lavandin didn’t yield enough to make the crop profitable
Photo by Gareth Hubbard

As a farmer—especially a regenerative one, attempting to work in harmony with nature—so much is out of your control, which makes a poor decision like this one especially hard to stomach. Recently, the South African Essential Oils Producers Association received funding to establish itself properly, and is now doing a better job of disseminating market intelligence. Unfortunately for the Baviaanskloof, this came too late.

The idea of farmers cutting out middlemen and selling directly to consumers sounds clever but isn’t always business-wise. In this case, it certainly isn’t.

In South Africa, a farmer can fetch somewhere between 60‒120 USD for a kilogram of rosemary oil if they sell wholesale. That same oil put in a bottle and slapped with a label is worth around ten times that much. If this is the case, why don’t farmers just start their own brands?

Apart from the obvious challenges of finding the time and money to develop a brand and its products—packaging them, getting them to market, and building brand-awareness—there’s another barrier, which is the biggest obstacle for many small-scale farming systems trying to make a profit. Central to this issue is the problem of volumes—too much and too little.

Understanding the emerging essential oil market is its own difficult science.

Understanding the emerging essential oil market is its own difficult science
Photo by Gareth Hubbard

At the time of writing this, the Baviaanskloof Devco has 100 kgs of rosemary essential oil, which means about 21,000 5ml bottles of the retail product. If Devco was to sell directly to customers, it would need to capture a large share of South Africa’s annual market for rosemary essential oils. This is practically unheard of for a new company, especially one without a range of products on the market.

Using a single ingredient in a range of different products could help the farmers appeal to a wider market, but it also requires sourcing several outside ingredients. And developing and marketing new products quickly becomes something very different to farming.

The Baviaanskloof Devco actually developed its own product range called Ompad, which is available in several padstals in and around the Baviaanskloof. They sell room sprays, soaps and shampoos. But even with the additional products, the brand is tiny. Since a single bar of rosemary soap only requires a few drops of the oil, utilising the full yields is still a struggle.

What are the other options for selling the product? Let’s take a look at the pyramid below.

Pyramid with potential buyers for products from the Baviaanskloof Devco

Selling to small brands creates higher revenue, but is typically costly and inefficient.

If setting up a brand doesn’t solve the puzzle, why not sell to an existing small brand? Small brands are interested in the story of authentic, regenerative producers and reward generously for it—seemingly a perfect fit for the Baviaanskloof Devco. However, most such brands only request about 1 kg of oil, which is hardly a meaningful scale. Consider that each order takes time to process, that it must be packaged and couriered individually, and as is the case for the Baviaanskloof, shipped from a remote location. It is wildly inefficient to spend that time and energy on a single kilogram of oil.

Farmers find it equally difficult to do business with medium-sized brands, who still only use around 5 kg of product a year. Usually producers ship in minimum quantities anyway, which exceed the needs of these relatively small brands. To get the excellent, regeneratively grown product they need, these brands are forced to work through middlemen—a process, which we’ll explore further later in this post.

A drum of regenerative essential oil

A drum of regenerative essential oil is a distillation of much hard work
Photo by Gareth Hubbard

Selling to large brands is difficult. Farmers must conform to tight specifications and compete with well-established relationships.

For a farmer, the ideal scenario is to sell a large volume all at once. This way farmers spend as little as possible on transaction costs and time sourcing buyers. Larger brands, who are increasingly interested in sourcing directly from farmers, offer this potential, plus attractive prices; some even appreciate the fact that the oil is farmed regeneratively, or that it has a story. But with the need for large volumes, also comes narrow specifications.

Big brands spend a lot of money on product development—years staffing laboratories with chemists to design product recipes for their soaps, perfumes, or whatever they’re selling. When a product is launched, it has a particular formulation consumers assume will stay the same for its lifetime.

To get such consistency, a brand usually builds a formulation with ingredients from a specific region, using suppliers with whom they’ve secured long-term contracts. Seldom do they shop for new suppliers; even if they are, their specifications remain rigid. Whatever the material, to keep the original formulation stable, it must have the exact chemical composition, which all depends on the particulars of species, ground, climate, harvesting and processing methods.

On several occasions, a company’s branding or sustainability departments were excited about Devco’s harvest and our restorative work in the region, and would have preferred to source from us. We had some inspirational and encouraging conversations, sharing our passion and vision with like-minded people from large brands, for which we are extremely grateful. But everything still boils down to the formulations and the chemists, who were unwavering about having an exact match.

Devco farmers carefully monitor their crops

Devco farmers carefully monitor their crops at every step of in-house processing
Photo by Gareth Hubbard

Selling to intermediaries is usually a last resort. By the time a product reaches the customer, it’s lost its story of origin, and much of its potential value.

To curtail inefficiencies in the supply chain, a number of companies step in to do the jobs of sourcing and supplying. The final option in the scaling pyramid is selling to middlemen, who buy ingredients from many different farms, usually blending and/or processing them to meet the specific needs of buyers. Intermediary companies also hold a lot of power because they can swap producers whenever they like with others from different regions of the world. They are often secretive, concealing information about their buyers or producers, even the market trends and prices. All this leaves small producers at the mercy of these third parties.

However, they exist for a reason: they also add a lot of value. Often intermediaries add a crucial processing step to a product, which is costly for farmers to perform themselves. They do things like fumigate spices for export (killing any pests that might be living on them), test aflatoxin levels on peanuts (a mould that can grow on them, which EU strictly regulates), or isolate specific chemical components of essential oils to blend with other oils to meet market requirements. They often have a large network with buyers and producers, which is valuable to both parties. It takes time and money to generate these networks.

Where we have too much for the small brands, we really have too little for the traders. With a global consumption of more than 300,000 kg of rosemary essential oil, anything below 1,000 kg is considered little—big players want between 8,000-10,000 kg.

Plus, if our oil is simply dumped ‘on the big heap’ along with all the other oils sourced by a trader, it loses its connection with our unique story, and we lose value. The same happens with dried rosemary, which is sold for its anti-oxidative properties, yet only included in an end-product in insignificant levels. If an ingredient is, essentially, invisible to a consumer, they won’t pay more for a better product.

Selling to traders is a great way to move high volumes of produce. It’s just not always the best way to get very high margins.

The future of regenerative farming? The ‘wineification’ of the food industry

None of these challenges are unique to the farmers of the Baviaanskloof. We have seen this market dynamic with many of the ingredients we are working with, whether it’s herbal teas, spices, or oils. In reality, we need a combination of buyers. We need to work with big traders to be able to sell large volumes, and we need to sell to small brands who can convey our story and access better prices, compensating us for the hard work of regenerative agriculture. For companies like the Baviaanskloof Devco to sell directly to the larger brands, however, a lot has to change. It’s really hard to change a system that is working for its own interests, but consumers have the power to make a significant difference.

It’s really hard to change a system that is working for its own interests, but consumers have the power to make a significant difference.

Buyers must think of every agricultural product the way they think about wine: each varietal tastes different from harvest to harvest, vine to vine, hill to hill. For some reason, uniqueness and distinction is celebrated in a bottle of wine but punished in nearly every other product. It’s unrealistic to expect a product, which was grown in balance with nature, to conform to the uniform specifications of a big brand—actually, it’s impossible without somehow tampering with it by blending, or adding additional ingredients.

The making of essential oils in the Baviaanskloof, South Africa

It remains to be seen whether or not a new economy can take hold in the Baviaanskloof
Photo by Gareth Hubbard

It’s a mystery: the moment a brand moves from artisanal to established, consumer expectations change drastically. We find it endearing when mayonnaise from the farmers’ market tastes different every time because ‘each batch is made with love while dancing barefoot in the kitchen’. But when we buy a jar of Hellmann’s we expect it to taste the same single every time, no matter where we are in the world. We should start thinking about how strange this is. Instead of expecting an artificial uniformity in our products, we might consider demanding the authentic taste of nature—the true flavours of our soils.

Instead of expecting an artificial uniformity in our products, we might consider demanding the authentic taste of nature—the true flavours of our soils.

This shift in mindset would go a long way to helping regenerative farmers gain access to the large markets at the prices they need to sustain their operations. It would ensure we all have access to products that are the best for us, and our earth.

This is the final post in the Baviaanskloof blog series. Grounded is no longer involved as a Managing Director of Baviaanskloof Devco, though we still independently support the company with sales of their products wherever we can. The company is now managed by Justin Gird, who lives in the Baviaanskloof and operates the company with support from the farmers themselves.

Today, Devo is focusing on the production of essential oils, starting first with local markets. For the dried rosemary food ingredient, at this stage, this product is struggling to access markets that offer prices attractive enough for an organic farming system. The company still produces organic rosemary camphor and rosemary verbenone oil and is getting excellent feedback on the quality of the verbenone oil, especially. It is also experimenting with indigenous crops like kooigoed for oil production. In a move to diversify and depend less on the oils market, Devco is also exploring the potential of growing both organic lucerne and cover crop seeds. The company is moving closer towards integration with the Baviaanskloof Hartland Bewarea, a Conservancy that works on rehabilitation of the degraded ecosystems in the area.

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