Reco Industries Limited: Food Processing and Agricultural Development in Uganda

Interview with Brian Rwabwogo, CEO and Technical Director of Reco Industries Limited

What is your assessment of the agricultural sector? What are the latest trends? Is the sector competitive?

The agricultural sector and agroprocessing specifically is a very fast-growing sector. It is a sector that has the biggest chunk in terms of contribution to the economy. We have a lot of agriculture produce that is not value added and goes to waste. We sell a lot of raw materials as well. The idea now is to align ourselves as a country to take advantage of the produce and agriculture capacity that we have. There are not many companies that can do the conversion from raw materials to value addition. They lack both the technology and the skills to execute. We have a lot of companies that are investing in agriculture in primary production on the farms. However, even on the farm level, much of it is very subsistence based, not only because of the land tenure system but because it is also very fragmented. So, we decided that we have to work with the environment that we have. It is difficult to find large scale producers. Those that do come to do large scale production in Uganda export almost everything that they produce. Uganda is one of the fastest growing populations in the world. We need food. 60-70% of the population is under the age of 35. They need to eat, they need to grow, they need good nutrition. Uganda is a net importer of value added products so there is a lot of growth domestically. Uganda consumes a lot, but we need to also support the local production. When you look at priorities for investment by the government, they have also increased spending in agriculture. We are happy to see that this trend is increasing. We are looking to the future because the sky is the limit. Uganda has the capacity to support agriculture in all our neighboring countries from DRC to South Sudan to Kenya. We always have a deficit in grain and cereals to supply to our neighbors. The biggest challenge in all of this has always been the quality of produce. In terms of quantity, we are able to produce but because of knowledge, information, and international standards, the market now demands quality both in raw materials and finished products. Uganda is not able to meet its obligations in terms of quality. Last year, Uganda produced a lot of grain, but the rejection rate was very high. There have been years where Kenya has given us an open contract on grain but we have not been able to supply it in terms of quality. The next step now is to move from producing poor quality products in huge numbers to high quality products, perhaps in less volume but of better quality. Many of the diseases that exist today are non-communicable diseases that result from poor feeding. Either people are eating foods that have a lot of contaminants or they are not eating the right foods. We have invested in understanding how the economy works in terms of nutrition and agriculture because they go hand in hand.

How long have you been in business? What is your competitive advantage?

We are a family owned business and we have been in production since 1982. Our biggest competitive advantage is that we are able to participate in the entire value chain from production all the way to packaging. We have invested in farmers and farmer groups, logistics, manufacturing, distribution. We have a presence in the entire value chain and we are able to trace many of our products from the source. The key advantage is that we have scalability. With investment in the value chain, we are able to control the key thing which is the quality of the produce and also give information to our farmers and our participants in the value chain on quantity. In terms of forecasting, we are able to do a much better job and we are able to support our partners and clients with very good quality produce at affordable prices.

Which sectors are you involved in?

Our main products are value added fruits. We also work with grains. We are very into therapeutic foods. Some of the raw materials we work with are groundnuts, soya, maize, millet, tomatoes, chilis, papayas, oranges. Basically, if you look at the host of fruits, vegetables, and cereals, that is where we have most of our focus. We also do nutraceuticals and botanicals where we do extractions from herbal plants under the brand name of Nature. This is used to help with ailments. We standardize existing remedies into these products.

Is that done by others in the sector? What do you bring that is different?

There are many people doing this in the world but many of the companies are either dealing with imported products or artificial products. What we bring to the table is that once we are integrated in the value chain, we are able to support every part of a local economy and we are able to produce specific products based on the demand. Uganda is a landlocked country so the cost of bringing product in and taking product out is very high. If you have to produce or manufacture for the local economy and you have to import all your inputs, you may buy them cheaply, but the upfront capital that you need to invest in logistics, stocking, warehousing, forecasting is very high. It is a huge investment and that is what has deterred a lot of investors from coming here. You even have to pay some of the taxes for these inputs in advance. But if you are using the local markets and the local products that are available, it is a huge advantage. As a company, we have 30 years of experience working with local producers. There are very few companies, if any, that are doing what we are doing in Uganda. There are very few companies that are dealing with natural products produced and processed in Uganda.

Do you do a lot of research?

We are a family owned business and we have been in production since 1982. Our biggest competitive advantage is that we are able to participate in the entire value chain from production all the way to packaging.

As a local company, we have taken advantage of many opportunities. We have a collaboration with a university. We have worked with international companies in France, Germany, the UK. At the moment, we are doing some work with Imperial College London. We have a lot of investment in research and development, especially in nutrition and extraction. There are products that we are trying to tailor for the local market. One of the key things that we are working on through investing in all this research is local sourcing, local production, local utilization. The Ugandan government came up with the “Buy Uganda, Build Uganda” brand. It is something that we have been doing for the last 30 years. We want to continue supporting it because it is evident that the key contributor to the nutrition of the country is the ability for communities to be able to source their food locally based on their diets. We are working with many research companies to tailor our products using the locally available resources. For example, in terms of legumes and cereals, there are many variations for fortified foods based on oats and things that are not easily available here. So, we are designing different products for both babies and children and also to manage the nutrition of young adults using locally available varieties that are not quite as well known internationally or in the West. We work with these agencies to do research on what is available, what the nutritional content is, how to optimize it, what kind of products we will get. We then try it on the market and we come up with a product that is tailored to diets such as fiber or protein for the local market and the local population. We are a very diverse country. We have many different communities. But a lot of the products that are produced in Uganda are perishables. We have two seasons each year, but in between the seasons there is a lot of drought in some areas. People are starving in some areas because they have sold everything. They have no way of preserving food or having food that is available to them with good nutritional content during those periods where food is scarce. Once the two main seasons are over, many children are not able to develop well because they have no vitamin C or access to fruits. Many of the juices that are available have artificial flavors and sugar and they do not add nutritional value to the diets of children. Those that do add nutritional value are very expensive and can only be afforded by a few. They will be able to buy these products if they are produced locally. We are taking advantage of bumper harvest season. When products are available here, the prices are low and you can actually transform them and make them available. Secondly, the technologies are available. We are tailoring to what is already being used. We are not offering a foreign strawberry juice or something they do not understand. If it is a mango juice, it will be mango juice based on the local flavors. When you have a bumper harvest in pineapples, instead of them going rotten you transform them into either dices or juice which you can sell over the next three or four months until the next season comes. That is what we have been lacking. Students in schools do not have access to good nutrition. They are eating maize and beans that are not fortified or balanced. We are working with institutions to see how we can improve school feeding programs. There is really no one using local raw materials effectively. There is a huge bumper harvest every year as well as a second smaller one. Historically, the population has been low and people have been able to eat what is available but the population is increasing, there is demand on local resources, and we must find a way of combating all these excesses into products that we can use during the times of scarcity. That is what we are here to do. If you look at some of the challenges that we are having, in the grain sector, a lot of the grain that is produced is not even fit for human consumption because it has high levels of aflatoxin. Aflatoxins are micro toxins that cause cancer in the body and damage the liver. We want to educate people about this. There are a lot of problems in nutrition and diet. We have worked with the ministry and research agencies. For example, our fortified maize has the acceptable low or no aflatoxin levels. But to get this kind of product now is almost impossible because the primary producers are not informed of the quality that their products are supposed to have. We want to invest from the primary producers. They should understand what they are producing and how it fits into the final product.

Who are your clients?

Some of our major clients are institutions. We work with the World Food Programme, USAID, a host of other NGOs that provide both relief and nutrition products. We also have the local market where we work with all the key customers including supermarkets, hotels, and we now want to move further into schools, local institutions, to bring the message home that locally produced products are as good if not better. They have not suffered the stress of haulage or chemicals that are added as heavy preservatives. If people consume local products it is better for the economy and for their health.

What kind of investors are you looking for?

We are looking for very specific investors, ones that are interested in a long-term vision for the company, investors that are looking at gaining value from the value chain. We want to be major players not only locally but also internationally. We want to build this company to an international reputation where we have a sustainable, world-class product that can compete with any product anywhere in the world. To do that, one of the key things is to invest in the local sourcing and procurement of raw materials. Working through the entire value chain is the most sustainable model and it is the best way to do business. It makes sure that everybody that is involved in the value chain understands their role. We want someone who is willing to see this company grow into an international business.

What are your current projects?

We have projects in cereals and grain setting up silos to hold almost 8,000 metric tons of different grains. We are setting up a juice factory to work on converting all local tropical fruits that are available. We are going to work with mangoes, passion fruits, papayas, pineapples. We have a line that will be focused on tomatoes. We also are setting up buying centers working upcountry investing in not just warehousing but also in collection centers. We have projects in nutrition where we are increasing the varieties and using locally available raw materials and ingredients to improve the ready to use therapeutic and supplementary foods. We have research that we are doing in terms of nutrition for children and people who are severely malnourished.

What is one of your success stories?

One of our biggest successes has been in working with USAID. We recently finished a five-year project where we were the primary and managed a $25 million project as a company in the area of agriculture and nutrition. We worked in 62 districts across the country providing therapeutic foods to over 120 health facilities dealing with 80,000 small holder farmers working on improving their livelihood and also setting up community-based nutrition support. That was one of the biggest achievements we have had because we were able to directly participate and know who our producers were and engage with them on a more personal basis. It was completed successfully and we achieved what we were supposed to. We have actually grown since then into a stronger company that has a better understanding of what we do.

What do you want to achieve for the company in two to three years’ time, the medium term?

Our goals in the next three to five years are to grow this company into the largest juice exporting company in East Africa. We have done the numbers and we know where the raw materials are coming from. The market is there. It is now about us taking advantage of the opportunities that are available. We are ready, we have the technology, ideas, and raw materials. We just need to put in the structure and the right investments to achieve this. Also, as a company, we want to work with more small holder farmers. The way the economy is set up, much of the produce is subsistence. The more people we can get onboard and educate about the produce that we are working with, the better. We have engaged institutional organizations. We are working with regional chiefdoms and kingdoms, local governments, and the National Agricultural Research Organisation (NARO). There are many players that we have brought together. We want to make sure that we have the right varieties, the right quality, the quantity, and the right support to achieve this goal.

FAIR USE POLICY
This material (including media content) may not be published, broadcasted, rewritten, or redistributed. However, linking directly to the page (including the source, i.e. Marcopolis.net) is permitted and encouraged.