Low hanging fruit: Avocados, nuts, and the reinvention of Meikles

With the global avocado market at US$7bn, Zim companies looking to cash in (file pic)

With cash in the bank after selling the iconic Meikles Hotel, Meikles Limited is refocusing strategy on growing its farm exports.

Meikles sold its flagship hotel to Dubai’s Albwardy for US$20 million in February. The company retains tourism interests, ass it co-runs the Victoria Falls Hotel. But Meikles sees a better future in horticulture than in trying to revive Meikles Hotel, which has operated at below 50% occupancy for 20 years and is surrounded by decay in Harare’s CBD.

The company needed US$30 million to refurbish the hotel and return it to its past 5-star glory. Spending that amount of money was a big risk, given the outlook. “After taking into account the current and projected performance of the Hotel as well as the volatile environment, your board has concluded that the hotel as well as the Group do not have the capacity to carry the level of foreign currency denominated debt required to fund the refurbishment,” Meikles told shareholders.

Of the US$20 million that it is paying, Albwardy, which operates brands such as Hyatt and Four Seasons, is paying US$3.8 million for the hotel business and US$16.2 million for the Meikles hotel building. With this money, Meikles’ plans to expand production and exports of packed tea, increase production of avocados, coffee and macadamia nuts, and install 7.5MW of solar energy to provide power to its estates and factory. Meikles’ other operations, TM/Pick n Pay and Victoria Falls hotel, have been hit by the impact of COVID-19.

After selling the hotel, executive chairman John Moxon says his company is “in an unsurpassed financial position since the dollarisation in 2009”. Tanganda, together with supermarket expansion, will be Meikles’ focus, he says. Tea has long been the main export of the company’s agriculture business. The company is now looking to expand beyond tea; macadamia, coffee and avocado exports now account for an increasing share. Macadamia export sales grew by 129% while Meikles sold 39% more avocados than it did last year.

[Click to read – From Lobengula’s cows to Dubai: Over a century later, Meikles family checks out of historic hotel]

In the year to March, Meikles’ export earnings from macadamia nuts, avocados and coffee grew by 78% from US$ 4.5 million last year to US$ 8 million. As a percentage of exports, these three crops contributed 25% last year. Now they account for 43% of the company’s exports, and Meikles sees further growth there. “Contribution of the high-value crops to the company’s export earnings is expected to rise to 60% by March 2022 as the bulk of them reach maturity,” says Moxon.

Low hanging fruit

Meikles is looking to ride on the global avocado bandwagon. The world avocado market grew from US$3 billion in 2014 to US$6.5 billion last year, according to TradeMap. Zimbabwe exported US$2.5 million worth of avocadoes in 2018, ZimStat data shows. Kenya, Africa’s largest exporter, earned US$74 million from record avocado exports in the first half of the year. South Africa and Tanzania are also expanding production.

Over the last year, world tea prices fell 14% from US$1.64 per kilogram last year to US$1.44 per kilogram in the year to March this year. This was due to glut from increased production in Kenya, which met weak world demand. Meikles says it has received approval to sell packed tea in South Africa. “The much-needed RBZ authority to increase promotional spend in South Africa has been secured. This will help to support market penetration efforts to grow packed tea exports.”

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To back its strategy, Meikles is building 7.5MW of solar power for its estates and the Mutare factory. The first phases of the project cover Ratelshoek, Tingamira and Jersey estates. Ratelshoek’s 1.8MW solar plant, built by DPA, is expected to be completed by September 2020. Tingamira’s 1.6MW and Jersey’s 2MW plants are expected to be completed by December. “By end of December 2020 we will have implemented 72% of the project. This project is expected to result in an efficient and integrated power supply system that will give impetus to the growth and maturity of our high-value crops and efficient crop processing,” says Meikles.