An important factor in understanding the world cashew market is that most of the world production is processed outside of the country of origins. Although Africa is the largest producer of raw cashew nuts (RCN) most processing takes place in Vietnam and India. Only about 10 % of the African production is processed locally. As a result most of the added value related to the African RCN is generated outside of the producing countries. Furthermore there is increasing focus on other, potentially adverse, aspects related to this complex supply chain. This includes the environmental impact connected to a higher carbon footprint, higher risks due to unfavourable quality effects related to longer transport- and storage times and origin-mixing. The limited transparency across this supply chain is a challenge for the compliance with social standards.
Therefore Lorenz, an independent family-owned company with headquarters in Germany and one of the leading producers in the European snack market reconsidered its sourcing approach for its branded cashew kernels. Stephan Hochstein, Director at Lorenz Responsible Sourcing: “As a family business in its fourth generation that goes back over 130 years, it is important for us at Lorenz to act responsibly in our markets, within our communities and for the environment and this is also what our consumers rightly expect from us”. In order to contribute to a positive and sustainable development of the African cashew sector, Lorenz started sourcing cashew kernels directly from Africa and is now working on an existing three years cashew development programme established in collaboration with the GIZ and other private and public partners to further support the development of the Mozambican Cashew sector. An important focus of this programme is creating long term relationships and collaboration within the supply chain. Stephan: “We are committed to working closely with the farmers and with our local cashew processor for sustainable sourcing and fair working conditions in Mozambique”.
Creating long term market access for suppliers
Stephan: “Lorenz wants to ensure high quality cashews without compromising social responsibility. Important preconditions to move towards a sustainable supply chain are to increase transparency and traceability. Only then, we can work on improvement of quality, volume or working conditions. If you switch from one supplier to another supplier regularly it is not possible to work on sustainability for the long-term. This is why Lorenz commits itself to create long-term partnerships with our farmers and processors in Mozambique”.
Lorenz started with long-term purchasing agreements with their processor, as well as the definition of mutually beneficial goals and activities stipulated in a formal collaboration agreement. Stephan: “We certainly experience benefits from this collaboration in both ways. The cashew market is not always a reliable market, we would like to provide stability to the processor via long-term market access; through this strong partnership, we are also supporting our partner during challenging times by offering them a premium for a specific time period. This way, they are less vulnerable to on & off business. We also support our supplier in finding outlets for less common grades like cashew brokens and pieces in order to improve their total calculation. This fosters their financial viability and improves their investment capacity.”
Working on continuous improvements
Stephan: “The long-term collaboration has incentives on both sides. Lorenz wants to work on continuous improvements for our customers and our suppliers. The long-term agreement provides us more security, stability and possibilities for improvements within the chain”. Lorenz understands that a processor is only willing to work on changes in food safety, quality, traceability and social conduct if he sees a long term perspective. Stephan: “We have a more secure availability of cashews when we work with just one or two suppliers. We know where the cashews are coming from and we can work jointly on continuous improvements. If we would switch every time from one supplier to another it is not possible to work on true developments”.
One of the main benefits for Lorenz by working in a traceable and transparent chain is food safety. Stephan: “We want to be 100% sure that our consumers eat a safe product. As a roaster Lorenz supports the processors to comply with state of the art food safety standards and increase their efficiency level. Our nuts must comply with these fundamental requirements before entering our production area and finally our products to comply with international food standards such as IFS Food and BRC Global Standard Food Safety. We share knowledge and resources around food safety and efficiency to transfer know-how and develop the processing facilities in Mozambique. We invited processors to our facility in Europe to show how we are working and what can possibly be done in Mozambique. We want to create awareness for best practices, share our quality management systems, build expertise, with a common objective to achieve the highest standards of food safety.”
One of the reasons to source from Africa, besides more transparency in the supply chain, is to reduce CO2 emission. Stephan: “With the support of external consultants, we could evaluate that Lorenz’ CO2 footprint in the cashew sourcing area was reduced by 51% due to the shift to direct sourcing from Africa”.
Support for farmer development
Besides the long-term commitment to the processor, Lorenz also strives to support and develop the cashew sectors on five different activities; nursery activities, farmer organisation, Good Agricultural Practices (GAP) & business school, management capacity, as well as organic spray. The project supports local entrepreneurs to select the best seeds and develop local nurseries within different areas. Farmers can then buy seedlings from those local nurseries. This way the income of farmers can increase by improved yield per tree. An important part of this cashew development project is to support the farmers and guide them in how they organise themselves. Stephan: “As part of our common project, GIZ is training them in understanding how the supply chain is working, how to calculate their input costs and grow a viable business. Furthermore, additional training is focusing on Good Agricultural Practices (GAP). We also see a growing demand for organic cashews. If we want to provide customers with sustainable products, we need to invest and work together with our suppliers on this. This is why we are working on a bio spray for cashew trees to protect them from mildew, a thin whitish coating consisting of minute fungal hyphae, growing on plants or damp organic material such as paper. By applying bio spray, farmers can increase their yield considerably without using any chemical fungicides. At the moment this is still in a proof of concept phase but we are optimistic.”
Cross sectoral collaboration
Stephan: “We are happy to see that we made great progress within this programme. We see increased yields and quality due to the support to farmers and processors. We see higher levels of satisfaction from our customers and hopefully a better income for farmers and processors moving forward thanks to improved inputs and organisational and skills development along the value chain. At the moment we are looking to diversify and build more long-term relationships with processors in Africa due to these positive results. The ultimate goal would be for us to work on cross sectoral collaboration; in the long run it is insufficient if only the processor and the roaster collaborate and further down the chain the collaboration stops. We trust that the SNI platform can act as a catalyst to foster an integrative collaboration approach of all actors along the value chain from farmer to consumer”.
Sustainable Nut Initiative
The Sustainable Nut Initiative (SNI) is a pre-competitive, collaboration platform for the nut sector. SNI brings all actors of the international nut supply chain together. The nut sector is characterized by complex supply chains with continuous changing market dynamics and limited transparency. Participants of SNI are collaborating to drive positive change towards sustainable production and transparency along the entire chain. A common agenda has been developed, addressing current and future sustainability issues at sector level, taking into account the sustainability challenges of the different nut categories. SNI develops strategies and tools to address industry bottlenecks, share and act on lessons learned, bundle resources and scale up impact.