Investing in Regenerative Agriculture and Food
Investing in Regenerative Agriculture and Food podcast features the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Hosted by Koen van Seijen.
Investing in Regenerative Agriculture and Food
109 Thekla Teunis and Gijs Boers, the good the bad and the ugly of regenerative agriculture
An interview with Thekla Teunis and Gijs Boers, founders of Grounded, who we interviewed 4 years ago, about the lessons learned in 5 years of applying regenerative agriculture practices in South Africa.
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Regenerative agriculture is really really really hard. Something we don’t talk about often enough, when we see the shiny farms, pictures, movies documentaries. Thekla Teunis and Gijs Boers share their experiences among which what it means losing 70% of your crops and buyers who don’t honour their agreements.
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RegenEgg is really, really, really hard. Something we don't talk about often enough when we see the shiny farms, pictures, movies, and documentaries. So today an interview with the founders of Grounded, who we interviewed four years ago, about the good, the bad, and the ugly of RegenEgg. Five-year droughts, losing 70% of your crops, and buyers who don't honor their agreements. Plus, of course, lessons learned. What is currently working really well, and what is Grounded launching soon in the Regen ingredient space? And their big realization when it comes to working with and investing in smallholder farmers. Welcome to another episode of In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits, and how to become a member, check gumroad.com slash investingreach Welcome for another episode, and today we have two guests that we had previously on the show, Tecla Teunis and Gijs Boers, founders of Grounded. We had them in March 2017, so almost 4 years ago, and it's time for an update, actually many updates. I'm very, very happy to have them back on the show. Welcome, Teikla and Gijs.
SPEAKER_02:Thanks, Koen.
SPEAKER_01:Thanks for having us again, Koen. And just to set the stage a bit for people, obviously, I will link to the previous interview we did in the show notes below, but could you briefly introduce Grounded back in the day? And then, of course, we're going to talk about Grounded currently in 2021.
SPEAKER_02:Yeah, I can actually take a step at that. I think maybe you're grounded back in the day in 2017. It was, I think, Gijs and me and a few people. And we had established a project in the Baviaanskloof in South Africa, where we were trying to restore a degraded landscape together with some NGOs that we were working with and with the farmers there. And we had just started to see if we could replicate some of our approaches there in other areas in Zambia and in another area in South Africa. And since then, the organization has progressed quite a lot and also maybe changed. But I think still to our core, what we do is that we work with farmers to help them to transition into regenerative agriculture. We build companies that take their produce, process them if necessary, and then bring them to markets. And yeah, so we then also actually help buyers access the produce from the farmers. So that's in a nutshell, maybe what we do.
SPEAKER_01:In essence, that hasn't changed, but I think the execution has completely changed.
SPEAKER_02:Yes.
SPEAKER_01:Based on many, many lessons.
SPEAKER_00:That's the biggest difference. I think we were very optimistic at that moment. We've actually, in the team, overcome a lot of hurdles in the Baviaanskloof. close to raising investment, first planting.
SPEAKER_01:Yeah, let's talk about that one because that was the project we mentioned a lot last time. What was the original idea and what has it pivoted, morphed or emerged into? And now you're still partly involved, but let's take us through the journey of the Baviaans Club because I think it's a great example of a lot of lessons learned and what we can take away from that and what you obviously bring to other landscapes now.
SPEAKER_02:Yeah, so the original idea in the Baviaans Club, so it's a sort of semi arid landscape where the predominant farming method was grazing goats, extensive grazing, so in mountains like on thousands of hectares. But a lot of the mountain land was severely degraded because of overgrazing, actually not by the farmers who are there now, but already like over generations this had been happening. And it was identified by ecologists as a very important biome, also because of its potential to capture carbon, actually. So there's like a keystone species there called speckbohm, which...
SPEAKER_01:Which is a tree.
SPEAKER_02:It's a tree, exactly. And you can plant it from cuttings and it showed really good results in like initial restoration efforts. So the idea was to help those farmers restore their lands using as part of that, maybe like spec bone, this tree. And then we as grounded came in to see, okay, can we actually also ensure that that sort of makes economic sense for the farmers to do? So instead of we just plant trees on their degraded land, but they continue with their goat farming practices as they've been doing previously, that would not make a lot of sense because then the goats could come in again and eat the trees. And then, you know, there's just zero effect. So what we started doing is seeing, okay, is there a way to actually transform the farming system entirely? And that was, I think, in hindsight, maybe overly ambitious.
SPEAKER_01:Especially the word entirely.
SPEAKER_02:Exactly. Because then we came up with a plan for the farmers to transition away from goat farming and towards essential oils. So we set up a company that would enable the farmers to grow crops like lavender and rose Rosemary in the area and process them locally and then sell them. And then the farmer signed like holistic land management plans that they promised to take their goats off the land in return for like all kinds of benefits that they would receive through this company. And so we started off very optimistically because we thought this is going to be great.
SPEAKER_01:And ambitiously. I mean, this is going from goat farming to farming rosemary is a step, let's say, a huge step.
SPEAKER_02:So that is a step, but then we added an extra step on top of that because we thought that's not enough. Like we're also going to do it organic and they hadn't been growing organic before. So they had like zero experience on that. So yeah, but we thought, no, this is, it should be relatively easy. You know, the... The advisors told us like the numbers look great. The agronomist said, no, these crops will grow fantastically in the area. Maybe good to know that the essential oils industry in South Africa is very small. So the amount of advice that we could get was sort of limited. So it was a little bit like pioneering, but everything on paper looked fantastic.
SPEAKER_01:Your spreadsheets looked amazing. Your PowerPoints looked amazing. Yeah.
SPEAKER_02:And it looked even better if we made it really big.
UNKNOWN:Yeah.
SPEAKER_01:you added a few zeros here and there and move some exactly
SPEAKER_02:so the bigger the better basically and also the faster the better of course in your spreadsheet you know then your returns just great okay i'm exaggerating a little bit but it was like we were really optimistic and so we started off planting lavender at least the farmers did that and then actually immediately came like stumbled on a few challenges there it was much harder than we thought to get the lavender plants to actually grow in that landscape. Planted rosemary as well, which did a lot better. But then one rosemary field got clapped by a pest and 70% disappeared again. So on the growing side, we had challenges. And
SPEAKER_01:you did a bit, I mean, it was big. This wasn't a few, like half a hectare here and there. This was a lot of
SPEAKER_02:hectares. No, we started with 100 hectares, which I wouldn't, if anybody is listening, I would not recommend starting off any kind of project with 100 hectares. maybe start off with like half a hectare or something, or one, maybe maximum five, but not as many as we did. Also because it's just much more difficult to manage 10 hectares than a half, you know, plus your financial risk is way bigger, obviously. So yeah, maybe long story short, eventually, yeah, it was actually, it was a really tough process because as you can imagine, the farmers put a lot of time and effort into making this work as did I and like the rest of the team we worked like really really hard But eventually we had to come to the conclusion that all the lavender fields that we had established, which I think was about 60 hectares or something, I don't remember exactly, we had to write them off because it was just impossible to get it to grow. The rosemary, on the other hand, did really well. But there we found out that the variety that we planted actually didn't get the highest prices in the market for the oil. And there was another variety which was much more attractive. which we then started planting as well. And those are still actually doing fairly
SPEAKER_01:okay. Yeah, we will get to the ingredient part and the buyer part and the markets, et cetera. But what would be the biggest takeaways? I think one of the biggest is starting smaller or not being overly optimistic in terms of size, but anything else that you really want listeners to hear? I mean, obviously you wrote a number of really interesting blog posts, which I will link below because you basically took apart all the lessons learned of the Baviaanskloos and of others. But as a biggest takeaway, Gijs, what do you want the listeners of the podcast to know about this project and what they maybe won't have to go through?
SPEAKER_00:The biggest takeaway, and I raise my hand here, is I think we work with farmers. Farmers are really ready to go through change. We mix it up with teams, with people with all sort of knowledge. So we had a wide group of people supporting us. Everybody was on track. And if you then see how difficult it is to get through that transition. Now, imagine that all these farmers have to go through this transition. Everywhere in the world, we hope to see these farmers completing this transition. And I think to me, the biggest takeaway is all these hurdles in between. We still strongly believe in region agree, but seeing the perfect examples that you see today, how they work, they have made that transition. They are there. They were maybe in a certain spot or certain area that favored the conditions to make that transition. But in the Baviaans Club, the conditions are not very favorable for that path. And to me, that is the biggest takeaway. We've exposed our success directly to the success of the farmers. And that working with them and trying to make the complete that transition, even if you mix bringing all outside knowledge and everybody's on the same page and everybody works day and night to get there. And then still you make, everybody must make some of these mistakes so to get through the transition and complete it I think that's the biggest challenge and that I think is something we're focusing on it's not it's focusing on making that transition work and then especially for us as grounded in an African context often
SPEAKER_02:I think I can maybe add some like give some specifics to things which were actually difficult
SPEAKER_01:in the weather obviously
SPEAKER_02:exactly so for example the weather so this is actually quite a significant thing because when we started there was five years ago and we We didn't know back then, but that was actually going to be the start of a drought, which still lasts until today and which is a horrible drought. The farmers have never seen the water levels this low. It's actually a little bit scary. They need rain at some point now because this is...
SPEAKER_01:Yeah, you mentioned it's semi-arid, but soon it's going to be arid.
SPEAKER_02:Yes, definitely. Yeah.
SPEAKER_01:Without water, nothing grows.
SPEAKER_02:No. So for example, in the first two years when we started, we had 90, so 90 millimeters of rain over a of two years, which is like a desert kind of environment. And the effects you see then is like, so for regenerative agriculture to work, you want to build up life in the soil, but that helps if you can actually then have stuff growing on the soil as well. You know, these things like interact. So how do you, for example, plant or establish cover crops if you have no water? You know, this is something which is like, maybe sounds a bit trivial, but was a real challenge. So then you do get more challenges with with weeds for instance if there are no cover crops to like so it all sort of then interlinks
SPEAKER_01:and in this case it wouldn't have made sense to look at historical data because this is a historical drought which you wouldn't have been able to predict
SPEAKER_02:exactly
SPEAKER_01:so you're going in blind basically in many of these places
SPEAKER_02:exactly yeah that is just and yeah now it's actually so dire that they've had to even stop irrigating some of the rosemary fields which I listened to our previous podcast and then I was like proud saying like, oh, this is all very water resilient because the farmers now use 10 times less water than they used previously. But now there's so little water that they don't even have enough water for this. And then of course, like if external condition like that beats you, then there's just, you know, very little you can do. Although I must say on the positive side that despite this drought, the farmers have actually like, okay, because when you get a little bit of rain, then you can quickly plant cover crops etc. And they have now transitioned into regenerative agriculture and that is actually working fantastically. The farmers are super excited about
SPEAKER_01:it. What's the current situation from, let's say, the pessimistic of what went wrong because many things did, but what's the current where a number of years in, I think you just went to the Bavianskloof, what did you see and what's the current even though there's been a historic drought, what's happening in the field, on the field, in the soil?
SPEAKER_02:Yeah, so on the soils it's amazing actually i like i stood on a plot where a farmer had like applied regenerative and then right next to it he hadn't done that and the difference is just incredible
SPEAKER_01:and what was the difference then what kind of approaches of methods
SPEAKER_02:so on the one field he had implemented like a compost tea all sorts of like a cover crop mix so they had actually implemented a full regenerative program we had a guy who was the general manager who was like very much involved in this and who look I'm not the expert so I can't give you the details unfortunately but it worked really well so all the farmers make their own compost tea on the land they can put it directly into the irrigation systems that works very well if they can irrigate and then yeah these cover crops also so you can just see the effect in the soil and that is only like after one or two years so it's actually nice the farmers can also see immediate benefits it's a much more closed loop system they don't need to get inputs from outside especially if you need organic inputs they can get super expensive so the farmers are happy about that as well they've still got the rosemary fields which despite the fact that they can't irrigate are still standing they don't grow as well but they're surviving so hopefully when they get rain you know they'll get like better yields again and they process those into oil as well as a part of it is dried and is used in the food ingredient industry as a preservative there's a molecule in rosemary it's called carnosic acid that's used as a food preservative and actually they now found a market for just dried herbs
SPEAKER_01:so that's actually sort of working like despite a lot of things
SPEAKER_00:maybe another anecdote on this is that carnosic acid if you have a very healthy soil healthy plant and then you put it under a lot of stress then that carnosic acid is like a protection mechanism of that plant so if you have a very healthy plant and The more carnosic acid, you would say the more value that product has to the industry. So we had buyers that promised us a green company and say, well, we want more organic sourcing. So they said, we're going to help you and we're going to pay you for the improved quality. And two years later, after all the hurdles, all the challenges, all the mistakes, the farmers actually said, give us two years and they delivered. And then that company backed off. Later on, it turned out to be a huge fraud scandal at that company.
SPEAKER_01:But so you're saying this, the healthier the soil, the more of this specific piece, or it has to be stressed because of the drought?
SPEAKER_00:Yeah, it's a combination. So first a healthy plant and then put it under stress. But it has to do with a lot of factors. So the right variety for this, it has to do with the right plant, the right harvesting times, indeed, when it's under stress, and also the right processing. So it's difficult to say It's just a soil, it's just that. It's a combination of factors that improve that plant's defense mechanism and that's what they later on extract from it.
SPEAKER_01:And obviously you've figured this out in the last years because it's not that you go in, we're going to do essential oils and you already have this as a plan B or something. No, this is something you happen to find out on the road.
SPEAKER_00:Sometimes you have a bit of luck and then you need to capitalize on that luck and that then didn't happen. And now there's another company, a family business, and they say, yeah, we first want to have a couple of batches and see if we really can get it out of it and if it really works. But then they say, yeah, but we actually need volumes. And then it takes another two years to get to the volumes they want. And so, you know, in the meantime, we've completely, the business itself, so we see the transition on the farmers, but the business itself has had so many hits after hits after hits. And that's difficult to hang in there while you try to get from the small success to bigger successes. And you need, God make so many mistakes as us. And you also need a bit of luck from time to time. Because if that buyer would have been there at that moment when it said it would be there, that they would pay and an organic premium and a premium for the quality of the product. That would have been amazing. That would have been closing the business deal and be the proof of a successful company. And that's then again delayed by two years. And afterwards to say, yeah, you should have gone for alternative buyers quicker. But they gave us also such a good impression and really committed that we could ask them anything. And probably the people in that business that were talking to us were excited. So it's not even the persons in that business.
SPEAKER_01:I think it's a great bridge to the ingredient side of things, like what you learn there and how you're... And also the buyer side and the marketplace. It's amazing if you can grow a lot of fields of rosemary in healthy soils, but then what do you actually do with it? It needs to be not too big, not too small, this kind of ingredient, this kind of color, this kind of weight, this kind of color, et cetera, et cetera, et cetera. And for many farmers, that's simply too complicated, whatever they're growing. So... Have you seen, not only in the Valiance Cloud, but also in the other landscapes you're working in, on that, how do you get it to a proper buyer for a proper price? What are the big lessons there?
SPEAKER_02:Yeah, I think in the end, of course, it's also all about your quality, right? So you can have amazing soils, but you're not selling the soil. So it can be a fantastic regenerative landscape, but then you still need to get the specs of your product right, especially if you want to get a premium price. And there, we've seen that that just takes time especially if you're entering a new market for instance in the case with this rosemary right now they've got a fantastic product so the feedback that they're getting on the oil is really good and then you see like okay so it takes actually a long time from establishing till when you actually get demand from the buyers and your product is good enough and then people get come back to you and they refer you to other buyers
SPEAKER_01:but it takes four or five years basically
SPEAKER_02:exactly so it requires i think a lot more patience than we would have thought it would take. But I still believe that it's actually an interesting model for that area, like that business could still work, because especially now they've got a good product, they've got the growing going, there is a market, so this could work. Then the next challenge is actually what we've come across is like what Gijs already mentioned previously, is sort of the mismatch between the skill that you're producing and the skill that the buyer wants. like I just mentioned, don't start with super big production because then you can make too many mistakes. But now the challenge is then you get a buyer who says, okay, this is really nice oil. I would love to buy a ton. And then they say, okay, no, but we don't have a ton. We've got 200 kg. We can get you a ton, but they're going to be then in whatever two years time or something. And then the buyer says, okay, no, that's fine. And I'll go to another producer somewhere else. And so that's cycle is almost a little bit chicken and egg because you need to have the product to get the buyer because nobody's going to buy if you don't have like a sample for example but then once you have the buyer you don't have enough of the product so this is kind of a tricky loop
SPEAKER_01:so with all your experience now in different landscapes what could be a solution or what is a solution you're working on or how do you fix a chicken and egg
SPEAKER_00:well firstly i think if you're on a farm you produce different qualities as well especially in the transition so So it is key, I think, that farmers that produce a better quality, they can access a market to that. And there's also a commodification of products. So we pay for a minimum standard, but not for a higher standard. And at the same time, this wholesale industry in the middle is critical, plays a critical role in capturing, processing all the mass products that are there. So we have to take a step somewhere in that wholesale arm as well, and especially seeing if we can get a bit of upside of maybe 10 or 20 percent of the produce of some businesses or farmers or farmers that maybe have produced smaller volumes, as Tekla explained, but at a better quality, connect that to buyers interested in that better quality. And I think that's where a missing link is. And it's not saying that we can overcome that as an organization. This is big. This is a big infrastructure challenge that's holding back Regen Agri in general. But I think we would like to to contribute that and be a part of that transition, be a part of that movement and play a role there as well. So I think, Tekra, over to you.
SPEAKER_02:Yeah, what we see is maybe there's almost a mishmash or there are two groups that don't find each other as easily, which could be a solution to this problem. Partially, maybe. So the one group is actually maybe smaller, medium-sized brands with a very authentic story and product. And that segment is actually growing really fast. That's driving growth in consumer goods industries. So it's actually not an insignificant size of the total market.
SPEAKER_01:You have examples of brands you can disclose. You're talking to our brands that people know too. So they're not super big. They're definitely not tiny and they have an appetite for good stories and hopefully good quality.
SPEAKER_02:Exactly. So there's a lot of, for instance, brands here in South Africa that your listeners might not know, but it's like Sunbird Tea and maybe like slightly bigger ones. ones that they might know but those are already more established but it's like lush or pukka tea things like that but those I wouldn't really call small I think the smaller ones are more localized actually so they would be specific they wouldn't have maybe expanded internationally yet
SPEAKER_01:and they could they are looking for players like yourself and for ingredients that you can give them access to
SPEAKER_02:so what they are often looking for is ingredients which are produced sustainably and with like high ethical principles. And ideally, a lot of them, I think, would like to show transparency to their customers on where they get their ingredients from. But for a lot of these, especially smaller brands, it's difficult to get access to those ingredients because they would either have to approach all the farmers individually and then get the stuff. It's expensive, logistical nightmare, takes a lot of time and effort. Or they have to go to like your traditional wholesalers, but then you lose the story and you often don't even know where your product actually comes from. So we spoke to quite a lot of those small brands and they actually said to us, wouldn't you be able to help us get access to those ingredients? The reason why we spoke to them initially was because we thought we were going to establish our own brand.
SPEAKER_01:I remember those discussions.
SPEAKER_02:Yeah, it's actually as a way to capture better value for the farmers. But then we figured, oh, there are actually so many brands. We might as well position ourselves like sort of one level lower and instead actually help them get access to these ingredients because we are connected to the farmers at the same time the farmers for them it's really interesting to sell to those brands because often they will get lower volumes which we just spoke about especially if you're just transitioning to regenerative that's super interesting
SPEAKER_01:the quantity of quality you have might be not a ton but a few hundred kilos here and there
SPEAKER_02:exactly
SPEAKER_01:and it grows over time, hopefully, but you're not stabilized yet. You don't have a stable production of high quality.
SPEAKER_02:Exactly. Plus, these brands are often also a little bit less critical to the exact specifications of their ingredients. So the more bigger, more established brands want to have exactly these chemical specifications because their product needs to be uniform all the time, whereas the smaller ones can offer a lot more flexibility, which also provides great opportunities for these producers. Plus, they can actually actually pay a better price often because they will value the impact that's been created. But it's sort of like what I just explained, there's an inefficiency in the system, like for these two to come together. Because also for the farmers, it doesn't make sense to now go phone every small brand and try to sell them like half a kilogram of oil.
SPEAKER_01:Hey, do you want to buy some XYZ?
SPEAKER_02:Yeah. So this is actually something which we are busy now with, which we're very excited about, because we're actually going to launch an online platform in may we're going to do a pilot here in south africa where we bring these two together so where we offer ingredients from great producers that we know that grow regeneratively so it's our own produce like the operating companies that we established but also other companies that we found that meet our standards and then offer the brands an opportunity to basically buy directly from those producers
SPEAKER_01:so basically a wholesale ingredient regeneratively wholesale ingredients platform.
SPEAKER_02:Exactly.
SPEAKER_01:And that could really speed up the transition of a lot of them. And then do they sort of like the farmers, do they between brackets graduate from that? Like at some point, if I am at that, like I'm standard farmer, hitting the high quality mark do I outgrow these brands some of them maybe do and what happens then
SPEAKER_02:yeah hopefully because like that would ultimately also be interesting for us we also like apart from this platform so this is like one distribution channel that we're having the other channel like which we use to generate sales is actually more direct sales so for the larger buyers the platform we don't really see it as a method it's more based on the connections that we have in the industry so indeed if they have like large your volumes and they can meet quality standards, then we can actually also help facilitate those deals or they can find those deals themselves, of course.
SPEAKER_01:So that's going to go live in May, specifically on South Africa. But obviously, I'm imagining you're planning beyond that for some ingredients that are easily, let's say, easily shipped, transported and light. Very exciting. That's basically four or five years of experience coming together in a very specific solution that could, at least in the transition piece that we were mentioning before, solve a lot of things to get at least some of the higher quality stuff to some buyers for a good price.
SPEAKER_02:Yeah, we're super excited about this. Also because it provides us with good opportunities to scale our experience and our model, I think, because we will be able, we think, like you mentioned, the South African market for this is relatively small, but it allows us to set up the platform actually with our own means as well. We don't need any external investments yet. And then we can test it, see how it works and then bring it to other markets. And it's also a great way actually to get access to more producers and then provide those producers because our vision is that we can then actually provide those producers with support to transition towards like better regenerative agricultural practices. So some of them might be at the beginning of a journey and then we can help them to sort of progress.
SPEAKER_01:And what kind of products, what kind of ingredients would be predominantly on there? For the beginning, like what are the main ingredients coming off the landscapes from the landscapes you're working in or with the producers you're working with?
SPEAKER_02:Yeah, so we're starting with the segments in which we have experience from our own landscapes indeed. So it's going to be essential oils and carrier oils, so seed oils, tea and herbs and spices initially. We might add some other segments later on, but we'll see. I think those are sufficient for now. And it's very interesting cross-pollination amongst those segments because those are the ingredient segments. And then the customer segments that we're targeting are the cosmetics industry, ready to drink, botanical drinks, those kinds of things, tea, spices. But they actually use ingredients from the different categories that I just mentioned. So in a tea, you can use spices, for instance. In a cosmetics formulation, you can use a tea. So yeah, it's like these segments, we also chose them because they're synergies amongst them. And because they are relatively high value and durable, so they're non-perishable, which makes our operations slightly more easy to handle, especially given the fact that we're in remote locations. So we don't need a cold chain or something like that.
SPEAKER_01:Yeah, which will change everything. And to shift gears a bit, because we have also discussed last time, you just started to work, I think, in Zambia. We discussed it briefly with smallholder farmers, very different setting, completely different setting from Yeah, it's been a
SPEAKER_00:very long trajectory there. But the starting point was a large training scheme operated by one of our partnering NGOs, where they provided small support packages, seed and training, to a lot of small farmers. in that area.
SPEAKER_01:Something we've
SPEAKER_00:seen many times. of some of the extra produce again and sell that over at a better price. So we figured it out. The smallest peanut butter in Zambia, great, great to make. And actually the smallest peanuts were more higher valued. In Zambia, the biggest peanuts were higher valued. In the Netherlands, we had an amazing company that wanted to take care of our logistics and reprocessing. So again, on paper, that makes sense. But firstly, let's talk about our biggest mistake there is that when you increase those packages to the small farmers. We saw a huge difference between smallholder farmers. So that was one of our biggest insights there, I think.
SPEAKER_01:You mean differences in how they responded to the bigger package?
SPEAKER_00:Indeed, how they responded to that, how they take it on. So how they were able to translate that higher package in more production, in a more efficient production. So you've seen maybe 10% of the farmers were able to take on that bigger package and really translate that in higher production. I won't go into detail. We've written blogs about it, but it's complex to scale. Labor is scarce and it's a labor intensive system. Many farmers were older farmers and it makes a lot of sense to grow your own food, but going beyond that has some complexities. So basically what we've seen there in Zambia, the biggest transition we've done after two years of trials, and obviously we lost 90% of all the crops through drought as well. So it's hard to measure exactly how bad we would have done in a normal year year but what we've seen now what we're trying there now is okay what you see is a region farm works you know the more integrated it is taking our business model so we're getting more high variety farm but we're going to invest 10 to 15 000 packages in let's say the top five percent
SPEAKER_01:so you're really selecting for like the top percentage of the farmers which is a huge shift from let's give everybody a package
SPEAKER_00:no that's huge and there's already a a lot of support from NGOs from small packages to small farmers. And then there is a lot of investment going into bigger farms, bigger investment, bigger projects. But in between, there's nothing. And the challenge is a lot of people want to see a million farm programs. And it's not really sexy to say, yeah, there's a million farmers. We think that million farmers are served well by some of the NGOs. And let me clear, not everybody, but there is a lot going on in that space. And also a lot of good work. The thing is that the next step, and what we have tried to build in is that next step, going with a lot of hurdles again, but bringing in that next step. And now we're at a stage to say, okay, we've We see talent, we see entrepreneurs, we see farmers, and we've read a great study, I think, an NGO, it's called Pathways, several organizations together. It's also mapped the different roads these farmers can take on their path from being a subsistence of very small farmer with all the challenges to a more resilient farmer, but also the other ways into the economy they can go. Not all of these million farmers we see are farmers that can become a full-on regenerative farm. like we see on the perfect examples on TV. And I think, yeah, that was our insight. And I thought if you want to invest in small farmers, really invest, then you have to do that. And even in a big example often mentioned in Kenya is Twiga. They source from small farmers and they sell to street vendors. They've come to a similar conclusion, say, okay, for us, you know, we need to invest more in some of the top farmers. And it's not always a well-received message.
SPEAKER_01:From donors, I can imagine, yeah.
SPEAKER_00:Yeah, and I definitely want to state that their work the donors what they are doing it's not saying that that is not effective but to say just the step afterwards is often lacking so it's to phrase that very carefully but indeed it's not sexy and it's also difficult to say yeah we're going to invest a lot in you and not so much in another farmer but that's also the reality
SPEAKER_01:yeah let's unpack that but I think it's a fascinating realization that obviously every investor has already come to you because it's if you are active in an accelerator if you're active I mean you screw a lot of deals before you invest or a lot of entrepreneurs you meet a lot of teams why combinate I don't know how many they screen before they select someone and somehow if we want to invest in smallholder farmers we don't do any screening we just sort of basically spray and pray and hope that it will work out and in this case it is figuring out which ones actually want to be a farmer first of all you wrote a great blog post about that I will definitely link that as well like who wants to be a commercial farmer and who sees his or her career and work in that and many don't and that's perfectly fine. But as an investor, you don't want to be backing the ones that actually don't want to do what they're doing. And obviously they will move to the city if they can, or they would start doing something else if other economic opportunities open up. So backing the ones that want to be and are able is crucial. Selecting them is not easy, but then, so you're now saying we're investing, you use that word very specifically,$15,000 worth of package in the farmers that want to do more. What does that exactly mean? What do you do? How do you work with them?
SPEAKER_00:So we are still doubting how it will exactly, the partnership look like. We're trialing now with 15 farmers. But first of all, the biggest challenge is irrigation. Those are the highest investments, especially in the dry areas in Zambia. You have to, if you want to do anything, you need to have water. We believe a lot in local markets. Zambia is the center of Africa, so exporting-wise doesn't make sense. But there's huge regional markets, cross-border trades also in the informal markets, shortages of a lot of crops during different times of year. Crops, I have to say, products, vegetables, fruit, And that mixture provides actually a good market to absorb the variety of projects a regenerative system brings. So yeah, it's partnering up with them and then that will go slowly. So first of all, it's the problem with irrigation. If you do it in different locations, it's super expensive. So the bigger area you irrigate, the cheaper it is. So we try to bring some of the best together. We start obviously in a sector where there's already a lot of good ones. So, you know, you don't have to move people whatsoever. And we're going to just try it a bit. a perfect business with several of those business models stacked on top. You know, what you've seen in other of your interviews, they mention it as well. You know, Regen Agri, it's also a couple of business models on top of each other to absorb that diversity. And from there, sell into the regional markets and try to hit specific prices when they are high and when there's shortages of the market, then try to bring in your produce. That's a high level of the business model. There's much more to it. But I think it also shows a bit of the transition we have made to you know you start as an impact company so you first look at impact and I think over time have to make more and more commercial choices also linking you know we started in the most degraded area so with our you know original model setting up these companies for stretch from scratch same thing happens you know we say rather than doing it from scratch in the most degraded areas of the say yeah you start a car dealer on an island where there's no roads it's super difficult but moving more into to finding other entrepreneurs in Africa that had already taken some steps where our support and our lessons have some value. So our previous companies and the companies still in portfolio like Zambia are, let's say, grounded as it was. So it was grounded where we built a company from scratch to support the transition of a wider landscape. But for us as an agri-company to succeed, we need also a lot more businesses in our portfolio that are more viable, can go faster. And I think We've learned to play this game in the toughest, the worst pitches around the world. So I think there might be some value in what we've learned and that we can also play the game in a better pitch that we also will do a better job. So one of the examples there is an amazing Tanzanian spice entrepreneur together with a Dutch spice trader. They joined forces. They set up a company in Tanzania sourcing from small farmers. I think in the first year, they got a half a million euro revenue, which is absurd. But now they need to raise investment they have been inspired by everything they've seen that's another thing over the last couple of years great work to hold a community because the movement that has been built is amazing even you know a spice trader whole life in spices 60 years old has seen it has inspired to say I want to set my company up or our company up in a way that it's impacting these farmers in these mountain forests how can we do that so yeah and by accident you find each other not by accident we went through a whole pipeline of process but this is one that
SPEAKER_01:it feels a bit like by accident
SPEAKER_00:you sometimes you force your accidents to happen it's so often but you come across these two persons that are perfect match but they are spice persons but never have written a business plan or secured external funds never worked with small farmers and see how they could be served what packages for what farmers are region every team in grounded can already help them with combating some of the basic pest problems which turn out to be sometimes just a timing of irrigation problem so there's a lot of overlap and the best thing is they like that we've made so many mistakes I think that is what resonates between us and many other entrepreneurs and I think we will be able to get more of these starting businesses to get them to an investments ready stage with our package with our support in Grounded that we've built over time so that's you know even the The traditional model of Grounded is still there, but even that has changed over the last couple of years a lot.
SPEAKER_01:And then what would you be doing with this company in Tanzania? Basically, you're providing support, you help with the business plan, potentially help raising funds. Will you step in as well? How would that, what would the partnership look like?
SPEAKER_00:Yeah, so this is like the full-on model, or what we call opco model, where we try to raise capital, preferably blended finance, blended also to improve the sourcing and do some pilots with the different type of farmers, so How do you support your different, again, there's a different type of suppliers. How do you support each of them in the best way? And also investment capital, working capital, better processing. The great thing about this is Tanzania is organic by default. So all the farmers are organic. First farmers will be certified organic. And they have quite a good quality, but that quality is lost now in the processing. And they make big steps short term. A lot of other suppliers in the world are struggling because EU changed the reg So you can't use so much pesticide anymore, which is a big problem with spices. You dry them, you know, only 20% of the volume is left. So you see any pesticide residue. So I know for crops, the EU sometimes have to pass them. Otherwise, we wouldn't even have those spices, but just because they can't source them somewhere else. So Tanzania has a great opportunity and all these organic farmers to step in there. And it's our role to bring that all together and to support them, telling them the story, go out, go out to the investors. the network so that they can focus on selling these spices, focus on improving production. And there's so much work that has to be done for this company, you know, both to scale, to grow, but also to leverage its capacity to have such an amazing impact in Tanzania and to nurture that organic farms that are there and try to, you know, it can go into different directions. You can clear forests and put spices there, but spices do very well on the canopy. They do very well in agroforestry. So can we use this company to, again, trend for some of the maize fields into more of an agroforestry spice system but this is not something that will happen you know the coming half a year but if you do it well and you support your farmers well I think that over a period of five to ten years Tanzania can have an amazing spice industry and leverage that industry so that yeah you create great mixed zones if they call it in common land in some of those areas
SPEAKER_01:yeah and I want to be conscious of your time as well and I think there's a lot to discuss here and a lot to unpack. And I will definitely be checking in a bit earlier than four years after to see how the different landscapes are evolving. But to end with a number of questions I always like to ask to start, I mean, you could both look at that or one of you can answer. I mean, I'll leave that up to you. But what if you would be in charge of a$1 billion investment fund tomorrow morning? What would you prioritize? Where would you dive into? What would be your first investments? And what would be your framework, basically, of making those decisions?
SPEAKER_00:Well, very biased. And, you know, obviously a bit of what we see is a huge finance gap when it comes to Africa with small enemies in general, whether it's from small to large farmers or small agribusinesses. We see a lot of very small and a couple of very big. And that's where finance needs to be leveraged for. And it's high risk. But I think a strong segment of medium sized companies is critical. So that is a big one for me, at least, and also a bit of personal perspective. Maybe
SPEAKER_02:if I can add, I think maybe also like following on to our conversation, I think there's a huge gap in the sort of maybe call it like midstream. So in the between the farmers and the brands.
SPEAKER_01:The infrastructure, the pipeline foods, but then built in Africa.
SPEAKER_02:Yeah. So to have, you know, processing facilities, transport, storage, all of that, like to actually get the produce from the producers to the markets. I think that's a huge gap. It's also a big gap. Otherwise, I would just invest it actually in growing grounded. I think if we have one billion, we can become really big. So we can just invest it in
SPEAKER_01:all
SPEAKER_02:that we just
SPEAKER_01:spoke about. Don't go too big too fast. You'll learn about that.
SPEAKER_02:No, I know. We would put something on the bank account, like we said, I think, the previous time when you asked it, and then we would just go slowly.
SPEAKER_01:And I've asked that before, but what if you could change one thing? Because it has changed, actually, your answer. You have a magic wand. You have a magic power. I would ask it to both of you. What would you overnight change tomorrow morning in the food and agriculture landscape sector but of course you can do say something about renewable energy as well if you want to what would you use your magic power for if you had one wish that you could change
SPEAKER_02:Yeah, I think for us, something that we've realized, which would be amazing if it could be changed, is if, this may sound strange, but if not all the consumer products would taste the same. So if you can actually sort of taste where it comes from, not only in wine, but also in, I don't know, mayonnaise or, well, maybe that's, well, okay, yeah, the eggs might actually taste different every time, or in a soap that you use, because this will actually allow for maybe more diversity and quality coming from these landscapes instead of everything having to be blended and further processed into products that can then taste uniform
SPEAKER_01:the butter changes through the season but that's only a few products probably have that at the moment I mean wine is the prime example
SPEAKER_02:exactly
SPEAKER_01:everything else has to taste the same unless you buy it almost straight from the source or very artisanal but everything in the supermarket has to be always exactly the same
SPEAKER_02:yeah and in wine you celebrate the fact that it's different every time and you know where it comes from which is fantastic I mean they did that brilliantly I think the wine industry like well done for them but I think many more industries should actually be doing that because it allows for traceability the story of the farm then you celebrate the diversity instead of being like oh no this is actually wrong
SPEAKER_01:punishing it
SPEAKER_02:yeah
SPEAKER_00:and the seasons you celebrate of the years the events that influence taste from year to year so I think that's also a big one and now the wholesale industry is trying to put it all on one heap so to make the same product every year whereas in wine we accept that the one year you're a Barolo wine in maybe in Italy you know there's good years bad years the good years are more expensive so you know we can think drink a Barolo but maybe not out of that certain years but that's also you know accepting a more natural vibe to it and accepting that natural change and also enjoying that difference
SPEAKER_01:yeah there would be I mean we've talked about it before but it would be it comes down to taste and comes down to not blending probably too much and letting a taste speak for itself sort of but it's a it seems to be starting like in chocolate and in coffee and in some bean to bar or like the single origin coffees etc seems to be starting in other places as well or actually on its way already in certain very niche segments but we need it also in tomatoes and we need it in rosemary and we need it basically everywhere.
SPEAKER_02:Exactly.
SPEAKER_01:And final question, what do you believe to be true about regenerative agriculture that others don't? I mean, we have hit a few actually already. This question is definitely inspired by John Kemp, but I'm very curious about your answer.
SPEAKER_00:I would say, and it could also be an answer to your last question, it is difficult to get through the transition. It is super hard. And I think if we all keep on voicing, you know, the benefits, the end system is amazing. And we believe in all the benefits it brings for nature, for people, But that transition is hard. And I think if we don't acknowledge the difficulties, the hurdles, if everybody sees it as that it's easy, maybe for some of them it feels easy, but I know for many of the farmers that actually have to do it, to do it as skill, then I think we have to acknowledge that and be open and transparent about it. Because if we not, we will lose a lot of farmers and we will lose a lot, in your case, very important here, investors that might say, okay, I've tried two times. It doesn't deliver. I haven't seen the results. So I'm out. I've done it. A sealed deal. This doesn't work. And that's what I think we have to be careful for. We
SPEAKER_01:have to manage expectations.
SPEAKER_00:Yeah. And I think we've been very privileged as grounded to have partners that were always supporting us in our mistakes so they encourage us to make mistakes and encourage us to be open about those mistakes and that has allowed us to get through stages that I don't think are impossible to get through if you see some of the mistakes we've made it's just and that has to do also with the type of support we have had from every organization involved for example like common lens you know never giving up on us and even The more mistakes we make, the stronger they like to, it felt they were supporting us maybe because they felt we needed it. But that's, I think, yeah, something to be. It was cared for your survival. Yeah. And I think you want that for a lot of organizations, also for farmers to feel that support to get through these hurdles. And yeah, if we can get to that and if everybody can do that, then I think we can deliver on the impact the region agri space promises.
SPEAKER_02:Yeah. I also feel like the industry can benefit from a, because it's like new It's also understandable that everybody who's in it is like trying to say like, this is fantastic. Everybody should do this, you know.
SPEAKER_01:Please start with 100 hectares. Yeah, go.
SPEAKER_02:Yeah, but it's something which you would expect from, I think, a very new field that's also trying to sort of fight its way in, in a like a super well established and well oiled, very powerful system. But in order for us to now really take it to scale this movement, we need to make sure that together we learn. And we don't get stuck in the saying this is fantastic and only showing photos of landscapes that went from brown to green, basically. We need to also show like maybe more the nuances and the things which are hard and thinking about how we can overcome those. Because I think that's how we can really now take sort of the next step in this field. Because I also believe it's a solution for many things, but it's not a solution that comes easily. You know, you need to work.
SPEAKER_01:I think it's a perfect end to this interview thank you so much for your time for your openness and sharing I will link below to the blog post you've written where there's a lot more info a lot more lessons learned a lot more mistakes made and I'm looking forward to the next one to check in to see the progress to talk about the mistakes and to share a lot of your journey basically
SPEAKER_00:thank you so much we promise to don't stop making mistakes so we have enough to share next time
SPEAKER_01:exactly
SPEAKER_00:I will hold you to that
SPEAKER_02:and thank you for doing this podcast it's excellent Actually, great. I listen to it a lot and it's very good to learn from what's happening all over the world. So keep up the good work.
SPEAKER_01:Thank you so much. If you would like to learn more on how to put money to work in regenerative food and agriculture, find our video course on investinginregenerativeagriculture.com slash course. This course will teach you to understand the opportunities, to get to know the main players, to learn about the main trends and how to evaluate a new investment opportunity. Like what kind of questions to ask Find out more on investinginregenerativeagriculture.com slash course. If you found the Investing in Regenerative Agriculture and Food podcast valuable, there are a few simple ways you can use to support it. Number one, rate and review the podcast on your podcast app. That's the best way for other listeners to find the podcast and it only takes a few seconds. Number two, share this podcast on social media or email it to your friends and colleagues. Number three, if this podcast has been of value to you and if you have the means, please Thank you so much and see you at the next podcast.
