A cursory glance at the juice aisle in Ghanaian supermarkets gives the impression that the country is making great use of its locally grown fruits. However a closer look shows that most of the processed fruit juices are imported.

For a country that is endowed with an assortment of fruit, including mangoes, pineapples and coconut, many wonder why local entrepreneurs do not take advantage of the opportunity to transform agricultural produce into juice and other value added consumer products for domestic and foreign markets, and ultimately dominate the processed fruits industry.

Foreign companies are recognising the industry’s potential and continue to invest. In May 2009, Coca Cola announced that it was going to build its third processing plant in Ghana, costing about US$20-30 million, to produce fruit-based soft drinks. With the developed world facing financial difficulties and consumers in the West focusing on essentials, multinational food and drink manufacturers such as SAB Miller are shifting expansion efforts to their emerging market portfolios in the medium-term.

While they may relish the idea of local dominance, Ghanaian industry players are not hostile to foreign competition. For many, competition from foreign fruit processors is welcome as some local businesses have improved the quality of their products by importing technology and imbibing the standards of their foreign rivals.

Yet, the processed fruits industry in Ghana was not always dominated by foreign brands. From the 1960s to the 1990s, the late Esther Ocloo, founder of Nkulenu Industries, a pioneer fruit processing company, dominated the market with her Nkulenu mixed fruit juice products. During that period, the now defunct local company, Astek Fruit Processing, also entered the market and began to control a significant market share with its Refresh pineapple and orange juice brands.

While there are some existing strong local fruit juice brands like Kalipo and Papso, it seems as though the likes of the once popular Nkulenu brands have been eclipsed by the entry of foreign substitutes like Don Simon, Ceres and others.

Data on the variety and volume of processed fruit imports as well as the total number of Ghanaian fruit processors is difficult to come by as many operate in the informal economy, but it is believed that the local industry is suffering from attrition.

“The cost of packaging is the local industry’s main problem,” Vincent Malm, a senior director at the Nkulenu Industries in Accra, told GB&F in an exclusive interview.

“Unlike imported fruit juices that come into the country in attractive packaging, Ghanaian entrepreneurs who own orchards or who have processing facilities do not have the capital to compete at the international level,” Mr Malm added.

Local fruit juice processors usually use plastic or glass bottles to package their products. The few who have the capital and can afford the technology use Tetra Pak (the world’s leading food packaging solutions company).

It is believed that imported fruit juices have a competitive edge over local brands because their manufacturers abroad often benefit from subsidies from their governments. This would make it easier for these foreign companies to invest in good packaging materials, as well as invest in modern machinery for processing and storing fruits.

“In Ghana, our local fruit processors do not have the luxury of getting government subsidies, therefore instead of going into fruit processing where they will have to compete with their well-equipped foreign counterparts, they would rather go into processing of oil palm, where there is a ready market and we are industry leaders, at least in the sub-region,” Mr Malm said.

Another obstacle that local processors of fruit juice face is the perception that foreign made products are of better quality than the locally produced juices.

Hannah Tetteh, Ghana’s
Minister of Trade and Industry

Mr Malm pointed out that, while the imported juices seem to last longer on the shelves, Ghanaian consumers fail to realise that the juices are not as fresh as their Ghanaian equivalent. According to him, the imported fruit juices are reconstituted or carbonated with preservatives so that they can last for a  long period, whereas the local producers keep fruit juices in their natural state, but lack the appropriate technology to do so.

Industry watchers say a lot has to be done to boost the efforts of local processors.

“The government needs to take an interest in the activities of Ghanaian owned companies and help them to effectively and aggressively advertise their products. Also, proper regulation should be put in place to monitor the quality of local products,” said Mr Malm. He added that the government should also review its taxes on local products and if possible waive them completely so that local firms can save on significant costs.

“Tax revenue could be reinvested into the local industry for the benefit of the processor, the consumer and the Ghanaian economy,” he said.

When asked whether the government should consider giving Ghanaian owned fruit processing companies subsidies to offset their costs, Mr Malm said that while the government appears interested in helping the industry and the agricultural sector as a whole with subsidies, he was not sure whether the government had the political will to have targeted subsidies for fruit processors.

As a result of the numerous constraints to the industry, some local processors have gone into partnerships with foreign companies. Local fruit processors such as Blue Skies and Pinaro which are jointly owned by Ghanaians and foreigners have a fair share of the local market and have been able to break through to the European markets as well.

This is because of their ability to meet high quality standards, adhere to the strict international delivery timelines, and satisfy international volume requirements.

Blue Skies, for example, has since 1998, being exporting fresh pineapples and coconuts to the UK, Europe and South Africa. With operations in Ghana, Egypt, South Africa and Brazil - with Ghana as the first and largest producer in its network - the company works with Ghanaian cooperative farmers to produce fresh fruits which it then supplies to a variety of customers including some of the biggest supermarket chains in the UK, Europe and South Africa. It is estimated that the UK alone imports over 2,000 tonnes of prepared pineapple from Ghana every year which contributes £2.6 million to the local economy.

In recent years, the increasing number of health conscious Ghanaians has raised demand for fruit juices, particularly, fresh fruits. According to estimates, 10.4 million litres of fruit juice is consumed yearly, which is met by a combination of both local and foreign supply. However, Business Monitor International indicates that annual per capita intake in Ghana for carbonates (which includes bottled water and soft drinks, in addition to juices) is a mere 10 litres.

This suggests that there is significant room for all the industry players to turn sizeable profits. But it would appear that in the next few years, margins will be fought on the lines of distribution and marketing. For example, it is important to note that organised retail outlets in Ghana are relatively non-existent which make it difficult to supply value added products outside regional capitals. Shoprite is the only foreign grocery retailer in Ghana and it only has a single branch despite being in operation for 8 years. Retail stores only account for 2% of total grocery sales. However, with the oil industry attracting a larger expatriate community, demand may increase for high margin type stores.

The recent launch of Ghana’s industrial policy, hopefully, will address many of these issues facing entrepreneurs in various sectors of the economy, especially the agriculture sector. Already, government is working on funding the supply of machinery and other equipment for fruit juice processing.

In the meantime, more is expected to be done for local processors to enable them to access more funding options to enable them to purchase the necessary materials for their operations.

Currently, although it is easier to access bank credit than it was a few years ago, many small and medium size processing companies, still find obtaining loans from the bank a herculean task since many cannot meet the stringent collateral requirements. However, for the larger players, domestic capital market investment would provide an avenue for greater growth.

Ghana’s fruit industry has great potential and if local processing companies are given a fair chance through varying incentives, they will not only be able to hold their own against imported fruit juices, but they will be able to export to the subregion, particularly to the landlocked countries like Mali, Burkina Faso and Niger – where unfavourable climatic conditions make it difficult to produce fresh fruit and where fruit juices make a great alternative to alcoholic beverages like beer in these largely Muslim nations.

Although Ghana believes in an open market economy and has created the environment to attract foreign direct investment, local entrepreneurs believe some support from the government will help them to better compete with their formidable rivals from Europe and elsewhere. Hopefully, the government will heed their call.