In February 2021, MCE made a US$300,000 debt investment as part of a $500,000 revolving facility to support The Perennial Foods Group (PFG), a social enterprise that partners with small farms in Ethiopia to produce and source a range of fruits, vegetables, and herbs using regenerative and organic agricultural practices. The company supports smallholder farmers to transition their farms into diverse and densely cultivated “food forests” that enhance soil health and productivity while strengthening climate resilience and improving rural household incomes. In doing so, PFG seeks to build a sustainable and profitable international supply chain that connects smallholder farmers with buyers across the UK, Europe, and the Middle East.
PFG is a vertically integrated organization involved at every step of its supply chain, from seed selection to harvest to commercial sales. First, the company selects seeds that are suitable to local growing conditions while preserving and building biodiversity in the soil, planning well in advance of each season to match its production and sales targets. These seeds are cultivated and tested in PFG’s nursery, which is staffed by an almost entirely female team, to ensure that the company provides the highest quality seeds to its partner farms.
PFG recruits farmers in cohorts each year after carefully assessing each farmer’s potential to produce organic, export-quality crops and negotiating a contract with them. In addition to receiving seeds and organic inputs from PFG, each farmer undergoes a six-month rigorous on-farm training program that covers topics including soil nutrition, crop diversity and rotation, use of organic inputs, integrated pest and disease management, and other practices related to regenerative agriculture. This training is led by PFG’s team of agronomists, who continue to provide in-person support to each partner farm twice per month throughout the year. This close contact allows PFG to develop a strong and mutually beneficial relationship with each farmer.
“MCE’s investment comes at a critical time in the company’s growth — unlocking invaluable working capital to scale sales and production. We couldn’t be more pleased to have such a great new partner joining the Perennial Foods Group family.”
— Jacie Jones, PFG Co-founder and CEO
Through careful planning and a deep understanding of each farmer’s production capacity, PFG helps farmers create a diverse portfolio of high-value crops they can harvest and sell to the company throughout the year, generating consistent cash flow and improving their economic stability. PFG farmers benefit from premium pricing thanks to their linkage to an international speciality supply chain — PFG frequently assesses market prices and strives to pay farmers a minimum of 15% above local market prices for their harvests. Importantly, the company has also maintained a strong commitment to paying farmers within two weeks of their harvest via bank transfer.
After crops are procured from farmers, they are processed and undergo quality control in PFG’s state-of-the-art packhouse and cold storage facility, supplied by InspiraFarms. Once sorted, the crops are shipped to PFG’s buyers across the UK, Europe and the Middle East. The entire process from farm to buyer typically takes less than four days.
PFG takes its social and environmental impact seriously. In recent years, the company has conducted two impact studies in collaboration with 60 Decibels to demonstrate the outcomes promoted by its partnership with smallholder farmers in Ethiopia. Some of the latest study’s findings include:
- Increased farm production. Overall, 55% of farmers reported that their production had “very much improved” and 42% reported that it had “slightly improved” since working with PFG. This is strong evidence in support of PFG’s focus on regenerative agriculture, which seeks to increase agricultural yields per square unit of land by maximizing complimentary rooting systems, enhancing soil health, and producing year-round harvests.
- Increased incomes. Directly tied to improvements in farm production are improvements in income. 64% of farmers self-reported that they have experienced an improvement in overall income since working with PFG. Between 2017 and 2020, PFG farmers’ average annual income per hectare increased from $756 to $2,650, driven by increases in yields and overall farm production. This is more than double what a non-PFG farmer makes growing monocultures such as maize (approx. $914 — $1,245) or teff (approx. $1,025 — $1,300). Most PFG farmers manage less than a hectare of land (the average was 0.54 hectares in 2020. Accordingly, the average annual income per farmer from sales to PFG increased from $175 to over $1,000 between 2017 and 2020. Sales to PFG accounted for 69% of total farming income, according to farmers’ self-reported data. Thanks to this increase in income, farmers also reported an improved ability to pay for school fees and other household expenses, better consumption, an improved ability to save, and an increase in purchased assets.
- Improved quality of life. Overall, 97% of farmers reported that their quality of life had “very much improved” (66%) or “slightly improved” (31%), which speaks to the impact of PFG’s farmer-centric model. With better agricultural knowledge, year-round income, and environmentally sustainable practices, farmers are able to make improvements to their farms that have lasting benefits for the family.
“We started the company with an express goal to provide small farms with an alternative that increases the value of their land over time, not degrades it. Through our work, we hope to demonstrate to the world that a more environmentally sustainable model of smallholder agriculture is not only possible, but critical for the future of both farming communities and the planet.”
— Jacie Jones, PFG Co-founder and CEO
PFG’s commitment to regenerative and organic agricultural practices has a strong positive impact on climate change and carbon emission mitigation. By improving soil nutrition and fertility, these practices also increase the soil’s ability to sequester carbon from the atmosphere. In addition, organic practices inherently eliminate the use of synthetic fertilizers and pesticides, which can potentially harm soil health and require significant energy to manufacture. In order to quantify its environmental impact, PFG used the Cool Farm Tool to estimate the effect of their agricultural approach on carbon emissions. This demonstrated that a portfolio of organic perennials typically grown by PFG farmers has a net negative carbon emissions output of -2.14 kg CO2e per kg of crop harvested, compared to a conventional agriculture equivalent portfolio, which emitted 3.81 kg / CO2e per kg of crop.
PFG holds the highest standards of social responsibility, food safety, and environmental sustainability. The company currently holds certifications from EU Organic (the first produce company in Ethiopia to do so), Soil Association Organic, GlobalGAP, and GRASP. PFG is also a member of SEDEX and their Kib processing facilities are compliant with HACCP standards. In addition, PFG is in the process of pursuing certifications from SMETA, BRC, and will soon ensure that all facilities are HACCP-compliant.
As of December 2020, PFG works with 265 partner farmers, 190 of whom are EU Organic-certified (the other 75 are in process of certification). All of PFG’s active farmers are GlobalGAP-certified as well. With the support of MCE’s financing, the company expects to expand its network by 100 farmers this year (and every year moving forward). PFG also employs more than 300 permanent and temporary staff, over 75% of whom are women and 90% of whom are under 35.
MCE’s investment of $300,000 is part of a $500,000 revolving facility, which will cover PFG’s working capital need in 2021 and 2022. We are proud to support PFG’s work in Ethiopia, which is bolstered by approximately $4.5 million in previous investments, led by Novastar Ventures. Our loan will enable PFG to continue taking its operations to the next level by sourcing larger volumes of crops in the 2021 season and continuing to expand its farmer network.
“This is where MCE needs to be — supporting organizations like Perennial Foods Group that promote regenerative agriculture practices and climate-smart solutions for smallholder farmers in challenging environments. I couldn’t think of a better company to be MCE’s first investment in Ethiopia.”
— Maria Raurell, MCE Portfolio Manager
Photos courtesy of Perennial Foods Group