Thanks to a quick turnaround of Incofin's agri-finance liquidity facility (ALF), the Peruvian hot-pepper trader Exportables was able to offset rising operating costs and meet the increasing demand.
COVID-19 disrupted global food systems and some industries had to hold on by the skin of their teeth to weather the pandemic. At the same time, however, a gradually rising popularity of the Latin American and Asian cuisine in the Western World buoyed the hot-pepper sauce market. More time at home during the lockdowns has inclined people to experiment in the kitchen stirring up the appetite for exotic meals. The global hot-sauce market attained a value of USD 4.3 billion in 2020. The market is further expected to grow to a value of USD 5.8 billion by 2026.
Exportables is a 100% women-owned company in a male-dominated industry, and exports Peruvian hot-pepper mash: tabasco, cayenne, habanero and jalapeño. One of the elements that makes the firm stand out from the crowd is that it operates with contract farming. Exportables sets up a yearto-year schedule with its supplying farmers to secure the crop production. The farmer gets the guarantee that Exportables purchases 100% of the production at a fixed price.
While this innovative approach benefits hundreds of farmers to secure a steady income stream for at least 18 months, it deters traditional banks from financing Exportables. Without financing, the pepper-trading company managed to sustain its growth thanks to a sound financial management and commercial strategy that anchors its supplier base.
Nevertheless, COVID-19 brought shipping delays, which led to a spike in operating and logistics costs for the company, threatening Exportables liquidity. A loan facility from Incofin’s agri-finance liquidity fund (ALF) now enables the company to offset those costs while meeting the increased demand. It has also made Incofin the first and only international lender to the company.
In 2020 Incofin launched a debt facility for sustainable agro-enterprises in Africa and Latin America, together with the German development bank KfW. The goal of the emergency fund is to offer smallholder farmers in developing countries breathing space to maintain or even reinforce their operations during and after COVID-19.
Exportables sources the hot peppers from smallholder producers located in the regions of San Martin and Amazonas. In this area, most farmers produce rice, coffee or cocoa; crops that make them vulnerable to climate change effects and volatile local prices. Diversifying their crop with hot pepper makes them more resilient to those external risks. A hot pepper cycle lasts for 18 months where from month 4 until month 18 the plant is producing fruits daily. Coffee for example, needs up to 3 years after a first harvest before it reaches its productive stage.
Exportables motivates the first-time farmers not to substitute their main crop, but to choose hot peppers as a complementary source of income. The farmers get their first set of seeds from Exportables for free.
From the signature of the contract until the culmination of the agreement, Exportables works closely with the farmers to ensure high crop yields, produced in the most environmental and social friendly way. The company deploys drip irrigation to conserve water, cut fertiliser usage, control weeds, and to avoid erosion, loss of nutrients, and soil degradation.
The company ensures that it only contracts with producers in areas that are already under cultivation, so as to not engage with producers who would destroy rainforest or clear new land for agricultural purposes
Once harvested, fruits are delivered to milling stations, where they are ground and fermented with salt. The milling process must be conducted on the same day of harvest to preserve the fruits’ qualities in colour and flavour. To make this process more efficient, Exportables introduced the notion of in-farm processing: it is the farmers themselves who make a mash out their own peppers.
In return, they receive an extra USD 0.2 per kilo while also eliminating daily transportation costs, leading 80% of Exportables’ farmers to sign on for milling responsibilities. The mash is collected weekly and transported to San Martin. There, shipments are sent a central plant where they sample, test, filter and store the mash. After that, the product is ready for export.
