Alk Brand, the group CEO for Westfalia Fruit, says the company expects to generate much of its future growth from continued expansion into new geographic markets. But he cautions that any expansion must be preceded by careful diligence and accompanied by aspirations not just to turn a profit but to improve a community. The company’s repeatable formula for geographic growth involves solidifying existing markets before moving into new ones, and then conducting extensive research to quantify risk in advance of making a final decision on expansion.
Westfalia Fruit’s history traces back to the 1920s, when it originated on a small farm in Limpopo, South Africa. The company now claims to have the largest avocado-growing footprint in the world, with farms in North America, South America, Europe, Africa, and Asia. Its vertically integrated operations span 16 countries and encompass research, cultivation, processing, packing, and shipping. In addition to avocados, the company markets guacamole, avocado oils, and other fruits (including mangoes, pomegranates, and blueberries) to customers in more than 50 countries.
Brand recently spoke with Imran Manji, formerly an associate partner at McKinsey, about focusing on end consumers, preparing for climate change, and meeting the challenge of supplying avocados all over the world—every week of the year. An edited version of their conversation follows.
McKinsey: You’ve had consistent growth over the years in your core business and core markets. For most companies, however, it eventually becomes necessary to expand into adjacencies. Product and category adjacencies are the most common avenues for finding growth. But the trajectory of growth at Westfalia has in large part come from geographic adjacencies, as you’ve taken it from a single-market player to now the largest avocado company in the world. How did you bring that expansion to life?
Alk Brand: Every company wants to grow. But you cannot do it if you don’t have a sound core. You might think you should start looking at new opportunities in adjacent markets, or even adjacent categories, but if you don’t have a very strong and stable core, built over generations of expertise, then you’re going to struggle.
Our focus has always been to be either the number-one or number-two player in a core market before we move into a market adjacent to it. And then when we move into adjacent markets, we do so with clear information and knowledge about what the adjacent market will do for our business. On the supply side, we are the world’s largest investor in avocado research, which enables quantification of some of our risk.
McKinsey: Many players fail when they’re trying to grow through geographic adjacencies, often delivering below-average portfolio growth. You’re not only managing the general volatility of entering into a new market but also the specific challenges of conducting business in that particular market. How do you create a repeatable, reliable growth formula that’s centered on geographic adjacencies?
Alk Brand: There are different types of risk whenever we contemplate entering a new market. But there are two things we will never allow to happen—even if the investment opportunity is wonderful. One is that we will never compromise the safety of our staff. And the other is that we will never compromise the reputation of our business, which we have built over a long, long time. So we do thorough diligence on everything before we make a decision.
We believe that our mission when we enter new markets is not only to make money, which is table stakes, but also to create something meaningful in communities. I’ll use the example of Mozambique. We were the first company of size to farm at large scale there. We created employment for a lot of people. But we also gave small growers the opportunity to farm and become businesspeople in their own right.
A prime reason why we invested in Mozambique was to make sure that our objective of supplying our markets 52 weeks a year would be properly met. In our research, we discovered that Mozambique has a very favorable delivery window into other markets known as seasonal pinch points, where avocados can sometimes be in short supply. In our agronomical studies, we examined where the best place in Mozambique would be to farm. We researched infrastructure, available skills, and trainable skills. Pilot studies were conducted. When we were happy with the result of those studies, we made serious capital available for the investment.
McKinsey: You have had a long history with CPG [consumer-packaged-goods] companies. In that world, when it comes to delivering products to consumers, a lot of the variables are relatively controlled. But now that you’re also in the agriculture industry, you need to deal with the harsh realities of commodity cycles. How have you brought CPG principles into the agriculture industry while dealing with the different challenges it entails?
Alk Brand: One of the common things you will see in the agriculture industry is that it’s very production focused. You need to be the leader in your agricultural specialty—in our case, avocados and a few other fruits—so you can be a supplier of quality products.
But at the end of the process, the product needs to get to a consumer. Very analogous to CPG, you need to ensure that shelves aren’t empty and that your retail partners are happy because your consumers are happy. I hope one of the things I’ve done successfully is to link that supply and demand side properly. Our business has radically changed over time and is now absolutely a consumer-focused business.
There are three separate elements we deal with. First, we need to have a product. In the world of fast-moving consumer goods, you can generally produce that product with a machine. But we have to plant a tree and then wait patiently for three to five years for that tree to produce enough quality fruit to send somewhere. Second, on the opposite side of this process, we have consumers. We supply them mainly through a platform of retailers and food service outlets. And third, in the middle, we have a logistical platform.
We really need to be masters of all three. Being consumer centric, and understanding consumer needs, makes it easier to take a company through a transition period in which it’s moved from being focused on the farming side—which is still very, very important—to connecting that with the consumer on the other side. Because, in the end, it’s all about what consumers need. If you can’t meet that need, you’re not going to be successful.
McKinsey: Over time, competitive intensity in any industry grows. Competitors move fast, and elements that used to be differentiated can become transactional. How do you maintain your competitive differentiation?
Alk Brand: Last year we experienced floods, drought, hail, and tropical storms all over the world. Before that, we had to deal with supply chain dilemmas arising from the Russia–Ukraine situation. And before that, we had to handle COVID-19. During all these challenges, all of our customers were supplied on time, in full, 52 weeks a year. It’s what we promise to them. A consumer makes the effort to go to a store because they’ve got a product in mind—ideally, avocados—and if they can’t find that product it’s a big disappointment for them.
The ability to connect hundreds of global supply touchpoints and deliver product to our consumers 52 weeks a year is, I think, still something that differentiates us. So we focus intently on that. To keep our customers supplied, we diversify our footprint all over the world, in terms of farming. Our research program identifies new varieties of avocados that are more resilient, and more resistant against plant disease. And we of course pay fanatical attention to detail in terms of our supply chain.
Another advantage we have is that we work closely with our retail customers, in partnership with them—especially with our top 20 or 30 customers globally. We work with them in terms of research, category management, and making sure that we understand what the consumer wants. We try to make sure that our retailers are a destination for consumers because consumers have a level of trust with them. We want to collaborate with retail customers in ways that let them meet the evolving needs of consumers in terms of convenience, promotions, ESG [environmental, social, and governance]-related concerns, and omnichannel retailing.
Performance is, in the end, the decision maker between a retailer staying with us or moving to a competitor. We have to make sure that we perform better than anybody else. We are fanatical about our service levels, our quality, and our attention to KPIs. If there are customer complaints, we work hard to understand why they are happening and what we can do about it.
McKinsey: In terms of diffusing risk, one of the components that you’ve talked about is climate change and how it’s affecting different geographies. How have you built climate research into your decision making and ultimately managed that risk?
Alk Brand: The effects of climate change are undeniable. We’re already seeing them in our business. We work with institutions all over the world to see if we can use artificial intelligence to make better predictions about climate events.
Because we have to assume that climate change will continue, we need to be geographically diversified to make sure that our customers can be served from many territories at the same time. We also have to assume that certain resources, such as water, will become less and less available. Through our research program, we are creating varieties of avocados that need less water. Also, we’re looking for the most effective ways to conserve water in irrigation. We might eventually need to decide that it’s not wise to farm avocados in certain areas, but I hope that that never happens.
Meanwhile, we do everything we can to make sure that we are a responsible global citizen. For instance, we ensure that our packaging is as sustainable as possible. And we have developed partnerships to use ground avocado seeds in beauty products, replacing plastic microbeads that were previously used as exfoliator agents.
McKinsey: What’s next on the horizon for you? Where is the company headed?
Alk Brand: There’s a lot of good work still to be done in the United States. We feel that there are great opportunities, especially in the Midwest and on the East Coast, so we’re going to work hard to bring extra consumers from those regions to the category. In Europe, there are several countries, including Italy, Spain, and all the Eastern European countries, that still haven’t seen avocados in the way we present them. We feel we can offer better quality, value, consistency, availability, and ethical and environmental assurances.
We penetrated India a few years ago, after proper research. We’ve got a solid business there, with our own farms, nursery, and commercial team. Our focus at the moment in India is on the big cities.
We’re also looking for new worlds to enter. And the new worlds for us are in Asia—China, Japan, South Korea, and Indonesia. We have already done our homework. And at the right time we will trigger a movement into those markets. Our vision is to make avocados available to every consumer in the world, and we are able to fast-track development in target countries using the experience we’ve garnered from our fully integrated global operations.