COVID-19 crisis reinforces the importance of diversification for successful agribusinesses

Two years ago we interviewed established, thriving agribusinesses in Fiji, Vanuatu and Tonga, hoping to identify the key ingredients in their success, measured not solely by growth or revenue, but by longevity. The 15 businesses involved notched up a combined 200 years experience of highs and lows.

Agriculture in the Pacific Islands is an inherently risky business with losses from extreme weather events, pest and disease outbreaks, post-harvest handling, and unreliable inter-island transport services giving business owners and managers their fair share of headaches. The final report was appropriately named ‘Learning From The Survivors’ and documented the key lessons and success factors.

At that time there was great concern of threat to agribusinesses posed by the predicted increase in intensity of extreme weather events over the coming decades due to climate change. While this threat has not gone away, COVID-19 has created a more immediately pressing crisis, that is foremost a human tragedy in lost lives, but also an economic shock on a global scale.

For much of the Pacific, the human tragedy is something we are reading in newspaper headlines, but with many livelihoods dependent on tourism and regular air freight for exports, the economic costs are very close to home. 

In this context, many of the lessons learned and factors for success can be viewed in a new light, and many are even more starkly relevant. 

Up until a few months ago, diversifying into tourism was a key strategy for many agribusinesses. As we wrote in the report, “Tourism – and the sustained growth of tourism across all three countries – is offering opportunities to support relatively low-risk revenue diversification, through farm visits and the carry-on and suitcase tourist market created by cruise ships and visiting friends and relatives”.

Of those interviewed at the time Tupu’anga, in Tonga, had opened a coffee shop at their plantation, Civa had opened a boutique store on Taveuni, Fiji, Agrana had broken into the Fiji hotel and catering market selling juices at scale, and also in Fiji, South Sea Orchids opened their gardens for event hosting for weddings and private dinner functions.

However, while this was a useful diversification strategy, companies like South Seas Orchids chose to remain diversified, with their core business firmly focussed on the domestic market for flowers, their tourism revenue stream was always an addition to their core business, useful during floods and cyclones in particular. Such a decision in the good times, seems overly cautious. Why not expand to cater for more visitors, take more direct bookings, employ more people?

Through a survey led by the Pacific Island Farmers Organisation Network with PARDI2 support, the Director of South Sea Orchids, Aileen Burness shared that while their tourism revenue has reduced to zero, to her surprise, “Sales have increased for both cut flowers, as well as orchid plants. Some are doing work in their backyards hence buying more plants”.

For South Seas Orchids, maintaining a focus on the local market has proved to be a source of resilience. As Aileen says, local flower sales will “continue as it is a product that is needed in our culture for funerals, weddings, although it may not be huge volume”. She also shared, as many are now doing, that returning to our reciprocal cultural roots is a key part of this resilience, and reasserts a traditional part of Fiji life, “We need to work together to see each other through; if cash is not available, through barter”.

Learning From The Survivors

Key Lessons

#5: Small Can Be Beautiful

Success Factors

#6: Managing Risk Will Become Increasingly Critical
#7: Diversification of revenue from a solid core business foundation

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