Raw Material Sourcing

Procurement of raw materials

Sustainability begins for AGRANA long before the industrial processing of agricultural raw materials with their procurement.

AGRANA processes around 10 million tonnes of agricultural raw materials every year. On a long-term average, around 90% of the processed raw materials come from the EU, where very high social and environmental standards exist in international comparison due to controlled legal regulations and socio-cultural framework conditions.

Sustainable Agriculture Initiative

Sustainable Agriculture Initiative

Cooperation with contract growers is of particular importance to AGRANA as it offers the unique opportunity to work together to improve environmental and social standards in the production of the raw materials we process. With this in mind, we have also been involved as a member of the Sustainable Agriculture Initiative (SAI) since 2014.

The SAI gives processors of agricultural raw materials like AGRANA several helpful tools particularly for the evaluation and documentation of conformity with good environmental and social practices in the agricultural supply chain and for comparing the value of different documentation types and international certifications.

The underlying tool is always the Farm Sustainability Assessment (FSA) created by the SAI. This assessment is carried out using a 112-point questionnaire covering all features relevant to sustainability, such as farm management, working conditions (including questions on child and forced labour), soil and nutrient management and crop protection. Depending on the fulfilment of the various criteria, each farm receives a sustainability rating designated by a status of “gold”, “silver”, “bronze”, or “not yet bronze”.

further information on SAI

Environmental and social procurement criteria

Environmental and social procurement criteria

Consumers are demonstrating increasing levels of awareness when buying basic and luxury foods. In the food industry, it is therefore also necessary to take sustainability criteria into account during procurement and to rely increasingly on partners who meet these criteria.

When procuring agricultural commodities and upstream products, we at AGRANA therefore insist that sustainability aspects are considered and documented.

AGRANA principles for sourcing agricultural raw materials and intermediate goods

The AGRANA for sourcing agricultural raw materials and intermediate goods set both minimum social standards (by reference to the AGRANA Code of Conduct) and environmental criteria that AGRANA regards as relevant for the sustainable production of the agricultural raw materials required by the Group.

The principles also address different ways for suppliers to meet these sustainability criteria, according to the degree of vertical integration of the respective sourcing model. They are part of individual contracts with contract growers and other raw material suppliers.

Sugar Beet Cultivation

Contract sugar beet farming

The production focus in the sugar segment lies in the production of sugar beet sugar products. The supply of sugar beets as raw material for sugar production in AGRANA's seven beet sugar factories in Austria, the Czech and Slovak Republics, Hungary and Romania is under contract cultivation, which also extends to organic sugar beet. In the course of the contract business, AGRANA has for many years paid attention to the advisory support of agricultural producers. The knowledge behind this advice stems from many years of experience and extensive field trials.

Performing the Farm Sustainability Assessments of the Sustainable Agriculture Initiative

In the 2017|18 financial year the previously voluntary completion of the FSA questionnaire became mandatory for some contract suppliers. In accordance with the SAI FSA Implementation Framework published in June 2016, selected farmers in all five beet-growing countries (Austria, Czech Republic, Hungary, Romania, and Slovakia) participated in the mandatory FSA self-assessment and the external audits to SAI standards. Based on the results of the external verification, AGRANA’s Sugar segment is entitled to claim gold or silver status under SAI standards for more than 75% of the statistical population of all sugar beet growers. AGRANA’s minimum requirements are fulfilled by all contract beet growers; areas of potential for improvement identified by the audits are addressed through existing training programmes.

Building awareness of good agricultural practice

In June 2017 the annual BETAEXPO field symposium focused on crop protection and reflected the debate over the use of specific groups of crop protection agents. In the 2017|18 financial year, AGRANA also again carried out many awareness-building events under its “Mont Blanc” efficiency improvement programme, which aims to increase sugar yield per hectare and reduce production costs. In fields of contract farmers in Austria, AGRANA took about 1,100 soil samples for EUF analysis, with the sample locations mapped by GPS, to support needs-appropriate, precision fertiliser planning. At the 85 demonstration farms across the entire beet-growing region of the AGRANA Group, 150 field tours and eight field days with a total of more than 7,500 participants were held during the growing season. Strong audience interest was also shown in a one-day organic agriculture conference for all organic crops processed by AGRANA, which was organised by the Sugar and Starch segments in collaboration with BIO Austria.

Biodiversity in sugar beet cultivation

In 2017, about 5,000 hectares were greened in Austria with the catch-crop mix from Österreichische Rübensamenzucht GmbH, a not-for-profit subsidiary of AGRANA Zucker GmbH that makes GMO-free seed (largely produced in-house) available to the contract farmers. The catch-crop loosens the soil structure, mobilises nutrients, activates the soil fauna and improves field biodiversity. In addition, flowered areas of annuals and perennials were established; together, the flowering fields provide ideal forage for wild animals, offer honey plants for bees, and add to the beauty of the landscape.

Raw sugar

Guaranteed, sustainability-certified, raw sugar

At some production sites in the Sugar segment, AGRANA refines raw sugar from sugar cane into white sugar (either solely refining, or refining in addition to beet processing). To supply its raw sugar refining operations in the EU, AGRANA buys raw sugar from Least Developed Countries for the refineries in Romania and Hungary; the raw sugar for the refinery in Brcko, Bosnia-Herzegovina is sourced on the world market, primarily from Brazil.

Bonsucro

In order to also ensure a sustainable supply chain for raw sugar as an input product, AGRANA became a member of Bonsucro in July 2014. The membership in this multi-stakeholder initiative for sustainable sugar cane enables AGRANA to purchase Bonsucro-certified sustainable raw cane sugar. To be able to provide its customers with a Bonsucro Chain of Custody certificate, all AGRANA refining facilities are certified under a Bonsucro group certification. The Chain of Custody certificate enables AGRANA's customers to display the Bonsucro logo on their products.

raw material procurement - Starch

Contract growing in the Starch segment

At its starch mills and bioethanol plants in Austria, Hungary and Romania, AGRANA processes around two million tonnes of cereals per year and therefore is a major market player as a result of its purchases of regional surpluses in its key procurement markets of Austria and Hungary.

The procurement of waxy corn, organic corn, organic waxy corn as well as certified GMO-free corn and wet corn is largely based on growing contracts. A proportion of the requirements of ethanol wheat and ethanol triticale are met through growing contracts. At its potato starch mill in Gmund | Lower Austria, AGRANA processes starch and food potatoes (organic and non-organic) to make puree and dough-based products. Starch potatoes are sourced under growing contracts.

 

Potato Cultivation
Implementation of the SAI's Farm Sustainability Assessment

In the 2017|18 financial year the previously voluntary completion of the FSA questionnaire became mandatory for some contract suppliers. In the Starch segment, Austrian contract potato growers selected in accordance with the SAI FSA Implementation Framework and its Audit Guideline participated in the mandatory FSA self-assessment and the external audits to SAI standards. Based on the results of the external verification, AGRANA’s Starch segment is entitled to claim gold or silver status under SAI standards for more than 75% of the statistical population of all Austrian contract potato growers. AGRANA’s minimum requirements are fulfilled by all Austrian contract potato growers; areas of potential for improvement identified by the audits are addressed through existing training programmes.

 

Procurement of raw materials for wheat starch and bioethanol production

When it comes to procurements of raw materials for the production of wheat starch and bioethanol, AGRANA has for years relied on the International Sustainability and Carbon Certificate (ISCC) and the Austrian Agricultural Certification Scheme (AACS). Both the ISCC and AACS are accorded silver status in the SAI system.

Contract Farming - Fruit

Contract fruit growing as a key success factor for fruit preparations

The operations of the fruit preparations division of AGRANA’s Fruit segment span the world. Only frozen and aseptic fruit are processed in order to enable production to be independent of the relevant fruit harvesting seasons.

In order to better manage and utilize procurement synergies, the procurement of fruits is the central responsibility of AGRANA Fruit Services GmbH. This subsidiary is the central fruit purchasing organisation for the Fruit segment and active in all major fruit growing regions in a total of 48 countries.

AGRANA’s key global advantage lies in sourcing frozen fruit directly from producers and under contractual growing agreements, which are also increasing in importance in the Fruit segment. Contract growing combined with advisory support for growers increases food safety by means of simplifying quality control and guaranteeing end-to-end traceability in the food chain, a factor which is particularly relevant in the increasing important organic market segment. In order to be able to optimise the commercial, ecological and also the social aspects of the supply chain and their traceability, AGRANA also operates its own processing plants (the first transformation step) in Argentina, Morocco, Mexico, Poland and Ukraine, where the freshly harvested fruit is sorted, cleaned and frozen. Overall, around 40 percent of the fruit processed by AGRANA either undergoes the first transformation step in the group's own facilities or is sourced from exclusive contractual partners.

Fiji

In the South Pacific island nation of Fiji, AGRANA is supporting small farmers since 2014 by acting as the holder of a group certification for bananas, guavas and mangoes under the internationally recognised Australian Certified Organic standard (ACO). At the local AGRANA plant the fruit is processed into purees; in 2016 the fruit portfolio was expanded by the addition of passion fruit.

In the course of the project, the number of certified farmers was increased by 255 operations; additionally, 50 farms are in the process of conversion to organic methods and will soon receive their organic certification. In the year under review, most new participants recruited to the project were young, well-motivated farmers with a high willingness to acquire the necessary expertise through training and to invest in their farms. The aftermath of Cyclone Winston, which raged across Fiji in February 2016, remained a reality throughout the 2017|18 financial year. Nearly a full year’s banana harvest was lost, and as a result of the high demand for fresh product on the domestic market, very little banana was available for puree production. The propagation of virusfree planting stock (banana and pineapple) in the local AGRANA-owned organic laboratory was launched as planned, and was all the more important in view of the storm damage. At the end of 2017, ten thousand seedlings were already distributed to the contract farmers for planting. The development project, which was conceived to run for three years, was completed in October 2017; the intensive collaboration with the organic farmers and the production of organic fruit purees continue.

Mexico

July 2016 saw the completion of a project running since August 2013 to promote the certification of strawberry and blackberry suppliers in Jacona, Mexico, to the Rainforest Alliance (RA) standard. With the support of the local AGRANA agricultural extension team, the participating supplier farms were able to improve cultivation practices, introduce water and waste management, implement safety and health measures for their more than 2,000 employees and be certified to the RA standard. The suppliers benefited not only through the higher competitiveness resulting from the certification but also by their added popularity as employers. AGRANA was pleased to be recognised for its engagement with an award as one of the best three companies in Mexico – and the best in berry processing – in the areas of agricultural practices and food safety; the distinction was awarded by Primus GFS, a global initiative for food safety.

Sugar Beet Cultivation

Opportunities and challenges
in the fruit juice concentrate division

In order to be able to compensate for vegetation-related variations in harvests from various growing areas, AGRANA's fruit juice concentrate business is constantly searching the globe for new suppliers and regions so as to bolster its independence and ensure that only the best quality fruit is processed. In the fruit juice concentrate segment, AGRANA is successfully striving to tap new sources of raw materials and has set itself the goal of consolidating its strategic position in new growth markets. In principle, there is an endeavor to increasingly source raw materials directly from farmers in the future.

Supporting apple farmers in Hungary and Poland

AUSTRIA JUICE currently maintains two projects for direct procurement from growers. In Hungary, since the year 2000, AUSTRIA JUICE has supported local farmers in growing pest-resistant apple varieties that require about 60% to 80% less pesticide than conventional cultivars. Besides financial assistance for the new planting of the trees and ongoing advice over the growing season, the fruit growers also receive purchasing guarantees and a price premium from AUSTRIA JUICE. A further project with contract growers was begun in Poland in 2007. In 2017|18 about 11% of all apples processed by AUSTRIA JUICE into apple juice concentrate worldwide came from these two projects.

The 2017|18 financial year was the first in which Hungarian suppliers of disease- and pest-resistant apple varieties, who were selected according to SAI standards, also participated in the mandatory FSA self-assessment and the external audits. As a result, AUSTRIA JUICE is entitled under SAI standards to claim silver (and in some cases gold) status for the majority of Hungarian growers of resistant varieties. The minimum requirements are met by all Hungarian contract growers of resistant varieties; areas of potential for improvement are addressed through training events. In the 2018|19 financial year the FSA questionnaire and external verification are also to be used with the contract apple farmers in Poland.