As part of the Transition Finance for Farmers series, Benedikt Bösel and Koen van Seijen interview Bert Mulder of Tomasu and BoerBakkerBert BV. Thet looked into margins, connection with end products, pay for quality not quantity and guaranteed payment per hectare.
Listen to the interview:
In this podcast they discuss with Bert Mulder of Tomasu what is the role of fully vertically integrated products in the regenerative transition of a farmer. We discover the story of the only micro soy sauce brewery in Europe as example of a product that really goes from soil to plate.
The role of Farm to Fork, farm to bottle products in the regenerative transition
Why are we talking the only micro soy sauce brewery in Europe, about soil and regenerative agriculture?
Many farmers are ready to speed up to regenerative transition. They’ve looked for learning, done the courses, read the key books, hosted the gurus on their farms, explored farm sized regenerative designs and most importantly, started their pilots and feedback loops.
This is where transition finance is key. A local bank loan often isn’t feasible because of the short duration, lack of flexibility and the farmers lack of collateral. Furthermore, there’s a limit of how much equity a farmer is able or willing to give away.
That is why Benedikt Bösel and Koen van Seijen are embarking on a journey to find out what are the key principles of transition finance for regenerative farmers. We are having conversations with leading practitioners in the regenerative agriculture and food finance space. They share the insights how they would finance the speed up after regenerative transition on Benedict’s 1000 hectares, which is almost two and a half thousand acres farm in Germany, close to Berlin.
Benedikt, Bert and Koen dive deeper into the role what the role is of fully vertically integrated products in the regenerative transition of a farmer. We do this by diving deep into the value chain (or web) of one of those products that literally goes from soil to plate (bottle) via the only micro soy sauce brewery in Europe. The soy sauce of Tomasu finds its origin in Rotterdam, the Netherlands, and I’m pretty sure they’re the only soy sauce maker in the world with a regenerative farmer as part of the company.
To understand the role of soil better they explored the origin of the company:
“We got really inspired by wineries where soil was an actual part of the whole product philosophy. It all started with that search for autonomy. We want to do everything ourselves. So we needed a farmer. Actually, in the end, that turned out to be one of our most crucial decisions that we’ve made. Because, for us, it’s all about some sort of relentless search for flavor, if you call it like that, and we never expected the farmer to play such a crucial role in that process.” Bert Mulder
Can you grow for quality instead of quantity?
The Tomasu co-founders (at the time without a farmer) started asking this question to the farmers they met. Although that seems like a very positive question to a farmer, it didn’t resonate with them at all. They found farmers who were so ‘programmed’ to focus on quantity, that the whole quality aspect was not part of the conversation.
After many frustrating conversations, they finally connected to Jeroen Klompe, the farmer who then became part of the company.
5000 species of soy plants, why it helps to have a farmer on board
The first question they needed answering was what is the best soybean for this type of soil in this type of climate and for this type of product? With the University of Wageningen, where they discovered that there are over 5000 species of soybeans, they narrowed it down to 24 species. After some small test fields they selected four types based upon nutritional value and looks.
Benedikt: “A farmer will always ask for the financials, right? So on an acre or whatever like, is there a margin increase that you’re offering Jeroen for his work?”
Bert: “Well, we have a couple of things that we strive for. I’m not saying that we are already successful with all of them. But what you’re striving for is that we are paying for quality and not quantity. So meaning that he (Jeroen) doesn’t need to focus on yield or quantity wise in its focus on quality. And that could result into a situation where we give him a guaranteed fee per hectare.”
About that fee, he (Jeroen) is part of the conversation, he is part of the company that is buying his soybeans. So there’s an equal conversation, he is sitting at both tables. So that already gives him the flexibility to say okay: “for this year with this level of quality, in the context that we are with both companies, this is a proper price to pay”. And this far, we didn’t face any situations where we didn’t manage to figure it out with the four of us.
It’s not that at Tomasu we are activists who simply think farmers should get paid more, it actually brings us a lot of added value. Ever since we started, we never spent one euro marketing. But we drove to the farm, I think 100, maybe 200 or 300 times and the value of having conversations in between your own soybeans, if you wanted to express that in marketing (ed. value) that is insane.
What is crucial to understand is that it took them four years to come up with a product that was actually being sold. A lot of investment was required, especially time obviously, but also money. It made them fully focused on DIY. For instance you can’t buy a soy sauce press on Amazon, so they built one themselves.
Everything they do is about managing costs, keep them as low as possible, because it took them four years to have our first sale.
Bert: “What if we would have started with a lot of money in our bank accounts, then we would have approached it totally different than we would have to build a large brewery, the website would look 10 times better, but it would also create a lot of additional pressure to level of success that we need to strive for. And by taking small steps, doing a lot of things ourselves and just investing especially a lot of time, which is pretty precious, obviously. But I think making small steps allows us to keep the pressure off slightly. And that gave us the time to proceed and pursue that level of quality that we’re aiming for, and it’s still part of our daily process”.
“Start small. Obviously we all think big, but it’s the start small and baby steps towards that bigger ambition. We have the time. We are not looking at next year or the year after. We are looking at 10, 15 maybe even 20 years from now. That’s where we are aiming for. It’s not that we are pressured by investors or by ourselves in the sense of ‘this year, we need to have this'”. Bert Mulder
Benedikt: “I have two hearts in my chest. One is somewhere around those lines you just mentioned. And the other one is screaming quite loudly “Come on!”
I mean, there is just so much to do and so much you can do and achieve“.
Bert: “These are the most difficult conversation we have between me and Tomas, but also with Jeroen because it’s not easy, but it’s the bridge between what we can do today based upon the financial possibilities that we have, based upon the team that we have, versus what we have in the pipeline as far as ideas, concepts, products. That gap is insanely big with us. Because soy sauce is not the only product that we’re gonna launch. There are a lot of other products that we are aiming to launch in the same way like we did with the soy sauce.
The upside is that we are basically forced to take small steps because you’re pretty strict on that we don’t want to like external pressure by having investors in the whatsoever because autonomy is our holy grail.
One of the big problems of having basically to find someone who is able to finance a transition. In the classical bank model, you become dependent, you have a third party, even if it’s an investor, you have to speak to and tell him or her what you’re doing with the money.
We discussed the tension between taking outside capital to go faster or DIY
What if you have someone that would offer you capital to take one or two steps faster, or scale it up a bit faster? What if he or she would be sitting on the same side of the table. If they won’t pressuring you, because they understand it is a slow processes which might take 10, 15 or 20 years time.
What would you do in a situation like that? Would you say no and answer “I like the kind of pace and what it makes me focus on” or would you engage with this investor?
“We’re always open for those type of conversations, and the only thing we have a really clear rule with the four of us is if three of the four smile: we do it. And the same goes for this so if three of us think “that’s a good idea”, then we’ll do it. But it really depends then again on values connection”.
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