Introduction: Company Overview
Costa Group Holdings Limited is an ASX listed company which is among the top horticulture companies in Australia. The company has a chain of business starting from growing, packaging and finally marketing of horticultural products such as fruits and vegetables. Costa Holdings has five categories of fruits and veggies namely: Fresh berries, mushrooms, tomatoes, citrus fruits and Hass avocados. All the company’s operations are conducted in approximately 4500 hectares of land and other 30 hectares glasshouses. In addition, Costa has seven big mushroom growing centers located in different locations in Australia. Aside from farming and packaging, Costa has other business interests which include foreign farming interest in overseas countries such blueberry farms in Morocco and other berry farms in Asia. Costa was established in the year 1888 and the company’s headquarters is located in Ravenhall, Australia.
Business Units, Products and Service Lines
Costa has 3 main operation segments namely: Costa Farms & Logistics, Produce and International. The main fruits offered by Costa Holdings include Berries, tomatoes, mushrooms, avocadoes and bananas. A part from Horticulture, Costa Holdings is also engaged in logistics warehousing and in provision of other services such as licensing of various varieties of blueberries in different continents. The primary export destination for Costa Holding is Asia, North America and Europe.
Business Revenue Units
Costa has several revenue generating units which are discussed below:
Sale of goods: This is the revenue collected from selling various company products and the risks involved in packaging and export has been reduced when the consumer receives the goods. Revenue is collected at the point where the customer collects the product and the money for the product is provided.
Service Provision: This revenue is collected when the customer receives services from Costa group Holdings.
Dividends: Revenue from dividends is generated when the company has reached a maturity level for dividends allocation from its associate companies and joint ventures. Dividends are allocated using an equity formula.
Commission: This is revenue collected when the group conducts a high volumes sale.
The table below provides a clear indication of the revenue collected at the Costa group holdings in the year 2017/2018.
Importance of the Largest of these Revenue Units
The largest revenue is from sale of goods which is by selling of fruits and vegetables such as blueberries and mushrooms. For example, the revenue collected in 2018 from sales was $970,297 as compared to $15,063 which was collected from discounts and rebates. This means that the company’s key revenue collection unit is through sales of goods.
Costa Group Holdings External Environment
External factors which affect the operation of Costa group are those factors which affect the company indirectly. The company has no control over these factors; however, the ability of Costa group to adapt to these factors determines its success. Some of these factors have the capability to influence of the annual financial output of the company. External factors are explained below:
Political environment in business include the distinct changes in government policies which may affect the operation of a business. Costa experiences risks linked to the foreign operations especially in its businesses in Africa and China (Doyle et al., 2015). Example of these come from the risks associated with changes in jurisdictions which may obstruct normal operation of business in overseas markets. In order to counter the negative impacts of these changes, Costa has developed policies which enable the company to operate with reduced risks. These policies have to be reviewed frequently for efficient operation with minimal interruptions and maintain financial performance. Some of the Jurisdictions in which the company operates in may experience changes in the near future when there is a change in top government leadership and review of legal systems.
Changes in leadership affect local laws which in turn affect business operation.
Other political risks which Costa may experience include foreign exchange variations from distinct export locations such as Japan and USA. When there is a negative change in foreign exchange, Costa may be forced to experience a negative financial performance. In order to counter these risks, the company employs hedging strategies in a bid to minimize extend of damages incurred.
Social environment include the changes in the behavior of the consumers. Commonly, Costa’s market is made up of more than 75% of local sales. As a result, changes in Australian markets can have a huge impact on the operation of the company. Even though the company is continually looking for new markets, there is an ongoing review to provide risk measures to ensure that the company remains stable in case of variations in Australian economy such as fluctuation of goods prices
In terms of technology, Costa has embraced the use of agronomic technologies which ensures maximum efficiency and high yields from the farms. Other technologies which the company has adapted include the use of the current devices to analyse and measure crop yield per acre. The company continues to invest in learning new techniques of farming that will improve efficiency and reduce wastage in production. These investments also seek to come up with new strategies to improve post harvest automation which will reduce the amount of time between harvesting and delivering products to the consumer. As a result, the company will be able to deliver high quality goods which are in a passion to attract a higher and competitive price at the market.
There are numerous environmental changes which affect the operation of Costa group holdings. For instance, changes in the weather conditions affects produce output and eventual financial performance (Johnson and Wallach, 2016). The company controls these risks by making use of protective planting centers which have got little or minimal weather interruptions. These include the use of indoor planting and greenhouses. Although these strategies minimise damages, climatic damages cannot be eradicated completely; thus, the company engages in planting in different locations across the continent such as in Morocco and China.
Costa’s business is regulated by numerous environmental laws and different licenses are required for operations. In case the company is found to be liable of breaching environmental laws, then the company is liable to be fined and its company reputation may be jeopardised. Costa Group continually updates its policies to develop measures to reduce the impact of inputs used in farms in an attempt to reduce waste generation. The company is required to report to the National Greenhouse and Energy Reporting Act 2007 (Antille et al., 2015). Although the company’s emission has plummeted throughout the years, the group has been continually reviewing its operation policies to ensure a more efficient farming (Montagu et al., 2017). In this case, the use of solar energy has been adapted to reduce overall energy consumption (Antille et al., 2017).
Costa Group conducts an annual sustainability research of the company with the intention of coming up with sustainable environmental performance (Rogers, 2016). Due to the surge in the development of sustainable farming practices, Costa has made notable steps in an attempt to improve efficiency in yield production (Rogers, 2016). Costa should therefore be dedicated in meeting the set requirements of environmental performance as stipulated by the federal, state and local requirements.
As a considerate company, Costa has adapted measure to come up with efficient strategies to reduce the consumption of water in the near future. Generally, if the company fails to secure sufficient water for its operation in the future, the company may be forced to register a reduction in financial output which may affect future operation of the business. Therefore, Costa group holdings should conduct both long term and short term review of the water security to ensure that the company gets a continuous supply of water for its operation. Other investment is channeled into developing up to date farming technologies to minimize water wastage.
There are several regulatory measures in place that Costa need to look into. The company is a major beneficiary of the fresh vegetables and fruits import regulations and restrictions (Barclay and Bartel, 2015). These restrictions affect the importation of berries, tomatoes, mushrooms, avocados and bananas. Adverse effect on export volumes and margins may be witnessed if any alterations are made on the import regulations. Nevertheless, high perishability of various horticultural crops similarly serves as a natural hurdle among the importers. Additionally, in the fruits and food division where Costa operates, the company is expected to conform to a comprehensive series of other food handling and processing rules and regulations. Some of them comprise of food processing standards, packaging and labelling, protection of consumers and fair trading, customs, quarantine procedures and environment (Morgan, 2009). Slight amendment of these guidelines may negatively affect Costa’s trading deals by increasing the cost of processing hence lowering income margins of Costa.
Costa Holdings is also expected to observe all environmental guidelines as stipulated under different state, local and federal laws that are particularly related to noise and air emission intensities and water use. Costa’s operating procedures are in agreement with its permits and licenses. They adhere to strict environmental protection and management procedures. The company has not been implicated in any environmental degradation case throughout the year.
Labor schedules and arrangements: Costa practices several staff engagement systems to satisfy the requirements of cultivating, harvesting and handling of perishable products. One strategy involves the use of worker recruitment organizations to meet the staff requirements during peak seasons especially harvesting periods. In this arrangement, Costa does not directly control employment schedules. All the processes are conducted by the hiring organizations leaving Costa to deal with its direct employees only. Costa uses a rigorous procurement procedure to select a third party worker hiring firm. The company requires that the hiring should firm satisfy all employment laws and practices as stipulated in Australian employment guidelines. In addition, Costa confirms that all labor agreements and engagement terms set by all the third party worker hiring firms engaged adhere to authorized minimum living conditions and remuneration. Moreover, the bulk of employees working for Costa are insured by the company.
Work safety and health: The nature of the business conducted by Costa predisposes its employees to the dangers of workplace incidents and accidents. In an event of an accident Costa’s status and financial position may be adversely affected. Costa is striving to avert any accident by discouraging any tolerance to risk of harm to the workers and its clients. In the same vein, the company has constantly worked towards attaining zero injury by adopting best work practice principles and eradication of injuries or risks related to work.
Costa Group is dedicated and devoted to conduct commercial activities and invest in agricultural activities that are cost effective and innovative. The group is largely focused on promoting sustainable horticulture that meets expectations of its stakeholders.
Costa is committed to provision of quality products to its clients. The company understands that any case of contamination, product recall disputes, public health concerns or adverse media reporting can damage its brands and image. Thus, Costa does not tolerate any circumstance that may lead to food safety hazards. Costa observes stringent food safety measures and quality in the entire firm (Chen et al., 2015).
Community: Costa has integrated its business among several regional societies. The company has dedicated some of its resources to support the communal fabric of the regional groups where its businesses branches operate. The support is both economically and socially driven. Costa has entered into various workplace contracts and other trading agreements that are reviewed periodically.
Costa’s business deals have benefitted from its unique niche and access to quality products. However, the competitive advantage may vary in the course of time. There could be new entrants who have better varieties that can compete with Costa’s. Therefore Costa should strive for superior scales and varieties to avert adverse effect on the financial prospects and performance of Costa.
Recommendation and Conclusion
Costa should continually improve its operations to ensure that the company continues to grow and expand sustainably. Costa should continue focusing on reducing waste during production through efficient use of water. The key focus should be on water security and recycling. Costa should use innovative farming methods coupled with latest technology to overcome the hurdles caused by the changing climate (Sudmeyer et al., 2016). The Group can use protected cropping systems and employ renewable energy technologies.