Concentration in food retailing has been the single most important development to confront Europe’s fresh fruit and vegetable supply chain in the last 20 years. Yet the transformation of relationships which interconnect suppliers with supermarkets has not run its full course; indeed, some argue a more far-reaching revolution is underway.
This state of affairs was brought into sharp relief after yet another visit to South Africa a short while ago. Older heads will recall clearly the fierce debate that characterised the deregulation of the country’s old, established deciduous and citrus export monopolies during President Mandela’s first administration. Some thought that the export sector would implode, removing South Africa’s singular competitive edge in key markets such as the UK and Germany where Unifruco and Outspan had for so long acted as a bulwark against the growing power of the major supermarkets.
On reflection, the South African government’s bold decision to sweep away legislation that forbade anyone from exporting its deciduous and citrus crops outside the single channel seems remarkably insightful. Unwittingly perhaps, it recognised that the leading supermarket groups in northern Europe would inevitably continue to command greater market share. For the first time, it exposed South African producers to market forces they simply hadn’t experienced via the single-desk system.
Who could have known at the time, but deregulation also positioned South Africa more effectively to take advantage of today’s opportunities outside its traditional markets. Multiple exporters are better placed to service the many different demands of fast-growing markets in Asia, the Middle East and Russia, not to mention rapidly emerging markets elsewhere in Africa. It comes as no surprise therefore that South Africa’s fresh fruit export volumes have more than doubled since deregulation, while incomes generated from sales have also grown substantially.
Elsewhere, the decision to disband single-desk marketing has been less successful. Alongside South Africa, Israel and New Zealand were the other big deregulation stories of the 1990s. Since then, Israeli citrus has lost a significant market position in Europe, while New Zealand’s apple sector has more or less accepted that they are no longer the major force in Europe’s summer apple market, admitting recently that the export future lies in new markets such as Asia and the Middle East.
But their respective declines are not wholly due to abandoning single-desk sales structures. The problem was a dependency in both Israel and New Zealand on a single product line at times when markets have came under intense pressure from rival suppliers, companies who offered better cost structures and a similarly marketable portfolio of varieties. South Africa had a far wider range of crops, from stonefruit through grapes, apples and pears to a basket of different citrus types.
Zespri has watched these developments closely. New Zealand’s kiwifruit export marketer remains the last redoubt of single-desk marketing anywhere in the world, branded something of an anachronism in a global market where competition begins even before the farm gate. But no two sets of circumstances are ever the same, especially in Zespri’s case. Ironically enough, New Zealand’s kiwifruit growers were the outriders for export deregulation in the early 1990s when they came close to overthrowing the NZ Kiwifruit Marketing Board. The board did the work for them, reforming to respond more effectively to market changes.
Indeed, Zespri has become a global marketing company, sourcing a range of kiwifruit varieties throughout the year and marketing them effectively, realising good prices at relatively low cost. It has been wise to market demand, able both to meet the private label requirements of European supermarkets and use its brand position to find new export opportunities in Asia and elsewhere.
It has also spent much energy – not to mention a small fortune – in its domestic tussle at home to preserve its single desk status. Its skirmishes with Enza, the Turners & Growers-owned company that once had exclusive rights to market New Zealand apples, have some of the flavour of the old battles of 20 years ago. But Zespri is more secure this time, so much so that you might ask why it still requires a government statute to preserve its monopoly. Zespri has used the last 20 years wisely, developing a global network that can hold onto a near monopoly of kiwifruit sales thanks to market forces alone.
