Quality, not quantity the focus for Pérez Zara Agrícola

Hugo, when was Pérez Zara Agrícola was established and what its main line of business?

Hugo Steeds: We are a small family business founded in 1999, with our roots in micro-distribution and local citrus production from the Guadiaro Valley in the province of Cádiz. We continue to pack local citrus fruit and now also supply Hass avocados year-round.

Our Spanish Hass season starts in December and continues through to April with our own vertically-integrated production representing around 20 per cent of our supply, the remainder being sourced locally within our catchment basin, and within a 40km radius of our packing facility.

We pack an average of around 5,000 tonnes of avocados and 1,000 tonnes of citrus annually. We import exclusively from Peru and Chile to guarantee our customers the consistency and ripeness they expect.

Our distribution is strictly private label, mainly pre-ripened and we focus on southern Europe and small companies who share a similar philosophy of prioritising quality over quantity. With an overcrowded market and a cacophony of mediocre supply, our objective is to deliver a truly superior eating avocado, sourced and delivered sustainably.

How would you summarise the current state of the European avocado market?

HS: The avocado market has seen an unprecedented rise in consumption over the past 10 years, where demand has consistently outstripped supply causing strong retail prices and very attractive returns for producers.

As free market economics dictate, this producer-friendly market will end when the supply curve outstrips the demand curve. The summer of 2023 will once again see a sustained period of oversupply dominated by price volatility and a plethora of different origins competing for a place on the shelf.

Unsurprisingly the strong performance of previous years has incentivised large-scale plantings worldwide and this will destabilise both quality and price in the years ahead.

To what extent are water scarcity and climate change posing a challenge for Mediterranean growers?

HS: There is no doubt that the ‘Mediterranean Arc’ is on the frontline of climate change and average annual rainfalls will continue to limit production capacity here. Let´s not forget Australia and Israel both export avocados in extremely water-stressed origins but are much more effective thanks to an innovative and technologically advanced water management policy.

If Spain want to compete going forwards, it must restore its reputation for quality, modernise its water policy, improve yields and better its technical management. The potential is there but overseas competition is improving all the time, and meanwhile capturing more market share.

Is it slowing down the development of new Hass avocado production?

HS: Water stress is of course a concern, but this is a trend that has developed over many years and should not be catching anyone by surprise. There are many options available to Spain such as using waste water, desalinisation, updating the infrastructure to improve water capture and reducing evaporation from canals and reservoirs.

It must be added that the proliferation of overhead sprinklers to combat temperature stress is short-sighted and only increases the water footprint. Water policy must modernise but without innovation and technology, the industry will remain on the backfoot.

The European avocado market is becoming increasingly crowded at certain times of the year. How do you think the situation will develop in the coming years? As supply windows get smaller and smaller, at what stages of the calendar and in which markets do you still see the best potential to build sales?

HS: Price volatility is indicative of an industry entering a boom and bust cycle. While European per capita consumption is relatively low at an average of 1.6kg, the industry assumes that per capita consumption in Europe will continue to increase to US levels of 3.9kg per capita.

Recent years have seen a marked slowdown in growth, which suggests a different story. Mexico with nearly 270,000ha under production represents a fortress-like 90 per cent of US avocado purchases. This dynamic forces southern hemisphere sources to divert volumes to Europe with little or no other diversification on offer.

What about China & Asia? They will play a bigger role in the future won’t they?

HS: Asia is of course a growth market, but will not be enough to absorb the exponential rise in production coming onstream. China, for obvious geopolitical and strategic reasons, will focus their trade where possible across Africa, and this will limit opportunity for Southern Hemisphere origins.

Furthermore, East Africa and South Africa both benefit from strong sea freight links to the Middle East and Asia, enabling the Afro-Asia trade to flourish and remain competitive. Not to mention that both Australia and New Zealand also supply South East Asian markets, and these are markets that are far away from Chile’s 7kg per capita levels of consumption.

In Peru, ProHass has predicted to reach a record production of 650,000 tonnes this year, compared to 554,000 tonnes in 2022. This is a 15 per cent increase year-on-year. If Peru continues its rise to the 900,000-tonne mark and the Mexicans keep the door firmly shut to the world´s largest market, its hard to see Asia mopping up the excess, leaving Europe very over-exposed with a mix of origins too long to list.

So what, in your view, the best way to stimulate demand so that the market can absorb all this additional volume? What can companies like Pérez Zara Agricola do to stop avocados from being popular and introduce more differentiation into the category?

HS: First of all, the industry needs more regulation and control to slowdown the proliferation of uncontrolled planting worldwide so we can properly regulate global supply. Avocados are a tree crop and once in the ground, they keep flowering and producing kilos year after year, contrary to field crops which can be taken out if they no longer become profitable.

To stimulate demand, a product needs to offer stability in price and be consistent in quality, both of which have been absent. We only need to ask consumers who regularly complain of how much avocados cost and end up throwing them in the rubbish. This only pushes consumers away to other fruits which eat better and cost less.

The danger is that as producing avocados becomes less profitable, while inputs such as fertiliser and labour rise with inflation, producer margins shrink and force growers to seek out efficiencies, cut corners, and cause a further downturn in quality.

To stimulate or even maintain demand, the supply chain must become more sustainable, radically reduce waste, reduce its water footprint and deliver a more consistent quality. If this is supported by promotions and marketing and an industry that is more quality focussed, then consumers will gain regain confidence.

One of the great challenges for fruit and vegetable companies seems to be the need to become increasingly sustainable without sacrificing their economic viability in the short term. What are you doing to achieve both goals?

HS: Effective soil management is a tool we continue to use daily on our trees to achieve a more sustainable crop. We grow in clay soils which are moisture-retentive, and by using in-house mulching and worm composting, we can optimise our soil structure and fertility without using chemical intervention, such as imported artificial fertilisers.

Our compost sustainably adds organic matter to our soil which improves its protozoa population, increases soil oxygen levels and encourages tree roots to grow in a more aerobic environment, which improves yields and reduces disease exposure.

Furthermore, soil optimisation has helped us reduce our water footprint to nearly 240 litres per kg in some areas of the farm. This also helps reach our SPRING certification and our mission to achieve a residue free avocado, which is grown sustainably.

In terms of packing, we are in the process of installing a large photo voltaic roof which will mean all our cooling and ripening capacity will be solar powered and 100 per cent renewable. We are using plastic-free packaging and expanding our distribution of ‘waste fruit’ to reduce our waste footprint as well.