In an industry as swift-moving and dynamic as fresh produce, changes happen almost on a daily basis. Yet, as the days and years roll by, it sometimes takes a moment of deliberate reflection to realise the enormity of all that has gone before.
For Israel’s leading exporter of fresh produce, the changes it has clocked in the last 50 years must be colossal. As Agrexco looks forward to celebrating this important landmark, the head of its UK office, Amos Orr, has spent considerable time mulling over the ebbs and flows of half a century in trading.
Agrexco first emerged in 1956, in a government bid to revolutionise the agricultural sector, Orr recalls. “The government decided to establish the company to maintain the local market business,” he says. “Fifty years ago, agricultural produce formed the majority of what Israel was producing and we couldn’t sustain that with just the local market.” So after some structural adjustments, Agrexco’s exporting days began. “They soon realised that they weren’t serious enough: that if you want to develop the market you need quality and consistency and the best growers producing for export,” Orr explains.
Being a small country, Israel’s agricultural community naturally started on a fairly modest scale and Agrexco enjoyed total control of the sector for a long time. “We were a monopoly for maybe 35 years in the majority of items until the government declared a free market situation 15 years ago,” Orr says. Now there are 110 Israeli exporters competing for market share, but this has not held Agrexco back. In fact, quite the reverse is true, he suggests. “We have seen the transition as beneficial to Agrexco. When we were a monopoly we had to take under our umbrella all the growers that wanted to export. They weren’t always offering product of the highest quality and they were not as professional as we thought they should be. Now we can be much more selective about the growers we work with.”
Competition, both internally and externally, is a given in any industry but Orr believes the company has survived better than the majority of monopolies faced with dissolution. “Of course there were fears that other companies would compete with us and they do, but we simply thought if they start doing better than us, then maybe we aren’t in the right place,” he says.
But so far so good and above and beyond such a testimony the figures speak for themselves. As a monopoly Agrexco grossed a high of $280m, while at the last count the company announced a global turnover of $720m. “Our market share is stable; we represent about 65 per cent of Israel’s horticultural export business,” Orr claims.
Over the past 50 years, Agrexco has developed an international presence in addition to its Tel Aviv headquarters, with principal offices in London, Paris, Rotterdam, Frankfurt, and New York and smaller branches in Spain, Italy, Austria and Switzerland. The head office also looks after business in countries not represented by local branches, including the Far East, the Balkans and Eastern Europe, which have steadily become major customers for Agrexco’s exports. The company has a staff of 340 in Israel, with a further 150 located overseas.
The number of end markets within the company’s remit has grown immensely since the early days as well. “In the beginning, Europe was the only target and we sent the majority of our products by air because prices were much better so we could afford the cost of air fares,” Orr says. However, the significant cost, both in environmental and financial terms, of air transport has rendered it less favourable from both sides, with the US, in particular, trying to curb its intake of air-freighted produce.
Before commencing his stint in London, Orr headed up the New York branch for four years so he has experience of two very different markets. The UK office continues to do well under Orr’s watch. As the number one office, outside of Israel, the Hayes-based branch handles around one third of Agrexco’s exports and Orr expects the team to continue growing as further business opportunities arise.
Since they began their meteoric rise, the supermarkets have constituted Agrexco’s core business, with wholesaling providing a lasting, strong component. Today, Agrexco diverts around 28 per cent of exports to wholesale or foodservice and Orr is quick to emphasise the opportunities in foodservice available to exporters and importers, believing this will gain more momentum in the future. “This is why we chose to sponsor the Foodservice Supplier of the Year award at Re:fresh last year,” he adds.
Not surprisingly, however, nowadays the majority of Agrexco’s produce ends up on the shelves of the major multiples, handled by a large number of different category managers. Responding to this method of business may have its challenges but Orr appreciates that as the key link to the growers, companies such as Agrexco are in a less vulnerable position than the category managers, to whom Agrexco delivers produce as directed by the supermarket buyers. In addition, not only does he believe the stringent specifications demanded by the UK customers result in better agricultural practice overall, but putting the necessary procedures in place early on has rendered the company’s affiliated growers in a position to comply with the sudden demands of other markets, Orr says.
Located a considerable distance away from the UK, Israel obviously faces tough competition from a number of countries, on different products - in particular, Spain, Egypt and Morocco. As well as rising labour costs, in accordance with better standards of living, Israeli exporters face jumped up transport costs. However, thanks to the construction of two fully-refrigerated reefer vessels, Agrexco has managed to retain its competitive edge, even in the current climate of high-costs and low-returns. “Luckily we introduced them just before sea freight became very expensive and as long as we maintain a balance between air and sea transport we can compete,” says Orr. “It only takes three days from Israel to Marseille by sea, which makes us competitive even with the price of using trucks from Spain. It still takes two or three days for the trucks, and although it is more expensive for us, it is still within the same cost framework.”
Despite these disadvantages, Orr believes Israel, and more specifically Agrexco, still have a few vantage points. “We have a large assortment, reliable and consistent supplies and we are coming up with new products all the time - something to which the supermarkets usually respond very well,” he says. Research and development is something Israeli producers invest in significantly, often in conjunction with government research institutions, which has led them to make some renowned introductions, Orr claims.
Premium tomatoes are one area of particular interest for Agrexco. Having started a few years ago with cherry-on-the-vine, the company’s growers continue to tempt buyers with all manner of different breeds, in the hope that they will hit gold with a tomato that not only looks and tastes good, but has durability.
The company has also seen great success for the new native grape variety it introduced two years ago. “It is a new variety of early sweet grape to replace the old Perlette variety, being grown in the hot regions in the Arava desert and Jordan Valley,” says Orr. “Last year was our first year of commercial volumes. It was approved by all the top supermarkets and we are now doing thousands of tonnes. It was our growers that first introduced the variety and we are handling the majority of the exported harvest.”
Breeding for health benefits is another development, which the company has keenly latched onto. “We’ve seen signs of a big uptake in lycopene-rich tomatoes and are always mindful of the nutritional benefits in developing new products,” says Orr. Pomegranate has been another winner. “We have been growing them in Israel for 5,000 years. Then in the last two years they have really taken off and we don’t have enough so we are frantically growing more.”
Organics is fast becoming another key driver for the company, particular in various fruit, veg and salad lines, complementing its objective to remain at the premium end of the product spectrum. The market for organics is growing at an extremely fast pace and, although the UK industry has recently recognised a strong demand for local organic produce, this is only possible for a small selection of items. Yet people choosing organic will inevitably still want organic versions of all the imported items they wish to purchase, creating an opportunity for companies, such as Agrexco, he adds.
Another way in which the company is trying to project itself forward in the competition stakes, is by forming subsidiary exporting businesses in other countries. “We have a highly developed international trading system which is an area of the business that is growing year-on-year and now accounts for around $30m,” Orr says. “This enables us to better serve our customers by offering product year-round or for extended periods of the year, at least.”
So, after 50 years, does Orr think the difficulties of dealing in fruit and veg are worth the perseverence? Undoubtedly. Fresh produce may not be the most stable of businesses, but the challenges, he says, keep things interesting. “All industries have their difficulties. I think we are more at God’s mercy. The weather may affect purchasing for other industries but it is fundamental in horticulture. Our orchards are all open and exposed to hail and frost, while cloudy days will affect the ripening of produce in greenhouses. But all of our growers and product managers are all so enthusiastic. They take it very seriously and they really care about the product and are prepared to work all hours for the business.” Orr prefers to give his team a free reign in managing their particular areas, and looking at the increasing number of customers and volumes being handled, the approach seems to be working, he suggests.
While Orr, himself, may not be at the helm by then, he believes the company will still be around in another 50 years to celebrate its centenary. “If the company is flexible and learns by listening to and ultimately complying with the needs of both overseas customers and growers - both of whom are equally regarded as clients - I believe it will not only survive but flourish,” he concludes. “We have dealt with competition for 15 years now and know we can succeed and the growers and exporters are always working to be more efficient, which is the only method of survival in this current climate.”
