A Free-Trade agreement with the European Union has proved something of a double-edged sword for the Chilean fruit industry.
While exporters have benefited from the freer - and cheaper - access to the market the agreement has brought, it has also led to a far greater volume of Chilean fruit flooding onto the market.
Carlos Bennett, commercial director with Bendel Fruit, says: “The agreement is likely to continue to increase competition. We saw a large amount of fruit sent to Europe last year, and internal competition between Chilean producers is only likely to increase further.”
If that trend continues into the future, it will only damage prices for the Chilean industry.
Carlos Loyola, commercial manager with exporter Rucaray, agrees that the free trade agreement has both benefits and drawbacks.
“It has been very good for us because it has allowed us to be more cost effective, but on the other hand it has made the market more competitive with increasing exports from Chile,” he says.
This has, of course, been exacerbated by the favourable exchange rate, which has made Europe, and the UK, an increasingly attractive market.
However, Rene Wunkhaus, marketing manager with Copefrut, says gambling on the exchange rates is a risky business: “If you plan your marketing strategy around the value of the euro or dollar, you’re not going to last very long.
“You need to focus on your customers and clients, how you can improve quality and increase your volume.”
Indeed, while the free trade agreement and the exchange rates might be making the spot market attractive to Chilean producers, more and more organisations are entering into planned programmes with UK and other European retailers.
Loyola says: “Our ambition is to expand, not blindly, but always with what the market needs. Our policy is not to fight for every dollar, but to stick to the programmes - if the market is worth $20, but we agreed $18, we stick to that. We would rather stick with our long-term plans than fight it out on the spot market.”
Wunkhaus echoes this: “We are working more and more with supermarkets in a programmed manner, and less on the spot market.”
Certainly, one of the biggest problems for the stone-fruit industry last year was the vast volume of plums shipped to Europe.
Wunkhaus says: “Last year’s results were not good for the growers. We had too many smaller sized plums and we were early by around 10 days.
“At the same time the South African crop was delayed so we came into the market with a lot of volume, the wrong sizes and at the same time as the South African fruit. So really the whole thing was just a big mess.”
“At the end of the day it was a disaster,” says Matias de la Fuente, commercial director with Chiquita Chile. “We had a 40 per cent increase in production and this year I think we are going to have more or less the same or perhaps even slightly more.”
Not only will volumes be similar to last year, but most of the growers are expecting sizes to be the same as well. “The sizes are not good,” says de la Fuente. “Colder weather in spring affected the fruit, both in its growth and the sugar levels.”
Copefrut is taking a pragmatic approach to the problem this year: “We’ve basically decided not to export such a large volume as last year and will stick to exporting only the larger sized fruit,” says Wunkhaus.
Even if the expectation of a large plum crop is fulfilled, the industry is more confident of handling things better this time round, says Chiquita’s de la Fuente. “The main difference between this season and last is that we’re prepared for the extra volume.
“Last season no-one was expecting such big volumes, and people just weren’t aware of the growth. This year, everyone is in the picture, so I think things will be better. We’re going to be much more strict, and only pick the fruit we can sell.”
However, while most predictions for the stone-fruit sector are for volumes similar to last year, Rucaray’s Loyola expects to see a general fall: “Last season was very tough, and as a result some growers have been cutting back on production, so we’re anticipating a fall.”
The unseasonable spring weather with a sudden period of rainfall also caused some headaches for growers. “We suffered some rain damage. We had 40mm of rainfall in two days just before harvest and that cracked some fruit, particularly plums,” said Hugo Poblete, production manager with producer/exporter Sofruco.
De la Fuente says: “The weather has been quite worrying. My impression is that the shelf life of the fruit will be affected, the fruit we’re picking at the moment does not feel so good.”
And he is not confident the summer weather is going to be any better for Chilean producers. “According to some of the weather predictions I’ve seen, we are in for some weird weather this summer. So I am a little bit afraid for this season, but you never know what may happen.”
Fortunately, says Bennett, stone fruit has not been hit by frost: “We had some damage last year, but we’ve avoided that this season and it’s looking like a better crop all round.”
Cherries, however, are one crop that has suffered, says Wunkhaus. “Until a few weeks ago the season was looking perfect, but then we had some rains and the spring weather has not been good - rainy and cloudy. That has affected us first of all on volume but also on quality.”
He says Copefrut is anticipating final volumes on cherries to be down by around 15 per cent compared with last year. The company has recently invested in a new cherry packing line, doubling its capacity. This year it expects to export around 500,000 boxes, with around 60,000 of those coming to the UK market.
“We only sent around 40,000 boxes to the UK last year, so although volumes will generally be down, we’re increasing our presence in the UK with cherries,” says Wunkhaus.
“Nectarines are looking good this year,” says de la Fuente. “Demand, particularly from the US is very high, but peaches may be more of a problem and we’re expecting an up-and-down season.
“There will be peaks and troughs and we’re expecting to find ourselves facing both oversupply and shortages as the season unfolds.”
A particular development in Chile, when it comes to stone fruit, and particularly peaches and nectarines, has been in pre-conditioned fruit.
Bendel Fruit’s Bennett says: “It’s basically a system to prepare the fruit so that it arrives in the marketplace very juicy and sweet, similar to Ripe and Ready. We’re using it on nectarines, peaches and plums.”
He says the fruit is prepared in special chambers, heat-treated and put into cold storage before being put into special packaging. “We’re seeing increasing demand for guaranteed sweet and juicy fruit.”
Wunkhaus is also working with the system: “It’s basically a case of ensuring the fruit is juicy and tasty and ready to eat when it is sold. The fruit needs to have good sugar levels.” He says at the moment it is mainly being sent to the US market but Copefrut is also doing some trials in Europe as well.
Meanwhile, on the grape front, Chile continues to go from strength to strength, and the season is looking good.
“Grapes are a little bit later than last season,” says Bennett, “but then last year we were early so we’re probably starting about the normal time.” He estimates his own production will also be slightly higher this year, by around five per cent.
Grape is the biggest sector of Chile’s fresh fruit industry, representing around 33 per cent of exports and around 30 per cent of the country’s growing land is devoted to its production, around 45,000 hectares.
And that is only likely to grow, with more and more companies looking to expand into the grape sector.
Sofruco is one organisation that has seen potential in grapes. The company, which has not previously exported the fruit, now sees it as a vital sector of the industry, and the UK a key market for the product.
As a result it is developing grape production, which will see its capacity expand from its current 45ha to more than 200 over the next five years.
Poblete says: “We made the decision to go into grapes because it wasn’t an area we covered and we wanted to diversify. The UK is an important market for grapes, but we’re not ready yet to export there.”
It is not the only company expanding either, Chiquita Chile has announced plans to boost its own-grown volume, says de la Fuente.
“We’re increasing our production from 3.8m boxes to more than 6m, around 50 per cent growth. We’ve just leased around 2,000ha extra to grow fruit on, with the majority being grapes.”
De la Fuerte says the decision is part of a plan by the company to increase its own in-house production, rather than rely on third party growers, as well as increase the company’s production of seedless grapes.
“If you want to have good grape sales, then you need to have at least 50 per cent of your production in seedless. By leasing the land, we will move from having around 90 per cent of our production from third party growers to around 50 per cent of production being our own.”
Own production is vital when dealing with the UK retailers: “They want to be dealing with export companies that have overall control,” says de la Fuerte.
With regard to this season he’s confident grapes will be a strong performer, with his own volume up by around 10 per cent.
Another leading grape producer and exporter, Unifrutti, is expecting a significant improvement in volume. Luis Latrille, chief of production, says he is expecting volumes to be up by around 20 per cent this season and quality to be higher as well.
The company is also investing, spending around $500,000 on its packhouse in El Canelo in the Copiapo Valley. “We’re putting in automated systems and new cold storage,” he says. “We’re starting in February and should be finished by November, 2005.”
Unifrutti is also working with Asda and has started doing mixed punnets of red and white seedless grape for the first time this season.
A serious issue the Chilean industry needs to address, both on grapes and stone fruit, says Chiquita’s de la Fuente, is developing new varieties.
“We are good when it comes to quality and volumes, and have some of the best facilities in the world, but when it comes to developing new varieties, we’re towards the bottom of the pile.
“In other countries, such as New Zealand and South Africa, they spend a lot of money working on new varieties, and this is an area we need to improve on, both in grapes and stone fruit. It needs to be a main aim for the fruit industry.”
A number of Chilean producers are beginning to look at new varieties. Rucaray’s Loyola says: “We have the new variety Autumn Royal this season and we’re planning to produce around 30,000 boxes of that over the next two years.”
Unifrutti is working on Autumn Royal too and also Regal, says Latrille, as well as developing new varieties through grafting.
Christian Carvajal, marketing manager for Europe and Asia with the Chilean Fresh Fruit Association (CFFA), acknowledges variety work is an issue: “We know we’re not as strong as New Zealand or Australia on this issue, but we want to start looking at it more, and that’s something we are going to be focusing our efforts on in the near future.”
One area in which the Chilean sector has been extremely innovative is the introduction of ChileGAP, which has recently been recognised as equivalent to EurepGAP.
The challenge for the CFFA now is to spread the word among Chilean producers. “We need to sell it better,” says Carvajal, who admits the industry, some of whom already has EurepGAP accreditation, has been slow to sign up. “It has been designed to act as one system to cover both the European and the US markets. It’s vital we get the right message across to the growers.”
It is still early days however, with the scheme only recently having been recognised by EurepGAP and Carvajal is confident he’ll soon have the industry on board.
In the meantime he says the CFFA is working in the US to gain further recognition for the scheme from the country’s retailers.
Shipping is also developing into a bigger issue for the Chileans. While costs are an ever increasing factor - many producers estimate increases of around 15 to 20 per cent in shipping due to the rise in oil prices - a bigger issue for many is physical space.
Bendel Fruit’s Bennett says demand for shipping is beginning to outstrip supply. “Demand for space from China is on the rise, and that means there are fewer ships available and less space when it comes to sea freight.”
Airfreight remains too expensive an option for most fresh fruit products and again space is an issue as airfreight is dominated by the salmon sector.
As a result of the issues with shipping, Carvajal says more and more companies are beginning to consider investing in their own logistics.
However, the solution may be just around the corner. One of Chile’s biggest ports, in Valparaiso, is planning significant expansion.
Francisco Lopez, spokesman for the port, said a project is under way to increase the capacity of the port from around 4.6 million tonnes to nearly 20mt by 2010, with further expansion planned to more than 40mt by 2045.
Promotion in the UK is also something the Chilean industry is keen to continue, to maintain a high profile with both the trade and consumer, says Carvajal.
A market audit carried out by the CFFA showed that the promotional work the group is doing is worthwhile, although it is more effective to focus on the trade and at the point of sale.
He says the CFFA will be carrying out a range of promotional activity, doing tasting sessions with all the UK’s main retailers as well as supporting the 5-a-day campaign.
“We’re keen to increase our sales, maintain our shelf space during the season and make our produce as prominent as we can.”
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