While other fruits and vegetables flourished in the luxurious food spend in the run-up to Christmas, the grape sector lost out to £1-a-punnet offers on other fruit. The category is dominated by its shorter seasons and a large number of source countries, with an average year seeing more than 11 countries supplying the fruit worldwide.
But this quarter created considerable overlap, previously unseen during this period, as Brazilian crops continued to bear fruit into December. The UK industry had feared that Brazil, a major grower of the Italia, Festival Seedless, Aledo and Red Globe varieties in the semi-arid conditions of the country’s north-east region, would snub these shores with the weak sterling offering poor margins.
“It has been an unusual period for grape trading,” says one insider. “We were concerned that trading with Brazil would be tight as the US market looked promising. But then there was market congestion and exporters wanting $30 (£20) for 8.2kg achieved just $18 for that weight. This diverted fruit back towards the UK.”
Brazil has two seasons for grape; one that stretches from April to June, and another running from October through to December. The extension of this second season caused problems due to the successive nature of the category.
South Africa and Namibia, whose seasons follow Brazil, were the losers in this southern hemisphere battle. They entered the market early to attempt to counter the Brazilians. However, a number of factors - not least the relatively low yields from crops picked in their infancy - meant it was hard to make a profit.
“The relatively weak rand has meant money has been diverted elsewhere during the credit crunch,” says one exporter. “South Africa is a very volatile environment for a number of reasons, and the rand has weakened against everything but sterling.
“It has been a very difficult situation out there, with some hail and rain issues and also sugar development issues. The country still has very tight discipline with export standards and I know of one grower on the Orange River who was forced to leave some grapes unpicked because of sugar standards.”
This comes after the largest flood in living memory devastated the low-lying areas of the Hex River Valley in November, which caused the complete collapse of eight bridges, as well as severely damaging the approaches to several others.
The region usually receives 330mm of rain annually, but around 200mm fell within 48 hours, damaging vineyards and costing the local industry an estimated R250 million (£16m).
The damage extended between 60 and 100 hectares of vineyards and infrastructure along 20km of river frontage in the valley. However, the biggest effects were felt by growers within a 50-metre radius of the river’s meandering bends in the valley.
Massive silting in the vineyards and bridge repairs with pontoons proved the biggest issues, but the more noticeable effect on grapes was on quality rather than volume, with slipskins common on arrival in the UK.
The Hex River Valley flood did have some effect, but the region is far from the main supplier to the UK. It provides some excellent-quality late Crimson and Thompson, but mainly specialises in seeded varieties exported to the EU and Middle East.
The latter is a market that many exporters are now looking to as the attractive FOB market, whereby fruit is paid for on departure rather than the traditional European style of selling the fruit then returning a price.
However, one insider painted a bleaker picture for exporters. “I see much caution in the year ahead,” he says. “Prices will be cheap as there is already oversupply worldwide. You only need sales to drop 10 or 15 per cent to leave a hell of a lot of grapes without a home.
“Exporters are looking for good money. Demand is down, supply is up - price has to go down.
“The UK is a long way down the Christmas card list in terms of buyers,” he continues. “We are a poor relation; they perceive our market as too fussy and too demanding, with highly certified pesticide records and country-of-origin stamps, when they can send the same fruit to Russia with no problems. The exchange rate is killing the market.”
In terms of quality, Brazilian grapes were reported to be particularly bulbous and full this season, while Namibian fruit was also excellent. South African red grape, on the other hand, proved too soft and never made top money, with a trail on the season making supplies tight in the last week. One importer reported a two million 4.5kg-carton slip in production. The first grapes from Chile are set to arrive this week, with the quality said to be a “very pleasing standard”.
South African grapes are currently making between 800-1000p for 4.5kg for Black Gem and Sugraone, while Peruvian Red Globe is also faring well at a similar weight and Spanish Napoleon fetched 400p for 5kg.
Chile, which also trades in dollars, is likely to be looking for a high price, despite sterling losing around 51 cents to the dollar since the country was last in the UK grape market. “We are hoping to retail at £7 for 4kg at the absolute minimum,” one supplier says. “Only two years ago, we were selling at £8-12, with profits of £30,000-40,000 per container - the import market became very lucrative and attractive.
“But now we do not have any choice but to put out prices that don’t make a great margin. The average housewife in the UK is not going to pay 20 per cent more when consumers have so much choice. We have an overly expectant market.”
Another supplier says of the retailers: “It is all about display; grapes are losing shelf space to other exotics - stonefruit, pineapple and sharonfruit - and it has been a rollercoaster ride.
“There has been some incredible growth, but it remains a luxury shopping basket item, not a commodity.”
DEALING WITH MARKET PRESSURE
It has been an interesting time in the multiples market, particularly with everyone trying to find a balance in such a pressured environment, writes Dan Crooks, commercial director for grapes at Mack Multiples.
Retailers are fighting harder than ever to retain and grow their market share. Key products such as fresh fruit are focal points in the battleground and, with consumers feeling the pinch, we have seen new customer entry points and innovations in the special offer areas. As an importer, one key point of the last quarter - which seems likely to be ongoing as an issue for some time yet - is the weakness of sterling against the dollar and the euro. We have to keep the UK market attractive for growers, but that is not easy in the current climate.
We import a wide variety of grapes from all over the world to ensure a consistent supply of quality product. In recent times, we have seen the shift to seedless grapes become complete - we no longer import any white seeded varieties, as consumer demand simply is not there any more. Thompson, Superior and Prime remain the Holy Grail for the white seedless market, along with red varieties Crimson and Flame, although we are seeing many red varieties emerge as they continue their strong growth within the market.
Quality has been poor in comparison to past seasons, and more so on white seedless than red product. White grape supply from Brazil has been affected by varying calcium levels in fruit due to over-yielding in the country. They need to find the right level there, but seedless production is still in its infancy in this region. However, red seedless product has been far better, with greater volumes from emerging sources supporting the area - it still remains a hotspot on the supply calendar.
In line with our forecasts and expectations, demand has been good over the Christmas period, despite market conditions. We have traded mainly in Prime from South Africa and Namibia, along with Crimson from Peru, backed up with the South African and Namibian Flame, where weather and grower skills have contributed to a strong crop over Christmas. We have seen a good standard of grape from Namibia and South Africa, which has certainly helped sales.
Recent trends within the multiple retailers seem to be focused heavily around punnet promotions, and we have seen a number of these in recent months. Retailers have been taking an aggressive stance and putting significant investment behind the promotions with successful effect.
We expect to offer different varieties during times of availability, which will be inevitably limited, but these will be sold as premium lines in the retail market. We are working on bringing our more successful new varieties into a 52-week supply over the coming years and we will undoubtedly see changes in the core supply areas. Our knowledge on worldwide varietal development is second to none. What is important to the industry is that it is managed in a cost-effective way, giving greatest value to the customers and best returns for the growers.
For wholesale markets, we have seen the successful launch of our own Mack Platinum brand. This has been very important for us and has helped us refresh our wholesale offer. It is quite a responsibility when grapes carry your company name, so they have to live up to expectations.
Looking forward, our main issues and areas of concern are not so much about the products we sell but around the low value of the pound at present. This is the biggest threat to availability and our own profitability; a challenge as we head into 2009. We aim to make sure that customers see good value in grapes and change high price perceptions.
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