The apple market has been static in the last quarter, both in volume and value terms, but the smart money is already on a tricky three months ahead, as the UK market adapts to both global availability and emerging trends.
The period between the end of the northern-hemisphere crop and the beginning of the next northern-hemisphere run is expected to get tighter as a general rule in the next few seasons, as southern-hemisphere exporters redefine their marketing strategies to take in the increasing opportunities in ‘new’ markets and the need to minimise risk at a high-cost time for production and distribution.
The end of the English season came and went without too many surprises, and the transition through to imported fruit, firstly from the European continent and then into the South African and Chilean arrivals, was smooth enough. Shortages of varieties such as Jonagold from the Netherlands, which has shot up in value, and Pink Lady, which has caused the retailers to go back to the future and reconsider Sundowner, are examples of the inconsistency of supply, but there has been just sufficient fruit to fill shelves.
This follows a relatively good few months for the English crop, depending largely on who you speak to, and ignoring the odd calamity which appears to be part and parcel of this year in the fruit industry. There is unease though. “Buyers are certainly beginning to look over their shoulders to see whether they can source enough fruit in the next three months,” says a supplier. “It is no surprise, but it does not make it any easier.”
Naturally, South Africa was the first southern source to reveal its hand, and with a crop that is roughly 20 per cent down year on year, and unusually short on the small sizes required in the UK, there has been a pronounced shortfall in availability to the UK market. “Normally,” says one importer, “the UK market would not suffer from a shortage in South Africa, because there would be plenty of fruit in the smaller size bracket. But this year there is both a shortage of smaller fruit in general, and a much stronger demand for the small fruit that is around from the domestic market, where ‘thrift-bagging’ has become the rage. Molecular sleeve-bag packs in retail stores have been very popular, and hawkers have been finding profitable trade too.”
Value of fruit from South Africa has therefore seen a seven per cent uplift, according to one source, but this does not translate to the UK, where programmes were already in place and are being honoured. “We are aware that we are in the UK for the long term,” says an importer, “but we certainly make the buyers here aware of the price of fruit on the continent.”
Meanwhile, although the Chilean apple season is only at its mid-point, Royal Gala sendings so far are down 7.5 per cent on 2007, and Braeburn is also going to see a decline in volume. “Braeburn is double short at the moment,” says a UK importer, which is borne out again by the New Zealand figures below. “There has been a lot of additional demand for South African Braeburn, which is usually largely overlooked because of the superior cosmetics of the NZ product. We’re looking for SA fruit for the next couple of months, but exports only amount to around 100,000 cartons, so there isn’t much around.”
Even if the South Africans had the fruit, whether they would consider selling it into the UK is another matter.
Bagging sizes are also short amongst the Chilean export crop and that has caused a problem, as much of the planning for pre-packed fruit at this time is based around Chilean programmes. Chilean exporters have also not been backward in telling their UK partners that there are places they can send their fruit and make more money
European supermarkets are in the process of switching their primary focus onto New Zealand supplies, as the country’s export season reaches its halfway point.
With the harvest now fully complete, trade body Pipfruit New Zealand (PNZ) has been able to release its most accurate forecasts to date of total crop volume.
The country relies heavily on its two main varieties for the bulk of its sendings, and Royal Gala and Braeburn responded in very different ways to early-season frosts. Royal Gala volume is expected to reach the target volume of 100,000 tonnes, while the Braeburn crop will be the smallest for 15 years. PNZ is predicting a final export crop in the range of 70,000-75,000t - 20 per cent lower than the pre-season estimate of 88,000t.
PNZ has reported that the first varieties marketed in key European markets, Cox Orange and Royal Gala, have been attracting slightly better prices than in 2007, which will be a much needed fillip for exporters who are struggling to find an equilibrium, as costs at home and on the sea continue to rise. Varieties that have come from New Zealand breeding programmes are also said to be growing in popularity in the UK, including two from the much-vaunted Pacific series, Pacific Queen and Pacific Rose.
“New Zealand has established a strong reputation with its key customers in Europe as an innovative producer of safe, excellent product,” says PNZ. “Consumers are prepared to pay premium prices for our apples and pears. We will work hard with our partners to meet both demand and quality expectations.”
However, this is not backed up by one UK source, who says: “Longer term, I think importers and buyers are wondering whether New Zealand will be able to compete in the UK market. There is a definite switch in the emphasis of planning for the future, and I think it is being partly driven by the Kiwis themselves.”
Shipping issues also threaten availability to an extent, and as the citrus season comes into play, there is a feeling that container operators may have pledged a little more than they can achieve, and the capacity they can deliver could fall somewhat short of demand for space. “That too could punch holes in the market,” says one.
The scratched record on UK prices continues to circulate on the turntable, but if anything it becomes more relevant when the southern hemisphere is dominant, as it has wider horizons and a predisposition to working with a bigger variety of marketplaces that is not shared by that large a proportion of European producers.
But a supplier in the UK says it is also important that prices stay at a sensible level. “We should be very careful in the next three months. There is an underlying concern that we need to keep the volumes onside, but it is far less feasible to choke off demand by simply raising prices than it used to be.
“There is a longer term lag effect on demand when prices drop, but by the time that kicks in, we’ll have moved on, and the market may well be in a different condition.”
Another insider says: “The UK is getting backed into a corner and will need to fight its way out with an offer that is more attractive to senders. When we will be in a position to do that is anybody’s guess.”
TESCO DOES TOP-FRUIT DOUBLE
Three years ago, when I picked up the apple portfolio and pledged to double sales of English top fruit in Tesco stores by this season, people were sceptical that we could deliver with such a solid base to start from, writes Martin de la Fuente, Tesco’s senior buyer for ambient fruit.
But we have done it, and people have been saying wow and thank you. The apple industry has seen that Tesco, and perhaps me personally, have delivered on our promise. Clearly we could not have done it without the help of a lot of people within Tesco, especially our marketing team, and the marketing teams in our supply base.
We changed our focus when I moved into top fruit. The main emphasis was to get the business to recognise the importance of English apples and pears for lots of reasons, as well as supporting UK growers, which as British farming’s number-one customer is a key part of Tesco’s strategy.
It was also about Tesco being able to demonstrate that we not only deliver volume sales, but that we are also about delivering products that our customers want.
We have pulled together everyone’s marketing plans to focus on the customer. By engaging with English Apples & Pears, for instance, we have been able to co-ordinate our marketing plans so that we were not going in a different direction to the industry.
We have worked with the industry, and with customers in store. When I took over there were no car park banners, no massive point-of-sale in store, and no lock-ins to British product, all of which we have introduced.
We have focused our growers and suppliers through grower forums and events like our Grower of the Year event, to ensure that they think not just of marketing their fruit, but about the requirements of the Tesco customer. Follow the customer has been a Tesco philosophy since Terry Leahy was our marketing director, and we want our suppliers to understand what the customers want and not to bury their heads in the sand just because they have done things the same way for years.
We have taken the time to try and show all of our growers, large and small, how we felt the landscape was changing. The suppliers that have seen significant growth in the last three years have listened to what we have said, still made their own decisions, but made them having taken on board what Tesco is trying to achieve for customers.
Customers have told us that they want newer varieties, as well as classic ‘Englishness’. They also want deals and value for money. Most of all, customers want products that are genuinely of high quality, and not poor products marketed as high quality just because someone says they are.
You would have to say as an observer that across the big four, Tesco and Sainsbury’s have always had a reasonable focus on English apples, while Asda and Morrisons have dragged their heels. Asda and Morrisons may have seen significant growth, but they spent a lot of time searching around for product and I don’t think they have done as good or innovative a job as they could. That said, I have always thought this business is about rowing your own boat. We are always searching for competitive advantage, and imitation is the most sincere form of flattery.
I also received criticism for some comments I made about Discovery a couple of years back. However, if you look, we have seen success from new late-season varieties because they are great products, unlike Discovery, which is the first of the season and largely there just because people are growing it. The industry has invented new late-season varieties; now someone needs to find the new Discovery. It’s out there somewhere.
No comments yet