South African grapes are making the long journey to the UK and, although early forecasts point to a slightly larger crop, a number of producers in the Western Cape will be racing against time. Rainfall, as any grower will tell you, is essential for most crops to flourish. However, when that rainfall turns into the largest flood in living memory, it is quite a different story.
This was the situation that faced South Africa’s Western Cape region in mid-November when heavy flooding devastated low-lying areas, causing the complete collapse of eight bridges across the Hex River as well as severely damaging the approaches to several others.
Although farmers close to the river have sustained severe damage, the flood should not have a significant impact on the region’s crop figures, as the first grapes are usually harvested in late December.
But South Africa’s other two main table-grape growing areas have also been presented with challenging weather conditions this season, says Morgan Barrett, senior product manager on the fruit desk for Redbridge Worldfresh. “In the Mpumalanga area right up to November 8, the weather was very good,” he explains. “Conditions were perfect for the physiological development of the grapes. Prime, Flame, Black Gem and Red Globe were all looking first-rate.”
However, heavy rainfall - with up to 80mm recorded in the Marble Hall and Grobblerdal areas - may result in the fruit’s sugar levels dropping, caused by the high moisture contained within the soil.
In the Orange River area there were a few hailstorms in Upington in week 47. “It is too early to tell what the extent of the damage is yet but we are hopeful that this will be isolated,” Barrett says. “Apart from that, weather conditions have been perfect but harvesting will probably be seven days later than last season.”
The first volumes of South African grapes from the northern region arrived in the UK in late November. According to the US department of agriculture (USDA), exports will reach 240,000 tonnes in 2008-09, compared to 237,394t in 2007-08.
Growers are anticipating a good year in terms of quality, but Mother Nature’s mischievous antics have certainly caused a stir.
“If all had been well and there had been good weather, there would have been an early start to the season but as it is, some early fruit will be affected,” says Martin Dunnett, Capespan’s trading director, who is expecting some changes during the upcoming season.
Although the pre-Christmas period is traditionally characterised by frenetic activity and significant sales, the sector could experience a slower pace this season. “There is still good-quality Brazilian fruit available so it is not such a bad thing if South Africa is a little later,” Dunnett said in mid-November.
Nevertheless, he is looking ahead to the new season and is heartened by the grape shipments coming out of Namibia. “We have seen some absolutely brilliant quality on Flame and early Thompsons,” Dunnett tells FPJ.
He anticipates that UK programmes will be amply fulfilled, but spot volumes are not likely to be given a rousing reception. “The UK market is not one to absorb surplus stocks,” he warns. “We could see reduced spot volumes coming into the UK this season.”
Karsten Farms’ Herman Engelbrecht predicts that volumes are anticipated to be very similar to last year and will only change if there is a change in demand from the UK retailers. “It is our intention to stabilise supplies to the UK to be in line with customer demand,” he says.
In order to maintain steady sales, Engelbrecht says supply needs to be closely matched to demand. At the same time, South Africa needs to ship a high-quality product.
Redbridge Worldfresh is looking forward to an increased supply of grapes under various marques. The company supplies the UK and Ireland with Bon Cap-branded grapes and Barrett says there is barely enough early Bon Cap fruit to go around, so this will be a sparse commodity until much closer to Christmas.
“Last year was a fairly short year for the variety as the weather conditions were against the crop and this caused shortages in volumes,” he adds.
According to Barrett, Redbridge has enjoyed an enviable position despite talk about an economic downturn. “We have expanded our customer base and placed significant effort into improving our supplier base,” he tells FPJ. “This has ensured that we will increase our South African programme significantly.”
Afrifresh has supplied the UK market since deregulation in 1997, and would like to develop and build more “direct” contact in the UK.
However, the company’s shipments to the UK could be lower this season, mainly due to the stronger European market. “We saw last season that Europe was very strong and really compared well against the UK market; in some cases it even outperformed the UK,” says Afrifresh’s Roy Fine.
Indeed, growing demand for seedless grapes on the continent is leading some growers to divert their crop. “There are some retailers that are delisting seeded varieties and that is the stage the UK was at 10 years ago,” Dunnett explains.
However, with the euro experiencing some volatility in recent weeks, the exchange rate will remain a concern.
Furthermore, the credit crunch could see grapes taking a hit. The fruit is still perceived by some as a semi-luxury commodity and sources fear that grapes may not be as heavily featured by the retailers.
“Just £1 is considered to be the key price and anything over that amount may be deemed by some consumers to be too expensive,” Dunnett says. “With bags of grapes regularly fetching over the £2.30 mark, this could affect sales.”
Fine predicts that if recession hits, the foodservice sector will be affected. “In Europe, between 70-80 per cent of all fruit is sold through retailers, so therefore a reduction in sales through foodservice will not affect our business too much,” he explains. “On the other hand, one might expect that in case market prices are really high (as we have seen with seedless grapes around Christmas last year), consumers will quickly change to buy other ‘cheaper’ fruits.”
“Clearly, within the current environment, consumers feel that they have less money and this could be translated into a reluctance to spend on what may seem like an indulgent item,” says Richard Parke-Davies, managing director of Redbridge Worldfresh. However, he argues that this can be counteracted by emphasising the health benefits of eating grapes as part of the 5 A DAY initiative.
According to Parke-Davies, suppliers will also be more selective to whom they supply, as their priorities remain to get paid by the importer and the credit crunch may have affected some companies’ ability to pay within terms.
Although changes are anticipated this season, the UK remains a highly prized market, even if it is considered to be one of the most demanding.
Dunnett says the UK remains a red and white market, and Crimson Seedless plantings are rising in South Africa. “Red varieties have outperformed white on growth and a good range is available, but there are lots of new varieties being sold in the premium and finest ranges,” he says. “Given the credit crunch, it will be interesting to see what happens there.”
However, new varieties will increase overall demand, just as black seedless grapes such as Midnight Beauty and Sable Seedless have raised interest in the category.
Sources say a few promising new varieties are being planted and some are being tested, although it is early days. “Inevitably, once a new variety is championed by a major multiple it will become commercially significant and available in other sectors, such as the wholesale and foodservice markets,” Barrett says.
Engelbrecht stresses that new varieties will only become popular if the right balance between price and volume is achieved. “Sufficient volume needs to be produced for a variety to become popular. Growers will only produce varieties in volume if the prices reflect the increasing costs of these new developments,” he argues.
There have been attempts to extend seasons through new varieties and growing techniques, but nothing major has materialised in these areas to date, Engelbrecht says.
Getting the basics right is vital during these challenging times. “Certainly, good quality and big berries will help grapes look fantastic on the shelves and could drive impulse purchases,” Dunnett predicts.
Capespan is hoping to capture further growth with its latest brand, Capespan Gold. “Wholesale markets are performing well for us and we see the premium end of the wholesale sector as a big growth area,” says Dunnett. “Capespan Gold has been a big success for us.”
Despite procuring fruit for Capespan Gold from Brazil, Chile and the northern hemisphere, as well as South Africa, Dunnett says there is not enough fruit to supply demand for the brand.
The South African grape industry has experienced huge increases in production and logistical costs over the last 12 months.
“Labour is getting more expensive and more difficult to find; the increased cost of fuel is alarming; pesticides and fertilisers have increased by more than 80 per cent; packaging has increased year on year and this means the break-even cost for a carton of grapes is increasing every year, but not necessarily the sales price,” says Fine.
The strengthening of the dollar, resulting in increased shipping costs, has countered any effect that a weakening rand might have had, Engelbrecht says. The weaker rand is also being offset by higher production costs.
With retail prices showing little scope for upward movement, Engelbrecht warns that if UK prices do not reflect the increases in costs, further consolidation among South African producers will be inevitable.
However, although growers may face testing times this season, the outlook for the sector is bright. “We anticipate, despite the challenges ahead, that we will win market share and our volumes will continue to grow,” says a bullish Parke-Davies. “There will always be a need to balance market prices across the globe with the economies of logistics and determine what the optimum long-term, sustainable proposition is.”
In the last year, Afrifresh has invested heavily in its farming operations and now has approximately 2,000 hectares under irrigation. “The Afrifresh Group is one of the few fully accredited broad-based black economic empowerment (BBBEE) fruit companies, and should be supported by the UK buyers for this commitment to making good and positives changes in South Africa,” Fine says.
Dunnett says there is more stability among South African growers. “Some have made strategic alignments and the picture is much clearer than it was a few years ago,” he says. “There is ongoing consolidation, with the good growers getting better and the others falling by the wayside.”
Parke-Davies agrees. “Only the strong will survive and you can become stronger by choosing the correct collaborator to benefit long-term strategic aims,” he adds.
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