Price is currently the big driver of growth in the top-fruit category, largely on the back of the light European crop harvested in 2012, with value sales increasing almost eight per cent in the past year. The rise is unsurprising considering stock levels in Europe are 30 per cent lower than this time a year ago.
Base retail inflation has had an impact on volume as customers look for value by shopping promotions. The current level of inflation has been high enough to absorb a drop in volume and still deliver spend growth for the UK market.
It is also likely that the reduction in UK fruit has influenced volume as the trend for supporting British producers remains one of the most important criteria for shoppers when choosing to purchase.
However, the fact that price appears to be the only driver of growth for both pears and apples is a worry. James Kingsman of Chingford Fruit says: “This is a concern, as with any market there’s a saturation point and we can already see the impact the higher retails are having on volume. Customers have the perception top fruit is a cheaper, everyday fruit type, so as prices increase, apples and pears will find themselves competing against fruits like berries, which entertain a perception of greater desirability.”
Looking at the performance of the retailers, Waitrose is leading the market in terms of value growth with a sizeable 21.8 per cent rise and the store also managed to achieve volume growth of 1.3 per cent, but the top four are performing behind the market and losing share.
Waitrose and the discounters have continued to perform well within the market. Aldi has increased promotional activity, while most retailers have reduced promotions, adding to inflation, which is visible across the market.
Kingsman observes: “M&S and Aldi exhibit the strongest increases in penetration and conversion, highlighting that people are shopping around more as the middle (top four) is getting squeezed from the premium and budget ends of the market.”
Within this, it appears Morrisons has proved more price sensitive than the other top-four retailers and the high inflation the market has seen is likely to have had a greater impact on Morrisons’ volumes than the others.
The UK marketplace at this point in the season is dominated by fruit from South Africa, New Zealand and South America. A significant reduction in European supplies has meant a very clear market for southern hemisphere suppliers.
Kingsman says: “The challenge will be to maintain a continuity of supply of southern hemisphere fruit, particularly from a quality perspective, into a delayed northern hemisphere [season].”
Growers in the UK and on the continent are already looking at the prospects for this new season, which looms in August against the backdrop of some of the coolest, windiest spring conditions in recent history.
Adrian Barlow, chief executive of promotional body English Apples & Pears, adds: “We had a lack of sunshine in the main growing areas in the two weeks immediately after flowering, which is the period that really determines what size the apples will be. Therefore we are likely to see a greater proportion of the crop in small sizes and I think the harvest will start two to three weeks later than last year, though it is still early.”
Meanwhile, although apples dominate the category, pears should not be considered the poor relation. Generally eaten by an older and more traditional demographic than seen in apples, growers are trying to engage more youthful consumers with new pears. Kingsman said: “Supplementary apple varieties have been introduced and established in the recent past, to offer a varied and wider spectrum of eating experience to the consumer, in turn resulting in wider appeal. This represents a real opportunity with pears, particularly through varieties such as Sweet Sensation, which could effectively reach out to a younger consumer.”
APPLE TIME
OrchardWorld is a key supplier of top fruit to British retailers.
Kathy Hammond asks MD Mark Culley how he sees the market
OrchardWorld has changed considerably since its inception 24 years ago to sell mainly English fruit. It has evolved to become a specialist in the field of procurement and marketing of top fruit from around the world, having progressively diversified and built on its strengths.
Majority owned by Poupart Ltd, OrchardWorld supplies major retailers Sainsbury’s, Morrisons, Ocado and Costco.
It has some 37 varieties of apples and 12 varieties of pears in its portfolio, which it sources from a broad geographical area from Chelmsford to China. Many of its suppliers have forged long-term partnerships with OrchardWorld, for example Lathcoats Farm in Essex has supplied the company since the very beginning when the marketing desk first went into business back in 1989.
However, there have been few seasons as challenging as those that marketers have had to cope with in the recent past. Mark Culley, OrchardWorld managing director, explains: “In 2012, the UK crop was 30,000 tonnes below the volume of marketable crop during the previous season.
“As a result, the dessert apple crop finished in April. Overall the market is therefore very strong and southern hemisphere supplies will continue into August. What has been interesting this year is that we have seen a good increase in prices but without seeing a drop in demand.”
Clearly there are large sections of the marketplace that agree with Culley’s assessment that “apples represent very good value for money”.
However, he believes that there is still more that some of the UK retailers could do. “Supermarket specifications were changed to maximise whole-crop potential… Sainsbury’s and Waitrose are doing very well,” he says. “But there are others that could sell more English fruit. More supermarkets need to step up to the plate and sell higher volumes of English fruit.”
That test will come when the new season starts in the autumn, but for now supplies at OrchardWorld are coming in from Chile, New Zealand and South Africa. “The season is panning out just as we expected it would,” says Culley. “The demands of the marketplace are changing. Europe, including the UK, is no longer the number-one destination market for southern hemisphere senders.
“There is growing demand for Chilean fruit from Asia and closer to home in other South American markets. And South Africa has the rest of Africa to send to and New Zealand has Asia. These supply countries now have immense markets on their doorstep.”
He concedes that good exporters such as those OrchardWorld works with know that they need to have a balanced business. Therefore maintaining the UK and other European outlets in the portfolio are essential, but this does not alter the marketplace reality that the UK does not command the position it used to. Culley explains: “The premium from the UK market before has been completely eroded by the supermarket price wars; the extra quality that senders are packing for this market is just not being reflected in the price. Of course the professional exporters are in it for the long haul, but it has to be noted that there is no surplus of fruit in the market, therefore the market is not as attractive as it used to be.”
Nevertheless, what Culley wants to see is an increase in consumption levels in the UK. New plantings are going in the ground in all the main apple and pear orchards in England. The rise of new varieties and the excitement Pink Lady, Kanzi, Cameo and other trademarked and club varieties have brought to the category are undeniable, but they are not a winning solution on their own.
“There has not been any change in the apple category in terms of increased consumption,” Culley says. “What we are seeing is that varieties are eating varieties. We continue to see the rise of Pink Lady; it is the highest-priced apple, but the demand is insatiable.
“I think in the last eight to 10 months we have been lulled into a false sense of security with the UK and wider European crops being short. This year the UK crop could potentially be 50 per cent higher thanks to last year and with further growth coming thanks to new plantings going in, it will really be necessary to increase the market rather than just increase its segmentation. I am not sure how we will do it, but I do know that some industry thought needs to go into it.” —
