Ripe and ready

Significant growth in the UK market saw the country take the number one spot from France when it came to South African avocado exports last year. And with this season shaping up to be a good sized crop - the highest since 2000, according to Claus Lippert, chairman of the South African Avocado Growers Association (SAAGA) - the signs are looking good.

Last year, 31.7 per cent of the crop came to the UK market, exceeding the amount sent to France, the traditional number one volume market for the South Africans. However, it remains to be seen whether it can hang onto the top spot this year.

“This year, I think we’ll see anything between 25 to 33 per cent of our volume going to the UK,” says Lippert. “It’s a growing market, although I’m not sure if it will be higher than France again this year.”

Derek Donkin, general manager of SAAGA, adds: “The UK is the market of preference for most exporters, and it’s usually the first we supply.”

This season, the South Africans are expecting more than 9.8 million four kilogram cartons, compared with just 7.6m last year.

Simon Curry, European marketing manager for Westfalia, said although the crop is larger than last year, it is still far from being a bumper crop: “It’s a reasonable crop, and certainly not a disaster like the previous few years, but nowhere near what it was five years or so ago. However, we do expect to see some shortages on Hass later in the season.”

Donkin says early fruit is now beginning to arrive on the UK market and will continue through to October.

The South African season is also set to benefit from the misfortune of Spanish producers, who have seen their crop virtually wiped out by the poor weather conditions in Spain.

Donkin says: “Somebody’s misfortune is often someone else’s fortune somewhere down the line. It’s unfortunate what’s happened in Spain, but we believe it will have a beneficial effect for our season.”

He says it will mean a larger volume coming out of South Africa in the early part of the season, and producers are already gearing up to shift South African fruit quickly.

Grant Blanden, marketing manager with Afrupro, says: “In a normal season, there would be around 600,000 cartons a week coming into the UK and EU from the southern hemisphere.

“But at the moment, it’s starting to look like demand for 1.1m boxes, and normally, in a situation like that, you’d expect the price to collapse, but it hasn’t and it’s holding steady.”

However, Blanden says despite this positive outlook, the situation could easily change: “The retailers are running to everyone in the world to find fruit, but I think that is dangerous. They’re going to countries that would not normally supply the UK.

“South Africa has been supplying the UK for a long time and knows the business, we’ve got a lot of accredited producers out there.”

He says the danger of going to new suppliers in a shortage is the producers are not accredited and fruit coming into the market is not up to the same high standards and quality.

“Our producers then feel frustrated, as they’ve spent a lot of money getting their accreditation, but it feels like that’s forgotten when there’s a shortage.”

He also points to the possibility of an oversupply situation later in the season: “There might be a shortage for one month, but the new suppliers will continue to supply product for six months. We might be facing a short market now, but by June or July, we’ll be facing oversupply.”

Donkin, however, is more optomistic: “I think the retailers are aware that there is adequate supply from South Africa.”

However, he did concede that the weak dollar situation was making Europe more and more attractive to their South American competitors.

“It’s true that countries like Chile and Peru, with the dollar situation at the moment, are finding Europe very attractive. That may lead to more supply into the European market which might lead to lower prices, but again that may also help enhance demand. Yes, we see more supply coming through, but the market is growing, so that’s good.”

Lippert says the early shortages might even have the opposite effect to what Blanden fears: “If South Africa ships big volumes early in the season, hopefully that may then take the peak out of the June and July supply period.”

Improved growing practices are also helping to flatten out supply on what is essentially an alternate bearing crop. Lippert says they are starting to see less swing in volume between on and off years.

He says: “We’ll still have the on-off element, but it won’t be so pronounced. It’s being driven by a more scientific approach, better nutrition for the trees and fertilising. As time goes by it will get flatter and flatter, and at the moment, among the more progressive growers, we’re seeing that happening already.”

Westfalia is one of those companies, says Curry. “Being the largest is not the issue, its about providing consistent supply. We’re working hard to extend our season at both ends, to avoid getting a peak of fruit in the middle, and spread the supply out.”

Quality is also looking good, Donkin says: “From a quality point of view, the weather has been very dry and, with good irrigation, that usually means good quality fruit.”

Blanden says that while quality is good, they will need to keep an eye on the avocados going forward: “It’s still very dry in South Africa, temperatures are very high so I doubt we’ll have any major quality issues, but we’ll have to watch out for shelf life because when its been so dry, the fruit doesn’t tend to last as long. However, overall, quality will be good.

“We had an excellent season last year. We, as a company, didn’t have a single rejection and we’re expecting the same again this year.”

Size is better this year as well, says Curry: “Fruit size is definitely going to be better than last year, we had some good early rains so the fruit is bigger, although we do anticipate some shortages of larger fruit, later in the season.”

Improvements in shipping and logistics over the years are also paying dividends, with significant investment in controlled atmosphere shipping and the use of Smartfresh technology.

According to SAAGA, this season will see increased usage of door-to-door container services whereby refrigerated containers are loaded at the packhouse and not opened until they are at the UK importers warehouses, ensuring optimum maintenance of the cool chain.

Lippert adds: “The big shippers have been investing in new container ships which means the producers will have more reliable shipping going forward.”

While the exchange rates may be working in favour of other countries, South Africa is feeling the pinch. Blanden says: “The exchange rate is proving difficult, and that does cause problems. Inflation is around four to six per cent and material costs are constantly rising.

“Our returns are now closer to around 18 to 21 per cent back to the producers, and break even is around 15-16 per cent, so it’s way down. In 1993 it was 58 per cent and in 1998, 51 per cent, so you can see how much it has fallen.

“The exchange rates have been like this for a while, and I don’t see them changing a great deal in the short term.”

Despite this, the market for avocados is a good one and in the UK the category growth is something the South Africans are more than happy with.

“In the UK, the penetration level is over 20 per cent, that’s increased significantly, doubling in the last five years. Over that period we’ve had more than a million new consumers,” Lippert says.

Bryan Anderson, md of HL Hall International, says: “The growth of the market has been very exciting. I would say its growing by about 30 per cent, year-on-year in volume through the supermarkets. That’s compared with the more general growth of the produce market which is around five per cent. Demand is on the rise, so having more fruit this season is good news.”

A considerable factor behind that growth has, of course, been the development of ripe-and-ready avocados. Lippert says the arrival of the pre-ripened fruit has “had a major impact on getting shoppers to try the fruit for the first time, resulting in increased consumer penetration and repeat purchases.”

He estimates around a third of all South African avocados will be marketed as ripe-and-ready this season.

Anderson backs this up: “We’ll continue to focus on the ripe-and-ready product, most of the growth is coming from that area and we expect to see that trend continuing. It started a few years ago but it’s just gaining momentum each year. It’s driven by the consumer demand for convenience.”

He says the work done by the packers has been integral in developing the market: “The packers are doing a very good job, ensuring they can offer a guaranteed ripened fruit, and that’s increased consumer confidence in the product.”

Another developing area, says Blanden, is in baby avocados. “We’re seeing a massive demand for baby avocados. In the past consumers wouldn’t have touched them, but now they’re starting to see the value in them.” He says the size of the fruit is perfect for the growing number of smaller-sized households.

Avocado oils and guacamole are also growing sectors and Lippert says he expects to see that grow further in the UK. “It’s a huge market in the US, and Europe is lagging behind that at the moment.”

When it comes to the consumers themselves, however, there appears to be little change, with the fruit continuing to appeal to the higher socio-economic groups.

However, that is far from a drawback, as Donkin points out. With the strong UK economy, it is a sector that is growing. More and more people have higher disposable incomes, and avocados continue to appeal to them.

Despite this, Tesco is aiming to spread the appeal of the fruit as Blanden says: “We’re seeing new lines, and the supermarkets now have economy range, bags of avocados. We’ve just launched a Value bag into Tesco.”

While Hass remains far and away the most popular variety of avocado, representing 40 per cent of South African volume, Lippert says that may soon start to change.

“Hass is still the most popular, but we’re starting to find the supermarkets looking for other varieties. They’re all beginning to say they want something different from everyone else, so we’re expecting to see other varieties grow, which is good for us.”

That may mean a growth in the presence of Fuerte, and the later season variety Ryan, on supermarket shelves.

Curry says the shortness of Hass may also contribute to this shift: “There are still the green skinned options and supermarkets are more than happy to take those, so we’re strongly placed to meet that demand.”

Promotion has always been a key strength of the South African industry, and nothing is set to change there either.

Donkin says: “The secret of our success is consistent investment in promotion every summer for the past nine years, plus not changing our strategy and building on success and relationships.”

The SAAGA campaign, organised by PR agency Richmond Towers, will continue to focus on the healthy eating attributes of the avocado with press and PR activity throughout the season.

A recipe booklet, “The Healthy Avocado” will be made available free to consumers and July has been designated Summer Avocado Month and will see a promotional programme involving up to 700 regional newspapers and a major promotion with London radio station Capital Gold.

A website, www.summeravocados.com, will also be used to promote the fruit to consumers.

However, when it comes to promotion, the South Africans are also keen to develop a more generic campaign, in association with all avocado producing countries.

While the ambition has been in place for a long time, Lippert says they are much closer to eventually getting something in place.

“We’ve been speaking to all the countries that supply the European market. We’re looking to develop a pan-European generic promotion. We’re hoping to have a brief developed sometime this year, but it’s difficult to put a time frame on it, and secure the funding. It’s difficult to develop, very political.”

Overall, the South African season, with or without generic promotion, is shaping up nicely, as Anderson summarises: “It’s looking good, there should be good supplies, we’ve had excellent growing conditions and we’re expecting to have excellent eating quality. We’re very bullish about this season.”