A seamless switchover to the southern hemisphere has meant a promising start for top-fruit supplies from South Africa, New Zealand, Australia, Chile, Argentina and Brazil, even in the face of a number of transitions that will make a wider impact on the sector in the long term.
The heavyweight category has, in many ways, come into its own as supply and demand finds a balance that it has lost out on in previous seasons. World Apple and Pear Association (WAPA) figures show that supplies from Argentina, Australia, Brazil, Chile, New Zealand and South Africa are expected to nudge up by one per cent to 5.2 million tonnes this year, while export figures are expected to rise five per cent to 1.8mt. At the same time, stocks in the northern hemisphere are lower than they were in 2010 in both Europe and the US, which means a clearer window.
This season was always going to be a challenge against a backdrop of fluctuating exchange rates, mounting fuel costs and a wider choice of markets that have combined to create some uncertainty about the coming months.
However, this year has seen some significant developments make their mark on the sector and cause fundamental shifts in the supply chain.
The rise of UK retailers working more directly with growers is changing the market like never before. A number of buyers have visited key sources to explore the possibilities of direct sourcing and only time will tell what the outcomes will be across the main producing countries. In fact, a lot is riding on this season as a barometer for what suppliers can expect in the future.
Peter Beavan, vice-president of WAPA and chief executive of Pipfruit New Zealand, is keen to see what this set-up will mean for the sector. “I know that several UK retailers have been visiting and talking about direct supply,” he says. “However, the fruit still needs to be handled on arrival and checked to meet retailer specifications. It will be interesting to see whether growers favour this model over the traditional importer supply model over the next couple of years.”
It is expected that retailers will have more back-to-back programmes with growers, but the rise in alternative markets will mean that the price that buyers will need to stump up to secure fruit is mounting.
Chris Moodie, group director of marketing at South Africa-based Fruitways, maintains that the supply chain will continue to evolve as it adjusts to these new developments. “The reality is that there are consumers and growers and the chain doesn’t exist without either of these,” he explains. “But the chain is always evolving and how the fruit goes from growers to consumers and I don’t think it will stop.
“The UK has been more innovative internationally in the retail space than most other countries and that will continue. They are looking at ways to reduce costs in the chain and of course, change has pros and cons.”
In fact, a number of prominent suppliers have had to evolve their business models to reflect the changing environment and carve a role for themselves in the long term.
Capespan, for example, has lost big contracts with Tesco and Morrisons as a result of them choosing to work with growers directly and in response, it has shifted the bulk of its top-fruit trading to non-retail including wholesale, foodservice and public procurement programmes. This has hit hard, with a 50 per cent reduction in volumes programmed this year.
John Hopkins, procurement manager at Capespan, says the firm has repositioned itself in response to the trading environment. “Capespan is a changed business,” he says. “Our main work for apples and pears is now non-retail. Two years ago, we had a very big contract with Tesco and a big contract with Morrisons but now we are one of the many suppliers that are no longer category managers.
“There is very little we can do in the short term. In reality, the answer that we have come up with is to split off the service provision company, which started last year in terms of volume coming out of the southern hemisphere.”
The shift in the supply chain has meant that optimism is highest among growers who are enjoying a wider choice of markets and higher prices.
Hopkins says that the expectations of growers and the value needed to secure product are “significantly higher than we have seen before”.
“The rise of markets such as the Far East and India gives producers alternative markets to sell their product into and exchange rates have all moved in a direction that means, in effect, that expectations of growers in the southern hemisphere are higher than they have probably ever been,” he says. “Fruit is more expensive at a farm gate level so fewer risks are being taken by importers, especially from a non-retail perspective. We are bringing in reduced volumes, but with a more specific, tailored offer.
“On the retail side, there will be more back-to-back programmes directly with growers and they will have to feed back to say whether it’s an easier or more difficult trade.”
At the same time, the logistics side of the export process is facing up to changes that are making their presence felt as supplies get underway in volume. From January, it became mandatory for suppliers to provide customs authorities with advance information for goods coming into the European Community. The controversial regulation has seen fruit delayed for up to a week longer compared to previous seasons, with the most perishable lines such as stonefruit and grapes the hardest hit.
However, top-fruit suppliers from across the southern hemisphere agree that it has affected their ability to put together containers at short notice and according to Hopkins, “flexibility has been taken out of the system”.
Dominic Neal, director of business development at Hellmann Perishable Logistics, warns that the introduction of pre-notifications will have an adverse effect until exporters and importers have got to grips with it. “With the introduction of higher levels of inspection, we believe that this will cause further delays as the major ports only have limited facilities for the inspections to take place,” he says. “All ports need to make investment in expanding the inspection facilities to ensure delays are kept to a minimum.”
This comes on top of rising fuel costs, which are affecting all routes and transport options. “It’s another inflationary pressure that we don’t need,” says Moodie.
However, expectations for this season are positive even with the challenges ahead and suppliers are anticipating a good start for southern hemisphere supplies and strong prices.
The most forward-thinking suppliers are innovating in order to secure the long-term future of the category.
A global alliance of top-fruit producers was unveiled in February to help pinpoint varieties of the future with the best chance of commercial success. The International Pome Fruit Alliance will evaluate varieties from a grower’s perspective and commercialise them globally. The group has five founding partners - Fruitways of South Africa, Heartland of New Zealand, Australia’s Montague Fresh, San Clemente from Chile and Italians VOG/VIP.
Christian Carvajal, marketing manager at Chilean exporters’ association Asoex, insists that “innovation is key” if the sector is to build on its growth. “The International Pome Fruit Alliance focusing on speeding up the development of varieties to suit consumers’ modern tastes and preferences is one of many initiatives that will contribute to maintaining growth in this category in the future,” he says.
But the many new options mean that growers and suppliers have important decisions to make. “The variety space for apples is getting very exciting but with that comes a huge amount of uncertainty,” says Moodie. “There is a high number of varieties coming through and it’s a 25-year investment once you choose to grow a new variety, so growers have to pick carefully. We are spoilt for choice, but it is difficult to pick what is going to become the next Gala or the next Pink Lady.”
It is clear that after a period of adjustment, southern hemisphere suppliers will be ready to make the most of what looks to be a clear window and good prices. How the supply chain will evolve remains to be seen but with both growers and retailers exploring their options, this will be a major transitional phase for the sector.
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