Within the world of citrus, the lemon and lime sector is one of the smaller industries, but in many ways embodies many of the challenges that the fruit sector has to face up to over the next five years and beyond.
At a global level, the production base is very fragmented even by the standards of the fruit sector. Established markets are showing limited signs of growth, and there is very little in the way of effective marketing being carried out in either branding or generic promotional activity.
The nature of international markets shows that while the total demand in value terms is over $1 billion per annum, this is also highly fragmented, with no one market accounting for much more than 10 per cent of the total. And after the top three to four markets, a whole string of other markets across the EU, North America and some developing countries account for much smaller volumes.
For the lemon and lime sector, therefore, the search is on for new and enhanced international markets. In the next five years, many of the newly emerging sources of supply in the fruit world will be looking to enter the fray and put pressure on the “stalwart suppliers”. This all adds up to a challenging time ahead for producers of lemon and limes around the world, regardless of where they are based. As always, for the forward thinking and those with a clear view of how international markets might look towards the end of the decade, there are opportunities aplenty.
World production has reached some 12.1 million tonnes a year, but of this, only some 1.7mt is traded internationally. The main producers at a global level are Mexico with some 1.8mt, India with around 1.5mt, Iran and Spain, both of whom produce around 1mt and then a host of other countries such as Brazil, Argentina and the US who produce between 750,000t and 1mt. Following behind are a number of other sources of supply such as Italy, Egypt, China, Peru and Turkey as well as South Africa. The sector is still remarkably fragmented compared to other fruit sectors, with Mexico as the world’s leading producer still only accounting for some 15 per cent of overall volume.
For the relatively high cost producers in parts of the world such as the US and within the EU, competitive threats from a host of other producers will be intensified: in particular, countries such as India and Iran - although large scale producers - are very modest exporters on a global scale. Any entrance by them onto the international market might produce significant changes in the pattern of international trade and sourcing. Egypt, Brazil and Argentina have over the last few years increasingly shown that they have the technical and commercial ability to make major inroads into international markets across a range of produce, and the Latin American sources in particular have already laid claim to the international citrus sector.
China is lurking in the background, and while current production is relatively modest at some 620,000t a year, one only has to look at what has happened in every other agri-food commodity sector when the Chinese decide to make an entry to the market to see what normally happens: traditional suppliers to the market are put under huge pressure, and the ability of the Chinese to compete on price as well as, increasingly, on technical factors changes the whole nature of the international market in terms of supply.
In terms of world demand, trade in this category is dominated by established markets such as the US, Germany, Japan, France, the Netherlands and the UK, although volumes in Eastern Europe and Russia have been increasing over the last few years. The largest international markets have historically been the US, Germany and Japan, where the value of the import market has been over $100m per annum.
However, as with many of the other fruit categories, trade in established markets is relatively static, especially in the major EU markets of the UK, Germany and the Netherlands. Any growth within the EU itself has come from the much smaller markets of Scandinavia, although of course starting from a much smaller base point. Further market opportunities will, in the future, come from a combination of the new EU member states in the east, the Former Soviet Union and then the Middle East, with markets such as Saudi Arabia and the UAE being of particular importance.
However, packers and exporters around the world still consider these as difficult and high risk markets to penetrate. Only by doing their homework and understanding the key routes to markets and the overall nature of the market environment will they have any chance of finding mid to long term success. Short term inroads into the market are all good and well, but are unlikely to pay real dividends in the future.
Eastern Europe and Middle East food markets are still developing, but have changed rapidly in the last 10 years and will continue to do so over the next 10. Price has been seen as very important in Poland, Hungary and the Czech Republic, and has always been a strong feature of the market in the Middle East. To pretend that these will not still be important in the future would be foolish. As markets become more and more sophisticated over a period of time, end customers will be looking for more sophisticated suppliers; being relatively low cost, having plenty of product and a lively attitude to trading will not be enough.
In the more mature markets of the US and Europe, the challenge for lemon and limes remains much as it does for many other categories in the fruit sector: this will largely revolve around understanding the needs of major customers and developing a better grip on what really motivates consumers to buy lemons and limes, when they buy them, how and for what purpose, and identifying the triggers for additional and higher value purchasing patterns. And in new emerging markets, the ongoing development of the retail sector along lines already seen in the west, and the continued growth of the foodservice sector, will provide further opportunities.
However, regardless of the geographic focus that is adopted, the leading players in this sector will need to look to consolidate the production base and enter into joint alliances with other producers in contra-seasonal arrangements.
It is vital to invest in proper marketing, rather than just trading of products. Only then can some sort of product and brand awareness with consumers be built, and the future development of markets secured. As with most things, the answers to “how can all this be achieved” revolve around the allocation of time, human and financial resource and investment in physical infrastructure. However, before any of these are committed, the basic groundwork needs to be carried out, and needs to be seen as an investment in the future rather than a short term cost.
Only then can sensible and sustainable decisions be made on the future development of the sector which can produce benefit throughout the supply chain. For those that decide wisely, a global market of some $1 billion awaits.
John Giles is a divisional director of Promar International, the leading agri-food consulting firm operating across the agri-food value chain with offices in the UK, North America, Central America and Asia. Promar has worked on citrus based projects for clients based in the EU, Middle East, Latin America, South Africa and Asia. John Giles can be contacted at the following email address: jgiles@promar-international.com
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