Session FiveCompeting in a global world: a

series of presentations by AMAPWG member delegates

Session Session FiveFiveCompeting in a global world: a Competing in a global world: a

series of presentations by series of presentations by AMAPWG member delegatesAMAPWG member delegates

New Zealand and Australia Avocado Grower’s Conference’05 20-22 September 2005 Tauranga, New Zealand

New Zealand and Australia Avocado New Zealand and Australia Avocado GrowerGrower’’s Conferences Conference’’05 05 2020--22 September 2005 22 September 2005 TaurangaTauranga, New Zealand, New Zealand

The Avocado Industry inSouth Africa

Competing in a global marketCompeting in a global market

Introduction

• ±150 000 avocado trees planted annually in SA

• SA export volumes have fluctuated between 32 000 & 44 000 tons per annum

• Domestic market & processing industry have absorbed some of the volume growth

SA Volumes Exported

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

The commercial environment

• Buying power has been concentrated –takeovers and integration of supermarkets

• Supplier power has been diluted –deregulation

The Tesco StrategyPrice Virtuous Circle

Lower Prices

Lower costs

InternalEfficiency

Higher Volume Tesco

Sainsbury’s Corporate Strategy

Increasing shareholder returns

outstandingquality

greatservice

competitivecost

fastersimplertogether

• Recapture our quality and innovation heritage

• Differentiated offer• First to Market for

Brands and Own Label products

• To improve ease and enjoyment of shopping at Sainsbury’s

• £200m/yr more expensive to run as a business than Tescos in 2000

• Reduce costs

Cost analysis of export fruit

Rand / carton (4kg equivalent)

Fixed Variable Total10-91 22-58 33-49

Cost Structures

Commission Overeas, 10.36%

Commission Local, 1.94% SAAGA, 1.91%

Transport, 8.87%

Picking, 2.62%

R & D, 3.19%

Seafreight, 22.15%

Overseas Cost, 6.99%

Production Costs, 23.25%

Production Overheads, 2.87%

Packing Costs, 12.57%

Packhouse Overheads, 3.28%

Currency Fluctuations

• Strength of Rand - negative impact on returns

• Breakeven price : R33-49

• Impact on the SA grower

Exchange Rate G S PR8-00 €1-00 €4-19R9-00 €1-00 €3-72R10-00 €1-00 €3-35

0

2

4

6

8

10

12

14

16

18

Jan-9

8May

-98Sep

-98Ja

n-99

May-99

Sep-99

Jan-0

0May

-00Sep

-00Ja

n-01

May-01

Sep-01

Jan-0

2May

-02Sep

-02Ja

n-03

May-03

Sep-03

Jan-0

4May

-04Sep

-04Ja

n-05

Year

RAND/USD RANDS/POUND RAND/EURO

Exchange rates monthly averagesince January 1998

• Currency issues are likely to have a large impact on the European avocado market.

• Depreciation of the US Dollar has made European markets more attractive to Central and South American exporters.

Production –cost

efficiency /productivity

Rootstocks

• Breeding and field testing of new Phytophthora cinnamomitolerant rootstocks

• Resulted in a new generation of rootstocks

• Brought a new dimension to rootstock tolerance and productivity.

Cultivars

• Trend to plant more Hass continues

• Result of market preference in specific EU countries.

Growth manipulation

• Planting in hedgerows

• Pruning to maintain tree size

• Increased mechanization

Composting

• An integrated rootrot control procedure will include practices that promote root health.

• Adding organic matter to the soil is becoming a more general activity on many farms.

Logisticalefficiency

Shipping

• Controlled atmosphere (CA) -most common post harvest treatment for SA shipments

• 1-MCP (Smartfresh™) technology is starting to play a more important role as an alternative

• Advanced Fresh Air Management (AFAM plus) might also be a consideration for the future.

• Breakbulk shipping

Avocado exports from SA

• Consolidation within the industry • Grower driven export companies playing a

more important role in avocado exports• More than 75% of the avocado exports

from SA are handled by 4 companies.• This trend has brought more stability to the

industry.

International interaction

Some of these exporters have been active in developing relationships with suppliers from other avocado producing countries to meet customer needs over a longer period.

Supplier / customer interaction

• More direct involvement in the market by grower driven export companies

• Is another dimension which brings the grower closer to the customer

• Or the customer closer to the supply base.

Avocado processing

• Value adding creates a fair value for factory grade fruit for SA producers

• SA producers can be more selective in what they export or sell in local market

Growth of value added products in SA

Avocado puree production

0

500

1000

1500

2000

2500

3000

Tons

1998 1999 2000 2001 2002 2003 2004

• Yield = 45% of fresh fruit• Total volume used in 2003 = 4290 tons• Total volume used in 2004 = 6160 tons

Avocado oil production

0

200

400

600

800

1000

1200

Tons

2001 2002 2003 2004

• Total fruit used in 2003 = ±10 000 tons• Total fruit used in 2004 = ±12 000 tons

** Factory grade fruit used for puree & oil2003 = 14 290 tons2004 = 18 160 tons

Impact of avocado processing on local market price structures

R 0

R 1,000

R 2,000

R 3,000

R 4,000

R 5,000

R 6,000

Ran

d / T

on

'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04Period

GROSS SELLING PRICE

Market development

• Selling more in existing markets – The UK story- Create bigger awareness for avocados as a

health product- Availability of Ripe & Ready to eat avocados

• Develop new markets- Israel efforts in East Block

countries

Market Access

Research on fruit-fly and false codling moth by– Citrus Research International– University of KwaZulu Natal– Agricultural Research Council

Created the technical base for possible market access to new markets in the future.

This research is a high priority in the industry.

Volume management

• Growers lost money over a number of years due to inability to balance supply & demand.

South African Avocado IndustryExports - 2000

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

Car

tons

11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

Weeks

South African Avocado Prices– 2000

-10

-5

0

5

10

15

20

714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741

-10

-5

0

5

10

15

20

714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741

Vessel number

Vessel number

BO

F (R

and)

BO

F (R

and)

Fuerte

Hass

South African Avocado Industry Exports - 2002

Successful Volume Management

0

100 000

200 000

300 000

400 000

500 000

600 000

Car

tons

10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42

Weeks

South African Avocado Prices -2002

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

0213

0

896

898

0216

0

902

904

0222

3

906

908

910

912

914

0223

0

916

918

920

0226

0

922

919

0225

0

924

926

0229

0

932

934

936

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

906

908

910

912

914

0223

091

602

240

918

920

0226

092

291

902

250

924

926

0229

092

893

002

310

932

934

0233

093

693

894

194

002

360

0237

094

402

340

946

Vessel number

BO

F (R

and)

Vessel number

BO

F (R

and)

Fuerte

Hass

International Avocado Marketing and Promotions Working Group

(AMAPWG)

• The interaction between representatives from countries supplying the European market played an important role in bringing at least some stability to the European avocado market.

November 2001Malaga - Spain

Israel, Spain, South Africa, Kenya, Peru, Mexico, Chile, Australia, New Zealand and Argentina are part of this working group.

HistoricHistoric

OverviewOverview

Volumes / Prices

2004

EU Greenskin Supply versus Price 2004

50

150

250

350

450

550

650

750

850

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Week on Market

'000

car

tons

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Eur

o pe

r ca

rton

"000 cartons Euro/carton

EU Hass Supply versus Price 2004

50

150

250

350

450

550

650

750

850

950

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Week on Market

'000

car

tons

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Eur

o pe

r ca

rton

"000 cartons Euro/carton

2005

EU Greenskin Supply versus Price 2005

50

150

250

350

450

550

650

750

850

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Week on Market

'000

car

tons

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Eur

o pe

r car

ton

"000 cartons Euro/carton

Estimate

EU Hass Supply versus Price 2005

50

150

250

350

450

550

650

750

850

950

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Week on Market

'000

car

tons

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Eur

o pe

r car

ton

"000 cartons Euro/carton

Estimate

Price projection - Fuerte

Gross Selling Price

0

1

2

3

4

5

6

7

8

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Week 9

Week 10

Week 11

Week 12

Week 13

Week 14

Week 15

Week 16

Week 17

Week 18

Week 19

Week 20

Week 21

Week 22

Week 23

Week 24

Week 25

Week 26

Week 27

Week 28

Week 29

Week 30

Week 31

Week 32

Week 33

Week 34

Week 35

Week 36

Week 37

Week 38

Week 39

Week 40

Week 41

Week 42

Week 43

4 Weeks prior Forecast GS Benchmark Actual GS

Green Skins WeekGMR

Benchmark ForecastAverage to date 1 to 33 € 5.00 € 5.04Previous week 33 € 7.00 € 6.82Current Week 34 * € 5.92Next week 35 * € 5.094 Weeks time 37 * € 4.67Season Ave 12 to 33 * € 4.95

Price projection - Hass

Gross Selling Price

0

1

2

3

4

5

6

7

8

9

10

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Week 9

Week 10

Week 11

Week 12

Week 13

Week 14

Week 15

Week 16

Week 17

Week 18

Week 19

Week 20

Week 21

Week 22

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Week 24

Week 25

Week 26

Week 27

Week 28

Week 29

Week 30

Week 31

Week 32

Week 33

Week 34

Week 35

Week 36

Week 37

Week 38

Week 39

Week 40

Week 41

Week 42

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Week 44

Week 45

Week 46

Week 47

4 Weeks prior Forecast Hass Benchmark Actual Hass

Hass WeekGMR

Benchmark ForecastAverage to date 1 to 33 7.10 7.07Previous week 33 € 8.25 € 8.42Current Week 34 * € 7.80Next week 35 * € 6.544 Weeks time 37 * € 6.08Season Ave 18 to 38 * € 6.83

Total EU Avocado supply (updated 19/8/2005)

0

200

400

600

800

1000

1200

1400

1600

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Week on market

4 kg

Car

tons

('00

0)

Israel green Israel Hass Spain Green Spain Hass Mexico Green Mexico Hass Kenya Green Kenya HassArgentina Green Argentina Hass Peru Green Peru Hass Chile Hass RSA Green RSA Hass

Bars to left of arrow represent actual shipments from South Africa, but alsoinclude estimates from other origins.Bars to right of arrow represent estimates

Supply 2005 – All countries

SUMMARYSUMMARY• Very competitive commercial environment• Avocados an exciting commodity• Tremendous opportunities compared to more mature

industries• Avocados still in it’s infancy - market expansion to the

health conscious consumer• Lends itself to value adding• Opportunities to offer convenience – Ripe & Ready

• A challenge - Match supply and demand – market info (timely, accurate and reliable)