Session Five Competing in a global world: a series of presentations by AMAPWG member delegates New Zealand and Australia Avocado Grower s s Conference 05 20-22 22 September 2005 Tauranga,, New Zealand
The Avocado Industry in South Africa Competing 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
2005 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 SA Volumes Exported 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1987
The commercial environment Buying power has been concentrated takeovers and integration of supermarkets Supplier power has been diluted deregulation
The Tesco Strategy Price Virtuous Circle Lower Prices Lower costs Internal Efficiency Higher Volume Tesco
Sainsbury s Corporate Strategy Recapture our quality and innovation heritage Differentiated offer First to Market for Brands and Own Label products outstanding quality faster simpler together great service To improve ease and enjoyment of shopping at Sainsbury s competitive cost 200m/yr more expensive to run as a business than Tescos in 2000 Reduce costs Increasing shareholder returns
Cost analysis of export fruit Rand / carton (4kg equivalent) Fixed Variable Total 10-91 22-58 33-49
Cost Structures Commission Local, 1.94% Commission Overeas, 10.36% Transport, 8.87% SAAGA, 1.91% R & D, 3.19% Picking, 2.62% Packing Costs, 12.57% Packhouse Overheads, 3.28% Production Overheads, 2.87% Seafreight, 22.15% Overseas Cost, 6.99% Production Costs, 23.25%
Currency Fluctuations Strength of Rand - negative impact on returns Breakeven price : R33-49 Impact on the SA grower Exchange Rate G S P R8-00 1-00 4-19 R9-00 1-00 3-72 R10-00 1-00 3-35
Exchange rates monthly average since January 1998 18 16 14 12 10 8 6 4 2 0 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 Year RAND/USD RANDS/POUND RAND/EURO
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 cinnamomi tolerant 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.
Logistical efficiency
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 3000 2500 2000 Tons 1500 1000 500 0 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 1200 1000 800 Tons 600 400 200 0 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 & oil 2003 = 14 290 tons 2004 = 18 160 tons
Impact of avocado processing on local market price structures GROSS SELLING PRICE R 6,000 R 5,000 Rand / Ton R 4,000 R 3,000 R 2,000 R 1,000 R 0 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 Period
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 Industry Exports - 2000 800 000 700 000 600 000 Cartons 500 000 400 000 300 000 200 000 100 000 0 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 Weeks
South African Avocado Prices 2000 20 15 Fuerte 10 BOF (Rand) 5 0 714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741-5 -10 Vessel number Hass 20 15 BOF (Rand) 10 5 0-5 -10 714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741 Vessel number
South African Avocado Industry Exports - 2002 Successful Volume Management 600 000 500 000 Cartons 400 000 300 000 200 000 100 000 0 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 02130 896 898 02160 902 904 02223 906 908 910 912 914 02230 916 918 920 02260 922 919 02250 924 926 02290 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 02230 916 02240 918 920 02260 922 919 02250 924 926 02290 928 930 02310 932 934 02330 936 938 941 940 02360 02370 944 02340 946 Vessel number BOF (Rand) Vessel number BOF (Rand) 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. Israel, Spain, South Africa, Kenya, Peru, Mexico, Chile, Australia, New Zealand and Argentina are part of this working group. November 2001 Malaga - Spain
Historic Overview Volumes / Prices
EU Greenskin Supply versus Price 2004 '000 cartons 850 750 650 550 450 350 250 150 50 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 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Euro per carton "000 cartons Euro/carton 2004 EU Hass Supply versus Price 2004 '000 cartons 950 850 750 650 550 450 350 250 150 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Euro per carton 50 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 0.0 "000 cartons Euro/carton
EU Greenskin Supply versus Price 2005 850 750 8.00 7.00 650 6.00 '000 cartons 550 450 350 Estimate 5.00 4.00 3.00 Euro per carton 250 2.00 150 1.00 50 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 cartons Euro/carton 0.00 2005 EU Hass Supply versus Price 2005 '000 cartons 950 850 750 650 550 450 350 250 150 50 Estimate 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 cartons Euro/carton 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Euro per carton
8 7 6 5 4 3 2 1 0 Price projection - Fuerte Gross Selling Price GMR Green Skins Week Benchmark Forecast Average to date 1 to 33 5.00 5.04 Previous week 33 7.00 6.82 Current Week 34 * 5.92 Next week 35 * 5.09 4 Weeks time 37 * 4.67 Season Ave 12 to 33 * 4.95 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 Week 7 4 Weeks prior Forecast GS Benchmark Actual GS Week 4 Week 5 Week 6 Week 3 Week 1 Week 2
10 9 8 7 6 5 4 3 2 1 0 Price projection - Hass Gross Selling Price GMR Hass Week Benchmark Forecast Average to date 1 to 33 7.10 7.07 Previous week 33 8.25 8.42 Current Week 34 * 7.80 Next week 35 * 6.54 4 Weeks time 37 * 6.08 Season Ave 18 to 38 * 6.83 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 Week 44 Week 45 Week 46 Week 47 4 Weeks prior Forecast Hass Benchmark Actual Hass Week 7 Week 8 Week 5 Week 6 Week 3 Week 4 Week 1 Week 2
Supply 2005 All countries Total EU Avocado supply (updated 19/8/2005) 1600 1400 Bars to left of arrow represent actual shipments from South Africa, but also include estimates from other origins. Bars to right of arrow represent estimates 1200 4 kg Cartons ('000) 1000 800 600 400 200 0 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 Israel green Israel Hass Spain Green Spain Hass Mexico Green Mexico Hass Kenya Green Kenya Hass Argentina Green Argentina Hass Peru Green Peru Hass Chile Hass RSA Green RSA Hass
SUMMARY 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)