Zespri boss sees bright outlook for kiwifruit industry
Zespri boss Lain Jager is bullish about kiwifruit's future, writes Gerald Piddock.
The New Zealand kiwifruit industry has a rosy outlook thanks to excellent export growth and a lift in returns for growers, says Zespri chief executive Lain Jager.
Kiwifruit growers notched up their biggest-ever total return in a 2015-2016 season that also recorded the highest-ever returns per hectare for green kiwifruit and record sales volumes for both green and gold varieties.
The average per hectare returns for green kiwifruit varied from $24,000-$30,000 a hectare between 2004-2008. For the past three seasons in a row, those returns have been over $50,000/ha, says Jager.
"And I expect them to be [up there] again this year as well."
On a per tray basis, growers were getting more than $5.30/tray, up from $3.50-$4.20/tray.
Gold kiwifruit was earning a market premium at up to $8 a tray last year. Zespri is looking to sell more gold kiwifruit and boost the amount of trays in the market from 11 million to 60 million trays in the next five years.
To achieve that, the kiwifruit marketing company has licensed 400ha of gold crop this year, 200ha of which is being offered to green growers only and the balance to an unrestricted pool. Kiwifruit growers bid on the unrestricted pool in a closed tender programme.
Zespri pays its growers on taste and for the percentage of dry matter in fruit, with a 70 per cent maximum taste payment for gold and 50 per cent for green.
Jager says that payment for green may be lifted. He has written to growers to have this discussion around dry matter, fruit yields and premiums.
The higher the dry matter, the more Zespri pays for kiwifruit and it also pays its growers on volume, size and the time of the year for when the fruit is made available.
"In the end, our business is about a branded premium offering and we have opened that dialogue with growers."
Zespri measures the dry matter or starch content of a kiwifruit to grade its taste standard. This year, that minimum taste standard is 15.5 per cent dry matter, up from 14.5 last year. So far, no fruit has come in that is below this standard, he says.
"We have done that because we only want good tasting fruit in the market."
Zespri sells its fruit at a 20-100 per cent premium, depending on the variety and market. It is able to command that premium based on its ability to ripen and be ready to eat and its superior taste compared with competitors, he says.
Kiwifruit is marketed as a nutrient-dense product to consumers which helped grow sales in the Chinese, South East Asian, Indian and Middle Eastern markets.
About 45 million trays of gold are estimated to be produced this year, up from the 30 million last year with most of that growth coming from Zespri's Gold 3 variety.
Gold was "on track" towards yielding 60 million trays in the future, says Jager.
The industry was still recovering from the kiwifruit vine disease, Psa, and as it does, gold volumes will grow from 11 million trays in 2013 when Psa hit, to an estimated 60-65 million in 2017-2018.
Hectare-wise, the green kiwifruit crop is reasonably stable with strong orchard yields in the past two harvests.
"We are talking about yields that have historically ranged from 8000-9000 trays a hectare, they are now coming in around 11,000 trays a hectare this year and they were over 11,000 trays last year," Jager says.
This was a result of two kind winters, good growing conditions through summer and good management practices from growers.
"What we are seeing is perhaps as a consequence of Psa, growers have got a really strong focus on their orchards and they are being really successful in driving some big yields."
Last year, Zespri exported 80 million trays of green kiwifruit, 3.5 million of green organic and 30 million trays of gold kiwifruit. Harvesting is still occurring on some orchards around Waikato and Bay of Plenty and Jager predicts it would eventually total about 90 million green trays. Of that, about 84 million trays will be exported.
A later start to this season's harvest, required Zespri to "crop manage" some green kiwifruit. This involved Zespri buying but not exporting three million trays this season of certain sized kiwifruit.
"Crop managed means we buy it, but essentially it's destroyed. It goes into stock feed, it goes into processing and supply," Jager says.
There was only finite demand for green kiwifruit and putting this fruit into the market risks too much volume being sold out later in the year. This put the fruit's quality under pressure because it softened, the returns from it were not great, and it also interrupted the start of the northern hemisphere season, causing anger among producers, Jager says.
"Your supply and demand don't always balance, particularly in certain [kiwifruit] sizes, and when that happens, we take the top off the crop and we crop manage.
"There's nothing nice about crop management, we don't like it, but it's not a strategic issue, it's a commercial issue."
About 3 million tonnes of kiwifruit are produced globally every year and New Zealand exports over 400,000 tonnes and Chile, the other southern hemisphere producer, exports about 170,000 tonnes.
The rest of that fruit came from northern hemisphere growers - China grows one million tonnes, while Italy is the largest exporter at 450,000-470,000 tonnes of fruit. France, Greece and Japan also grow kiwifruit.
Zespri's kiwifruit usually enters the export market in May as the northern hemisphere season winds down. However, this year northern growers were "a bit grumpy" because New Zealand had a later season causing markets to overlap.
The fruit is in great demand in Japan, Taiwan and South Korea and sales are up 80 per cent in South Korea largely thanks to the free trade agreement signed with the country, Jager says.
The resulting tariff reduction dropped the price of kiwifruit in that market, which resulted in a lift in sales and high demand.
Demand in China is holding up well after its growers had a good season.
Counterfeiting continued to be be a major problem for Zespri in China because of the premium its kiwifruit can obtain. Zespri kiwifruit sold three to four times the price of Chinese-grown kiwifruit.
While it cheated consumers, the more serious issue is the potential brand damage if a falsely-labelled piece of fruit harmed consumers.
"It creates a brand risk for us which from our perspective is entirely unacceptable."
Zespri can test a piece of fruit and prove whether it originated from New Zealand, but that took 7-10 days, he says.
By that time the damage is done.
Jager says he would like customers to eventually be able to scan a piece of Zespri fruit with their smartphones to confirm its authenticity. The challenge is creating technology that could not easily be replicated.
Gold kiwifruit was selling strongly in Europe, although the overlap with Italian-grown green kiwifruit means this variety was selling slower in the market and Zespri will be catching up for the rest of the season.
Indications were there is a smaller summer fruit crop coming out of Italy and Spain, and as a result, Jager expects strong demand for New Zealand kiwifruit later in the season.
Zespri is also working on a red kiwifruit as well as new generation green and gold varieties and kiwi berries. The red kiwifruit is in pre-commercial trials carried out by Plant and Food Research.
This is a long term programme and Jager expects this variety to be market ready in the next five years.