Variety mix is much more critical for orchard businesses that are not vertically integrated operations because they only have a single profit centre, the Orchard.
Vertically integrated operations generally have several other profit centres, certainly a packing and coolstore business and nowadays also an exporting and marketing arm. These vertically integrated businesses generally have a different set of drivers to the individual grower, particularly in the short term. Their main requirement is regular supply of fruit to pack and ship in order to maximise the return on their downstream investments. In the long term, they also have to adopt a progressive attitude to investment in their variety mix but for them it may be less urgent than for an orchard only business.
Many years ago, prior to deregulation of the domestic market, there used to be a mechanism built into grower returns called the district differential (DD) which was designed to bolster the returns to growers located near New Zealand’s major cities by adding to their returns the difference between their transport costs to their adjacent city market and the higher transport cost of shipping fruit in from Nelson or Hawke’s Bay. In the long run, the DD did not help its recipients because it removed the incentive to modernise their variety mix. I remember doing a fruit value exercise comparing the value of the variety mix in the district receiving the highest DD payment per carton with the Hawke’s Bay variety mix value where growers were forced to base their variety mix on market returns. This showed that the premium for keeping up with consumer demand and matching the variety mix to this exceeded the DD payments. It is no different today.
Stand alone orchards need to maintain a high profit margin variety mix. This may mean supplying a number of different marketers rather than focusing on just one marketer. This approach is also a good form of market diversification.
THE MARKET IS CROWDED WITH VARIETIES
The European Fruitgrowers magazine, No 5, 2017 features apple varieties. In it there is a table, first published by Belrose Inc in their World Apple Review 2016 which lists 45 established varieties with their percentage of total production worldwide excluding China. The top 10 varieties on their table in 2015 and forecast of the future percentage of world production in 2025 is shown in Table 1.
Jonagored is an improved colour sport of Jonagold so if its red strains were treated in a similar manner to the Gala sports it should be further up the table as a single variety which would bring number 11, Honeycrisp into the top 10. Had the data included Chinese production, Fuji would be at the top of the list, rather than number 4. The table also shows what I think are other varieties which are 17.85%, 21.76% respectively for 2015 and 2025 increasing by 18%.
Among the other varieties, further down the list are some recently introduced varieties in an expansion phase and many older varieties as well as some not so old varieties going into decline. The ones showing significant growth between 2015 and 2025 are listed in Table 2.
Sciros is shown in the table as increasing slightly but the rest of our newer varieties obviously make up some of the other variety category.
History of the fruit industry shows that huge numbers of new cultivars are introduced but very few of them actually succeed in the long term. Incidentally, more than half of the listed varieties are in decline. There are many new introductions around at the moment. The European Fruitgrowers magazine list 17 promising varieties that have been tested in Europe. This list includes the Plant and Food varieties Prem A34 and Prem A96 (Rockit ® ) and the US variety Minneiska (SweeTango ® ). Also mentioned but not tested in Europe is WA38 (Cosmic Crisp ® ).
The magazine also mentions that there are more than 80 apple breeding programmes around the world. These programmes have a wide focus and are often looking for varieties with
specific characteristics such as disease resistance, snack apples, red flesh or different skin colour characteristics.
HIGH VOLUME VARIETIES RELATIVELY STABLE
The top four varieties on Belrose’s list account for around 50% of apple production and will drop off a little as newer introductions eat into their markets. These are the true commodity varieties of the world. We have significant production of two of them, Gala which is a New Zealand variety and Fuji. Gala was developed here so is well suited to our growing conditions. Here the original Gala is now very hard to find so the Gala we now grow has come through several generations of reselection towards improved colour types which make it much more grower friendly. It is also an early season variety not well suited to long term storage even though advances in storage technology have enabled on Northern Hemisphere competitors to market their crop for the whole year. Generally, in long term storage, this variety holds its fruit condition but loses its flavour so not as good an eating experience as a fresher Southern Hemisphere Gala. For this variety, our ‘niche’ lies in delivering an eating experience in our season that cannot be matched by stored Northern Hemisphere product.
Fuji is in a similar situation. It is a difficult apple to store for much more than six months and retain good eating quality, particularly texture and flavour.
“Variety mix is much more critical for orchard businesses that are not vertically integrated operations because they only have a single profit centre, the Orchard.”
For both these varieties we can only survive at the premium end of the market. This means growing the best strains available then doing the best job possible in regard to crop husbandry, then harvesting at optimum maturity to capture their full eating quality potential.
These major world cultivars tend to fall into the bland sweet flavour category which has universal acceptance among consumers. Discerning apple consumers are generally looking for more flavour character. This is the market that supports the smaller volume ‘niche’ varieties.
In New Zealand, Royal Gala and Fuji make up about 35% of our pipfruit orchard area but supply 44% of our export crop. By world standards, the remaining 65 or so percent of our pipfruit orchard area can be considered ‘niche’ varieties targeting small specialist market sectors aiming at the discerning consumer.
Potential market size for most of these varieties is relatively small and easily flooded as demonstrated by our experience with Braeburn shows. Once its production approached 2% of world supply, the market for it collapsed. Now that supply and demand balance which has led to some price recovery to the level that high performing blocks are now economically sustainable. The problems we experienced with Braeburn were partly self-inflicted because the industry allowed the market’s perception of the need for high fruit colour to override important internal characteristics of crispness, flavour and juiciness. We fixed the colour problem but in doing so, we turned the variety into a mealy soft fruit which nobody wanted. This mistake cannot be repeated with other varieties and is one of the greatest risks our industry faces.
We have a good portfolio of interesting ‘niche’ market varieties which are finding profitable market outlets. Their future is very dependent on delivering a consistent high quality product that meets market requirements and expectations. With the world now starting to jump onto the new variety band wagon, many more new ‘niche’ varieties will appear. History shows that only a very small proportion, if any of them will ever become important high volume varieties and many will have only limited sustainable economic life.
TAKE A FLEXIBLE APPROACH TO VARIETIES
Progressive orchards need to keep abreast of the variety fashion business. Do not expect every variety you plant to have long term sustainable viability. Experience shows that some fall by the wayside.
New Zealand is well placed to play the variety game. We have a long growing season and can bring orchards into production rapidly, even at relatively moderate planting densities. Most of our orchard plantings are planted at
what are for us, intensive growing systems. In these orchards, varieties can be changed relatively quickly by grafting, so if a new variety fails to meet expectations it is simple and relatively inexpensive to change to another variety.
THE TREND TO HIGHER COLOUR STRAINS
This trend is firmly established among apple varieties and can be traced back for many years. Once a good red sport emerges for a bicolour apple variety, the writing is on the wall for standard colour strains, particularly for our major Asian marketa which demand higher and higher colour.
There are now good high colour strains for Cripps Pink, Fuji and the Gala group. Retaining standard strains of these varieties represents lost opportunity for improving your variety mix.
Use of tools such as reflective mulch and colour promoting growth regulators, has prolonged their productive life by improving grade 1 recovery but is nowhere as effective as using these tools on high colour strains.
RECOGNISE THE OPPORTUNITY COSTS
Poorer colour strains struggle to give good returns, therefore have lower profit margins compared to better strains. In today’s market, it is difficult to harvest poorer colour strains at optimum maturity because of their problems with delayed colour development.
In a difficult harvest season, such as the one we have just had, getting the harvest logged down on these lower return blocks can have huge opportunity costs because of the flow on effect of delayed harvest on being able to harvest high value varieties at their optimum maturity.
There is also the release of seasonal working capital that occurs when these older blocks are pulled out. These days working capital requirements for older mature blocks is likely to be in the vicinity of $12,000 to $15,000 per hectare which would probably give a better result being directed towards improving the performance of higher value variety blocks.
Reference: European Fruitgrower magazine, No 5, 2017
Fig 1. Scifresh forecast to increase 20% by 2025 to make up 0.41% of the global apple crop excluding China.
From left: Fig 2. Kanzi ® - A European competitor for Jazz ® which has made the list and is tipped to continue to increase. Fig 3. Prem A 96 (Rockit ® ) – Being trialled in Europe and now well established here has pioneered a new apple category, the snack food market.
Fig 4. PremA129 – A recently released variety which will have many competitors from other breeding programmes.
Fig 9. It is relatively easy to change varieties in intensive plantings as these third leaf double leader grafts show.