Sunday Times

When will the avocado bubble burst?

- Samantha Enslin-Payne

Imay end up with avocado on my face, but when I read this week that an avocado producer was planning to list on the New York Stock Exchange, my first thought was: bubble.

Avocados are fantastic fruit, just as tulips are fabulous flowers, but we know how that bubble burst in the 1600s.

Camposol, the biggest suppliers of Hass avocados to the US, plans to raise about $400m (R5.7bn) in the listing, Bloomberg reported this week. The company, based in Peru, intends to expand production with some of the funds it raises.

Demand for avocados has soared worldwide, driven, as common wisdom goes, by millennial­s’ penchant for smashed avo on toast. The fruit is big business, and, in some regions, a dirty one. Mexico is the world’s largest producer, followed by the Dominican Republic and Peru, according to Statista. Cartels in Mexico have muscled in on production of what is referred to in that country as green gold. Farmers have faced kidnapping­s and extortion, and the police have been deployed for protection.

SA has a thriving avocado sector, with 17,500ha planted and growing at 1,000ha a year. On a five-year average, annual production is 118,000 tons a year, says the SA Avocado Growers’ Associatio­n. It earned R2bn in export revenue last year. Long may the boom last.

But given that it takes six to eight years for an avocado tree to bear fruit, an investment now might not yield the expected return if fickle consumers latch on to another superfood.

There is already a lot of competitio­n: quinoa, goji berries and chia seeds are just some of the must-have foods for the healthy and wealthy. Prices of these products have risen sharply — in some cases, they are now too expensive for the communitie­s that grow them. Quinoa and goji berries have been cultivated in Peru and China, respective­ly, for thousands of years.

Between 2004 and 2014, the price of quinoa in Peru, the largest producer, rose more than 500%, while production more than tripled. But with the developmen­t of hybrid seeds, the crop is now also grown in other countries, and prices have fallen sharply.

Goji berries are still going strong, with exports from China up 20% a year, but demand may slow if reports are right that their hipster rating has dropped as they are “getting a bit passé”.

Avocados have relatively few applicatio­ns, beyond eating them fresh, and they are heavy and need careful packing to transport. And, given that conscious consumers have driven demand, the tide could turn against them as production requires a lot of water and the planting of more avo trees has been responsibl­e for deforestat­ion in parts of the world.

So what happens when millennial­s move on to something else or Generation Z gains the upper hand? A report from The Grocer suggests boabab fruit could be the next big thing. Now that will be one very long-term investment as it apparently takes about 200 years for a baobab tree to fruit.

The tide may turn against the fruit because production has resulted in deforestat­ion

Enslin-Payne is deputy editor of Business Times

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