A bite of the apple
A decade on from its crisis days, the pipfruit industry is blossoming and export markets are booming.
A decade on from its crisis days, the pipfruit industry is blossoming and export markets are booming.
Adecade ago, the outlook for the apple industry was grim: prices of major varieties had been falling for 15 years; the number of growers and packhouses was in decline; debate was rife about whether the 2001 deregulation of the pipfruit industry had been wise. Land planted in apples, which had peaked in 1995 at 15,916ha, had fallen to 10,980ha over 10 years and growers had just come through the disastrous 2005 season, where the operating profit margin was negative 19.5% – the second straight year of red ink. Consumption was falling in key markets, global overproduction meant some varieties were fetching lower prices as commodities for uses such as juicing, and new varieties were yet to deliver.
In 2005, it cost about $18 to grow, pick, pack and ship a carton of export apples, but the average grower earned only $12.60 per carton. For the average Hawke’s Bay orchard, this represented a loss of $189,000, according to Coriolis Research, which wrote at the time that apples were an “industry in crisis”.
But in 2017,
Pipfruit New Zealand is projecting its biggest export apple crop – 21.5 million cartons, valued at a record $800 million. By 2021, apples and pears (mostly apples) are projected to join the ranks of $1 billion-plus horticultural exports along with kiwifruit and wine, according to the Ministry for Primary Industries’ December 2016 situation and outlook report.
“The … sector has experienced four consecutive years of good profitability,” the report says. “This outcome, alongside increasing
demand for high-quality fruit from Asian markets, is driving investment and expansion across the supply chain.”
Average returns per carton were $33.96 in 2015, which was about 55% more than the 2006 average of $21.98 a carton.
INVESTMENT LIFTS QUALITY
Increased investment had lifted fruit quality and productivity, and the varieties being chosen for orchard replanting were aimed at growing export markets, PMI said. Another part of the sector’s broad transformation had been to foster ways to work collaboratively on breeding, marketing, and research and development. Now, 16 years after deregulation, the best breeders, growers, packers and marketers are bringing their A game.
“We’re quite bullish for the New Zealand apple industry and the outlook,” says Andy Borland, managing director of Scales Corp, owner of the country’s biggest grower, packer and exporter, Mr Apple, which controls a quarter of the crop.
Apple sales into Asia have helped drive Scales’ profits, he says. The region now accounts for 50% to 60% of apple sales; it was 10% 10 years ago.
The industry is breeding new varieties to tempt the Asian palate – sweeter than the Braeburn, a chance seedling discovered here in 1952, and redder than the big daddy of New Zealand breeding, the Gala, a 1930s cross between Golden Delicious and (another Kiwi) Kidd’s Orange Red from 1924.
Braeburn is the biggest export apple by volume, followed by Royal Gala, and is sold in Europe and North America, which are still important markets. The Gala, along with its Royal Gala variant mutation from the 1970s, is now one of the world’s most popular apples, grown around the world. In more recent decades, it has been joined by the Pacific Rose, Pacific Queen and Pacific Beauty, Gala-Splendour crosses developed by HortResearch and released in the early 1990s, and Jazz, a Gala-Braeburn cross. Mr Apple’s range includes Diva and the latest apple to launch in New Zealand, the Dazzle.
Breeders look for the desirable characteristics from among thousands of seedlings. Few have rock-star potential and new apple varieties have massively long lead times – up to 20 years for Dazzle, a big, red, sweet variety aimed squarely at the Asian palate.
“We’re convinced there’s a market for Dazzle,” says Steve Potbury, manager at Fruitcraft, a marketing venture between growers Mr Apple, Bostock NZ and Freshmax, which has the master licensing rights for production and marketing of Dazzle worldwide. “It’s big, red and sweet, and we know that’s what our customers want.”
Added to that, it “responds well to new storage technology”, which is crucial for an industry oceans away from its markets that sometimes delivered mushy Braeburns to Europe. “It’s a strongly positive time,” Potbury says. “People are planting trees, the nurseries are selling lots of trees – you need to order a number of years ahead.”
SIGN OF CONFIDENCE
In a sign of confidence in the outlook, Mr Apple agreed in November to acquire Hawke’s Bay apple grower, packer and marketer Longview Group for $20.5 million, expanding Scales’ total plantings by 85ha, with a further 30ha of bare land for development, coolstore and packhouse. It now has more than 1000ha of orchards in Hawke’s Bay.
Scales listed in 2014, selling shares in an IPO at $1.60, giving the company a value of $224 million at the time. It has doubled since then, having gained entry to the NZX50, and horticulture is the biggest of Scales’ three divisions by sales – ahead of storage and logistics, and food ingredients. It had been part of South Canterbury Finance before being acquired by Direct Capital, the NZ Superannuation Fund and the Accident Compensation Corporation for $44 million in 2011 and taken public three years later.
David Cranwell, an industry consultant who served for 15 years on the old Apple & Pear Marketing Board from the early 1980s, says in the era of Royal Gala and Braeburn, when nobody else in the world had them, “it was money for old rope … and then the market crashed”.
“The apple industry worldwide is cyclic and we’ve got to be able to change with the times very quickly,” Cranwell says. “What worries me is if people buy into orchards thinking it’s always brilliant. I’m not saying there won’t be hard times again but people are now more nimble on their feet and building loyalty through quality.”
“It’s big, red and sweet, and we know that’s what our customers want.”