“The 52-week availability of high quality product is a huge, huge advantage for Peru,” says Philippe Augier, md of Midifruit, which is the exclusive importer of the La Catalina and San Marcos brands from Peru’s largest exporter Agrokasa. ”It is the unique selling point of Peru.”
The vast majority of the asparagus production area is about three hours south of Lima, in the arid desert climate of Ica. Predominantly the UC157 variety - which is also the mainstay of the Spanish gras industry - volumes have risen rapidly since the industry established itself. Last year, another 32 per cent hike was registered, and more than 13.8 million 11lb boxes were exported by air and sea.
Expansion has been swift, but with expansion come attendant problems. “Growers are now starting to look at new varieties, with better yields, in order to combat some of the price pressure that is piling up,” says Augier. “I would liken the situation in Peruvian asparagus now to what has happened to the Chilean grape business. Fifteen to 20 years ago, having a Chilean grape business was tantamount to having your own mint. There was limited production and huge demand for the products, as well as a very weak currency - which gave them a license to print money. But Chile’s exporters will tell you all that has changed now, and they are having to look very closely at costs and becoming more efficient in everything they do. Peru’s asparagus exporters are facing up to the same issues.”
The cost of airfreight from Peru to Europe is US$2 a kilo and, with the oil price hike, is likely to go higher. Compare this with a pre-9/11 price of around $1.30 a kilo and the problems are immediately evident. Beleaguered airlines have been forced to pass fuel and insurance costs onto customers, and the exporters have suffered. “In terms of returns to shipper, the simple facts are that at $11 a box of asparagus, over 50 per cent goes on the airfreight costs.”
Until recently, the weakness of the US dollar, to which the Peruvian peso is pegged, has allowed the country to be extremely competitive, despite the need to airfreight product. If the dollar were to strengthen, base costs would rise, but there is no sign as yet of this being an imminent problem.
Augier, who is also a major importer of Spanish asparagus, says: “In the last couple of years, the currency situation, combined with the vagaries of the Spanish weather, have given Peru a very strong foothold in the UK market. The Spanish weather in the spring has been bad for the last three years and horrific in the peak gras production period. Supplies from Spain have suffered as a result and UK supermarket buyers have switched to Peru almost in unison and covered the gap Spain was leaving right through to the start of the English season. The microclimate of Ica sees temperatures sit at 22-28°C throughout the year and growers are therefore able to maintain volumes. Spain is now left with only a 20-day window now, from April 1-20, and I can see the day in the not too distant future where Spanish gras will no longer feature on the shelves of any major UK multiple retailer. There is still a very good wholesale business for Spain, which is almost exclusively where our volumes go now.”
Because of the unpredictability of the English weather, Peruvian asparagus also has a place on shelf throughout the domestic season. “As long as the dollar stays where it is, it will remain economical for supermarkets to maintain a flow of Peruvian product through the summer. If there is a sudden need to increase volume, it is far easier to fully open a running tap than start from nothing,” says Augier. The lead-time of four days means that Peruvian gras loses nothing in terms of speed from field to shelf against its Spanish counterpart.
And Peru’s exporters have invested heavily in packhouse facilities and assurance projects. They have also shown a willingness to innovate and be flexible. “We have played with the weights to encourage consumers to participate in the asparagus category,” says Augier. “As well as the normal 500g bunches, we have introduced 250g bunches. This gives retailers the option of selling them at an attractive price ticket and their customers are more likely to have a go. We have demonstrated with our supply partner and customers that it can be done. People used to believe asparagus was a luxury item and too expensive out of the English season, but through Agrokasa’s obsession with quality and service, we have changed perceptions. Agrokasa recognises that it cannot leave customers without product for even one day and that they need to receive a product they can trust 100 per cent, whether they buy a pallet or five boxes - it is all part of developing the business.”
Augier adds that he feels asparagus will always retain its luxury value in the eyes of the consumer, and for that he thanks the promotional efforts of English growers. “The PR carried out by the UK Asparagus Growers’ Association has done the whole industry proud. They have put the right PR messages in the right magazines and that will continue the “myth” of asparagus as a “sexy, “hedonistic” and “luxurious” purchase. No-one else has done any work like this for asparagus and we have a lot to thank them for.”
The wholesale markets, mainly due to the high demand for asparagus year-round from the catering trade, have proved a very profitable arena for Peruvian product. “Four years ago it was unthinkable that you could sell the volume of asparagus on the wholesale markets that we do now,” says Augier. “The value of Peruvian asparagus is such that it is no longer the exclusive domain of the likes of Harrods and Fortnum and Mason.
“We do not work the wholesale markets like other importers might use them; in fact our approach is diametrically opposite that of most companies. We bring in Peruvian asparagus on a 52-week basis exclusively for our wholesale market customers. We don’t just provide them with product that does not fit into supermarket programmes or has been sent on-spec. If you look after the wholesale market properly, the business is certainly there. The wholesaler has to be serviced as well as his retail counterpart; Agrokasa believes that this is the only way to build the business.
“The UK represents just over 10 per cent of its overall export business, but Agrokasa has shown commitment to fully understand exactly how the UK market operates and what it needs from Agrokasa. Consumption in the UK is nowhere near saturation, but the natural increase in market share we have seen in the last few years for Peruvian gras is bound to become more difficult to achieve. When it becomes more of a fighting arena, the value of quality and service will come to the fore.”
Agrokasa is number one - by size - in a fiercely competitive field, with around 40 exporters vying for global market share. But because demand has built and the US market is extremely strong, problems that appear to have beset other Peruvian sectors, for instance avocados, have not afflicted the gras job. “There is no need for Peruvian asparagus exporters to dump product anywhere,” says Augier. “If the market is bad everywhere, they will take their medicine in the US because airfreight is cheaper, but they won’t just throw product at the market and they will always keep the European markets well-stocked.
“For an American company that is taking 60 pallets a day, an extra six pallets isn’t too much of a problem; an additional six pallets would cause me a few headaches.” Having said that, Augier will bring in upwards of 1,500 tonnes of Peruvian asparagus in 2004, just the third year he has handled the product.
He feels that a production plateau in Peru may be around the corner. “Of course we don’t always know what everyone is doing, but I feel personally that Peru’s production may be reaching its peak between 2003 and 2005. The nature of asparagus growing gives the opportunity for growers to re-evaluate their options fairly regularly. There are two schools of thought in Peru, one which believes that a plant’s life should be elongated to seven or eight years by not over-extending what it is asked to yield, and another which says the plant should be hit hard from day one and perhaps only stretch to four years of production. Both have their exponents and both can work, but what it does mean is that every few years growers can choose to either carry on as before, look at new varieties, increase plantings or even pull out of asparagus.”
Producers that have the opportunity to assess the direction in which they want their businesses to go may well, he says, decide that the sustainability point for Peru’s asparagus exports has been reached. “I believe it has - and like Chile with grape, that’s where the costs start eating in and for some, everything becomes more of a struggle. There will undoubtedly be growers that take the view that staying below the volume levels where FOB costs begin to really bite would be the best option - and that would limit future expansion. It is too early to tell precisely whether this has taken hold this year, but I do think there will be a levelling out.
“There might also be more competition - from Chile for example. Chile is a very marginal player at the moment, but it is getting bigger. A few companies from Chile and Argentina have already been in touch with us and, while Peru will probably always be the true market leader, there are other sources that will gain market share.”
HARGREAVES SETS PERUVIAN BENCHMARK
Hargreaves Plants, a world leader in asparagus variety development, sees Peru as the global benchmark.
The company has focused much of its energy on the Peruvian industry. The most widely grown variety in Peru is the Californian selection UC 157. It is the industry standard and combines good spear quality with high yields. Jamie Petchell, asparagus project manager at Hargreaves Plants, says: “UC 157 has served the asparagus industry well and offers regular, steady performance. However, our aim is to find new varieties that offer something different. This may be colour, taste or suitability to tip production.”
Hargreaves Plants has 183 different varieties on trial in the UK and has selected what it considers to be the most appropriate to go to Peru for advanced screening. Petchell says: “We set up our first testing site in Peru with Agrokasa in March 2004 and the plants are coming along nicely. Peru offers advantages over the UK in terms of climate, especially when testing new varieties. These trials will commence harvesting 12 months earlier than their UK equivalent. This means that our significant investment in R&D will have a faster pay-back.”
Paul Taylor, chief executive of Hargreaves Plants, continues: “Peru plays a very important role for the UK industry as a whole. The demand built by Peruvian asparagus raises UK sales during our traditional May to June season. UK growers also have advantages in terms of freshness and are better able to benchmark against imported produce. As an industry we would be grateful of the good work carried out by the marketing companies such as Exotic Farm Produce, Flamingo and Utopia.
“UK consumption of asparagus has increased approximately six-fold in the last 15 years. However, we still pale in comparison to our European neighbours where per capita consumption is up to 10 times that of the UK,” he says.
XTEND ENHANCES PERUVIAN GROWERS’ FOCUS ON QUALITY
Peruvian asparagus growers have been extremely successful in winning increased market share in the US. And StePac believes the use of its Xtend post harvest system is a major factor, that could be translated very well to UK market requirements.
Whereas Mexico and Peru have traditionally been the top suppliers of asparagus in the United States, in the past few years Mexico’s market share has been slowly eroded by volume, while Peru has almost doubled its share.
In 2003, Peru supplied 55 per cent of US asparagus imports by quantity, but many growers are worrying about maturing markets and falling prices. All the more important therefore to focus on maintaining healthy prices by supplying the best quality asparagus, and that is what is starting to happen as more and more growers use a unique post-harvest technology supplied by Israeli company StePac.
StePac’s Xtend post harvest system for asparagus is unique because it is the only system on the market which offers a combination of modified atmosphere and condensation control technologies, as featured in the Journal and on freshinfo in the last 18 months.
The increased storage time due to the Xtend packaging system also means that the produce can be transported over much longer distances, extending market potential for growers. Less effective, alternative packaging methods such as packs with water or water pads, pyramid-packs for standing bunches and waxed carton boxes are no longer required. The overall efficiency and productivity of the Xtend system is further enhanced by the facility to automate packing and sealing.
Trials have shown that this system is capable of lengthening storage and on-shelf display times by as much as 28 days. This not only means that the period during which retailers can command a premium price for quality asparagus has increased, but it also helps grow the market for asparagus as consumers are guaranteed the field fresh flavour as well as the high nutritional content which makes this such an attractive food. What’s more, StePac is now also selling Xtend consumer and microwave bags which protect quality right up to the moment the asparagus is eaten, offering ultimate convenience to consumers, as well as added value to retailers.
Some 40 per cent of the asparagus grown in Peru is green, most of which is shipped to the US. Product using the Xtend system is air freighted to Miami where it is treated with methyl-bromide for fumigation purposes and then packed. White asparagus is sent by air and sea and StePac provides bulk transit bags for the sea trips. The net result is that growers like Inagrosur in Peru are able to gain competitive advantage by delivering a much fresher asparagus to the demanding US consumer.
Packaging technology is crucial not just for freshness, but increasingly for convenience and this is where StePac’s Xtend system provides additional major benefits to shippers and retailers.
StePac is now selling microwave bags for both green and white asparagus. They allow the asparagus to stay beautifully green or white for up to 28 days. The bag can be popped straight into the microwave oven and after six minutes the asparagus is ready to eat, tasting absolutely wonderful with a field fresh flavour.
Xtend‘s microwave bags could carry appeal not only for retailers but also foodservice and catering operators. Asparagus tends to be seen as a luxurious but high maintenance product. The microwave bag concept could help stimulate sales of more convenient formats such peeled asparagus and asparagus tips.
There are specific factors in the US relating to the consumers’ need to know products are safe and come from an acceptable country of origin. Since 9/11 many consumers want to be confident that no-one else has handled the stalks in the retail outlet and that there has been no chance of contamination somewhere in the supply chain. For these reasons also, labelling is important. Xtend packaging lends itself to informative labelling on both origin and nutrition content.
The importance of these developments to Peruvian asparagus exporters and to the country as a whole cannot be underestimated. In 2003, asparagus became Peru’s leading agricultural export, valued at $206 million, bumping coffee into second place. A brand new plant has been built in Peru’s main air terminal, Friaero, to specialise in the handling of asparagus. Peru’s production of asparagus is expected to increase only slightly to 190,000 tonnes in 2004 and 192,000t in 2005 so it is essential that growers and shippers add more value into the product in order to improve profitability in the long term. Due to Peru’s favourable climate, the asparagus does not have a dormant stage and the season lasts all year round with a peak in June and July.
Working with Peruvian growers, StePac has proved that it is possible to lengthen significantly the time asparagus stays fresh from harvest to consumption and also there is potential for turning asparagus into more of a convenience product, staying at the forefront of an important general retail trend.
From the growers and shippers perspective, this means keeping their customers, especially the supermarkets, very happy indeed. For the retailers themselves the key to profitability is the price achieved per pound weight of produce sold, and with consumers more likely to pay a premium price for high quality produce, Xtend provides a way of making asparagus an even better commercial proposition for everyone involved in the supply chain from Peru.
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