Like a lot of South Africa’s agricultural industry, it seems table grapes have had a rough time of late. An increasing amount of competition from the southern hemisphere has put pressure on the industry in an unforgiving market driven by unrealistic retail prices. As with other sectors, many producers have abandoned ship and figures show that as many as 30 per cent of South African grape growers are producing at a loss, although the national press has reported that it could be up to twice this amount.
But the future is not entirely bleak. The South African Tablegrape Industry (SATI) is driving the industry forward with a structured plan of action to rejuvenate stale markets and promote the country’s grapes on a global level.
Formed a year ago, SATI has made several positive steps towards stamping out counter-productive approaches by grape growers in the country, transforming the industry from one driven by government sanctions, to an independent, forward-thinking body.
Democratically made up 50/50 between grape producers and exporters, SATI unites the two groups in a bold move to promote communication and reap rewards for the industry as a whole unit. Within the body, 984 farmers make up the producers association, and 25 members represent the grape exporters’ forum. Producers are automatically included as members with the levy they already pay, and exporters are offered the chance to join for a fee. Elaine Alexander, SATI’s chief executive, explains that while the export membership has remained relatively static since SATI was launched a year ago, they have had interest from importers’ freight forwarders who want to be affiliated with the body: “It’s quite nice because we are starting to see the value in the organisation,” she says, and is adamant that, while sometimes far-ranging, the interests of the body’s membership can be served. Alexander says that SATI has worked over the last 12 months to provide a figurehead for South African growers and exporters: “I think this year is about confirming SATI’s position as an industry representative body and we’ve got to provide leadership for our industry; we have to be united,” she says.
The aim of the body is simple - to provide new market access to the industry and increase its existing market share, while all the time preserving a quality product synonymous with consumer’s perceptions of South African fruit. But unfortunately these perceptions have not always carried the industry through the hard times it has been experiencing. As has been well reported in the agricultural press, South Africa’s table grape industry has found itself one of the many casualties of the age of the multiple retailers.
High standards of production demanded by retailers can be rewarded with relatively low, often unpredictable prices, as Alexander explains. “They have two people to satisfy - shareholders and consumers, and they both do very well,” she says,” but what is difficult is when trying to give people what they want; they lose sight of the fact that it actually costs good money to produce a good quality product.”
As most in the fresh produce industry can probably testify, retail price promotions can see prices plummet to unreasonable depths at the retailer’s will. “When you’ve squeezed efficiency to the point where people are going out of business, it becomes very difficult to justify. They’ve got layers in between and they can pass on responsibility and information is not shared,” Alexander says. But, she adds, she can understand how it makes good business sense from a retail perspective. “You can’t condemn people for doing well - that’s what they are required to do and it’s what the essence of the free market is about. But when it’s costing us a lot of money, it’s hard. They claim the prices are down to relative oversupply, but that’s not always the case,” she says.
The outcome inevitably is that businesses, faced with operating under a negative income, fold. “Too many growers are producing grapes at a loss,” Graham Retief, chairman of the SATI board, says. Alexander agrees: “People go out of business and are liquidated and that’s been happening,” she says. “It’s some of the larger ones that have gone out of business - normally the economy of scale is in your favour but what you find is some of the smaller farmers are producing more of a niche product and getting more than double the average price return to farmers. Then you find people will start planting it and it’s no longer in short supply.”
She explains that it is this muddled approach from growers and exporters that was a major driving force behind SATI’s creation. For the industry as a whole to succeed and to move in to a new era of growth and success, the approach needs to be co-ordinated.
On a practical level, SATI is trying to achieve this by becoming an information point for its members, and this is one aspect of business they have ploughed a lot of stock into since last November. “We basically help supply market information. The industry does not have access, as there is no co-ordination in providing generic information about what they should be producing. Also, we have just put in place our website information where we will provide information online such as integ (information on volume of products packed prior to shipping) and shipped info,” Alexander says.
Part of the idea in providing in-depth information is that South African producers and exporters will form a co-ordinated approach, aiding the fluidity of the entire supply chain. “This year we’ve been busy providing market plans for each region so produce doesn’t end up being blocked at ports - it moves more freely. People now have an idea about what’s happening, for the first time we are getting a full picture of what’s going on. That’s our job - to make sure that they know what’s happening.”
And the hard work is paying off, she says. “I think it is taken a bit of time, but it’s gained a lot of momentum, and we are seeing less fragmentation in a number of areas than in the past and one of them is sharing information - we are much better co-ordinated now and on the whole everyone is working together better,” she says.
Retief agrees, but points out the organisation could go a lot further in this area: “We have made the supply chain more efficient this year, but only to a limited extent so far. It was not originally a focus area but we have recognised opportunities to, with co-ordination, improve efficiencies. We believe thereis more scope,” he says.
It is widely known that the sector has, at times, faced an over-supply problem, but the information that SATI is making available could see more market opportunities being created.
Highlighting these opportunities through extensive research and information sharing is a major element of SATI’s goal, as Retief explains: “Some growers are over-producing but similarly some marketers are under-performing. We believe with the right information and intelligence both these issues can be alleviated by competent individuals and organisations.” Alexander concurs: “All we can do is ensure that people are well informed and beyond that it’s up to their business acumen,” she says.
She says that the idea of identifying viable market opportunities has not always been the industry’s strongest line of attack, but says SATI is working on a practical level to change the industry’s often laissez-faire approach to promotion and marketing.
Some of the table grape growers that have been hit hardest by competition from the southern hemisphere have diversified risk, turning their hands to alternative grape products including wine grapes and dried fruit like sultanas and raisins.
More long-term is SATI’s work in new sectors. Research so far unveiled two major new areas for growth including supplying the hospitality and catering sectors in Europe and opening up the Asia-Pacific market for its growers.
To aid this new marketing focus, SATI has recently appointed Roger Manning, to direct its European promotions. Manning has a plethora of experience in marketing fresh produce, working with companies such as Jaffa, the Washington Apple Commission and most recently as director general for the Chilean Fresh Fruit Association in Europe.
He explains that deregulation has contributed to much of the industry’s current communication problems: “You witness much internal wrestling. What takes place is internal conflict with people saying we will get our own way now.”
He explains that SATI is unique in its democratic approach, an attribute that could make it one-of-a-kind. “To my personal knowledge, globally there’s hardly any organisation that is owned jointly by exporters and growers. That ownership makes it remarkable,” he says.
“It throws up a big test; it’s not easy but I’m pleased to be playing a key role to help in raising consumer and trade awareness for South Africa fruit in general, but SATI in particular.”
One aspect of Manning’s role is going to be to tackle the ‘retail conundrum’ as he puts it, to work towards increasing SATI’s foothold in Europe through exploring new distribution pathways and generating consumer promotions in their current market.
“SATI will this year be proactive in this respect with a selected number of pilot promotions in the UK and more broadly in Europe,” he reveals. “We will demonstrate the preferred partnering benefits of working with SATI to add interest and value to the grape sector because that’s what must happen.”
He explains that current retail promotions are not always handled correctly, and are ultimately not sustainable for the producers: “It’s important to recognise that exporters and growers are already pushed to the toughest limits on price…retail price promotions should be targeted to bring consumers in, not consistently subsidise products.”
“Retailers should drop the price to bring in sales but it should not be there constantly. Consumer promotions must be deployed to motivate lapsed purchases and increase repeat purchasing.”
So, all in all, it appears that SATI has made a successful debut. It seems that many important foundations have been laid in the last 12 months, and a new optimistic era for the South African table grape industry is afoot. But what can the South Africans and the rest of the world expect from SATI in the futue?
“Essentially continuity,” Retief says, “Obviously the company has been set up, so thereis anexpectation in respect of delivery. I hope that SATI’s credibility grows to the point where rumours are ignored and greater stability is achieved; that new markets are opened, andthis I trust will lead to better returns and a new growth phase in our industry. Growth, after all, is what South Africa most sorely needs in order to transform successfully.”
No comments yet