From a production point of view, the South African apple industry has seen better years than this, by all accounts. Severe droughts have plagued the major growing areas of Elgin and Ceres, in the Western Cape, for the second year running, which, while not affecting volumes has resulted in some quality defects and, in general, significantly smaller-than-average fruit.
This misfortune is compounded by the fact the export situation has reportedly turned a corner after a string of difficult years and could have been more profitable had fruit sizing not closed the door to some markets. The steady strengthening of the rand has also impacted on returns but exporters remain enthusiastic that, while traditional routes may not look as reliable in the long-term, the strong ties will hold, while new opportunities are springing up for those willing to put in the groundwork.
Gysbert du Toit, marketing director of one of South Africa’s leading private producer/exporter companies, the Ceres-based Du Toit Group, says the export situation has been pleasing in the main, especially in the UK, for which small sizing is actually ideal. “There have been some very good opportunities compared to last year,” he says. “The UK market started a bit slow but picked up quite quickly. We are expecting it to remain strong, with an upward climb on prices. We have seen good price increases on most varieties in the past couple of months.”
Alastair Moodie, chairman of producer/packer/exporter organisation The Melsetter Group, says the company, like the country as a whole, has traditionally enjoyed good relationships with UK buyers and importers and it is fully geared towards sustaining them.
“Our varietal mix, our understanding of the UK market and its requirements and the relationships we have developed with the category managers and supermarkets are such that we will still look at the UK as our core target market,” he says. Yet, while he appreciates the position in which his UK customers find themselves, he suggests the relationship is in danger of becoming a little too one-sided at times, provoking continual re-evaluation of the most suitable routes to market. “There has to be a reasonable balance of power between supermarkets and suppliers,” he claims. “Although we are a small group we believe that together with our partners in the UK we can present ourselves as important to them. I would rather work with them to find ways that allow us to reinvest because if we don’t they will clearly suffer in the end.”
The general consensus among exporters is that there is a need to be more selective about varietal focus, with a view to working on a more market-specific basis , and fluctuations in the viability of exports have urged exporters to turn their attentions closer to home.
“There are certain varieties and certain qualities that we need to develop other markets for,” says Moodie. “Another really important focus is the local market and the rest of Africa. There is no deciduous fruit of any significance grown in the rest of sub-Saharan Africa. It is a major market and we ignore that at our peril.”
The Du Toit Group has nurtured excellent relations with four of South Africa’s main retailers and, having aimed for a 60:40 balance between export and local distribution in previous years, this year it has been 50:50 which, according to du Toit, is no bad thing. “In the past the export difficulty would have been a real disadvantage but we have seen good growth on the local market,” he explains. “South Africa can’t import any apples or pears so we have to supply them all on a 12-month basis, and we are always working to extend the season.” Local prices have been encouraging, he says, and with domestic incomes on the up, consumers are more inclined to pay decent prices for export quality fruit.
“In the past, we have tended to have very low prices at the start of the season in January, February and March, because the local market is under pressure with too much fruit,” du Toit says. “June and July are always better but now we are seeing prices increase earlier in the season.”
While apples remain a core product for a number of multi-million pound organisations in South Africa, the face of the industry has changed fairly dramatically since undergoing deregulation nine years ago. Consolidation has been commonplace, with the weaker players bowing out, leaving only a mighty few, who can afford to perform regular maintenance and updates to keep their hand in.
Moodie says some farms in the Elgin area have suffered cash flow problems on the back of consistently high interest rates and the rising exchange rate and this has rendered them unable or unwilling to invest in new plantings, which if allowed to continue would be the death of any industry, he surmises. “There is very little expansion of new plantings but it is very definitely our aim and a significant part of the industry is still replanting old orchards and I think that has to be a sign of a healthy and sustainable industry,” he claims. “Once you stop renewing old orchards it is very difficult to maintain profitability through the tough years. A lot of farms across the industry, and in fact the world, have really been living off depreciation in the tough times but that catches up with you eventually.”
The Melsetter Group is so far maintaining its annual four per cent replanting objective but this dedication has clearly not been matched by some of its neighbouring producers, who have been tempted by the apparent allure of wine-growing, with never before-commercialised cultivars being grown in the Elgin region. Moodie says Melsetter has diverted 15 acres to this venture but well aware of the country’s ever-increasing wine surplus, he is quick to emphasise the company will not be prompted to dilute its focus on apples and pears.
Nigel Mudge, chairman of the South African Apple and Pear Producers Association (SAAPPA) reports the industry is losing an annual 2.5 per cent of apple-producing land to wine grapes, resulting in a 10 per cent drop in total volumes of fruit. Golden Delicious accounts for some three per cent of this figure, while Granny Smith volumes are dropping by a rate of four per cent a year.
The more remote and south-western region of Ceres, meanwhile, has remained fairly stable, according to du Toit. A lack of re-planting is still an issue, with some producers perhaps having left it too late to weather the storm, he suggests, but the wine craze has so far not reached the area. “I do see a bit of growth in stonefruit but producers in Ceres have always tended to offer a broad basket of crops,” he says. In terms of apple varieties, however, choosing what to plant is an issue under constant debate, du Toit continues: “It is a question of balancing market demand and practicalities. Some people think it is better to grow high-value products like Pink Lady but I work on returns per hectare and if lower value crops yield better, they can work out more economical overall.”
Ian Walton, a top-fruit producer in the Elgin Valley, sympathises with this dilemma, suggesting it can be hard for producers of fruit requiring such a long-term investment to keep pace with retailer s’ changing demands. “About 10 years ago retailers encouraged growers to have a broad selection of apples, now they seem to want a green, a yellow and a bi-coloured variety or something really different,” he says. However, Walton believes growers will ultimately be compelled to respond to forces beyond their control in making such decisions, and capitalise on the beneficial conditions of their specific regions. “I think we will be wary of climate change as to what varieties we grow,” he says. “For instance, we won’t plant varieties that need a lot of cold, we will leave that to people in Ceres.” Moodie agrees, highlighting his concern over the increasingly hot temperatures experienced in Elgin, which cannot boast the same chilling capacity as the majority of Ceres growers.
It is generally agreed that Elgin is more favourable for Granny Smith, while Ceres is better suited to Golden Delicious, Braeburn and Fuji.
Braeburn is no longer considered a particularly safe bet after a downward spiral of returns, which culminated in the infamous price crash of last year. This year, a shortage of New Zealand Braeburn has rendered South African producers in a fortunate position but most are happy to leave the big volumes to their southern hemisphere competitors, on the understanding that they will never compete with their nutrient-rich soils and ideal climate.
According to Robert Zulch, farm manager at Wakkerstroom in the mountain region outside Ceres, South Africa’s Braeburn deficiency is also down to the varietal strain being grown. “Most people are still using the original strain which doesn’t colour very well,” he says. “In New Zealand they get better colouring and larger sizes. It’s not a quality problem but we don’t get the same finish because of our hotter weather.”
Getting new varietal strains is a top priority for a lot of producers, however. Moodie says The Melsetter Group has updated its Pink Lady portfolio with a strain called Rosy Glow, while it is also hedging its bets on the ongoing rise of Fuji, with new cultivars, which are widely considered better tasting than the Chinese offering, he claims - although China is still leading in terms of appearance.
Sundowner has met with mixed reviews on the European market and, as such, the enthusiasm for it on the production side is waning somewhat. “It is good for the grower and for the consumer, given its long shelf-life but it doesn’t stand out from a retail point of view,” Walton says. It might be possible to reverse the slump, however, if supply is restricted to only a couple of supermarkets, giving the brand an air of exclusivity, he adds.
Du Toit, meanwhile, is championing Honeycrunch, having singly secured the country’s rights to the product. “I think Honeycrunch will be a welcome addition to the retailers’ existing range,” he says. “We see it as totally different in terms of texture and taste and although it is bi-coloured it is distinguishable in appearance.” The group has 10 hectares devoted to Honeycrucnch this year, with projections for 40ha next year - in line with the targets set out with the licence holders at the University of Minnesota in the US.
The major volumes being harvested are still the more traditional varieties - the reds, for local markets, Granny Smith for export and Golden Delicious, which is in demand on both.
The universal appeal of Golden Delicious was one of the factors prompting the South African industry-funded UK promotional campaign for its Goldens launched earlier this year. As reported previously in the FPJ, UK PR agency Richmond Towers has committed to running the operation from the UK side, while Mudge heads up the campaign on the ground.
Such is his determination to reverse the downward trend in prices and sales of Golden Delicious in recent years that Mudge has handed over the reigns of his own fruit-growing business to his brother in order to concentrate on such industry-wide concerns. Mudge believes consumption of Goldens has waned in the UK because other sources have not been delivering on quality, to the detriment of the variety’s overall profile. As such, he is calling for supermarkets to make South African Goldens more distinguishable, as they have already proved themselves in consumer polls on taste.
Ironically, it is the country’s poor water reserves, which concentrate the flavour in the smaller-sized fruit - a phenomenon European producers could never replicate. In a report recently completed by Richmond Towers, the South African fruit came out on top in all taste tests but because of the added transport costs attached to them, consumers are not always getting the freshest fruit available, Mudge says. “The supermarket buyers are forced to acquire cheap apples, so they will push French products until they can’t get them anymore because they fail the colour or pressure tests.”
The four-year campaign is still only in its infancy stages but Mudge and his fellow producers have a great deal riding on it to ensure the safekeeping of what has become one of the country’s flagship products, he explains. “It is very difficult to grow and pack and for that reason no other southern hemisphere country will do it. We have invested a lot in the product - it accounts for one third of the industry - so we need it to perform and when it doesn’t we feel it more than the French because of our added costs.”
Mudge says importers and buyers have so far been very receptive to the campaign but its ability to restore Golden prices from £1.13 to £1.49 - which is still well below the £2 premium enjoyed by Pink Lady - is heavily reliant on their co-operation. “My message to them is, ‘We’ve got £200,000 on the table to increase consumer awareness of our product, now what are you going to do to harness the benefits so when the consumer hears about this and looks for South African Goldens you make sure you get the sale?’”
Anton Rabe of the Deciduous Fruit Producers Trust, is in full support of the Golden Campaign, suggesting the industry has been tarred with a perception problem which, up until now, has been too slow to address. The reason for this, he suggests, has been a widespread ignorance of the need for promotion and an inability to fathom the changes affecting marketing requirements in the wake of deregulation. Moodie says the industry has been affected by an influx of investment companies entering with the intention of making a fast buck without due consideration for the growing aspect of the situation.
However, Rabe says marketing will become rather more producer-orientated, with existing marketing companies becoming increasingly marginalised. Zulch agrees, adding, “There has always been a middle man but now that is changing. The only thing that actually exists is relationships, which are becoming narrower, between farmers and supermarkets. Everyone in between is just a service provider. In the future the programme won’t belong to the likes of Capespan but to a group of farmers. That is not to say marketing desks shouldn’t be there but there needs to be a shift in mindset. The ways of marketing are changing.”
The pair also agree that more regulation is needed and that restrictions on volumes and variety specifications will be a top priority in preventing oversupply and ensuring long-term sustainability. “I don’t know if there is a long-term future for us in apples,” Zulch concludes. “The industry is not changing fast enough to what’s suitable for the market. There are too many apples being produced and too many low-quality apples, more importantly, so we need to take more control. As producers, we haven’t always known about the market requirements but now we cannot afford not to.”
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