Zespri chairman Peter McBride expects returns for New Zealand-grown gold kiwifruit to stabilise over the coming seasons, as more production of the new SunGold (Gold3) variety comes online.
Speaking at Zespri’s annual general meeting (AGM) on Wednesday (23 July), McBride said it was unlikely the industry would again see prices reach the heights of the 2013 season, where average gold returns eclipsed NZ$12.90 (US$11) a tray. This was on the back of extremely limited gold volume, as a large number of New Zealand growers grafted over their Zespri Gold (Hort16A) vines to the more-PSA tolerant SunGold variety.
McBride believed gold sales would still prove highly profitable to the industry, providing minimum production and quality standards were met.
“The forecast range (for gold in 2014) is below NZ$10 (US$8.50) a tray, which is a result of volumes increasing from 11m trays to 19m trays this year,” McBride explained. “This trend will continue as SunGold volumes rise and we are forecasting average per hectare Gold returns to stabilise above NZ$70,000 (US$60,000) a hectare. With its high yield, SunGold will continue to be an excellent commercial performer and will underline grower wealth in the medium to long-term if we continue to deliver high-tasting fruit.”
Not so Charming
Zespri CEO Lain Jager supported McBride’s claim in his address at the AGM, warning that gold returns would drop to “more normal levels” as production increased.
Jager also discussed the fortunes of Zespri’s Charm (Gold9) variety. He admitted there had been significant trade resistance to the offering, citing the tendency for the fruit to shrivel as the major deterrent.
“Our approach has been to strongly support Charm to make it work including technical support, focused marketing programmes in Taiwan, South Korea and Hong Kong,” Jager said. “We have certainly seen an improvement in Charm quality onshore; however the shrivel issue remains material and challenging in-market. Ultimately we may need to consider whether this variety remains viable. We will conduct a thorough season review of Charm in September.”
The road ahead
McBride also addressed challenges the single-desk marketer continues to face in other areas of its business.In February, Zespri terminated its relationship with its three Taiwanese distribution partners, following claims they had created fraudulent invoices.
It followed a highly publicised under-invoicing scandal in China in 2013, where Zespri was ordered to pay a RMB5m (US$800,000) fine, while the manager of its former Chinese importer, Neuhof Trade, was jailed for 13 years for his involvement in the case. Neuhof filed legal action against Zespri in June, claiming its supply contracts were wrongfully terminated.
Zespri is also the subject of a New Zealand Serious Fraud Squad investigation. McBride said it had been a trying period for Zespri, but insisted every effort was being made to strengthening the company’s compliance framework.
“As growers know, Zespri has in recent years been dealing with the consequences of non-compliance issues in three of its 53 markets,” he explained. “As I have previously said this was not good enough. We have engaged external professional advisors to ensure the company is compliant where ever Zespri Kiwifruit is sold. We have made and are prepared to make tough choices and end relationships where we believe our partners are putting us at risk.”
Chinese hope
In line with this philosophy, Zespri has chosen to rebuild it management structure and distribution network in China. McBride said the multi-million dollar restructure reflected the potential it sees in this market.
“China is the standout opportunity,” McBride said. “China now consumes almost a quarter of all fruit supplied globally. Per capita the Chinese eat 110kg of fruit a year on average, and only 1kg of that is kiwifruit.”
While China is expected to develop into Zespri’s leading market within the next 10 years, developing a presence in the Asian nation will not come at the neglect of other trade opportunities.
“It is clear that China offers tremendous potential, but it is potential inherent with a relatively high degree of risk,” McBride noted. “This pattern of increasing fruit consumption, while not quite as pronounced in other developing economies, is repeated through Indonesia, Brazil and India. We need to manage our exposure to China and the best way to secure our future is to strongly grow other developing markets.”
No comments yet