Cyprus is a country well used to change. Home to the world’s single remaining divided capital city, Nicosia, its citizens have seen their beloved island go from a place of peace where Greeks and Turks freely co-habited, to a land firmly segregated with thousands of Greek Cypriots driven out of their home towns. These days a relative peace is levied by UN soldiers but the backdrop of hostility remains.
Two years ago, the land still recognised as Cyprus, populated by the Greek community, underwent a significant transformation when it was granted EU status on May 1, 2004. Like others, the horticultural sector became subject to the regulations decreed, not only in Nicosia, but also far away in Brussels. All government subsidies were suddenly abolished, the paperwork grew virtually overnight and the Ministry of Agriculture’s methods had to change: despite years of experience, ministers who had for years issued checks for and certified farms suddenly had to relinquish these duties to registered agronomists.
So what of Cyprus’ horticultural exports? Looking at the bald figures, it would seem the glory days for Cyprus producers are well and truly behind them. Some 20, or even 15-years-ago the country enjoyed a strong international reputation for potatoes, citrus, table grapes, melons and fresh vegetables. As a former British colony, it had maintained good trading associations with the UK, with its produce favoured not least by the tens of thousands of ex-patriots residing there. The ministry’s Cypria logo with its accompanied images of sun-soaked produce had been well established in the minds of consumers as well as industry bodies.
These days, the marketing situation has shifted, cross-sector promotions have been halted and export volumes are down across the board, with some products, such as grapes, having dwindled into insignificance. “About 10 years ago, we exported more than 15,000 tonnes of table grapes,” says head of agricultural promotion at the Ministry of Commerce, Vrahos Hadjihannas. “It was mainly small sweet seedless grapes, such as Sultanas, but consumers started turning their attention towards big berries. So, we started restructuring, and advised our producers to consider Thompson and other bigger-berried varieties but it seems we didn’t succeed to a satisfactory degree which is why tonnage went down so low.”
In 2005, grape exports totalled a mere 540t. Watermelons and melons did better at 2,700t but the ministry believes the country’s exporting future lies in citrus, potatoes, and, more recently, fresh vegetables and herbs - but perhaps without a primary focus on the UK. Last year winter-crop potato exports reached 11,000t, while the spring crop was levelled at 92,000t - up from 76,000t in 2004; citrus was up slightly from around 73,300t to 73,800t, while veg rose from 7,700t to 9,000t.
“In terms of fresh veg, exporters don’t have the production in their hands to be able to offer continuity of supply for the UK supermarkets,” says Hadjihannas. “Citrus is a winner, it gives us something like C£15 million (£18.16m) to C£16m per year through exports. When the producers harvest at the right time and the sugars are there, we can export around 75,000t and there is room to increase - mostly in western Europe. In the past we concentrated on the UK but we have since diversified into central Europe and we are doing quite well in Italy and Germany.”
Citrus
Cyprus’ citrus industry falls under the duress of a handful of private producers and one co-operative organisation. The main products are grapefruits, lemons, some oranges and the orange/mandarin hybrid, Mandora. However, despite the stable reports, some believe the future looks far from bright.
For the short term, a drier than usual winter is set to make the age-old problem of water shortages a primary focus for the coming season, with fears of smaller sizing and patchy quality abounding the sector. Miltos Papadopoulos, sales and marketing manager at grower co-operative, Sedigep, says the sector has suffered a particularly difficult lemon season this year, owing to the dry weather, which meant the fruit did not reach optimum size. However, Mandora volumes are up and Sedigep is expecting to have 11,500t available for export - up 20 per cent on last year. Sedigep represents 1,600 growers and with 20,000-25,000t, handles more than one third of the country’s total citrus crop.
Mike Mitsingas, general manager of Lanitis Farms, the country’s biggest private exporter, believes the state of the market is by far the most worrying threat to the industry. “Prices are going down but the costs are going up,” he says. “The supermarkets need to think long-term. We are struggling to get last year’s prices.” Papadopoulos is predicting a difficult season for oranges this year, as well, owing to the poor prices offered. By choosing not to employ foreign workers, Sedigep growers face considerable labour expenses, which bumps up production costs, he adds.
According to Mitsingas, citrus growers are bearing up badly after the 25 per cent cut in the European budget for agriculture and Cyprus is failing to compete with other producer countries, such as Egypt, Morocco and Tunisia, which are not subjected to the same labour costs. Being an island at a considerable distance from the trading hub of western Europe, Cyprus simply cannot hope to deliver produce in the same time as other exporters, and producers are at the mercy of the pricing whims of shipping lines.
“UK supermarkets are forcing us out of business by going to other countries. I don’t think there is a future for the citrus business in Cyprus,” Mitsingas says. “We were hoping by joining the EU the situation would get better. Some of the EU funding schemes are very good but we used to get export subsidies and these have been replaced by agricultural development schemes which are ok, but not enough. The EU needs to understand that EU countries need support, otherwise they will depend only on third countries which is not correct.”
Andreas Catsellis, general manager of Phassouri Farms, producer of the renowned Red Seal-branded citrus, agrees that serving the traditional markets is increasingly tough but the company has long-standing contracts, which he is determined to continue. “We are looking for other markets but when you are established in a market you can’t walk away, you have to find ways of surviving. You just have to work hard to offer your buyers even better quality.”
Phassouri currently produces 16,000t although with new orchards coming into full swing in the next few years, volumes are expected to reach some 20,000t. The company sends 50 per cent of its exports to the UK, but Catsellis says eastern Europe is an exciting prospect. “Now the western European supermarkets have entered these markets, the standards will gradually increase,” he says.
Fellow producer and exporter Groexport is looking as far afield as Russia and China according to executive director, Frixos Tsakkistos. “If we only manage to target three per cent of the Far East, even that is bigger than Europe, and Europe is becoming very crowded.”
Despite perpetuating an air of doom, Mitsingas is keen to highlight that Lanitis will not be giving up without a fight. The company continues to invest in new machinery and R&D, as well as replanting and restructuring, having already uprooted many of its white grapefruit trees in favour of the more popular ruby varieties, for example.
Mandora is also gaining momentum, Tsakkistos explains. The fruit now comprises almost 50 per cent of the company’s production, which is concentrated in a period of just two-and-a-half months from January to March/April. However, it will be important to invest in newer varieties since, being an isolated country, Cyprus is in danger of getting left behind in this matter. “It is not easy to come in with something new in big numbers when you have fairly small plantations but you can’t offer supermarkets only 1,000t.” Tsakkistos adds.
One way in which producers can add value to their offers is by taking on the additional service of pre-packing, a point which Groexort has appreciated along with a few other producers; “We have been pre-packing for about five or six years. We started with countries closer to us, like Austria and Germany, and we are now experimenting with packing for the UK,” Tsakksistos explains.
Having established strong communication links within the industry, citrus producers are in a more favourable position than other sectors, Mitsingas says. The slickness of the industry is noticeable in the organised systems of packing, which for some are a far cry from the aging set-ups used by other producers.
But the economically-minded Mitsingas is not relying on citrus to secure his future. Lanitis Farms is just one division of the Lanitis Group, which has a finger in everything from property development to an adventure park on the outskirts of the citrus plantation and Mitsingas has already assessed the perks of taking a slice of the tourist industry, Cyprus’ fastest-growing and most lucrative sector.
Groexport’s senior executive director, George Tsakkistos, has also been investigating alternative projects, and is making a foray into the business of processing organic olive oils from local trees. Meanwhile, Sedigep is exploring the possibility of acquiring a stake in the potato industry, having been approached by growers wanting to experience the benefits of a co-operative organisation. “We understood what joining the EU meant very early and employed two full-time consultants and used their expertise to get organised. The bureaucracy is unbelievable but once you do it the growers and the whole company can gain. We are restructuring to take advantage of the opportunities. If you establish the good name of a company people will trust you to take on other trades, says Papadopoulos.”
Potatoes
Cypriot producers have long taken great pride in their potato offer. Grown in the mineral-rich “red soil villages” to the south-eastern tip of the island, these potatoes boast a distinctive appearance and flavour which insiders claim other producing countries would be hard-pushed to replicate. The UK has historically been a favourable market for Cypriots but the supreme presence of the supermarkets has brought questions of appearance into the foreground, which is unfavourable news for Cyprus.
The delicate nature of the red soil potato skins renders them unsuitable for pre-delivery washing - a prerequisite for dealing with UK supermarket buyers. As such, what was traditionally deemed a unique selling point is now a major disadvantage. And while consumers, ex-pats and UK citizens alike, may recognise the superior quality and taste of Cyprus’ product, they are unfortunately not moved to the point of demanding that their preferred supermarket carry them instead of an alternative, washed set-skin variety. Where Cyprus was once exporting some 150,000t of unwashed potatoes to the UK, 50,000-60,000t of which was absorbed by the supermarkets, now the multiples take only 1,000-2,000t.
In the winter season, from November to February, Cyprus enjoys a noticeably favourable position in the market thanks to the warm climate that sets it apart from other European producer countries. However, exporters have been increasingly feeling the pressure of competition from the advancements made, and larger volumes offered, by producers in Egypt and Israel, in particular.
Meanwhile May and June remain the traditionally “difficult” months when northern European crops come into play. International competition is par for the course, say producers, but these days they are facing unprecedented attacks. Having traditionally stood as one united front in the face of such adversity, they are now competing against each other as well.
For the last two years Cyprus’ potato industry has existed in something of a limbo state. Since springing into action in 1965, the Cyprus Potato Marketing Board (CPMB) had monopolised the sector, controlling everything from the volumes of seed imported, to the varieties and volumes produced by every single one of the country’s 2,000-odd potato growers, as well as marketing, agronomical advice and R&D. However, such dictatorial arrangements being prohibited by the EU, the CPMB had to surrender its omnipotence in May, 2004.
The Cyprus government granted the board a two-year grace period to continue operating, but as the expiration date looms the entire sector is on tenterhooks to see whether the government will extend the CPMB’s permit to trade or order its total dissolution.
With some 1,500 growers maintaining allegiance to its tried-and-tested methods, this imminent decision could potentially change the face of the sector beyond recognition.
According to Nicos Genneos, marketing director at the CPMB, 900 growers who formed a grower organisation called Pan-Cypriot Potatoes, widely known as POP, supply the board exclusively, while it is also affiliated with other smaller grower-groups who export their potatoes through other channels as well. The free market situation has naturally made way for several start- up companies, and for the first time last year the industry experienced a fragmented system of exporting.
So how do the growers feel about the upheaval? The fact that so many have stuck with the board suggests they are reluctant to herald the possibility of a new set-up - a point with which Genneos strongly concurs. “The board is going to continue, perhaps without being involved in trade, but the majority of growers want the board to continue in an exporting capacity,” he says. “The potato sector is not ready for the board to stop suddenly. We have 42 years of experience and the new grower organisations simply don’t have that level of experience when it comes to marketing and managing exports.”
This opinion is not shared by all, however, including some who have insider knowledge of the former monopoly.
Andreas Savvides was chief executive of the CPMB for 30 years, from its inauguration until 1995, after which he was nominated as chairman from 2000 to 2001. Two years ago, he established Terra Rosa Cypatat, an exporting company, which he operates alongside his son and daughter, to export the potatoes of 350 growers keen to step away from the board. He says various options were, and are still being, discussed: “Some people believed it would have been better to have a national growers association and they tried to establish that.
“Obviously this has advantages, especially the fact that it would not be a monopoly but an oligopoly. If the organisation could handle 75-80 per cent of the production, that would benefit the growers. The disadvantage of this organisation is that it would be impossible to bring together that 75-80 per cent, especially because until 2004 the CPMB had a policy, which was, according to the growers, in favour of late growers instead of early growers.”
Before joining the EU, Cyprus’ government freely handed out subsidies to growers but it is alleged that “early” spring season growers missed out since they traditionally earned as much as four times the amount accrued for “late” spring crop potatoes, and the government in fact only provided early growers funds to which they were already entitled.
Now that the government is prohibited from administering such financial assistance, it is in the best interest of growers to capitalise on whatever funding they can get, Savvides claims. To this end he is in favour of a more disjointed but co-operative system. “In my opinion it would have been better if we had seven or eight regional potato grower associations. This is encouraged by the EU and they provide grants for such organisations,” he says. “But I would also encourage the co-operation of regional organisations to form a union, for marketing and sales promotion.”
This response may seem unlikely from the former ceo of a monopolistic organisation. Yet, Savvides is fully prepared for such an accusation. “I was running the CPMB as a private business,” he claims. “After I left people were running the office as a bureaucratic operation but you can’t do the business of marketing with bureaucratic principles. In the potato marketing business you have to make decisions and they can’t wait for meetings all the time.”
Rodis Hadjiandreou, sales manager at Roha Premium Potato Ltd, strongly agrees and has welcomed the opportunity to enter the fray, having previously represented the board in establishing new markets in central and eastern Europe. The company was formed just six months ago, as a joint venture between Hadjindreou and his managing partner and experienced producer, Charalambos Orthodoxou. Roha is marketing for a grower group of 27, but others have shown an interest in putting in their lot with the pair for future seasons, Hadjindreou claims, which confirms his belief that regional organisation is the way forward. “Everyone was saying that the potato industry was dying out but all it needs is a transfusion of new blood,” he says.
As well as working towards 100 per cent compliance with EurepGAP and other industry standards, something the industry seems rather badly in need of is updated packing facilities. The board’s biggest packhouse, built in 1976, is due to be relocated from the industrial port of Larnaka nearer to the red soil villages, but plans are on hold until the future of the company has been decided. Meanwhile, Roha is set to construct a brand new 3,000 sq metre facility with three to six sorting lines and a capacity for 5,000t within a year. “It may continue next year but as far as I’m concerned the board is dead. The way it handles business is old fashioned and now we have a good chance to do something better,” he claims.
However, only one year into the new regime, all have a fairly bleak tale to tell. “Last year was a catastrophe,” Savvides recalls. “I have been involved in the potato business since 1960 and I don’t remember a year like last year.”
According to the Cyprus Ministry of Agriculture, export volumes actually increased for both crops: in the winter season volumes rose slightly from 10,642t to 10,977t on 2004, while spring crop volumes were up from 76,164t to 91,867t.
These results say nothing of grower returns, however - both for the 600-650 growers in the four associations assigned to Savvides and the remaining growers affiliated with the CPMB. Despite representing 60 per cent of the growers, the board was only able to export 40 per cent of the total tonnage, which Genneos attributes to other importers purchasing too much seed: a testament to the success of the regulatory system formerly provided by the board, he claims: “Because we could control the total production of Cyprus according to the new season in Europe we always tried to plan what we traded to get the best returns for growers.”
Such was the discontentment among growers that many staged demonstrations for up to a month earlier this year. Some individuals panicked and fell back in with the board, leaving Savvides with only two groups of around 350 growers, which is a real testament to their loyalty, he surmises. “At the end of the day I didn’t receive what I invested on their behalf and I did not pay them what they expected so naturally a lot were disappointed but 350 out of the 600 in the four grower-groups said it was not my fault that we didn’t sell the potatoes.” Savvides says he has encouraged the two dissenting groups not to dissolve completely in view of the financial incentives of being part of a grower organisation.
Like Savvides, Hadjiandreou believes that smaller organisations will be better equipped to deal with the demands of a 21st century potato industry, such as the challenge to find lucrative niche markets. As well as keeping abreast of the latest varietal developments, Roha is already set to benefit from the contacts Hadjindreou made in the new EU member states, although he is keen not to abandon traditional markets completely.
Despite the disappointment of last year, things are looking up for this season. Exporters have reported increased sales for the winter crop and the spring crop has kicked off well, with Saviddes announcing an unusually premature start of mid-February.
The main period of competition is yet to come and Genneos suggests cause for concern. “For this season there is big pressure from Israel and Egypt. Israel is going to have a very big quantity.” However, the European old crop has stabilised after a bumper crop last year and owing to a prolonged cold snap, northern European producers are forecasting a delay of at least two weeks, which is a significant opening for Cyprus, he explains.
Meanwhile, the board’s future hangs in the balance. As a valuable source of information and a central focus for the industry it has served it well and some growers will undoubtedly feel the loss of its governance. But others have relished the opportunity to breathe new life into the sector and take pains to restore the name of Cyprus potatoes to its former glory, and if the weight shifts to this side it seems the sector is indeed set for a dramatic facelift.
Fresh Vegetables and Herbs
Cyprus’ exports of fresh vegetables have fallen alongside potatoes and citrus but after a lull in the last decade, total volumes have picked up in the past five years from around 6,000t to 9,000t, which many attribute to the growing attention to herbs.
Between November and April/May, Cyprus exploits its climatic advantage with winter veg, which includes okra, swisschards, and lesser volumes of cucumbers, colocass and courgettes - the majority of which are destined for the UK. However, the most important products are now coriander, spinach, with methi, parsley, mint, chillies, dill and molohia also making the top 10.
Spyros Petrou, manager of Farm Vegfruit Marketing Co. Ltd and president of Cyprus’ Fresh Exporters Association, says fresh veg is a good business for the country. “The future looks quite good for Cyprus veg, especially in winter when all of Europe is frozen,” he says. “They can’t produce these sensitive, perishable products out of glasshouses but producing in glasshouses is much more expensive and in open fields the products taste much better.”
The summer months are more challenging, however, with temperatures readily exceeding 40ºC. “The problem of quality is not absolutely controlled by us,” Petrou explains. “We use our cold store and transfer products by refrigerated lorries, but there is still time between loading and unloading where the produce is unavoidably exposed.”
Farm Vegfruit markets for 20-30 producers growing various products on a constant basis, from which Petrou selects the best on offer at any one time. Kourtellaris, by contrast is a family-operated growing/packing/exporting business established in the middle of a 500 hectare vegetable plantation - a set-up which proves beneficial, given the ad-hoc nature of the market place, managing director Georgious Kourtellaris explains. “The advantage of being in the fields is that we are the growers as well, and we control everything which means if there is suddenly space on a flight we can turn orders around in 30 minutes.” Elena Rouva of El Saro herbs agrees there are advantages in being based in the area of production. “By controlling all of the logistics of exporting here, unlike most of the major companies which work with a logistics centre in Europe, we can have contact with every client and be very flexible to changes in orders etc,” she says. For instance, Italy reportedly had problems with its dill crops earlier this year, which provided an opening for Cyprus to fill demand.
The seasonal differential in airfreight charges is a significant burden for winter veg producers, Petrou explains. “The cost of airfreight increases in the winter time because the airfreight carriers take advantage of the big demand for our products so it goes up from about C£0.25 to C£0.42 per kg. In summer the number of flights for passengers increases so they all want freight because it doesn’t require any services but still earns them money.”
The packing facilities for veg are not all yet BRC, EurepGAP or HACCP-certified but there is enthusiasm to meet such requirements and developments are apace within the sector.
Alion has been in the veg trade since 1989 but the company only ventured into herbs around five years ago in view of the 15 per cent annual growth in demand for the category. In order to cope with the impending rise in production at its disposal, Alion is constructing what at 2,500sq metres will be the largest packing facility in the main veg-exporting district on the outskirts of Nicosia, set to be finished by the end of the year. Fully compliant with the afore-mentioned certification, the new packhouse will enable the company to approach customers in the UK and other important markets with commercial volumes of herbs. Alion has also invested in glasshouses for its sites in the Limassol region, which boasts temperatures suitable for all types of herbs, as well as in-field facilities for handling sensitive items, such as Basil.
While recognising the stronghold formed by neighbouring Israel in the herb market, Alion’s exporting manager Philip Philipou claims Cyprus still has an advantage in some respects. “We have had a very good response in Dubai, and the Israelis can’t directly get involved in this area,” he says. “Israel is not in the EU and in the winter time no other EU country can grow herbs. We have no tax or duties and our prices are more competitive than the Israelis. We have better weather and people say there’s more flavour in our product than theirs.”
Rouva says El Saro guarantees a good tasting product by keeping chemical usage to a minimum. Its Rosemary, Sage and Thyme crops are naturally organic and the company is working to get full certification for this in the next couple of years. Another method of value-adding is responding to consumer requests, Rouva claims and El Saro experiments with commercialising a couple of new products every year.
Herb exports is still a relatively new venture for Cyprus but exporters of other items are increasingly seeing the value, both to themselves and the horticultural sector at large, of switching crops, which is how Alion started, Philipou explains. “We had to start from scratch and learn all about growing different herbs but the ministry helped us with information. In the beginning producers were very reluctant because they were fixed in their old ways but now they have begun to realise there is money to be made if they grow the items that are in demand.”
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