During the week of March 6, temperatures in Southern California topped the 80 degree mark with clear skies and a bright sun. That meant sunbathers at the beach and strawberry plants popping with volume and size.
A wet February has slowed the early stages of the California strawberry deal and put it well behind an average year. But the rain and the sun has the industry anticipating a strong mid-March and beyond, which should produce very good volume for the popular promotional periods that include Easter (April 16) and Mother’s Day (May 14). Both of those holidays are a bit later in the calendar this year, which matches up very well with the later-than-usual volume.
Published by the California Strawberry Commission each week, “The Pink Sheet” illustrates this year’s timing quite graphically. For the week ending March 4, California sent about 400,000 flats of berries to market. That is quite a bit below last year’s first week of March total of 900,000 flats of berries, and is not even in the same hemisphere of 2015 volume when about three million flats were put into commerce during the first week of March.
Jim Grabowski, director of marketing for Well-Pict Berries told The Produce News on March 9 that volume for his company is on a steep curve for the next three weeks. By the end of March, he said volume should be heavy barring any more crazy rainstorms. “We can handle occasional rain just not six inches in three hours (like their Oxnard fields received during a February storm).”
Grabowski anticipates a fairly strong market through March but as supplies increase in April and move into what is traditionally the California strawberry industry’s peak shipping weeks in May and June, the price should fall.
The Well-Pict executive said there should be promotable volume by Easter and certainly by Mother’s Day. He noted that the Easter pull would typically begin about 10 days before the holiday, which would mean the week of April 3. By then Santa Maria should be in full production and Oxnard certainly will be. However, with Florida and Mexico winding down, he just couldn’t predict that total volume will be at the “promotable” level.
Speaking specifically of Well-Pict’s non-California volume, Grabowski said it has been very strong this year from Florida but by the third full week of March the firm’s harvest crews in the Sunshine State will have passed the baton to their colleagues in the Golden State. “We are up over last year in Florida, but we are about to transition to California,” he said on March 9. “We have about one week left there.”
A look at the latest USDA Market News National Berry Report on March 9 illustrated the increasing volume from California. In just the first three days of the March 6 week, volume was in the 650,000 flat range, meaning this week was almost certainly going to be the first one million-plus week of the season. The previous week, the 700,000 flat level was surpassed for only the second time this season. By the end of March, weekly volume could easily surpass three million flats, which would be on par with 2016, but still only half of the weekly production in 2015.
Watsonville is expected to get started by mid-April, which very well could put California’s production back on track. In 2016, which also had some rain issues, weekly volume from California in April ranged from a low of 4.2 million flats to a high of 6.2 million flats. In 2015, April’s weekly shipments ranged from 5.1 million to 7.25 million flats. For each of the past two seasons, the peak of the season is marked by weeks in which shipments are north of seven million flats. In 2015, that lofty number was reached during seven different weeks from April to early July. Last season, seven million flats were shipped only five different weeks, though the peak week occurred the second week of May when more than eight million flats were shipped. In both years, May was the peak month with shipments being very close to 30 million flats.
Grabowski of Well-Pict said acreage this year is about the same as last year so volume should reach the same lofty levels, barring more weather issues.
Meanwhile, Mexico and Florida have taken advantage of California’s weather-induced slow start.
By March 4, Florida had sent more than 21 million flats to the market while Mexico chipped in with 19.3 million this season. At that same point last year, the two regions were at 10.3 million and 11.8 million respectively. Crunching the numbers it means that in 2017 total shipments have almost doubled. And while California’s rise in production should coincide with a decrease from Florida and Mexico, during the week of March 6, both areas were still going strong. During the first three days of that week, Florida shipped more than 1.4 million flats while Mexico sent more than 900,000 to the U.S. market. It is a virtual certainty that total 2017 shipments from those two regions will far eclipse the 50 million cartons shipped each of the last two years.
This summer, the fledgling World Avocado Organization will launch its first promotion in Europe in an effort to continue to grow that market, which is already the second-largest market in the world, consuming about 800 million pounds of avocados per year.
Xavier Equihua, who is the chief executive officer of both the WAO and the Peruvian Avocado Commission, said the use of the avocado in the European Union and the United Kingdom is still quite limited. Consumption has doubled in the United States in the last decade largely because of the versatility of the avocado and the use of it at virtually any time of the day. Avocado toast has become a darling of the foodies and is emblematic of its acceptance on any plate at any time.
Equihua said that just isn’t the case in the E.U. and U.K. “Versatility is what makes the avocado unique,” he said. “That’s the message we will be bringing to this promotion.”
The WAO executive said there are lots of parallels between U.S. consumers and their European counterparts. He is confident that similar per-capita consumption gains can be made with the right type of promotions.
That view appears to be held by many in the avocado industry who have initially joined the WAO and are launching this promotion. Producers from Peru, South Africa and the United States were the early supporters, but Equihua noted that at the group’s first organizational meeting held in Berlin in February, there were more than 120 avocado producer, exporter and importer leaders from the United States, Peru, Mexico, South Africa, Chile, Brazil, Kenya, Zimbabwe, Colombia and elsewhere.
Jim Donovan, senior vice president of sourcing and logistics for Oxnard, CA-based Mission Produce Inc., is treasurer of the WAO and equally supportive of its goals. He strongly believes that the per-capita avocado consumption level of the E.U. and the U.K. can reach the same levels currently being experienced in the United States. Considering there are more people in that region, that could mean an explosion in demand over the next decade.
Add in increasing consumption in South America and the burgeoning Asian market, and it is a legitimate question to ask where the supply will come from.
“That is the $64,000 question,” said Robb Bertels, Donovan’s colleague and the vice president of marketing at Mission. “The biggest issue we have on a daily basis is making sure we have the supply to support the demand that we currently have in North America and Asia. Chile’s consumption has grown and we expect the same thing will happen in Peru and the rest of South America.”
Equihua agreed that there is a finite number of avocados in the world, but he also expects that production will increase as demand rises. “Some countries are already maxed out, but there is room for growth elsewhere.”
Donovan said that he remembers commenting as far back as 10 years ago at a Hass Avocado Board meeting that the “problem we have is with supply, not demand.” But he added, “That’s a good problem to have.”
The Mission and WAO executive is not overly worried that supply will catch up with demand. Because it takes as long as seven years to get an avocado tree into good production, Donovan said demand can increase faster than supplies but he believes supplies can catch up.
“We will have periods where we are out of balance, but that should lead to a surge of supply, which will put us back in balance again.”
Following the money
As demand increases and the price of an avocado increases, these experts expect avocado acreage to increase. Even in California, which he called “a difficult place to grow” because of water issues and regulatory concerns, Donovan said he has seen renewed interest in growing avocados.
He noted that as land and production costs increased over the years, much of the acreage in his region went to strawberries, which are considered to be a crop with about the best potential for return per acre.
“I know a strawberry grower [in Ventura County] that recently converted a strawberry field to an avocado grove,” he said.
Donovan also said there are increased plantings in several African and South American countries and he also expects countries closer to Asia to increase production as that market is developed.
“We are seeing more interest [in avocado production] in Australia and New Zealand [for supplying the Asian market],” he said.
As demand increases in other parts of the world, another huge question is how the U.S. market will meet its growing demand. That is another question that doesn’t seem to worry these suppliers.
Bertels said while it is true that Mission now has both an office and forward distribution facility in the Netherlands to help satiate the demand in that region, the U.S. market is still its No. 1 market. Most avocados are still grown in North America and South America, with the U.S. being both the closest and the best market — at least for the time being.
For Peru, developing a new market makes great sense and is helping to fuel continued growth on the supply side. For example, Bertels said Mission has new production in Peru that is earmarked entirely for Europe.
Equihua concurred, noting that it makes much more sense to promote in undeveloped markets than well-developed markets. “You get a much better ROI on your promotion dollars,” he said.
With California and Mexico growers facing shorter crops this year, it seems likely that demand is going to exceed supply throughout the summer, which might seem like a questionable time to launch a new promotion in Europe.
But Donovan of Mission disagreed. He takes the long view and believes increasing demand for your product is always a good thing.
Empire Co. Ltd., parent company of Sobey's, announced its third quarter results and the company's new president and chief executive officer was none too pleased. The company recorded a 58.1 percent decrease in its adjusted net earnings — $34.6 million compared to $82.5 million in the third quarter last year.
“Our results are not where they need to be," said Michael Medline, president and CEO. "We have the employees and assets to put much better numbers up on the board. It is up to management to put in place a game plan to aggressively address our cost and customer issues to return Empire to sustainable and profitable growth and, although it will take time, we will deliver such results.”
Medline took over in mid-January with a strong track record of success. Prior to joining Empire, he served for more than 15 years in a variety of senior retail leadership roles at Canadian Tire Corp., most recently as that organization’s president and CEO.
Sobeys reported sales of $5.89 billion for the 13 weeks ended Feb. 4, 2017, a decrease of $137.4 million or 2.3 percent from approximately $6 billion reported in the same quarter last year. The company said the decrease in sales was primarily the result of the continued negative impact of merchandising and promotional strategies in Western Canada; price sensitivity by consumers and their continued shift to improved value; and retail food price deflation.
During the 13 weeks ended Feb. 4, 2017, Sobeys’ same-store sales excluding the impact of fuel sales decreased 3.7 percent from the same period last year.
For the third quarter of fiscal 2017, Sobeys’ gross profit was $1.4 billion, a decrease of $27 million or 1.9 percent. The decrease in gross profit was a result of the factors impacting sales, as well as significant investments made in pricing, particularly in the West business unit.
The Canadian Produce Marketing Association was on Parliament Hill March 9 to support The Great Big Crunch, an event to highlight the importance of childhood nutrition.
To promote The Great Big Crunch, politicians, supporters and local school children gathered on the steps of Parliament Hill in Ottawa to show off their best crunching skills and support for healthy food choices for all.
All members of parliament received an apple to join in the fun courtesy of Algoma Orchards Ltd, and more than 250,000 Canadians took part in The Great Big Crunch, including schoolchildren.
Since 2008, close to 1 million crunches have been tallied as part of The Great Big Crunch. This year marks the event’s 10th anniversary. The Great Big Crunch is supported by the Coalition for Healthy School Food. The coalition is made up of more than 30 organizations across Canada, including FoodShare Toronto.
Mi Pueblo Latin Market Inc., operating out of Colorado, has posted a $100,000 cash surety bond with the U.S. Department of Agriculture. Under the regulations of the Perishable Agricultural Commodities Act, the company was required to post a bond following the company’s involvement in bankruptcy.
The company posted the bond to obtain a license to operate in the produce industry. USDA will hold the bond for three years, providing assurance to the industry that the company will be able to pay for produce purchased and to conduct business according to PACA rules.
In the past three years, the USDA resolved approximately 3,500 PACA claims involving more than $58 million. Its experts also assisted more than 8,000 callers with issues valued at approximately $140 million.