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AVOCO reports healthy OGR despite challenging market conditions
1 May 2015

Strong end of season demand for New Zealand avocados in Australia has assured AVOCO growers of Orchard Gate Returns in the mid-teens and the export giant’s ability to succeed in all market conditions.

The result, achieved in a year of heavy volume that usually signals low returns, has bucked that trend and been welcomed by the export company's 700-plus growers, many of whom were stung three years ago during the last heavy crop.

Final returns sees AVOCO growers receive prices of around $15 per tray for large size fruit and $14 per tray for small fruit. These returns are 50% higher than what growers received in 2011-12 when tray prices dropped to less than $10 a tray after some exporters over supplied the Australian market.

AVOCO director John Carroll says it's incredibly pleasing that AVOCO had fulfilled its vision by delivering strong returns to growers in a challenging season.

“Not only did we export a record volume of fruit, we were up against a bumper Western Australian crop and trading under more prohibitive foreign exchange conditions.

“Despite these challenges, AVOCO’s estimate of the shift in OGR between this season and the last heavy one is a lift of 50%. Our ability to execute a successful export strategy means AVOCO growers will receive 50% more money per tray.”

Collaboration yields success

During 2011-12, 3.7 million avocado trays were sent offshore. This past season, volumes were 21% higher and the industry set new records, exporting 4.5 million trays out of a total crop of over 7 million trays.

So high were the volumes this year that export earnings are on track to exceed the $103 million generated in 2013-14 when trays prices were in the high 20s. Avocados remain New Zealand’s third largest fresh fruit export.

AVOCO’s share of exports this year was 62%. About two-thirds of shipments were sent to Australia while the remainder was split between the US and Asia and marketed through AVANZA.

“As a joint entity, we’ve created a commercial force that now has the scale to manage harvest volumes and fruit flow better than ever before,” Mr Carroll says. “This has created an environment where AVOCO can maximise returns to growers more effectively than its competitors – in each and every season but especially so when volumes are heavy.”

Lessons learnt during 2011-12 sparked the formation of AVOCO and a desire among avocado industry leaders to work more collaboratively to avoid market collapse. In 2013, export rivals Southern Produce and Primor set aside their differences to form AVOCO and in doing so, became New Zealand’s largest avocado exporter.

A focus of the 2014-15 season was on market diversification and the execution of an export strategy that allowed Australia “to breathe” during potential periods of oversupply. The US, especially, served as a release valve with significant volumes (602,000 trays) shipped to the US through AVANZA in a programme run in conjunction with US-based Mission Produce.

It’s these shipments that helped to strengthen values in the Australian market by helping to avoid a situation of oversupply.

AVANZA, which handles 92 per cent of the industry’s shipments outside Australia, also invested in marketing campaigns across Asia to increase awareness of New Zealand’s “in season” avocados and stimulate consumption. This activity led to export growth across Singapore and Korea with sales in Japan growing by 144% compared to the previous season.

AVOCO director Alistair Young says this season’s result proves that AVOCO is a business that can adapt and succeed in all market conditions.

“Our inaugural season saw our growers enjoy tray prices in the mid to high 20s due to high consumer demand and low volumes. A season of high volume was always going to be different but our growers and expert teams delivered consumers a premium product which saw them coming back for more.”

This was especially the case in Australia where consumption was 30% higher than in 2013-14. Mr Young credits part of the success in Australia to the ready-to-eat retail programmes that ensure consumers will consistently find a ripe avocado at their point of purchase.

“This is where our ripening distribution centres come into their own. Our partners in Australia work hard on our behalf to rework the pallets so ripe avocados are delivered to retailers seven days a week, six months a year.”

The Australian market would always be New Zealand’s life blood, but emerging Asian markets was where exciting new consumption growth was being generated. Work in recent years to develop Japan was paying off where the Japanese are especially sensitive to Western messages about the health benefits of avocados in the media, he says.

With the bulk of all avocado exports to Asia marketed through AVANZA, the “New Zealand” story had also become a key selling point. Kiwi interaction in the market place was welcomed, with Asian customers enjoying regular face-to-face contact with New Zealand exporters, Mr Young says.

“Marketing-wise, we’ve invested time to building relationships across the supply chain and developed some vibrant marketing activity that has raised awareness about New Zealand avocados which ultimately leads to sales.”

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