Weather squeezes kiwifruit

Tim Goodacre says lessons learned last year has prepared him. Picture / Derek Flynn

Kiwifruit marketer Zespri faces a tough season as record volumes are squeezed into a narrower than normal processing window.

The golden weather that has bathed the upper North Island this autumn has meant a late start to the season, says Zespri chief executive Tim Goodacre.

Like most fruits, fine weather over the spring summer period is good for the kiwifruit crop. But kiwifruit need a cool crisp autumn to begin ripening.

The Indian summer this season has delayed the season by at least two weeks.

With another record crop expected, processors are bracing themselves for a deluge of fruit in the next few weeks.

Goodacre is confident the industry will cope.

"While the start of the season has been a little later than we would have liked, we are up and running now and it looks like we've got good quality fruit."

There were lessons learned last year and we are now well prepared for a big crop, he said.

Last year the industry was expecting to process 75 million trays of fruit but ended up doing 80 million.

"We're comfortable that we'll get the fruit into market on time," he said.

On their own the issues around weather and volumes would not be difficult to cope with, he said.

But they were compounded this year by the ever-increasing impact of the high dollar and an increase in freight costs.

This year foreign exchange costs will cut $52 million off Zespri's bottomline before the season even begins.

Rising freight costs were also going to add another $5 million in costs.

"That's what we have to live with at the start of the season so what we then have to do is try to claw back as much of that as we can. That's not an easy task."

Luckily the late-ripening crop is looking like it will be of a high quality, he said.

That gives Zespri some scope to raise its prices in key markets like Europe and Japan.

Because it is a strong brand and competes at the top end of the kiwifruit market, Zespri can command a significant premium over rival fruit.

The prices it charged would be as good or higher than they were last year, but when that was converted back to New Zealand dollars the return to growers would still be down, Goodacre said.

Zespri has achieved strong revenue growth for the past six years but currency costs are making that increasingly difficult to sustain.

In 1999-2000 the company had revenue of just $650 million - last season it topped $1 billion.

Hedging has buffered returns from the rising dollar, but ultimately that has just delayed the impact.

"There is not much we can do about it," Goodacre said.

"There is only so far Zespri can go to cut costs because marketing is crucial to maintaining its premium prices.

"Luckily demand remains strong around the world.

"We managed to sell a record volume of fruit last year so the underlying demand is there."

Goodacre said there was also plenty of potential for developing new markets for Zespri kiwifruit.

Despite the huge success of the Gold fruit, about 50 per cent of Japanese and Asian consumers had not yet even tried it.

He said that Zespri also had plans to add value to the large volume of fruit that did not make the grade for export.

Zespri has invested in a processing business called Aragorn. The aim is develop kiwifruit as an ingredient for juices and icecreams and yoghurts.

Green fruit has traditionally been considered too tart for processing purposes but the Gold fruit is sweeter and has potential.

So far Aragon has been operating at a loss, however Goodacre said it was a long-term project that had potential to generate real value for growers.