Zespri expects fruit quality hangover to start lifting this year

Zespri says hard work by its NZ and offshore teams has protected the brand in the fruit quality storm. Photo / Supplied

The multi-billion dollar kiwifruit export industry expects to start getting on top of its fruit quality woes this year while the cost of the problem will become more apparent next month.

Global marketer and dominant exporter Zespri has already signalled a $35 million likely cost to growers of green fruit from fruit loss and quality claims from markets, but the hit to growers of all varieties, including gold fruit, will be clearer when the company gives its next grower returns forecast late in February.

Zespri chief executive Dan Mathieson told the Herald several changed factors will ensure the 2023 crop is better than the disappointing and challenging 2022 season, which was marred by weather-induced softer fruit and a severe labour shortage due to the pandemic.

The New Zealand harvest and post-harvest sector was more than 6000 workers short due to absenteeism and closed borders.

Mathieson said aside from improvements the industry is making throughout its supply chain after a year of intense focus on the fruit quality issue, the available labour force should improve due to seasonal worker immigration policy changes and backpackers returning to the country. The Covid influence would not be so great.

Also, a spring frost which hit some North Island orchards hard last year meant there would be less fruit to manage. While unfortunate, this would give the industry time to make necessary changes to its fruit handling systems.

Mathieson believed a lot of hard work by Zespri teams in New Zealand and offshore to ensure sub-quality fruit did not reach markets and customers had largely protected Zespri’s brand. Zespri is the biggest kiwifruit marketer in the world, last year reporting more than $4 billion in global sales.

“They’ve done a good job with that but it has come at a cost.”

Dan Mathieson, chief executive of global kiwifruit marketer Zespri. Photo / Supplied

The weather had been challenging for the industry in the past two years, Mathieson said.

“Fruit has tended to be softer at harvest which means it has been more delicate to handle across the supply chain. That was compounded by the 2022 harvest happening through the peak of Covid with the result we were around 6000 people short of those normally needed to manage the industry well.”

Asked if the labour drought meant fruit harvesting and packing was rushed, Mathieson said as well as softer fruit, there was “a lot of physical damage on fruit”.

“[That] would have happened at harvest and over the course of processing through the supply chain could turn it into fruit which wasn’t saleable.”

Mt Maunganui-headquartered Zespri has the statutory right to export all New Zealand kiwifruit, except to Australia.

Asked if the fruit quality problem had raised any questions about whether it should retain that right, Mathieson said the industry had performed “very, very well” in previous years but had encountered significant challenges in the 2022 season.

“The industry has a huge opportunity ahead and certainly working together as a united industry is the best way to go after that opportunity. The industry and Zespri very much focuses on that.”

The industry-wide focus on fixing the fruit quality issue and improving quality management systems takes on extra importance with Zespri forecasting larger fruit volumes from 2024.

Meanwhile, Zespri has warned green fruit growers they could be in for a $35 million-plus hit in the pocket due to “much worse” fruit quality than expected in the season’s final shipments.

Mathieson in an update to growers said additional costs associated with the poorer green fruit quality were likely to be more than 60c per tray for growers of green fruit and 50c per tray of green organic.

The amounts had still to be finalised but based on latest information the estimated cost was likely to be more than $35m for green growers and more than $1.5m for organic green growers. The next returns forecast is due on February 24.

In Japan, one of Zespri’s most important markets, the quality issue led to that country being undersupplied by more than a million trays.

Mathieson told the Herald his update was to alert growers Zespri’s November orchard returns forecast had changed, particularly for green fruit returns.

“The indications out of Europe were that fruit quality was a lot worse than anticipated. We are still working the numbers across all fruit groups, but at this time, green is looking worse so we updated growers.

“There will be an update on all fruit groups after the Zespri board meeting in late February.”

Mathieson said gold fruit, which is marketed earlier than green, had also experienced “significant” quality claims and losses. Green fruit sales were in November and December.

Some green growers have been struggling to be profitable compared to their gold fruit growing colleagues. Zespri is considering several initiatives to try to improve their returns.

Zespri’s New Zealand kiwifruit growers were paid $2.4 billion in the 2021-2022 year. (The company also has overseas contracted growers).

The average New Zealand orchard gate return was $124,479 per hectare. But for green growers that orchard gate return translated to $75,494 per hectare, and for organic green producers, $67,752 per hectare. In comparison, a grower of Zespri SunGold fruit received $176,000 per hectare.