Industry Background
Key Features of Apple and Pear Industry
8. The apple and pear industry in New Zealand is facing some challenges. Many observers consider the industry has reached a crisis point. The poor financial situation of growers has been compounded by the very low returns received this season for a key apple variety, Braeburn. The Braeburn variety makes up approximately 40 percent of the New Zealand crop.
9. Informal soundings from within the industry indicate that many growers are under financial stress and may seek to exit the industry over the next two years.
10. Domestically, the apple and pear industry has been consolidating with average orchard- size increasing. Packhouses have been consolidating, particularly in the Hawkes Bay region with a number of smaller packhouses closing.
11. Off-shore, competition has been intensifying. Overall, New Zealand produces only about 1.3 percent of world pipfruit production. International apple production has been increasing steadily and this trend is expected to continue. The overall demand for apples has been growing at a slower rate than apple production has been increasing. In addition, New Zealand’s window of opportunity for selling pipfruit in the Northern Hemisphere has decreased. A key reason for this has been recent improvements in storage technology, coupled with increased production from other Southern Hemisphere countries (e.g. South Africa and Chile).
12. The market place is becoming increasingly competitive with continuing innovation by existing players and new entrants. Overseas marketers are integrating with producers to achieve economies and overseas retailers are consolidating. At the same time, marketing companies have diversified into other product types. Product lines in apples are becoming more sophisticated. Overall the business has become significantly more complex.
Key Features of Kiwifruit Industry
13. The kiwifruit industry is facing similar strategic trends as the pipfruit sector i.e. the power of retail buyers and diversified competing suppliers.
14. After a long period of relatively low returns, the kiwifruit industry is now experiencing buoyant returns. New Zealand kiwifruit exports account for around 30 percent of world annual supply and, during a small part of the New Zealand selling season (May to October/November), accounts for up to 60 percent of total global sales of kiwifruit. The recent flotation of Kiwifruit International Limited represents a move to diversify and provide 12 month supply.
15. It is expected that the average per-tray payment for growers at FOBS (stowed on board the ship or aircraft on which the fruit is exported) for the export of:
· 50.5 million trays of the main kiwifruit variety ‘Hayward’ will be approximately $7.30;
· 1.4 million trays of organic Hayward kiwifruit will be approximately $9.45; and
· 300,000 trays of the new variety ‘Zespri Gold’ will be approximately $13.85.
16. As a result, production is expanding. For example, in the Bay of Plenty a number of dairy farms are converting to the production of kiwifruit.
17. Overall, there is generally strong positive industry outlook for the next few years.
18. In the light of the advantageous commercial environment for kiwifruit, there was a strong and widespread desire for corporatising KNZ into Zespri Group Limited (although the model of corporate form was widely debated). This desire was reflected in the overall industry support for the recent legislation.
19. That said, and despite the strong returns being generated at present, a significant minority of growers, (around 30 to 40 percent by number and higher by volume), want the export controls on kiwifruit removed. Maori growers particularly are active in this context.
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