3.10 A Case Study: Deciduous Fruit Marketing
South Africa has for many years maintained a state of monopoly in the deciduous fruit industry with one organisation having the exclusive right to export fruit - Unifruco. This organisation operated under an exclusive arrangement with the Deciduous Fruit Board. It is worthwhile noting that the Deciduous Fruit Board had only one permanent employee. Almost all functions of the Board were carried out on its behalf by Unifruco.
Following the passing of the Agricultural Marketing Act 1996, the exclusive export arrangements for deciduous fruit held by Unifruco (through the Board) were removed and in the first season in excess of 60 export licences were issued. The Board decided that it would be more appropriate for the new situation to be brought into effect at the beginning of the 1997/98 season and therefore the date for deregulation was brought forward from 31 December 1997 to 1 October 1997. During the period from the passing of the Act until 1 October 1997, applications for export permits were considered "more permissively" as the movement to full deregulation took place. It is expected that Unifruco would retain a very large sector of the business through normal competitive actions but that new exporters from within South Africa and from international companies would emerge as contenders in the industry.
During the 1990s Unifruco developed as a marketing organisation handling all deciduous fruit in South Africa. Previously, the function was undertaken by the Deciduous Fruit Board acting on behalf of co-operatives producing the fruit. While the system of co-operatives operating through a Deciduous Fruit Board has not persisted, Unifruco has been able to develop in the form of a private enterprise handling fruit exports.
Unifruco has continued to develop sales for deciduous fruit while at the same time expanding as a technical and marketing organisation conglomerate for other fruit. During 1995, almost 10 per cent of sales were of non-deciduous fruit products - citrus wine and fruit juices.
Unifruco has also invested in subsidiaries dedicated to other sectors of the wider fruit industry. Fresh Cape Juices is an operation owned 65 per cent by Unifruco and 35 per cent by Ceres Fruit Growers to take advantage of Unifruco's Cape brand for packaged juice sales on their established international distribution network.
Vinfruco is a similar operation for international wine sales. This organisation is 60 per cent owned by Unifruco with four local Co-operatives and several smaller wine estates. It has been established to channel wines through larger chain stores in Europe.
The major recent development has been the establishment of Capespan International. In 1994, Unifruco, the grower owned export marketing company, and Outspan (the South African citrus exporter) formed a joint venture company called Capespan International which manages all promotion, transportation and sales for Unifruco and Outspan throughout Europe. The annual sales for Capespan are around $US1 billion with a retailer customer base of approximately 150,000 and around 200 million consumers. The products handled are all deciduous fruits, citrus subtropicals, vegetables, fruit juice and wines.
In addition to the supplies obtained from Unifruco producer members and the supply throughOutspan, Capespan also deals in fruit and produce from other countries where such supply helps to ensure a year round supply situation.
During 1997, intending fruit exporters have been extending their operations into South Africa. However, Capespan International has adopted a strong competitive approach to the question and considers that they will retain the major part of the market share for fruit exported from South Africa. They aim to achieve this result through the use of individual contracts with growers, rather than the statutory requirements of the past.
Based on the ability of Capespan to meet market requirements, it is suggested by Mr Kriel (Managing Director, Capespan International) that the worst case scenario for Capespan would be a loss of 15 per cent of the total export volume (Eurofruit Magazine, February, 1997) with most growers opting to remain with Capespan rather than going to the newer smaller exporters. Capespan has been operated with a view towards future deregulation and the Managing Director therefore considers that the company is well placed to succeed in the future.
However, a strong challenge to the existing "single-seller" situation is developing with major international companies and some local companies challenging Unifruco / Capespan for market share. Examples of such companies are as follows:
3.10.1 Albert Fisher Group
This is a major international company based in the United Kingdom. The Group's United Kingdom importing arm, Saphir Fruit, has purchased Elgin Orchards, a 854 hectare farm with 254 hectares of apples and pears which is expected to supply approximately 350,000 cartons. The Group has also arranged an exclusive contract with the Melsetter Trust for 700,000 export cartons of apples and pears and access to citrus and stonefruit from the Trust farms. Saphir Fruit is expecting to handle in excess of one million cartons of apples and pears for the United Kingdom. The group will also be marketing grapes and is establishing a new citrus packing house. This international group has therefore identified internal investment in South Africa as a way of ensuring fruit supplies for its marketing operations. It will be a significant competitor for Unifruco/Capespan.
3.10.2 Multifruit
Multifruit is the centre piece of the Exacape Group, a major company based in South Africa. It is a subsidiary of Exatrade (an agricultural and industrial commodities trading company 35 per cent owned by the Rand Merchant Bank (a subsidiary of Rembrandt Group (the second largest company in South Africa)). Also in the Exacape Group is the Cape Town Cargo Terminal, a fruit handling, storage and transport company and Longridge Winery, the largest private wine exporter in South Africa.
It is intended that Multifruit will be used to market more than four million cartons of fresh deciduous and citrus fruit in its first season. Multifruit is planning to "form partnerships with fruit growers and through service excellence and transparency, provide smooth passage for fruit from the grower to the end-user" (J Laubser, Managing Director) (Eurofruit Magazine, September, 1997). Multifruit will be establishing its own brand for exports of products into Europe.
3.10.3 Other
Other organisations which have been established to export fruit from South Africa include:
| Arafresh | - | exporting grapes and stonefruit | |||
| Afrifresh | - | exporting deciduous fruit, citrus and grapes | |||
| Cape Five | - | exporting deciduous and citrus | |||
| Green Marketing International | - | seeking niche customers for grapes and stonefruit | |||
| Intertrading | - | exporting deciduous and citrus (previously exporting mangos, avocados and grapes) | |||
All the above organisations indicate strong interest in working directly with growers under production contracts and arranging contracts with specific European buyers. Interpretation of market requirements for accurate targeting of production is seen as an essential ingredient by these organisations. Some of them operated in the export sector during 1996 under limited licences available from Unifruco anticipating the full deregulation and this enabled these "independent" companies to establish export marketing channels.
The continued dominance of Unifruco will thus depend upon the ability of Unifruco to compete with the new entrants to the marketing arm of the industry through the provision of services required by growers and the returns they will achieve. Strong interest in the industry by major organisations reflects the potential for profits to be generated.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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