AGROVISION CO-FOUNDER ON THE EVOLVING BLUEBERRY INDUSTRY Steve Magami heads up one of the fastest-growing companies in the sector, which he sees as being at a pivotal juncture.
HOW VICTOR MOLLER TRANSFORMED THE BERRY INDUSTRY THE FRESH PRODUCE IMPORT OUTLOOK FOR THE U.S. ANALYSIS OF THE PROPOSED KROGER- ALBERTSONS TIE-UP THE POTENTIAL OF THE AMERICAN MARKET FOR CHILEAN CHERRIES
12 Kroger-Albertsons Merger Poses Challenges for Divestitures It remains to be seen whether the biggest merger in U.S. supermarket his- tory will be given regulatory approval. BY MARK HAMSTRA 16 U.S. Horticultural Imports to Continue to Grow Despite Economic Concerns Growth over the coming years may not be as strong as the previous two de- cades, but the market is set to remain attractive to many shippers. BY TAD THOMPSON 38 Interview with Steve Magami, Chairman and Co-Founder of Agrovision The executive heads up one of the fastest-growing companies in the blue- berry sector, which he sees as being at
46 What is Really Happening With Costs in the Fresh Produce Supply Chain? The harsh reality of soaring prices could cause radical shifts in the industry. BY MASON BRADY 62 Victor Moller Schiavetti: The Admirable Life of a Berry Pioneer The late founder of Hortifrut was a true visionary who transformed the world of berries. BY CLAUDIA CARRANZA CORON 70 Mexican Avocado Sector Bounces Back from a Tough Season Mexico’s smaller crop in the past season may have seen competitors like Peru step up and increase its market share, but the future remains bright for the United States’ neighbor to the south. BY STEVEN MAXWELL
a pivotal juncture. BY EDWARD VERNON
4 Vision Magazine
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9 Foreword BY GUSTAVO YENTZEN 10 On the Radar 22 Produce Trends The Changing Landscape of U.S. Winter Grape Supplies BY COLIN FAIN 26 Opinion As Consumers Demand Change, Evolu- tion Wins the Day BY ALLISON MOORE 28 Market Outlook How High Could Chilean Cherry Exports to the U.S. Go? BY EDWARD VERNON 32 People Power Navigating the New Workforce BY SARAH LOCKYER 34 Marketing Matters Fresh Perspectives on Fresh Produce From the Next Generation BY LISA CORK
50 Industry Chronicle Portabella Mushrooms Sprout from Complex History BY TAD THOMPSON 56 Profile Ruzzamenti’s Role at EFI Fits Her Need to be a Force for Good BY ELLEN URIBE 61 Opinion Will FDA’s New Food Traceability Rules Make Our Food Supply Safer? BY BILL MARLER 68 Vision Chronicle The Revolutionary Invention that No One Wanted to Use: The Shopping Cart BY IVAN FERNÁNDEZ AMIL 76 Pricing and Volume Indicators 78 The World Today
Issue #2 - December 2022 The Import Issue
Contributing Writers Mark Hamstra, Sarah Lockyer, Iván Fernández Amil, Lisa Cork, Colin Fain, Mason Brady, Allison Moore, Bill Marler Photographer Jen Adams Cover Image Editor Johnattan Andaur Illustrator Italo Ahumada Morasky
For editorial or general enquiries, write to us at firstname.lastname@example.org. For advertising enquiries, write to us at sales@ visionmagazineus.com. Vision Magazine is published by Yentzen Group. Address: Ave. Apoquindo 4775, Office 1504, Las Condes, Santiago, Chile. Vision Magazine is distributed to retailers, produce buyers and other industry executives in the U.S. and Canada six times a year. The magazine is not responsible for the content of advertisements or sponsored content. Opinions expressed by columnists and contributing writers do not necessarily reflect the views of the magazine.
Publisher Gustavo Yentzen Editor
Edward Vernon Deputy Editor Ellen Uribe Art Director Roberto Ganzon Writers Tad Thompson, Steven Maxwell, Claudia Carranza Coron
Ad Sales Manager Macarena Osiadacz Printer Thomas Group Printing
6 Vision Magazine
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The End of an Era
W e are coming to the end of possible cancer cures, the return to the moon, a Malaria vaccine, and increasingly sophis- ticated artificial intelligence. But this year has also seen the return of many old things - challenges that we thought we had left behind in the past, such as runaway inflation, pos - sible wars on a global scale, and widespread social unrest. In September, Queen Elizabeth II, Head of State of the United Kingdom and Common- wealth countries, passed away. She ascend - 2022, a year that has brought us many new things including innovation, new technologies,
year from Chile. His solution: partnerships. He met with the Michigan blueberry and Cali- fornia strawberry growers and told them that they would be stronger working together. This alliance allowed them to create a platform that would supply berries in North America 52 weeks a year and establish a common brand for the end consumer. Naturipe was born, and the rest is history. In this second issue of Vision Magazine, which is themed around imports, we feature an article illuminating the history of how Mr. Moller transformed the berry industry. We also have an exclusive interview with Steve Magami, chairman and co-founder of Agrovi -
by GUSTAVO YENTZEN Publisher of Vision Magazine
ed the throne at the age of 25 in 1952, when Winston Churchill was prime minister, India had just gained its independence and the U.K. still ruled over parts of Asia and Africa. Over the years, her vision, dedication and hard work led to her becoming a symbol of stability that helped the country weather the disintegration of the empire and the Cold War, and in her later years, face Britain’s complicated exit from the European Union. Her death marked the end of an era. In October of this year, Mr. Victor Moller Schiavet - ti, founder of Hortifrut, and, undoubtedly, a monarch of the berry industry, also passed away. His contribution to the sector is incalculable. He pioneered berry exports from Chile to the U.S., Europe and Asia, offering consum - ers counterseasonal fruit. But his genius was not just in opening markets - it was in solving the challenge of how to maintain a commercial office year-round, knowing that he could only supply customers for a few months of the
sion, one of the fastest-growing companies in the blueber- ry sector. I am sure many people will find value in reading his perspective on the future of the industry. We also have feature reports on the outlook of produce imports into the United States over the coming years, and on prospects for the Mexican avocado industry. There is also analysis on one of the biggest topics in the American grocery sector to come along in years: The proposed merger between Kroger and Albertsons, two of the country’s largest supermarket chains. In addition, we have articles on the potential of the U.S. market for Chilean cherries, perspectives on fresh produce from next-gener - ation marketers, the fascinating story about the origins of the shopping cart, opinion on the FDA’s long-awaited Food Safety Modernization Act’s final rule, and advice on how leaders should navigate the new workforce. I wish you an excellent end to the year, and a prosper - ous 2023.
Vision Magazine 9
On the Radar
Food Inflation Drops for Second Straight Month
Produce Industry Icon Jim Prevor Passes Away
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose by 7.7% year-on- year in October. This is a slower pace of increase than the 8% that many economists had been
expecting, and the lowest annual inflation reading since January. Food price inflation declined for the second month in a row to 10.9% year-on-year, according to the USDA’s Econom - ic Research Service (ERS). This is down from a high of 11.4% in August.
Farm-Level Economic Uncertainty Remains
The Purdue University/CME Group Ag Economy Barometer, which is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey, came in at a reading of 102 in November, unchanged from October. High input costs continue to weigh on producers’ minds with 42% of respon - dents in this month’s survey citing that as their top
Jim Prevor, the founder and edi - tor-in-chief of publications includ - ing Produce Business magazine, suddenly passed away in November from heart failure. He was a pro - duce industry icon and maverick thought-leader. On this earth for merely 61 years, Jim was a force of boundless energy and enthusiasm for the perishable food and fresh produce industry in which he was born and carried a rich family legacy. Jim is survived by his wife Debbie, sons William and Matthew, and loving extended family and friends.
Kroger and Albertsons Announce $24.6B Merger Plans concern in the year ahead. Slightly over one-fifth of respondents chose rising interest rates, while 14% cited input availability and declining commodity pric - es as a top concern. Nearly 80% of respondents indicated now is a “bad time” to make large investments in farm machinery.
Kroger and Albertsons Companies, two of the United States’ largest supermarket chains, on Oct. 14 an - nounced plans to merge in a deal that could change the country’s food retail landscape. Kroger said it would acquire Albertsons for $24.6 billion. The two companies have about 5,000 stores across the country under chains like Ralphs, Safeway and Vons.
The chief executives of both companies defended the merger to the U.S. Senate committee late in November. Kroger said in early December that it still expects to complete the deal in early 2024.
10 Vision Magazine
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Kroger-Albertsons Divestitures Challenges for Merger Poses
K roger’s proposed acquisition of Albertsons for $24.6 billion would be the biggest merger in the history of the U.S. supermarket industry, if regulators approve the deal. The combined companies would operate nearly 5,000 supermarkets across the United States, with stores in nearly every state, operating under dozens of different banners. In the fiscal year that ended Jan. 29, 2022, Kroger, which is the largest operator of traditional supermarkets in the U.S., reported sales of $137.9 billion, and an oper- ating profit of nearly $3.5 billion. Albertsons, the num- ber-two supermarket operator, reported revenues of $71.9
It remains to be seen whether the biggest merger in U.S. supermarket history will be given regulatory approval.
by MARK HAMSTRA
12 Vision Magazine
merged company would reduce competition, and thus be free to raise prices even more. Observers say that is unlikely, however, especially given the intense competition that Kroger and Albertsons face from Walmart, Costco, Aldi and other low-price operators. Still, the Federal Trade Commission will likely look at market share on a market-by-market basis to deter- mine where the companies will have to divest individual locations. The challenge will be finding buyers for those stores. Kroger and Albertsons have already suggested that they will spin off between 100 and 375 stores to satisfy regulators, and form a new company that would be able to compete on its own. Several observers have suggested that they may need to spin off even more stores, and that cobbling together a viable company made up of discarded stores could be difficult. “In Southern California, for example, Albertsons and Kroger have about 540 stores altogether, and maybe as many as a third of them might have to be spun off,” one observer said. That’s in part because Walmart has a limited presence in Southern California, compared with markets such as Dallas, where Kroger and Albertsons also both operate, but Walmart has a much stronger presence and would be seen as a competitive counterbalance. Kroger, which is based in Cincinnati, has a strong presence in the Midwest and along the Mid-Atlantic coast, The companies said the merger would generate an annual run rate of about $1 billion in synergies after the first four years.
A Kroger supermarket in Indianapolis, Indiana
billion for the fiscal year that ended Feb. 26, 2022, and operating income of more than $2.4 billion. The companies said the merger would generate an annual run rate of about $1 billion in synergies after the first four years, in areas such as purchasing not-for-resale goods, technology, supply chain and manufacturing, and general and administrative costs. The biggest question mark surrounding the proposed merger is whether or not federal antitrust regulators will allow the merger to take place, especially at a time when grocery price inflation is rising, with prices up 12.4% in October, compared with a year ago. The fear is that the
Vision Magazine 13
An Albertsons store in El Paso, Texas
while Albertsons, based in Boise, ID, operates a large per- centage of its stores in California and the Pacific North- west. It also has a strong presence in the Chicago market, where its 188-store Jewel Osco banner operates, and where Kroger owns the 44-unit Mariano’s Fresh Market. Part of the challenge in markets like Chicago and others where the two companies overlap is that regulators will likely require the company to divest stores to other operators rather than close them. It may be difficult to find buyers for individual locations or even small groups of stores, the observer said. “Would they want to give up Mariano’s in exchange for Jewel? Maybe,” the person said. “But if they just want to sell 12 Mariano’s — would somebody buy those stores?” In addition, the merger would give Kroger a presence in the densely populated Northeastern U.S., where it current- ly does not operate. Albertsons owns the Acme super- market banner, which has about 164 store locations in several Northeastern states, in addition to the Shaw’s and Star Market banners, which have about 150 stores in New England. Albertsons also recently acquired the Kings Food
Market and Balducci’s Food Lover’s Market stores, two upscale supermarket chains operating about 25 locations in the Northeast and Mid-Atlantic. In the Western U.S., the two companies will have significant overlap. In Washington state, for example, Albertsons operates 216 Safeway and Haggen stores, while Kroger operates 114 Fred Meyer and QFC stores, according to local reports. And in neighboring Oregon, Albertsons has 121 supermarket locations, under both the Safeway and Albertsons banners, while Kroger has 51 Fred Meyer and QFC stores. In a recent filing with the Securities and Exchange Commission, Albertsons noted that it has a No. 1 or No. 2 market share in 68% of the 121 metropolitan statistical areas (MSAs) in which it operates. Even when combined, however, Kroger and Albertsons would have significantly less share of the total grocery market in the U.S. than Walmart. A recent report in The Economist pegged Walmart’s grocery market share at about 25%, compared with about 19% for the Kroger-Alb- ertsons combination.
14 Vision Magazine
U.S. to Continue Imports Horticultural to Grow Despite Economic Concerns Growth over the coming years may not be as strong as the previous two decades, but the market is set to remain attractive to many shippers.
by TAD THOMPSON
T he United States market looks set to continue to import rising levels of fresh fruit and vegetables. The value of imports is expected to remain on its upward trend in 2023, driving total horticultural imports to surpass a major milestone, according to a recent USDA report. And further into the future, as key Latin Amer- ican production countries continue to ramp up production, a huge amount of that extra volume is poised to be sent to the market. Throughout history, the fresh produce industry has overcome many ancient challenges. As previous hurdles were cleared, new problems that were unfathomable 50
years ago now flourish in modern daylight. Nowadays, fresh fruit and vegetable grower-shippers must consider global market saturation, economic trends, developing consumer tastes, environmental concerns, deadly pan- demics, currency exchange rates, military invasions, international trade barriers and certainly crop conditions in competing fields and orchards — not only across the fence — but on the planet’s far side. Since the beginning of time, across the globe, agricul- tural production has always been a gamble. Even today, rain, drought, wind, freezes, insects and disease lurk as possible disasters for all crops. But in perishables, time is
16 Vision Magazine
Refrigerated cargo ship Knud Reefer offloading grapes from Chile at the Port of Los Angeles in April 2020.
The value of total U.S. fruit imports (including fresh, processed and frozen) rose nearly five-fold from $4.8 billion in 1999 to $22.7 billion in 2021, according to the USDA. Total vegetable imports grew at a similar rate from just $3.6 billion to $15.8 billion over the same period, while tree nut imports to the U.S. jumped from $833 million to $3.2 billion. All this growth cannot be attributed to population growth alone, which grew by just 19% over the period. Import volume growth is attributed in large part to longer production seasons, liberalized trade agreements, comparatively lower foreign exchange rates, and increased consumer demand for year-round availability of many types of fresh produce. This impressive growth is showing no signs of slowing down. In the fiscal year 2022 (which ended Sept. 30, 2022) total agricultural imports, of which almost half are hor- ticultural products, grew by 19% in terms of value. This is their largest year-on-year percentage increase since FY 2011, according to a report by the USDA’s Economic Research Service (ERS) and the Foreign Agricultural Service (FAS). “The historically large increase […] is a product of the unwavering upward trend of import volumes in the face of increasing unit values for nearly every agricultural import product group,” the report said. Today’s global view The future may not always be so rosy, cautions veteran pro- duce consultant Dawn Gray. “It is a big, complicated world. But it is also a little tiny world. We all follow each other around,” says Gray, adding “Southern Hemisphere produc- ers ask each other: ‘What was a good market for you?’” She notes that when fruit exporters heard that Viet- nam was paying great prices, “everybody went to Vietnam and crashed the market. Vietnam was great for about five minutes. These markets look big, and they are big, but they can’t take the entire world dumping their fruit into them all at once.” Through health and logistics, the Covid pandemic dealt a blow to previously booming Chinese and Indian economies, impacting the fruit markets, Gray says. Now, North America may very well be the beacon of hope for the fresh produce industry. International grow- er-shippers eye 370 million people living in the United States and Canada. They see that American experts “may argue on various television channels about the state of the economy,” but U.S. commerce is still stronger than most places. As a consequence, Gray says global trade seems to have made a broad decision to go to North America. The U.S. has long been self-sufficient in food. But as
always on the attack as each tomato, berry and basil leaf is plucked by a harvester — if one can be found. Even as for- tunate perishable crops survive initial weather threats, it is always a rush to market for fresh fruits and vegetables. Gradually, a plethora of technological advances ad- dressed perishability and extended timelines to stretch the geographic reach of fresh fruit and vegetable consumption. Today, refrigerated trailer temperature monitors guard produce traveling quickly across modern highways. Fruits and vegetables, bred for long shelf life, are now routinely carried between continents by sea — or through the air — in sophisticated refrigerated containers.
Vision Magazine 17
Shelves of fresh fruit and vege- tables at a supermarket
Near-term outlook In the near future, produce imports are indeed expected to rise. In an ERS-FAS report published in November 2022, the authors say that horticultural imports into the U.S. are expected to edge past the $100-billion mark for the first time in FY 2023, rising 3% year-on-year. The category’s growth is largely driven by expected increases in fresh fruit and vegetables, which are set to rise by 4% and 6% respectively. For fresh fruit specifically, the report notes that the forecast rise is due in part to ongoing droughts in key fruit-producing areas of the U.S., high production costs, and an ongoing decline in citrus production. At the same time, favorable production is expected in major export- ing countries in South and Central America. From South America alone, agricultural imports are due to rise by 6% year-on-year in FY 2023 to $22.8 billion, “due to a good production forecast for fresh fruits and vegetables for the region,” the report says. Generally, the report adds that the strong U.S. dollar makes foreign agricultural goods comparatively afford- able for the U.S. domestic market and partially accounts for moderate upward pressure on import volumes. However, current economic conditions are likely to mean that the import increases in FY 2023 are not quite as high as in the previous couple of years. The report notes: “The upward pressures on U.S. imports are expected to be tempered by a slowing economy coupled with continuing inflation, which would slow domestic demand for con- sumer goods as well as agricultural products. Though ag- ricultural products would be less impacted by these ebbing
consumer expectations grew with the luxury of year- round produce sourcing, successful foreign suppliers gained momentum and further accelerated demand. Meanwhile, U.S. growers faced increasing internal cost and supply problems, opening even wider doors for production outside the U.S.’s borders. Dante Galeazzi, president of the Texas International Produce Association, based in Mission, TX, observes that competitive setbacks for U.S. growers are advantageous not only for his Mexican produce constituents but for growers around the world. While the produce industry once was characterized by seasonal availability gaps, production extended to many fertile corners of the earth fulfilled con- sumer demand and then served expanding expectations. Broadly speaking, Galeazzi says the North Ameri- can market will import increasingly large volumes of fresh produce because the population is growing. And far beyond eating to avoid starvation, sophisticated North American consumers are gaining knowledge in food and health, especially after the pandemic. Galeazzi further notes that with inflation, supplemental nutrition such as vitamins will be replaced because of the cost of fresh fruits and vegetables. “Fresh is far more affordable,” he says. “Families want health, but they need it in a budget-friend- ly form. That is the direction we’re going to go.” Eyeing continued North American produce import growth, Gray notes: “Some of it will be targeted, planned, strategic partnerships and carefully thought out, and some of it will be based on that wonderful agricultural activity — hope. Time will tell, but in the immediate term that is the way I would read the tea leaves.”
18 Vision Magazine
factors as consumers prioritize consumption of food and other necessities over more non-essential goods, some impact on agricultural import demand is still likely.” Production rises in key supply countries But looking further ahead than FY 2023, it seems like- ly that the rate of fresh produce import growth will be stronger than that year, especially when considering the production increases that are set to come from some of its biggest Latin American suppliers. USDA figures show that in 2021, Mexico — by far the U.S.’s biggest foreign supplier of both fruit and vegetables — sent 625,995 truckloads of fresh produce to the market. This is a leap from 260,992 truckloads in 2007. From his Texas office, Galeazzi says Mexico’s growth is attributable to a long list of resources for the industry that are difficult or less available for U.S. producers. Labor is starting to be a challenge for many growers in Mexico, but unlike in the U.S., there is still a good labor pool. Also, in America there are major water shortages across the country, not only in California, and agribusi- ness is strained by competition for land, and high levels of regulatory compliance and oversight. Agrochemical prices skyrocketed in 2021 and transportation costs have gone up dramatically over the past three years. All these factors drive up final costs, which then push a certain amount of production outside the United States. Increasing U.S. production costs, growth of knowledge and experience in Mexico, and the speed and ease of commu - nication spurred a wider variety of commodities being grown outside the U.S. Mexico has grown strawberries for 30 years, but that production has exploded in the past decade. Now every major U.S. berry producer has Mexican berry production, according to Galeazzi. Additionally, now there are more high-value items produced with very good results in Mex - ico. For example, proprietary grape varieties and other high-value specialty programs have been tailored as part of a planned production system to meet consumer demand — especially American consumers who go to grocery
stores and expect these items to be there all year. Imports of horticultural products from Mexico between 2016 and 2021 soared by 61% from $18.1 billion to $29 billion. And in 2022 through September - the last month with data available at the time of writing - imports were running 15% higher than 2021, above the average of 13% across all supplying countries. Another important fresh produce supplier to the U.S., especially for fruit, is Peru. Imports from the South American country have skyrocketed over recent years. The country has shot up the rankings from just the 14th big - gest fruit supplier to the market in 2011 to the third largest in 2019, FAS data shows. If recent trends continue, it will take Chile’s number-two spot within the next few years. Speaking about table grapes - one of the stars of Peru’s fruit exports of the past few years - Mark Greenberg, pres - ident of Montreal-based Capespan North America says: “Peru is absolutely rocking and rolling, 100%, because of excellent fruit. “There is a wonderful climate. The growers are big and sophisticated, and they have desirable varieties. Peru used to be known for Red Globe grapes, but in the past decade it has moved to seedless and proprietary seedless varieties. The country has ideal conditions. Rarely are there water problems for irrigation. Peru produces a first-rate product. Everything grows there. If you plant a new vineyard in northern Peru — Piura or Chiclayo — you’ll have produc - tion two years earlier than you would have from a new vineyard in Chile or California. The produce grows well, and it grows fast. The product is absolutely great.” Looking at the U.S.’s imports of horticultural prod- ucts from Peru from 2016 to 2021, these grew at an even faster pace than Mexico’s, almost doubling to $1.6 bil - lion. And through September 2022, they were up by 35% year-on-year, more than any other major supplier. With big production increases expected over the coming years from numerous fruit crops like blueberries, avocados and table grapes, the U.S. market will surely see rapidly rising import volumes from the country for a while to come. Elsewhere in Latin America, fruit producers are also
The value of U.S. fruit imports rose nearly five-fold from $4.8 billion in 1999 to $22.7 billion in 2021.
Vision Magazine 19
Fresh produce is unloaded from a Seatrade ship at the Gloucester Marine Terminal
targeting the U.S market. Colombia’s position reflects that of growers in other countries. While Colombia is a major banana and fresh flower source for North America, the U.S. is a dream market for producers of other commodities. Even for bananas, Colombian produce export volumes histori - cally have been heavy to the European market. But those exporters are making a concerted effort to develop sales to the U.S., according to Giovanni Andrés Gómez, executive director of the National Association of Foreign Trade (Anal - dex), a non-profit entity promoting Colombia’s exports. Like many other countries around Latin America, Co - lombia is working to gain USDA phytosanitary clearance for various items like lemons, mangos and passion fruit to be exported to the U.S. Such goals will take years, but when they are achieved they will open up opportunities for ex - porters to ship even more produce to the market. What the future holds Looking ahead to the coming several years, agricultural imports to the U.S. are expected to remain strong, accord - ing to a USDA report published in February 2022. The re - port says the value of U.S. agricultural imports is projected to increase by an average annual rate of 6% through 2031, “as domestic consumer spending is expected to remain strong over the next decade combined with domestic pref - erences for an array of agricultural goods that continue to exceed domestic production.”
Agricultural imports are forecast to rise by 60% from $163.3 billion in 2021 to $261.3 billion by 2031. The vast majority of that growth is set to come from horticultural products, with other agricultural categories like grains and feeds, and livestock, dairy and poultry, all forecast to be relatively flat. Imports of fresh fruits and vegetables are forecast to rise by 48 percent from $26 billion in 2021 to $38.5 billion in 2031. Importantly, the report notes that the nearly $100 billion increase forecast in agricultural imports between 2021 and 2031 would be the smallest 11-year percentage increase going back to 1990–2000. So even though volumes are still set to rise significantly, it is not expected that they will grow quite as fast as they have done over recent decades. In any case, with global production of many fruit and vegetable items set to rise substantially over the coming years, it remains to be seen just how aligned rising import volumes will be with rising demand. If the former outpaces the latter, it could lead to significant pressure on the market. However, there is no doubt that fresh produce imports will continue to remain strong over the coming years. “We want to believe that good business will prevail,” Gray says. “I think that it is going to be very interesting to watch to see if global production — and especially Southern Hemi - sphere production — takes the point of view that North America is going to be their new beacon of hope.”
20 Vision Magazine
Changing Th e
Supplies by COLIN FAIN AT AGRONOMETRICS The dramatic shift in market dynamics during the last five years is striking.
22 Vision Magazine
T he United States is one of the major importers of table grapes in the world, second only to Europe. Over the past 10 years, from the 2012- 13 to the 2021-22 season, U.S. table grape volumes increased by 25.8%, with imports from Peru growing sevenfold, USDA data shows. Peru usually dominates exports to the U.S. during December and January due to seasonally higher prices. The U.S. and Chilean shipping seasons overlap only in December. As Peru’s season subsides, the Chilean season commences. Although Chile is one of the lead- ing global producers, imports to the U.S. from the country have decreased significantly during the past five years. Influence among suppliers in the southern hemisphere has substantially changed as a result of Peru’s emergence as a major supplier. Particularly, Peru has taken a sizable chunk of Chile’s former share in the U.S. import market. Looking at the first two charts on the next page, the dramatic shift in market dynamics over the last five years is striking. Being further north in the country, the table grape harvests in the Atacama and Coqui- mbo regions of Chile are early in the season, generally in December and February. These grapes have been the most affected by the growing volumes arriving from Peru. At the same time as there is in- creased pressure from volumes, the average spot market prices of table grapes in the United States have not increased substantially over the pre- vious ten seasons. This means that
At the same time as there is increased pressure from volumes, the average prices of table grapes in the United States have not increased
substantially over the previous ten seasons.
the increases in input and transpor- tation costs have been borne by the supply chain, squeezing margins and increasing pressure on producers.
maturation in the country is expedit- ed by ideal growing conditions and a daily average of 12 hours of sunshine. According to the USDA Foreign Agricultural Service, these con- ditions, combined with precision irrigation, enable Peru to mature vines 55% faster than in neighbor- ing countries, thus facilitating the country to adapt swiftly to market
Outlook for Peru Table grape production in Peru
occurs predominantly in two areas along the coast: Ica in the south (41%) and Piura in the north (22%). Vine
Table grape volumes by origin in the U.S. market
Italy Peru Spain
Source: USDA / Agronometrics
Vision Magazine 23
Table grape volumes in the U.S. in 2016-17
needs and adopt superior cultivars. The U.S. market accounts for 41% of Peru’s grape exports. In order to increase its marketing potential, Peru is constantly explor- ing new producing regions in both the north and south of the nation for prospective investments. Given the growing demand for grapes in the U.S., the EU, and China, we may anticipate Peru to continue gaining market share. In the 2022–23 cam- paign, Peru is anticipated to overtake Chile as the world’s top exporter of table grapes in terms of volume. Outlook for Chile While the majority of North Amer- ican grapes are protected types, which are varieties higher in demand by global consumers such as the prime seedless, only a fraction of Chile’s grapes are protected. It has taken until this coming season for the Chilean industry to expect new varieties to make up more than half of the export supply. If the country fails to adapt to this new varietal exchange, it risks losing a significant portion of its primary markets, such as the United States. Chile has also suffered from subop- timal weather, specifically severe droughts in the last decade. The decreased profitability of table grapes has led to significant structural changes, including a re- duction in planted area and replace- ment of grape varieties. The ratifi- cation of the long-awaited Systems Approach for Chile’s exports of table grapes, however, is a quantum leap in the right direction. This significant agreement will benefit not just Chil- ean producers, but also the whole U.S. supply chain, including ports, logis- tics operators, importers, retailers, and, of course, consumers.
Italy Peru Spain
Table grape volumes in the U.S. in 2021-22
Italy Peru Spain
Source: USDA / Agronometrics
Table grape per-kilo prices in the U.S. (as reported)
Source: USDA / Agronometrics
24 Vision Magazine
Víctor Moller In Memoriam
Your vision brought Fresh Berries to the World December 13, 1942 - October 19, 2022 The domestic seasonal berry category was forever changed the day you brought a few flats of berries on your lap on a flight from Chile to the US. Today, the multi-billion-dollar berry industry thrives because of your vision to bring,“All Berries, To All The World, All Year-round”. Your passion, enthusiasm and visionary spirit was unprecedented and the world was captivated by you. From being the first international member of the PMA board, to Global Produce Marketer of the Year and the ultimate honor of being awarded International Entrepreneur of the Year, you proved that in every challenge you took on, that you did so with the trailblazing spirit that will live on in your businesses and your family forever. The foundation of multi generational farming is in the Moller’s Family DNA and will ensure carrying the torch from one generation to the next. You changed the lives of everyone who knew you and thousands more that were never so lucky to cross
We will miss your partnership, passion and laughter. Your Naturipe Family
As Consumers Demand Change, Evolution Wins the Day A multitude of produce varieties across all categories and strong trade agreements bring improved deliverables.
fruit did not cause harm to domestic blueberry production. Further, the USITC pointed out in their cucumber and squash findings that U.S. growers face challenges unrelated to imports. When the USITC failed to erase their competition, Florida agricultural groups again tried to stop imports by asking the U.S. Trade Representative (USTR) for a Section 301 investigation into all Mexican produce imports. The USTR rejected the request. These are just a few examples in a long line of trade actions where those growers have attempted to limit their com- petition instead of looking internally and finding ways to evolve along with others in the industry. Despite repeated attacks, the importance of trade in supplying quality fresh produce continues to win out over protectionism. And evolu- tion beats out stagnation. Companies that truly see the value of evolution in the North American marketplace continue to find new varieties, adopt new growing methods and find new partnerships in order to fill grocery shelves with the fresh, colorful and healthy produce items that consumers buy week in and week out. This evolu- tion will be vital to the supply chain’s continued success. Even as they fight evolution, many of trade’s biggest detractors are also becoming trade’s largest adopters. You see more trade detractors from areas like the Southeast working with grow- ers in Mexico, partnering with Cana- dian operations, or even expanding to other U.S. growing areas with more beneficial climate and soil conditions. As they are starting to learn from their peers in the industry, it’s a matter of evolution or extinction. • Allison Moore is the executive vice president of the Fresh Produce Associa- tion of the Americas.
by ALLISON MOORE
I f you look across the produce department of most major grocery stores, even in the cold winter months, you see a wide and ever-changing variety of fresh fruits and vegetables. This array of availability is in large part due to North American supply chain integration over the past several decades and strengthened by our strong trade agreements. The recent negotiations that led to the creation of the United States-Mexico-Canada Agreement helps the region build on the certainty started under the North American Free Trade Agreement in the 1990s. The world of produce has evolved during the decades of stability with our trade partners. Produce suppliers want to provide consumers with the quality and variety of fresh produce items they expect. More and more, that means companies in the Unit- ed States and Canada are expanding into Mexico because of the beneficial climate, diverse growing regions, and broad adoption of protected agricul- tural practices making it possible to
grow all of those items that make a produce department competitive. Unfortunately, while many compa- nies have looked for ways to adapt and innovate to meet changing consumer demands, mitigate climate chal- lenges and adopt improved growing methods, there are some growers that resist evolution to their own detriment. Instead of evolving, some growers try to regulate their way to competitiveness. For example, grow- ers in the Southeast of the U.S. pushed authorities during the previous Administration to initiate a series of U.S. International Trade Commission (USITC) investigations on blueberries, bell peppers, strawberries, squash and cucumbers. Instead of giving them the results they wanted, the USITC investiga- tion on blueberries and its report on cucumber and squash showed what many already knew: Imports are needed to meet increasing U.S. con- sumer demands for a broader range of fresh produce items. In the case of the blueberry investigation, the USITC voted unanimously that imported
26 Vision Magazine
Exports to the U.S. Go? As the world’s biggest cherry exporter seeks less reliance on China, its second-largest market appears ripe for expansion. Chilean How High Could
by EDWARD VERNON
T here are few fruits more popular in China than cherries. As consum- er spending power has grown, so too has demand for the fruit, whose red hue represents pros- perity and fortune. Cherries imported during the winter in particular have become somewhat of a status sym- bol, in part due to their higher price tag than most fruits. Arriving in peak volumes for the Chinese New Year, which typically falls between late January and mid-February, cherries are the perfect gift to give friends and loved ones. These factors have led to stag- gering growth in shipments during
recent years from Chile, by far the world’s biggest cherry exporter. The country’s total exports of the fruit rose from around 19 million boxes (95,000 tons) in the 2016-17 season to a little more than 70 million boxes (350,000 tons) in the 2021-22 season. Incentivized by the higher prices, Chile during the past few years has been sending more than 90% of its exports to the Chinese market. But this high reliance on a single market has put Chile in a challeng- ing position, and the South Ameri- can country is now beginning a big market diversification effort, and one of the main secondary markets is the United States. The question now is
what levels could Chilean cherry ex- ports to the U.S. reach in the future?
The need for diversification In this equation, one thing is certain: There will be no shortage of cher- ries for U.S. buyers. The fruit has undoubtedly been the star of Chile’s fruit industry over the last decade. As production of other high-value prod- ucts like avocados and table grapes has struggled due to various fac- tors, such as climate-related issues, production of cherries have soared. With many young trees yet to start producing or reach full production - and many more trees likely to be planted by growers in the near future
28 Vision Magazine
around 3 million boxes. A report pub- lished in October 2022 by Rabobank, a Netherlands-headquartered financial bank, noted that U.S. imports of cher- ries from Chile from January through August 2022 showed an uptick of 131% year-on-year, with record volumes in January and February. Claudia Soler, general manager of the Cherry Committee of Chile’s Fruit Exporters’ Association (ASOEX), says the organization expects the U.S. market to become increasingly im- portant for exports over the coming years. “It is for this reason that our investment in marketing has also been increasing at annual rates of over 25%,” she says. “This season we will launch a marketing program that includes not only retail ads but also consumer promotions.” In the short- term, she expects that volumes will reach more than 7 million boxes. Alcaíno expressed a similar view, saying that exports to the U.S. could double year-on-year in the 2022-23 season. He adds that the potential of the U.S. market is “very high.” The industry veteran says that a basic exercise to analyze the po- tential can be done, based on the assumption that there is a similarity between table grapes and cherries. “The U.S. market consumes about 150 million boxes of grapes per year, of which approximately 40% is count- er seasonal fruit from the Southern Hemisphere. By that logic, consid- ering that the U.S. consumes around 65 million boxes of North American cherries per year, 40% of that total would mean there is potential for around 25 million boxes of South- ern Hemisphere cherries,” he says. “I think that the U.S. could absorb those kinds of volumes, but not in the short-term.” Alejandro García– Huidobro, the
- expectations are that by 2030 Chile could be exporting up to 140 million boxes. This would be around double the volume of the 2021-22 season. Over the past few seasons, the Chi- nese market has been able to absorb the vast majority of Chile’s cherry ex- ports, while also paying significantly higher prices than countries in other major markets such as North America and Europe. Chilean exporters have been establishing operations in China to receive and market their own fruit, while some Chinese companies have been buying up cherry orchards in the South American country to have more control of the supply chain. New trees have continued to be planted amid
optimism that the profits from sales in China would continue to roll in. But the last two seasons have been especially challenging and have prompted a reexamination, says Manuel Alcaíno of Decofrut, a Chile- based consultancy. It is now clearer than ever within the industry that market diversification is imperative. The U.S. market’s potential Although the numbers are still small, the push toward expanding trade to the U.S. can be seen in the figures from the past two seasons. In 2020-21, around 1.5 million boxes were shipped to the market, while in the most recent season this rose to
Vision Magazine 29
general manager and founder of Prize, one of the largest exporters of Chilean cherries - which recent- ly announced plans to list on the NASDAQ stock exchange via a deal with private equity firm Rose Hill - also says that volumes could grow significantly in the near future. “I would say that five years from now we could easily increase the market by several times. If you look at the North American season, they con- sume around 20 times the amount Chile exported last season, so I think increasing the consumption of Chilean cherries by five, six or seven times is achievable.” But he emphasized that to reach those volumes in the long-term, exporters need to send higher qual- ity and larger fruit to the U.S. than what they have traditionally sent. A
vicious circle had been created in the past, he explains, in which the U.S. market paid less than the Chinese market, leading to less than top quality fruit being sent to the U.S., which in turn led to lower consump- tion. Now, however, he says that a rising number of shippers are under- standing that “China-quality” fruit needs to be sent to the U.S. market to build demand, even if it means ac- cepting lower prices than what China has typically paid. Alcaíno also notes that the Chilean cherry industry needs to work hard to create demand in the U.S. market for what is a fairly niche product in the winter. “This is a very different business to table grapes or blueber- ries, which have 52-week supply. The industry has not done a good enough job in the U.S. market so far, but now
it needs to step up,” he says. These efforts could come in tan - dem with a push to also increase ex- ports to continental Europe. Alcaíno explains that this market consumes around 140 million boxes annually but Chile in recent years has only shipped around 500,000 boxes. “The growth potential there is enormous, but even greater development efforts are required as it is a more fragment- ed market than the U.S,” he says. Aiming high Carl Immenhausen, sales manager at the Oppenheimer Group (Oppy), a Vancouver-headquartered distributor that is one of the largest importers of cherries into the U.S., notes that even though the market received only around 4% of Chilean cherry export- ers in the 2021-22 season, up from 2%
30 Vision Magazine
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