Unstable supply stimulates new business strategies for Processed Fruit and Vegetable (PFV) industry

As a result of adverse weather the processed fruits and vegetables industry faces major challenges in the supply of raw material, and more businesses choose to take primary production in their own hands. This is one of the main trends mentioned by the expert participants during the PFV Focus Group meeting organised by CBI.

Many production countries struggle with very bad weather conditions, either caused by freezing, flooding, rain during dry season or severe drought. Some very recent examples are freeze in Poland, South Tirol and in the South of Italy causing damage to apples and apricots. Drought in Thailand, Philippines and Sri Lanka causes decrease of coconut production. This year the supply of granadillas, limes and avocados from Peru is threatened, as a result of severe flooding. Also Spanish supply of fruits and vegetables is severely affected as a result of floods. The increased average temperature during winter has a negative impact on production of crops which need a certain amount of chill hours. The reduction of chill hours decreases volume as well as quality of crops like pistachios, peaches and almonds.  Participants relate these conditions to climate change, which seems plausible, although it is hard to prove in individual cases.

As a consequence of the unstable supply of fruits and vegetables, prices are highly volatile. Processors react to this development by investing in their own production fields. In Brazil big processors already have their own orange plantations. In China several processors grow industrial varieties of apples in their own orchards. Other examples can be found in Chile, Ecuador and Mexico.

For small producers in developing countries this trend can mean an additional threat for their business. Processors prefer to grow their own produce, or alternatively they look for a few large-scale producers rather than a large number of smaller producers. Large scale producers have more access to technology and experts which enables them to react correctly on changing growing conditions.

Whether processors succeed in setting up their own production fields or in finding large-scale producers depends on the crop and the country. In some cases the product is only offered by small farmers, and in several countries (for example Turkey) governments are subsidizing small farmers.

Another response to scarcity is for importers to look for alternative sources of supply. This trend provides interesting opportunities for suppliers in new production centres.

CLOSE
CLOSE