Tough apples and all that Jazz in NZ

July 11 , 2011

While its parent apples Braeburn and Royal Gala are more than 25 years old, Enza’s Jazz is still very much the new kid on the block.

The apple was first launched in 2004 as part of a new wave of pipfruit varieties with significant intellectual property and marketing costs attached.

While sales in overseas markets flourish the variety has struggled to benefit New Zealand growers, who lost an average of NZ$5 (US$4) per tray last year.

This year an iQonsulting report predicted Jazz exports would increase 27%, as part of a 19% increase for New Zealand’s total apple shipments.

Pipfruit New Zealand chief executive Ian Palmer, says he still believes in the variety despite the fact local Jazz growers have been out of pocket for the last two seasons.

“Returns are not what I would consider acceptable in New Zealand dollars at the moment. There are reasons for that; some probably sit with Turners and Growers (T&G), some with the economy, and some with the growers,” Palmer told www.freshfruitportal.com.

The commissions paid to Enza’s parent company T&G are something that Enza general manager Snow Hardy says he 'makes no excuses for'.

“It is a fantastic fruit with a future. But it is a new variety that is still building its presence in the market,” he says.

Last year frustrated growers formed a Jazz lobby group as they felt promotion and marketing costs were too high, but Palmer highlights T&G have invested significant money into boosting the variety’s image.

Ian Palmer

“I think what we’re seeing now is growers are much more knowledgeable. And they're asking pertinent questions about performance and what could be better and that’s good.

“I know they’ve put a lot on the line with this variety as well and we’re all sharing the pain. Nobody wants prices to be low.”

Covering royalties

Growers also need to pay royalties to Plant and Food research in addition to the commission they earn.

Plant and Food research spokesperson Emma Timewell, declined to comment specifically on revenue from Jazz royalties, saying it was a confidential part of its relationship with T&G.

“Suffice to say, Plant and Food research revenues from commercialization of varieties are a small percentage of the sales value generated by Enza,” she says.

It is understood royalties for the Jazz variety are 3% of the net sale price of each carton.

Palmer says covering this extra cost is a challenge and will be a problem for future varieties as well.

“It’s an IP variety and this is an issue the industry is going to deal with globally over the next few years as more owned or controlled varieties are marketed. The reality is the costs associated with those are going to have to be carefully managed if they are going to be viable.”

Hardy says Enza makes no secret of the extra costs and Plant and Food Research will not relinquish their royalties.

Last year, amid frustration over paying these costs, speculation arose that New Zealand growers would begin to start switching varieties.

Palmer says it was an 'inevitable scenario' that some farmers grafted younger Jazz blocks to other varieties.

“Like anything farmers will make decisions based on their farms and what they like.”

Swinging into new markets

New Zealand Jazz’s biggest overseas market remains Europe, which accounts for 40% of the variety's exports.

“We don’t have to promote the variety in Europe much anymore but the prices are still going up,” says Hardy.

Oppenheimer executive David Nelly distributes Jazz in North America and has been dealing with New Zealand apples for more than 17 years.

Nelly, who introduced Jazz to the North American market, is aware of disgruntled New Zealand growers but says ‘everything is finally paying off’.

“Last week we had our biggest week, we sold our most ever, 25 containers. This enabled us to lift prices by US$2 per case.”

So while the European and Northern American markets have high transport costs and difficult exchange rates, Jazz is venturing into Asia.

Palmer recently travelled to several Asian countries including China, Singapore and Thailand, recognizing the growing importance of these markets for the variety.

“We’re going to look at the wholesale market and spend some time with particular customers and get an understanding of how they perceive the apples going to them.

His outlook on Asia is echoed by Hardy.

“Volume into Asia has tripled which is good. We are now shipping Jazz into Japan which has a much more favourable exchange rate. Whilst volumes are small, we also have a direct route into China.”

A successful Thai marketing campaign saw Vachamon Food, Thailand’s leading importer of Jazz after Tesco, increase its orders by 50% this year.

Palmer says he is confident about the apple and grows it because he believes in it.

“The reality is Jazz isn’t going anywhere. It is a variety that will demand a reasonable spot on the market for the foreseeable future.”

www.freshfruitportal.com

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