Peru: Camposol to become fresh produce multinational

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Peru: Camposol to become fresh produce multinational

For the largest fresh produce exporter in Peru, Camposol's office in Lima's La Victoria district is surprisingly nondescript. But behind the thick walls and lack of signage it's executive team is planning what is set to become Peru's first multinational fruit and vegetable company, with plans to reach annual revenues of US$500 million in five years time. Commercial manager Jose Antonio Gomez tells about the inspiration of a business that provides employment across the Peruvian countryside and is fast making a name for itself as an international produce power.

Camposol commercial manager Jose Antonio Gomez

Gomez was Chiquita general manager for the U.S. Southeast until he joined the Camposol team two months ago, returning to his homeland during an important transition period for both Peru and the company.

"I think we are in a transformation phase where we are going to become a multinational company, where we are going to not only take product from Peru, but also from fields in other countries," he says.

"We are going to integrate ourselves a little bit more into the market by putting up commercial offices. Right now we have one commercial office in the Netherlands and that office has been there for 2.5 years, we are soon to open a new office in the US, and most likely we will open a new office in Europe and maybe in Asia.

"Our strategy is definitely clear; we are a big player in avocadoes and that's our bet in the future. We are the largest avocado producer in Peru, soon to be the largest in the world, we are going to continue to invest in land in Peru, and we’re trying to widen the window of production as much as we can."

Camposol has a lot of options in terms of how it will widen that window. It currently has 25,000 hectares of land in Peru of which it is using less than a third, so planting in new valleys at different altitudes is on the cards, but expansion abroad will be necessary too; most likely through partnerships or joint ventures.

"That is going to lead us to take some ventures into Mexico to look for a partner and maybe into Chile, just to complete the whole window year round."

Asparagus and the new Camposol brand

The company's other products include asparagus, mangoes, table grapes, piquillo peppers, mandarins and shrimp. Out of these goods Camposol has become perhaps most synonymous with asparagus, which it plans to incorporate into a new preserved branding scheme.

"In most of the cases when we talk about preserve asparagus we do a private label or no label at all. Over the years most importers have taken our products and labelled them themselves with their own brands or supermarket brands," says Gomez.

"We’re working towards integrating a little bit more in distribution and offering the supermarket the option that we will do the private label, but with that we also want to introduce our own brand on the preserve side of the business."

The group already has its own brand for fresh products, but the move into preserve bottled branding will come hand in hand with a direct distribution strategy to supermarkets, especially in Germany. Gomez also expects piquillo peppers and artichokes to be a part of that plan.

With year round production of asparagus Camposol is not planning expansion in the vegetable variety. In fact, in recent years it has cut back land dedicated to green asparagus in the country's north.

"On the green side of the business, we reduced our fields in the past years on the green side because Trujillo might not be the best spot to have green fields of asparagus. The south helps a little bit more with the yield and the weather is a little bit more beneficial, so we are not discounting the possibility of getting into the south.

"As far as white asparagus goes we are not planting any more. We are keeping what we have and we’re trying to optimize the land that we have. We did some renewal of land in the previous years that other players didn’t, so that helped us to get younger plants with higher caliber asparagus, and that's helping us differentiate.

"Most of our production of white is going to preserve. We have a big base of consumers in Spain, and some in Germany and France, which take the majority of the volume of white asparagus."

The early stage commodities

Few would argue that demand for both grapes and easy peelers is booming right now, and Camposol has taken notice.

"We are playing on the grape business, it's big business right now. Last year we were trying to export close to 150 hectares of fruit and this year we have another 290 hectares that are coming, and we are also looking to expand that business - right now we have the majority Red Globes

"Right now we have the majority Red Globes and this year we’re going to export close to 400 containers of them this season. We have a small percentage of Flames and Thompsons, it’s very little, more a test mode now, but definitely we’re going to expand in the seedless business.

"The other part of the business that we have right now that will grow next year is citrus, in the murcott mandarin variety. We already have 150 hectares of that fruit, one third of that was production this year and in the next two years most of that land will be full production, and we do not discard the option of increasing hectares of that particular variety."

Many industry experts believe Peru could become the world leader in capsicum exports if its able to get access to the U.S. market, and Camposol aims to be a part of that success.

"Definitely we are on track to grow the capsicum business, we are looking for new varieties that will adapt to our soils, and we will try to incorporate those varieties in our offer, our preserves, our jar business, but also we’re looking for some fresh exports.

"Right now we’re in a testing phase, we have some land dedicated to testing some varieties, from marron pepper to paprika to jalapeño to different varieties, and depending on results we’re going to expand land.

"That development is quite easy for us because it doesn’t take that long, it takes a few months from planting to harvest, and I think the expansion of that arena is going to be very fast once we find the right variety for the right market."

Putting the brakes on mangoes

The majority of Peru's mango production comes from the northern region of Piura, with production concentrated between late-November and early March.

It sounds enough like a normal season, but Gomez points out the difficulty that arises from an intense peak period around January and February, and the price consequences.

"There is a level of production that the fields yield on those peaks that the market sometimes cannot take as easily as we would like to, therefore price drops to levels where growers lose money.

"So the nature of the business right now is putting a little bit of stop or brake into anyone that is on the business as a grower to develop anything new or different, because cash is compromised. For example, in the past season the yields were incredibly high, super good from that perspective but the returns were terrible.

"That is putting a lot of growers to think about what should we do the next year, should I stay in this business or not, as no one wants to stay in business to lose money."

In the second quarter Camposol's EBITDA margin fell 10.3%, driven largely by poor results in its mango division.

"But there is an alternative right now. Other businesses are getting around the oversupply of mango in these peaks, and those two businesses are frozen mango and dry mango - they absorb the peaks of production which are normally very high, you can get them for a reasonable price because normally market prices collapse during those times.

"So you can store the product and start drying or freezing, building the inventory for a year-round type of supply. I think the trend is going in that direction - Camposol is working on the frozen business. We do sell frozen mangoes, it’s a business that has been giving us a fairly good return compared to the fresh, and it complements the business, and we may be interested in seeing the dry business as well."

The organic question and a change of heart for artichokes

Gomez says Camposol plans to get back in the game with artichokes having pulled out a few years ago, while the company is considering a push into organic produce, which has been part of the nation's sustainability-based marketing drive.

"We were a very important player on the artichoke business until a few years ago the company decided to step out, and that created the opportunity for other players to step in and take that market, and they have been developing that market.

"It got to the point where this year we made a strategic decision to keep that business, so we’re getting back into business and next year we’re going to be very aggressive.

"I think we can jump onto the Peruvian umbrella brand, especially in the produce business which has been recognized as a different type of agriculture, a sustainable type of agriculture, an organic type of agriculture - there’s a lot of good recognition about our culture that we turned desert land into fields that yield production, that in order to do that we really needed to manage the water usage on those lands."

He says Camposol is not strictly involved in organic production but wants to get involved in the category's opportunities. The business has also taken many steps to avoid chemical usage when it perhaps would have been easier to do so.

"Camposol is very involved in sustainable development and most of our diseases we control with natural methods, for example we have a laboratory in Trujillo with entomologists and they produce or re-produce good insects that go against the bad insects.

"We try to minimize the use of pesticides, fungicides and all the chemicals required to keep the crop healthy by using insects or natural methods of control.

"If you had to choose two organic bananas between Peru and the neighbor country, probably the Peruvian one is going to be more organic than the other, and that’s just because of the natural resource. It’s very difficult to have organic production next to a massive non-organic production, as a lot of diseases can jump from one to the other. In our case we don’t have those massive banana plantations, so therefore it’s easier to grow organic bananas."

Humala and the 'social license'

Concerns were raised when newly-elected president Ollanta Humala discussed nationalization, but he has since softened his tone and spoken more about promoting exports and sharing with the community under the notion of a 'social license'.

Gomez says agriculture is the best industry for bringing the country out of poverty and it's something that inspires him.

"In regions like Trujillo, the area of Chao where we are, where a few years ago there was only sand and rocks, we were able to turn that desert into a place with thousands of hectares of products that provide sustainable jobs for thousands of people.

"When we’re in full production we might have 10,000 people working on our operations. So definitely I believe that’s very congruent, very online with what the president is trying to do.

"I believe agriculture, especially when it’s targeted to exports, can develop new jobs much faster than other industries. Agriculture spreads the wealth a little bit better than other industries."

The company expects between US$150 million and US$170 million in sales this year, but Gomez believes it can increase revenue significantly in the coming years and effectively manage environmental issues.

"We are very busy trying to develop new lands, new opportunities, new business, to grow, to expand. We see our company getting into the US$500 million in the next five years, and then from there growing even further.

"Water is a problem and could it be a worse problem? Yes. Did we manage to optimize the use of water in Peru? We did. Can we do it again? I think we can.

"In the last 10 years we saw a very fast and sustainable growth, and I think the in the next 10 years we could continue to see that if the right incentives are on the table."

Gomez doesn't rule out the possibility of more incentives abroad either, with the potential to expand Camposol's presence from the Lima Stock Exchange to have listings on other bourses too.

"Once we get a little bit more scale we might think about listing the company in other markets - that's defintiely something we've thought about."

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