Striking a balance between customer satisfaction and grower profitability
Since taking on the role of Crown Jewels Produce South America director in June, Bill Lewis has been busy forging supply deals to reach key North American clients such as Kroger, Safeway and other retailers. Having lived in Chile for the past 20 years, his experience has given him insights into the subtleties of Southern Hemisphere fruit campaigns and until recently he was working as a consultant. With grape, blueberry, pomegranate and avocado agreements in the bag for his new employer, he caught up www.freshfruitportal.com to discuss what he sees as a very bright future for Chilean, Peruvian and Brazilian fruit exporters.
For Lewis the management of a successful supplying campaign is about striking a balance on many levels, with customer demand at the core along with grower profitability and carefully executed sourcing from different regions.
"For example on the grape program we are going to be involved in Brazil, Peru, Chile, Arizona, Mexico and California, and the idea is not to become too heavy with each of those areas, but just to balance it with our customer needs," he says.
"Our idea is not to go into a heavy storage deal and find ourselves overlapping heavily with Mexico; we want to get in, sell very good prices, and then get out with a clean market before we see ourselves overwhelmed with cheaper shipments out of Mexico.
"Unfortunately in the past there have been a lot of gamblers, and some last year did very well betting heavily on the late market, but we’re not gamblers; we prefer instead to have a very clear idea of what our customers want and what they’re willing to pay for it before we ship."
Across produce categories this means also paying attention to cold chain postharvest handling as it makes all the difference for arrivals and liquidations for growers.
"My main role is to develop, maintain and ensure that the product matches our customers, as well as making sure our growers are satisfied with our sales results coming back to them. Our business is to sit down with them, find out what their breakeven costs are, and work out something that makes sense for them as a business.
"We make sure they’re actually involved in the decision-making process and there are no surprises as we update them on a regular basis, including online where they’re able to see what is the real inventory of that fruit."
Like the company's business philosophy, his appointment in Santiago de Chile has been primarily customer-driven, with clients wanting year-round supply for grapes, blueberries, pomegranates, citrus, apples, pears, asparagus and avocados.
"We've reached agreements with some growers for grapes, blueberries, pomegranates, some avocados, to supply products to the North American market. Others are still in discussion."
While Chilean, Peruvian and Brazilian grape growers all have their own challenges, Lewis believes all three will continue to have an important place in global markets in the future.
"I think that the news of the demise of Copiapó (northern Chile) is over-exaggerated - there is a decline in production in Copiapó to water issues, due to recent climate problems there and certainly due to competition with the mining industry; there's a real problem supplying sufficient labor for that region.
"But in saying that there will continue to be many excellent grape-growing operations offering excellent quality, fitting an ideal marketing window not just for the United States but for the world, and that business will continue quite strongly."
"I think Chile will remain the most important exporter of grapes in the world."
He says Peru's grape industry is now at the stage Chile was at in 1985, and based on statistical trends it could become the world's second-largest grape exporter in three years, or at least be in third place.
"We’re seeing amazing growth in both the Ica and Piura regions of Peru, and I would say over 75% being planted now is primarily red globes, with the main market being the Far East.
"The United States and Europe will continue to compete quite strongly for the seedless varieties coming from those regions and we see Peru as becoming a significant factor during the harvest windows of October through to late December-early January.
"Peru is surprising with a mix of highly sophisticated modern and clean state-of-the-art facilities that have been approved by the British Retail Consortium, and others that are sort of shade tree packing operations under the black netting."
In Brazil, Lewis says the two main issues are the high value of the real and frequent heavy rains.
"A factor that really causes problems for them are the mid-summer rains in Petrolina; it seems that one out of every three or four years they have heavy rain storms during the months of November and December, which causes havoc for their grape programs to the United States and worldwide.
"That's a problem you don't have in Ica and Piura. You know what the average annual historical rainfall is in Lima? Half a millimeter, and Ica and Piura are drier."
He adds Brazil also has a higher labor cost per box due to its rules surrounding worker conditions, but facilities are of the highest standard and the crop does come with physiological advantages.
"It’s technically possible to get five harvests from a vineyard in 24 months, whereas in Chile you can get one harvest every 12 months."
"There's that famous quote from Charles de Gaulle that 'Brazil is the country of the future and it always will be', but we are seeing that Brazil is growing; it's a powerhouse of the future no doubt, but petroleum is going to to make it difficult to control the value of the real against the dollar."
Lewis says another fruit with strong demand that shows growth potential is pomegranates, which have established and growing industries in South America.
"It’s the new health food, the new blueberry, with a tremendous amount of health benefits that have been proven, and therefore more people are buying the arils and the whole pomegranates - we've seen explosive growth.
"The key though is to make sure the right varieties are being correctly packed and marketed to the right customers, because there is a specific customer base for pomegranates; a lot of people take it as just another commodity, but it is a specialized product and it has to be marketed in a specific manner.
"We cannot get enough pomegranates to supply our customer demands, but we have to pack them to our strict customer standards because they know when they’re buying Crown Jewels they’re getting the very finest quality."
He says pomegranate growers and shippers need to be careful about the Wonderful variety's susceptibility to what is known as 'black heart'.
"You have to be cognizant if they have a black heart problem, which is very difficult to detect at the time of packing; it's not like you can cut it open and say, 'oh this has black heart'.
"You have to understand before you’re putting it on a boat and investing all your money on freight and marketing that it’s not going to arrive with problems.
"There is a specific method for detecting if there is the incidence of black heart or not in the pomegranates, so you’ve got to train people on the ground to look for it, and check it yourself too, not looking at it as it is now but what will it look like in a few weeks time."
He says pomegranate sales can be broken down into two primary markets - the decorative market for ornamental fruit bowls, and fresh consumption.
Lewis is very upbeat for avocados - which the company only sells pre-ripened - and blueberries as well. However, he recognizes a mix of postharvest handling issues and increased supply were part of the reasons why returns were not as strong for the latter in Chile this year.
On the citrus front, he sees a great future for new easy peeler varieties.
"All the new clemenules and other easy peeler varieties coming in are going to surpass clementines in the future; lots of new varieties are coming out and they’re going to be a big factor.
"We're seeing demographic changes with easy peelers becoming more popular than the traditional navel orange, and the reason why is people can give them to their kids who would have had difficulty peeling an orange, but with the smaller easy peelers it's a no-brainer.
"There’s the emphasis on five-a-day too, and you can put a clementine as a fruit serving in food service, whereas a whole navel orange is too much."