North American produce consignment model evolving

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North American produce consignment model evolving

Extreme weather, increased labor costs and unfavorable exchange rates have taken their toll on fruit growers this year, and distributors are taking notice. Combine this with shorter product life cycles and high volume expectations on the demand side, and you get a scenario where producers need much more certainty from buyers. In the view of Oppy marketing director James Milne, this need to take out risk has given rise to a different, more European approach to sourcing in North America. He told about this adaptation, a couple of new products in the pipeline and the "fulfilling endeavor" of selling fruits and veggies.

Milne said the industry was very conscious of the effect climate is having on crops, whether it be frosts, floods, extreme heat or even wind storms; it has been speculated by some that the latter may lead to more seeded fruit in some areas due to extra cross-pollination.

More recent examples include frosts in Chile, Argentina and South Africa, while one of Oppy's apple suppliers in British Columbia has had significant losses stemming from a late summer hailstorm.

"That's a definite challenge, to go with everything else in terms of increasing labor costs and affected exchange rates related to the U.S. dollar, which has been particularly stressful for growers," Milne told during the Produce Marketing Association's (PMA) Fresh Summit trade fair in New Orleans.

Click here for more stories from this year's PMA Fresh Summit.

"I think they're [growers] also concerned about what they have to do to keep ahead of the trends in varietal development, and that's not an easy one - it's a big risk for a grower, certainly for crops that take four to seven years to come to fruition.

"We're seeing one item that many years ago would have given them 20 years of success, that product life cycle is getting hit quite quickly by other items coming in rapidly behind. You might get a five-year window where you’re enjoying the fruits of your endeavors, but it’s shortening up."

James Milne

James Milne

The distributor's way to adapt to this situation is to diversify supply, which Oppy has done across regions and categories, but unforeseen events can still derail supply.

"We ourselves suffered just in the spring from a major grower of ours having a packhouse fire, so suddenly we were out of the game in this particular item [avocados] for five weeks.

"You’ve got to be nimble, you’ve got to be prepared and you’ve got to be adaptable. I don’t think anything in that respect has changed and the produce industry is like that, but at the moment, there are a lot of growers that want to take the risk out of the market.

"To a certain extent that’s where a lot of the success has come through in Europe as a lot of the programs are locked in programs, fixed volumes and pricing structures put in place that give them that degree of certainty."

In contrast, Milne said the U.S. and Canadian markets have typically followed a more free and open consignment model, which has been less certain.

"There are elements of that that are changing quite dramatically now. There are a lot more of the back-to-back deals, there are a lot more pre-committed programs and  contract pricing.

"So we're getting a bit of a hybrid here now which I think is going to be a benefit. We’re seeing a little bit of the European model insert itself into the commercial terms that are here in North America."

He clarifies that this trend would be the case regardless of the phased acquisition of his company by Ireland's Total Produce, which currently holds a 35% stake in the Canada-based company.

New suppliers and supply

Milne said teams from the two companies were still just "scraping the surface" of what benefits they could bring to one another, but some advantages were already felt through negotiations with new growers connected to Total Produce.

The executive had arrived in New Orleans following meetings with kiwifruit growers in Spain - a Mediterranean country that may also be increasing its fruit supplies to Oppy along with Italy.

"I’m potentially working with a couple of clementine growers in Spain that are through Total Produce - that will get us very engaged  in that program again for this coming winter.

"I think that you’re potentially going to see more from some of the connections that Total Produce has in South Africa, other parts of Africa and the Middle East. We've touched base with those people in the past, but now it’s getting a bit more substance and credibility to it.

"Nothing is off limits now. It expands to Egypt, Turkey, Italy; we’re already in Italy but it might be more expansive for us in that respect."

In terms of new products, Oppy will be sourcing greenhouse green bell peppers from Divemex in Mexico this November, while it will also import a sample of full blush red mangoes to Canada from Australia's Seven Fields.

When asked about the potential for Australian mangoes in the U.S. following government approval, he said retailers had not been responsive to the idea as the fruit must be irradiated. On a more positive note for Australia, he said the country's citrus maintained a "pretty significant premium" over competitors this year despite concerns over the new deregulated sales system.

Health and wellness

Even though the fruit and vegetable industry faces some difficulties, it is still vibrant and "on the right side of the equation" in global terms.

"To be in the produce industry in general is a very fulfilling endeavor for everybody with the benefits that can be attributed back to the families, the growers and the people they affect.

"We have seen some very heartwarming stories in that regard. We’re bringing health and wellness basically to the worldwide population, so it’s a good industry to be a part of."





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