Peru is attracting more and more horticulture investors
Peru’s success in its fresh produce staples like asparagus, avocadoes and grapes are well-known, but their potential is still untapped and there are inroads yet to be made with blueberries.
Peru has had its fair share of milestones in the past few years, from free trade agreements coming into effect with Japan and Korea to the approval of its avocadoes for access in the U.S. without cold treatment. The country is currently the largest exporter of asparagus to the U.S., hopes to become the leader in both capsicums and avocadoes, while the government is pushing for a clean green image by banning GM seeds; whether scientists agree this last part is necessary is another issue.
Nonetheless, brand Peru is striving forward through its cuisine and culture across the developed world and agriculture has hopped onboard, in both common horticultural products and more niche crops like lucuma, quinoa, pomegranates and figs; not to mention 50% growth in the organic category in the first five months of 2011. And with an enviable claim to 36.5% year-on-year growth for non-traditional exports, distributors are starting to take more notice of this Andean exporter.
But not everyone is on the Peru train yet.
“This is a great opportunity I think because most people in the United States, if you asked them to list 15 countries where they are going to import product from, I think Peru would not make that list in many organizations,” Schnucks Markets ex-VP Randy Wedel told the conference in Lima’s Hotel de Oro.
“They simply don’t know what you’re doing here, they don’t know what you’re growing here.”
Wedel said he is ‘bullish’ on the role Peru will play as part of the health shift taking place in U.S. eating habits.
“Consumers may need to get their map to see where it’s (Peru) located, but I can tell you those consumers are going out to eat and they’re seeing dishes with asparagus year round – I see that as one of the potential extreme bright spots.”
He says now that Peru has entry approval in the U.S. it needs to do everything it can to prove quality so it can make a good name for itself in the market, with strong ripening practices and avoidance of any need for re-packing.
“I can tell you that the demand for high quality avocadoes that will ripen properly is at the highest level I’ve ever seen. It’s now become a staple in fancy upscale restaurants, and recently our sandwich shop Subway with a store on every corner announced they would have avocadoes too.
“I see big shifts coming in how we eat, and why Peru can’t participate I would have no idea. I would think that they certainly could and for that reason I’m bullish.”
The Mango Dilemma
Not everything is rosy for Peruvian fruit growers though, particularly in the mango industry which is now forecasting a decline in exports to avoid the low prices of peak production. The country’s biggest fruit exporter Camposol is set to change the way it ships mangoes too with an increased emphasis on the frozen product.
So while the industry is moving towards pulp and frozen product to improve profitability, Wedel points to a more demand-driven equation that could be part of the answer Peru is looking for.
“Many parts of the United States have still not truly discovered the mango, as popular as the mango is around the world. The reason for that is we have given the United States consumer 30 years of bad mangoes,” he says.
“Now we’re getting better but if you go into a supermarket, particularly one that is not targeting U.S. Hispanic customers, the mangoes are either the wrong variety, they aren’t ripened, or they have no flavor.
“I think at one time the mango was the most widely consumed fruit in the world. If that’s true, ultimately the people in the United States will figure this out if it’s grown properly, shipped properly and its ripe.”
Peru is far behind the world’s biggest mango exporters with annual production of 200,000 metric tons (MT) forecast for 2012-13, with many growers eager to find new solutions to the current dilemma. PMA vice president of global development Nancy Tucker, believes the country could improve its situation through the development of innovative presentation and ripening programs.
“If we talk about increasing consumption of mangoes, personally I think that convenience items is the way to go. If you want to increase the consumption of mangoes you’ve got to make it easier to eat – you peel a mango, it takes a lot of cutting, it’s a little messy.
“They’d have to very much change their frame of reference, their methodologies, and if you did the processing here in Peru to take advantage of lower labor costs, you’re going to have to go from ripe and cut, and even air shipping it.
“It’s not to say it can’t happen, because they were doing that with products in Africa in Kenya, cutting up pineapple and other products and shipping that via air up to the Netherlands.”
Tucker says programs like this could be a good example for Peruvian mangoes, while an alliance with a ripening company could also be beneficial.
“It could be creating an alliance with a company like Mission Produce that has ripening rooms already for avocadoes.”
On the avocado front, Tucker highlights the importance of food safety standards now that Peru has entry in the U.S., pointing to recent troubles surrounding Mexican papayas and salmonella. But, provided food safety measures are met she says the overall economic situation is promising for horticulture, despite worries over a U.S. recession.
“What happened in the last recession? Whether or not we have another recession now or just continued slow growth, what can we learn from the recent path in terms of what did consumers do? What we saw was pretty encouraging – there will be little dips in volumes, but imported fruits kept going, kept rising.
“We saw overall the consumption of sales of fruits and vegetables continued to grow, they went up in 2008, stayed stable in 2009, then went up again in 2010. We’re in a great industry to be in.
“Even if consumers retrench a little bit and pull back, I don’t think they’re going to pull back as much as before. They’ve kept some of their careful shopping habits.”
The labor needed for a premium product
Pandol Brothers director of global operations David Sudduth says Peru has great potential, particularly in grapes, with a renowned reputation for quality that can justify higher prices if need be.
“Peru is an extraordinarily reliable supplier of quality, they are very dedicated to quality. Their products are not cheap to produce, they need a good price and so a distributor or importer needs to be able to convey that.
“In that respect Peru is able to defend pricing a little bit better than other mass suppliers, simply because they can deliver. I have to say this, Peru’s had the advantage of having a nascent fruit industry that came about at the same time as the internet, so their access to technology and to access what the market wants, that’s been direct and they’ve been able to access that and make it happen.”
Despite the fact Peru is often known as a lower-cost producer in terms of labor, Sidduth says it is becoming more expensive to the point where growers are looking to import workers.
“The Peruvian farmer has to be very careful where to get the workers from as the value of the product is so high. You can’t get an expensive product like grapes or avocadoes and put it in the hands of somebody who doesn’t have the skills to handle it right.
“The fact is that they’ve maximized their labor force and now they have to compete for their labor; they have to either pay more for salaries or benefits.”
Wedel agrees products generally could still be sold if retail prices happen to rise due to tightening margins for Southern Hemisphere exporters.
“I’m certainly not an economic expert when it comes to exchange rates. I won’t predict how that’s going to go, but there is room for prices to go up if in fact that’s how the market takes it.”
Since his involvement in the blueberry category with Giumarra Agricom International, Tom Richardson has understandably spent a fair bit of time in Chile. The southern neighbor is in state of rapid growth and demand is on the rise too, which could mean Peru’s infant industry could get a lot bigger in times to come.
“Here in Peru the opportunity that you have is that the real window of the year where we’re still a bit limited is at the end of the Canadian production, which comes at the end of August, and really for the month of September the volumes available in the United States and Canada are really quite limited,” he says.
“So there’s the window of about four to six weeks depending on the year, from mid-August to the end of September, where people in Peru could supply the market and we’re looking forward to the time that happens.
“Now that there’s this agreement that’s been put in place to protect the proprietary varieties of the nurseries, I think you can count on pretty quickly some of the producers here getting on the varieties, getting them in the ground and within two to three years you could start to see some limited production – for any sort of volume I think you’re five years away.”
Peru’s blueberry industry still has challenges however, from phytosanitary procedures that require fumigation or cold treatment, as well as the fact Mexico’s market window for blueberries could coincide.
“At the same time, the opportunities for Peru in middle to late-August to September is during production in Mexico, and that production in Mexico in certain areas could mean they’re entering the market at the same time as Peru.
“What I see the potential for having the next few years is that countries like Peru and Mexico that are lower cost operators are going to compete very strongly with Argentina in particular.
“As the production from Mexico and Peru would grow and begin to compete with Argentina, it really is the Argentineans that will be struggling to remain competitive.”