Page 30 - December2018
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Andreas Schindler Cindy van Rijswick
on the receiving side. So, there are kind of hybrids.”
Donovan also echoes Cook’s comment that it would be challenging for retailers to bypass major avocado players such as Mission and Calavo.
“Yes, it’s really dif cult,” says Donovan. “There is diversi cation of supply and trade disruptions — those are all things with avocados that we have to deal with. A retailer may have stores in Mexico, for instance, and say, ‘well if I bought from a grower and it didn’t make spec for export, I could sell it internally,’ but that’s typically a different supply chain,” he says.
Nonetheless, the executive does not deny the new model brings competitive chal- lenges. “I think I’d be naïve to say there isn’t some sort of competitive component,” he says. “There are many avocado people who might be at risk because they play a part in between. The bigger you are, you’ve probably integrated in either direction, so you’re less threatened by that concept because you’re part of it, so to speak.”
The other challenge any retailer would face in bypassing a leading player’s packing lines is the fact fruit size varies not just from orchard to orchard, but within every individual tree.
“That’s where I  nd some of the direct part is tricky for the smaller producer because they still need to talk and deal with multiple people to basically sell everything the tree is producing,” he says. “Mostly, the retailers that are sophisticated enough to go direct are also pretty particular that they want one or two sizes.”
Andreas Schindler, chief executive of Don Limón in Hamburg, Germany, also emphasizes the ranging standards expected by different retailers around the world.
As a trader who has become an integrated supply chain manager whose group has farm and packhouse investments from Central America to India, Schindler says people get the impression direct buying is cheaper, but the management cost is more complex.
“We have 200 customers, and I would say
Danie Kieviet Michael Castagnetto Gary York
we have 190 different ideas of what quality they want,” says Schindler. “You need to know all these details.”
Cindy van Rijswick, fruit and vegetable industry analyst at leading agricultural lender Rabobank in Utrecht, the Netherlands, says retailers sometimes make it harder for themselves in the way they set their quality requirements.
“Retailers like Tesco sometimes have speci cations for the product that can be hundreds of pages,” she says. “I spoke with a grower who was growing berries, and he said it was also extremely dif cult because for one German supermarket, there could be only  ve chemical residues for the berry, and for another country the limit was six; he has to keep track of all of this, and he has to keep separate  ows in his packhouse.”
Danie Kieviet, founder of exporter and service provider Freshworld in Stellenbosch, South Africa, says a growing emphasis on popular new varieties that may be in short supply can also factor into a direct sourcing decision.
“With the new global trend towards taste and new varieties that are high in brix with a better eating experience, it’s important that they [retailers] try to maintain that, and those commodities are normally fewer to begin with and scarce,” says Kieviet. “It becomes more dif cult, especially with the newer vari- eties with short production periods, moving from one variety to the next. You need to be very much on your game to do that well, and that means you need to have good people with experience who know how it works.”
“I just recently visited a U.S. retailer — one of the best I’ve seen — and they’re really focused on freshness, range, taste and consistency, and they do their own procure- ment through nominated partners who do pre-packing and then deliver to their own distribution facilities, specializing in making the most of all categories of fruit.”
Kieviet was responsible for opening Walmart’s sourcing hub in South Africa, an
Dionysius Christou Markus Fellman
of ce that has since passed hands to Interna- tional Produce Logistics (IPL) of the retailer’s UK subsidiary, Asda.
IPL now claims to be the largest single importer of produce in the UK.
“Walmart in my view was one of the leaders; I still see them as a fantastic company,” says Kieviet. “They took the lead opening up their global-procurement initiative for food with hubs in Spain, South Africa and Chile, and eventually in Mexico, to supply Walmart stores worldwide. That was the ultimate model. But it’s no longer in the format that it was.”
He says any retailer that sets up a direct sourcing program is faced with the same problem — capacity in their distribution centers (DCs).
“The  rst step normally is to build a big distribution center, and we’re ready to go,” says Kieviet. “But facilities very soon become fuller due to range expansion and the new varieties utilized. Packed to the hilt. You get to the stage where over the past 10 years, the increase in the number of SKUs and also speci c products have become more in favor, such as the berry category, cherries, avocados, kiwifruit. And then you have increases in the range of apples, stonefruit and grape varieties.”
All of this puts “hefty pressure” on super- markets, which then need to decide whether to invest in new stores, expanding DCs or building new ones. Usually, it’s the stores that win out.
“The result of this has been that people who are doing pre-packing for limited high- volume items in their distribution centers are having to outsource,” he says. “They have to push out certain services, such as owning stock, so they’re becoming a  ow-through distribution center or they’re giving people around them the opportunity to pre-pack for them on an open-book basis.
“Distribution centers are very expensive to build and also to get all the accreditations from your local authorities. It’s a complicated process, and it takes a long time to get new fresh DCs to be built.”
In Walmart’s case, this has led to the creation of large regional DCs that can carry

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