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FROM PERISHABLEPUNDIT 05.28.19
Building the Grape
Industry Of Tomorrow: Inaugural Global Grape Summit Gathers The Best And The Brightest
JIM PREVOR EDITOR-IN-CHIEF
The success of the produce industry — whether judged in financial terms, or the ability to increase consumption, or the sustaining of the agricultural economy with the
environmental and social benefits that flow from all this — hinges on individual crops being successful.
This is especially true of the largest and most important crops, such as table grapes, which are always a Top 5 fruit in terms of sales to consumers and a crop experiencing an explosion of innovation — both in varieties and business models.
Yet, as is always the case, the same innovation that offers hope and optimism for the future of the category threatens the established order of things and thus the supremacy of estab- lished interests.
We wrote recently about the decision of Sun World Interna- tional to divest its growing operation and refocus on its Sun World Innovations unit — a sure sign that at least one savvy player sees the value-add in the industry as coming from genetics, licensing, branding, etc.
Now, long term, of course, it is unlikely that this business can succeed if the growing community does not prosper. In the same article, we pointed out some deep concerns of the California grape growing community:
1) California’s minimum wage law raising production costs. 2) Worldwide over-production of grapes.
3) Mexico on the front end and Peru on the back end, liminating the once profitable shoulder seasons.
4) Many new varieties not delivering on a promise of better taste, but still costing in royalties and licensing fees.
5) Consolidation on the buying end of the business, allowing for great pricing pressure to be put on producers.
6) Spain and other producers competing for Asian business that once was exclusively a market for California grapes.
Of course, many of these concerns are global. In Spain, they worry about Morocco; in Chile, they worry about massive plant- ings in Peru, etc., etc.
Clearly the advent of proprietary genetics has been a game- changer. Indeed, when one looks closely at regions or countries that have bad seasons, you often see a bifurcation in the market — that those with superior varieties did much better with direct retail sales, while older non-proprietary varieties struggled to find a place in the market, sometimes winding up being cuffed to
terminal markets with concomitant pricing pressure.
Yet the role that proprietary varieties will play is still uncertain. Phil Macy, Category Buyer for Grapes and Stone Fruit at Sam’s Club, has positioned himself as an advocate for the new vari- eties. Pat Burlinguette, Fresh Foods Buyer at Costco Wholesale Canada, has been slower to the party. Not so many years ago, speaking on grape varieties, she explained, “If I could get a good Thompson Seedless and Crimson 52 weeks a year ... that’s all
I would need.”
Today, Pat and much of the industry have come to embrace
many new varieties.
It is, however, hard to know the actual importance of varieties
in this decision-making process.
There is a kind of selection bias leading to new varieties. After
all, the newer plantings and better growers are both heavier to newer varieties. If buyers aren’t ‘variety-specific’, they will tend to get product from older vineyards and the varieties that are out of favor. It happens when you get a buyer who ‘will take anything’. Then shippers have a tendency to push the limit, fool themselves that ‘this is what the customer wants’ and kill the goose that lays the golden eggs.
So, some shipper winds up slamming too many vintage reds down some buyer’s throat, and the buyers start to change their way of thinking.
So today, many buyers have their lists of preferred varieties — not all new — a list of varieties they will take if they have to do so from companies that have the varieties these buyers really want, and varieties — old and new — that these buyers do not want at all.
In this continuum of acceptance — required, preferred, indif- ferent, discouraged, prohibited — many buyers are evolving into identifying an acceptable group of varieties, among which they are indifferent — price, quality, service, loyalty become the factors. They are also evolving into identifying a prohibited group of varieties.
This is all very problematic for the grape industry. In theory, proprietary varieties could be the answer to change the power structure between consolidating retailers and, in this case, grape growers.
If everyone has a Thompson seedless, buyers can play one vendor off another and drive the price down. If the buyers must have a particular variety and that variety has been restricted, the grower has much more power.
14 / JUNE 2019 / PRODUCE BUSINESS