Zespri lifts profit to $290.5m after selling $3.5bn of kiwifruit but is running into headwinds

Like  the  dairy  industry’s  Fonterra, the  kiwifruit  industry’s  giant  Zespri  has  had  a  golden  year.  It  has  reported  record returns  for 2020-21, with  a  net  profit  of  $290.5m (up $90m  from the  previous  year)   after  achieving total fruit  sales revenue  of  $3.5bn  (up 14%).

It  further highlights the strength of NZ’s rural  economy during  a  period  when the  Covid-19 pandemic  underlined the  fragility of  global  trade.

Zespri’s  global sale volumes were up 10% on last season to 181.5m trays.

The company said increased sales, the ongoing expansion of Zespri SunGold kiwifruit production and great quality fruit lay behind the strong returns.

CEO Dan Mathieson said the results would see earnings spread through many regional communities in NZ.

“We’re delighted a record $2.25bn will be returned to the NZ kiwifruit industry. The unity of our industry allowed us to respond effectively to incredibly difficult conditions around the world”.

Looking ahead, Zespri is confident the season already underway will produce  yet another record breaking crop.

The  kiwifruit  industry  has  a  fresh  ace  up  its  sleeve, with the  gradual  expansion  of production of a  new  variety, Kiwifruit  Red,  to  reinforce  the spectacular  success  of  SunGold kiwifruit.

There are 5,483 productive hectares of the gold kiwifruit cultivar, commonly known as Gold3 or SunGold, licensed in NZ.  The cultivar was fast-tracked to commercial launch in response to the identification of Psa in 2010, and has been the major driver of the kiwifruit industry’s expansion.

SunGold’s market performance has been very strong and, as a result, Zespri released an additional 400 hectares of licence in 2016, 400 hectares in 2017 and 750 hectares in 2018, 2019 and 2020.

In 2020, 150 hectares of licences for the red cultivar Red19 were released to NZ growers. The new cultivar is subject to provisional plant variety rights (PVR) protection in NZ and elsewhere in the world. Based on the current expected market demand of 15 million trays in Asia during the current supply window for Red19, Zespri plans to license 1,500 hectares between 2020 and 2023.

Point  of Order  reckons  Zespri  should  follow Fisher  and  Paykel’s  example  in allocating  a  chunk  of  its  profit  as  a  profit  share not  just to  its staff  but  to  the clever scientists   who  have  produced  the new  cultivars.

Other cultivars  are understood  to be  in the  process of  being  tested in the  laboratory.

Those  cultivars  give  the  NZ  industry a  marketing  advantage   over  growers of the fruit  in  other  countries.

Kiwifruit continues to achieve increased returns per tonne exported.  In 2018 this was $3,661/tonne, and increased to $3,989/tonne in 2020.

Much of the growth is from a 69% increase in the value of exports to Japan to $67m in 2020.

Japan, which  eliminated its tariff for  kiwifruit  under  the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, has replaced the European Union (which  still imposes  an 8% tariff on kiwifruit) as the number one export market. This is the first time since 2012 that Japan has been the most valuable market for kiwifruit.

The EU and China have increased in value by 25% and 24% respectively. These top three markets take 74% of exports.

The top ten countries have all shown an increase in export value from 2018 to 2020, and together are 95% of the total export value. Vietnam has shown strong growth, increasing by 86%.

Even  though  the  kiwifruit industry  has enjoyed  spectacular  success  it  is running into headwinds including industry capacity constraints, rising costs and securing enough people to get the fruit to the world, as well as pandemic-related disruption to  shipping  and distribution in some  markets.

For  growers  there  are  still the  memories of the devastating effects of the  Psa bacterial canker disease,  the  outbreak of  which in November 2010 rapidly caused widespread and severe damage. It is now well managed year-round through monitoring, canopy management, spray protectant use, hygiene and movement controls.

Psa is  present in other countries including Italy, Japan, South Korea, Chile and, most recently, Australia. There is no current cure for the disease.