Kiwifruit post-harvest player EastPack has about 30 per cent of the market. Picture/ Alan Gibson
Kiwifruit post-harvest player EastPack has about 30 per cent of the market. Picture/ Alan Gibson
A $1 billion bill is coming for the industry that handles kiwifruit after they're harvested, to keep pace with Zespri's ambitious outlook for exports.
Zespri, which markets most of New Zealand's export kiwifruit crop, expects demand will result in it doubling annual sales to $4.5 billion by 2025, just sevenyears away. That means more infrastructure to handle the bigger harvest.
Zespri plans to manage the crop-growing side of the equation by increasing the size of its overseas orchard operations, and offering licences to New Zealand growers. New kiwifruit varieties mean those growers will increasingly be outside the traditional Bay of Plenty growing capital.
How the picking and packing side of the industry will meet the challenge is now under close focus.
To put Zespri's $4.5b export sales scenario into context, New Zealand's dairy exports earn about $12.4b a year.
Zespri chief executive Daniel Mathieson said two of the biggest challenges facing the industry in meeting the projected consumer demand were having enough infrastructure, such as packhouses and coolstores, and enough labour.
"But we have a very confident post-harvest sector. They are talking about $1b of investment in the sector to have enough cool storage ability and enough packing lines to pack the increased volumes."
Herald inquiries suggest the $1b capital investment figure has come from Zespri leaders' discussions with the country's biggest kiwifruit post-harvest player, EastPack, which has about 30 per cent of the market.
Zespri chief executive Don Mathieson says two of the biggest challenges facing the industry are having enough infrastructure, such as packhouses and coolstores, and labour. Picture / NZME
EastPack chief executive Hamish Simson said his company, which also has its own growers, was closely communicating with Zespri over the export sales projection. Zespri's $1b projection for the post-harvest sector was a "scaling view" of EastPack's own modelling.
"We gave them roughly our industry share, which is about 30 per cent, and said we are spending 'x', which means the industry roughly will have to spend 'y'. But then there's been some general discussion around post-harvest and the figure is generally widely accepted."
The final number would probably be less, because of innovation, Simson said.
The post-harvest sector's second biggest player, listed grower and packhouse operator Seeka, has invested more than $40 million in new packing and coolstore infrastructure in the past three years to meet the kiwifruit industry's rebound from disease.
Chief executive Michael Franks said it would be inefficient to build more coolstores, so the industry would have to become more innovative with the resources it had.
He also sounded a warning about debt in the industry, and challenged Zespri to "do a better job" of improving returns to green kiwifruit growers.
"We have a reasonable lead time to see the crop increase in front of us. Up until recently, while the Zespri variety Sungold has been making great money, the Hayward [green fruit] returns have been at best, lacklustre," Franks said.
"Some growers have been making good money, but on average it remains to be seen whether that is sufficient for new plantings. Zespri will have to do a better job and lift returns to Hayward growers for there to be a significant increase in green plantings."
Zespri, which markets most of New Zealand's export kiwifruit crop, expects demand will result in it doubling annual sales to $4.5 billion by 2025. Picture / Alan Gibson
Franks said there had not been much industry consultation about Zespri's sales goal.
"They've just said this is our goal. But we are commercial operators and if we can make commercial sense of it then we will get on with it. Our growers will still expect performance. This is a reasonably competitive part of the industry.
Franks said that having seen the industry "falter on a couple of occasions", Seeka was aware of the risks of over-investment on the basis of sales predictions.
"We're also mindful of the level of debt in the industry at the moment. It will all depend on what appetite growers have got [for this] and what risk they are prepared to take on."
A study of the impacts of the virulent bacterial disease PSA, which hit the industry in late 2010, concluded from a 2011 survey of the major banks that kiwifruit orchards owed $804m.
Compounding the financial issues, the average grower is relatively old.
Industry returns have been riding a high in the past three years. Zespri's latest forecast return to growers is nudging $1.5b for this season, which started this month.
