Zespri SunGold quality loss cost forecast to be $2.80 per tray this season. Photo / Supplied
Zespri SunGold quality loss cost forecast to be $2.80 per tray this season. Photo / Supplied
The kiwifruit New Zealand is sending to export markets this year is the worst since some fruit was likened to bland potatoes 20 years ago, and many customers are upset, says Zespri chief executive Dan Mathieson.
In a blunt message to growers and shareholders at the dominant export marketer'sannual meeting, the usually upbeat Mathieson said fruit marred by softness, stains and rots had not fulfilled the promise of the brand the industry spent $1.5 billion building.
"Many of our customers are genuinely upset. These are people we've spent decades strengthening relationships with off the back of our ability to deliver consistently great quality fruit.
"The fruit we are sending to market this year is the worst since the quality and taste issues we faced with Hort16A in the early 2000s. That fruit was so bland that the general manager for Asia at the time said he couldn't sell the 'potatoes' we were sending him."
The Hort16A gold kiwifruit variety was wiped out when the virulent disease Psa attacked the country's vines in 2010. The new gold variety Zespri SunGold commercialised since has, until the quality crisis of this season, been a runaway global bestseller.
Mathieson flagged changes to Zespri's growing licence allocation system and hectare availability before next season as part of a review it has started into the quality issues. Sales of licences to grow varieties like SunGold are a major and lucrative earner for Zespri.
On Monday in a grim grower returns forecast, Zespri chairman Bruce Cameron warned New Zealand's reputation as a producer of consistent fruit quality was under significant pressure because of the quality issues. The harvest volume this year has also been below expectations.
"Our reputation for quality, the brand we've invested more than $1.5 billion of your dollars in building and our relationships are being damaged. And with that, so too our ability to keep lifting value and support sustainable returns."
Mathieson said while Zespri's customers had expected some quality issues because of the pandemic impacts and resulting labour shortage "what we're delivering is at the worst end".
"We're now seeing consumers in China talk about fruit quality on social media.
"Customers who've not been in contact with me for many years have reached out to tell me how poor the situation is."
Zespri chief executive Dan Mathieson. Photo / NZME
Mathieson reminded the agm of the chairman's Monday grower notice that this year alone, the quality loss cost was forecast to be $2.80 per tray for SunGold, compared with $1.68 last year. For green Hayward fruit, the quality loss cost was forecast to be $1.95 per tray "and this is in a short supply year".
As the Herald has earlier reported, the best measure for a total sector impact is Zespri's forecast total fruit and service payments (TFSP), which cover direct returns to all growers.
Last year TFSP was $2.42 billion (excluding loyalty payments) from a total crop of almost 180m New Zealand-grown trays supplied to Zespri.
The latest forecast is for TFSP of between $2.23b and $2.28 billion (excluding loyalty payments).
Zespri's global fruit sales topped $4 billion last year.
Interestingly, while the quality issue has made headlines this export season, Mathieson said it had "gotten progressively worse over recent years".
"We have to come together to fix it.
"Zespri's looking hard at how we respond and help to take the pressure off.
"One of these considerations is around licence release. In releasing licence, we've always considered the balance between meeting the demand we're creating and capturing as much value as possible from the market, alongside the industry's capacity to accommodate that growth.
"Unfortunately, the pandemic and resulting labour shortage have exacerbated this tension significantly, with the industry continuing to encourage the government to provide appropriate policy settings to allow us to address this shortage.
"It's also undermined confidence to invest in the infrastructure needed to accommodate the growth and the constraints have become more severe in the last two years."
Zespri is a creature of statute, entitled by law to be the main exporter of all New Zealand kiwifruit, except to Australia. It is supplied by around 2700 New Zealand growers, as well as some overseas producers. Around 48 per cent of New Zealand Zespri suppliers are shareholders.
Mathieson said as part of the quality issue review, Zespri would work closely with growers and post-harvest operators "to fully understand the industry's capacity to accommodate the growth and to balance that against the value we're leaving on the table."
It would announce changes to licence allocation and number of hectares available for licence ahead of the 2023 licence release programme. Green Hayward variety fruit, commercialised in the 1950s, does not require a licence to grow.
Refinements being made to the Taste programme would consider alignment between market signals and price positions, along with the impact Zespri's incentives were having on quality.
Labour was a "huge" part of the quality problem, Mathieson said.
"It's leading to sub-optimal picking and a shortage of people to do the proper quality checks on the packing lines."
This had lead to an "incredibly hard time" for growers and post-harvest operators.
"We also need to look at our incentives and growing practices and the impact of warming climate," he said.
The poor quality issues of 20 years ago had led to the establishment of Zespri's Taste programme to incentivise growers to produce great quality fruit.
Mathieson believed the industry had now reached a similar moment.
