It's been boom, bust, then boom again for international kiwifruit marketer Zespri, which turned 20 this week.

The industry, having fully recovered from the ravages of the PSA disease, is once again in a sweet spot, but it hasn't always been that way.

"Our long-term history is one of significant turbulence, characterised by times of real booms followed by times of real busts," says Zespri chief executive Lain Jager. "And industry returns have fluctuated wildly over time."

Grower-owned Zespri, formerly the New Zealand Kiwifruit Marketing Board, has a near monopoly on the marketing of New Zealand kiwifruit to the world beyond New Zealand and Australia.


The multibillion-dollar industry punches well above its weight in terms of land use - employing just 12,500 hectares of land compared with 2 million ha for dairy.

Jager says the issue facing the industry is not so much land availability, but how quickly Zespri can grow demand.

Kiwifruit, which is harvested from about now through to May, is an important economic contributor to regional communities.

More than $21 billion of premium kiwifruit has been sold in a Zespri box since 1997 and its key gold brand, SunGold, is on track for sales of nearly $1b in the current season alone.

The sector has never been far from controversy.

The 1980s kiwifruit boom made a lot of people very rich, but the wheels started falling off later in that decade.

A soft market and turbulence from a newly floated New Zealand dollar followed, precipitating a crash.

Tough times followed in the 1990s, when the sector faced a debt hangover while suffering a collapse of market share in the United States.

Dumping claim

In 1992 the industry was stymied by a market dumping claim in the US, which meant that it failed to sell the entire crop that year.

Grower frustration with the booms and busts resulted in the formation of the New Zealand Kiwifruit Marketing Board.

A revamped, corporatised board followed in 1997, under the Zespri name.

"It was in reaction to the down period, when growers said there had to be a better way than the fragmented selling practices and boom and bust cycles," Jager says.

Turbulence in the 80s and 90s had served as a foundation for a much more mature industry.

In the ensuing years there have been PSA, trade access issues in China and GPG's unsuccessful campaign - through its holding in produce company Turners and Growers - to dismantle Zespri's single-desk selling structure.

But Jager says that of all the curveballs that have been thrown at the industry, the 2010 PSA outbreak was the most threatening.

Even so, PSA spawned a new era of closer networking within the sector to deal with problems quickly and effectively.

"As a consequence of PSA, there was a dramatic crash in terms of our gold volumes followed by a strong period of rebuilding," Jager says.

Zespri's initial foray into "gold" kiwifruit started off with a hiss and a roar.

In 1990, the gold variety known as Hort16A produced 300,000 trays of exports, mushrooming to 30m trays by 2011.

But PSA dragged down that number to 12m by 2013.

By 2016, gold sales had been rebuilt to 45m trays, and this year 55m trays are likely, thanks largely to the advent of the new gold cultivar, Gold 3 or SunGold.

New Zealand had been free of PSA - which had been evident in most kiwifruit-growing countries - but growers were soon to discover just how susceptible Hort16A was when the disease first turned up in 2010.

PSA swept through the sector like a hot knife through butter but as luck, or good management, would have it, there was a solution.

Just before the PSA outbreak, Zespri had come up with two new varieties - Gold 9 and Gold 3.

Gold 9 suffered from what is known in the trade as "shrivel" - a wrinkled and porous skin - so it quickly hit the scrapheap.

But Gold 3, while not completely immune from PSA, had enough tolerance to be able to thrive in its presence.

The success of Gold 3 has played a significant role in the robust recovery from PSA.
Hort16A - apart from about 300,000 trays grown around Nelson - has been virtually wiped out.

"Happily for us, Gold 3 has proven to be quite resilient and more tolerant of PSA," Jager says.

"We've seen tremendous yields and it stores well with good taste properties, with broad appeal in Asia and in Europe."

Gold 3 is growing at a rate of 10 million trays a year and growers are grafting across to the variety at a rate of about 400ha a year.

"We have been very fortunate to have had Sungold as a part of our portfolio," says Jager, with more than a hint of understatement.

"On the other hand, we made our own luck because we had a very large breeding programme with 100,000 seedings.

New products

"And we are constantly bringing new products through the pipeline," says Jager.
"We would not have had it, had we not bred it."

Meanwhile, the ubiquitous Hayward "green" kiwifruit has also improved in performance, with orchard gate returns of $50,000 a hectare over the past three years compared with a historical average of about $30,000 to $40,000.

There's no understating the impact of PSA, and the impact that Gold3 has had in rebuilding the sector.

The outbreak had a devastating effect on orchard prices. They went from
$400,000-$450,000 a hectare to $80,000-$90,000 - effectively, bare land value.

"It meant that many of them - even the conservatively geared ones - were under water," Jager says.

Like many other primary industries in New Zealand, kiwifruit has benefited from very strong demand growth in China.

Zespri expects to export 35m trays of gold alone into China by 2021/22.

"We have enjoyed tremendous growth in China - 30 to 40 per cent on an annual basis, and we now see that slowing," says Jager.

"It's now sitting at 8 per cent and we expect that to tail off as the base grows."

Zespri struck a snag in 2010/11 over a duty issue, which saw it pay a $960,000 fine.

There is still an unresolved Serious Fraud Office investigation surrounding the same issue.
Zespri is moving towards becoming what is known as an "importer of record" in China, which means Zespri New Zealand will export to Zespri in China.

"In the future we will hold stock in our own warehouses and do our own quality management and supply to distributors in truckloads, as they order it, so that we will take on the inventory risk and the quality risk over next two or three years," says Jager.

Looking ahead, he is excited by the prospects of the United States becoming an export destination for gold.

He also sees greater potential in the Middle East.
Zespri's overseas sales came to $2.3b last year and the company is targeting $4.5b in 2025.

Jager expects "gold" kiwifruit sales to go from 45m trays to 90m over five years, while "green" stabilises at about 70m to 90m trays over the same period.

"We are confident that we have strong growth to come."