ANZ Agri Focus: Success with avocados is there for the picking

China might not yet have a taste for avocados, but the industry expects it to appreciate the fruit's credentials as a healthy choice.

The avocado sector is in a good position for growth, with increasing demand outstripping supply, according to ANZ Agri Focus.

And that was creating new greenfield development opportunities in the upper North Island.

"Globally, many countries are eating more and more avocados due to their versatility, trendiness and health benefits. Due to a long lead time for development, supply is struggling to keep up," ANZ rural economist Con Williams said.

That growing global demand, along with recent opening up of the Chinese market, highlighted the opportunity for New Zealand to increase the value of the industry from $146 million to the high $200 million mark over the next five years.

Consumption growth is expected to be driven by the health angle, as food in Chinese culture is viewed as health first and nutrition second, which is the complete reverse of many Western markets.

Currently the fresh domestic (32 per cent) and Australian market (56 per cent) accounted for the lion's share of the crop. Australia accounted for around 80 per cent of export revenue, with Japan (4 per cent), Singapore, Thailand and Korea (2 per cent apiece) being the other major markets.

"China (where the first New Zealand avocados arrived last month) has long been viewed as a significant opportunity, even though many Chinese palates are unfamiliar with the fruit," Mr Williams said.

"Consumption growth is expected to be driven by the health angle, as food in Chinese culture is viewed as health first and nutrition second, which is the complete reverse of many Western markets.

Balancing the need to diversify from the Australasian market longer-term and the current shortage of supply in markets that offered lucrative returns presented a tug-of-war for the sector, which would require some "exporter discipline" to strike the right balance, he said.

Initial volumes into China would be low, and there would be extra marketing costs in establishing a profile and building the brand.

Increasing supply would require significant greenfield development, most of it in Northland, thanks to the availability of land and favourable growing conditions. The Bay of Plenty would also have some development, but suitable land and its cost, due to competition from urban creep and kiwifruit development, were key barriers, he said.

Currently the Bay of Plenty accounted for 60 per cent of avocado production by area, and Northland 36 per cent.

While the economics appeared to stack up well, Mr Williams said, there were practicalities and challenges to consider.

"The horticulture sector is experiencing a high growth phase, with avocados another example with strong prospects. This is creating more diversity as land owners look for more options to increase earnings and make the most sustainable use of land," he said.