Move to high end apples takes it toll on NZ juice-maker

The move to better quality apples has led to less supply for juice makers. Picture/Hawke's Bay today.

The move by New Zealand apple growers into high-end varieties has taken its toll on the juicing industry, with T&G Global opting to put its food processing unit T&G Foods on the market due to dwindling fruit supply.

T&G, the fruit marketing firm controlled by Germany's BayWa, said its apple processing business had been hurt by a decline in fruit volumes and a slide in world apple juice concentrate prices.

The company reviewed the unit's operations and determined that it was "non-core" and should be either sold, rationalised or closed.

"Despite the best efforts of T&G Foods' management and staff, the business has struggled to counter the impact of the significant decline in the volume of fruit for processing in New Zealand and the continued worldwide decline in the commodity price of apple juice concentrate," said chief executive Alastair Hulbert.

Depending on the timing and outcome, T&G may incur a significant after-tax loss due to a write-down in the net book value of T&G Foods' assets and other associated costs, it said. At this stage the negative impact to the T&G Group is estimated to be about $14 million.

The company said, however, that any negative impact will be largely offset by a fair value gain of about $14m from T&G Group's investment in Grandview Brokerage announced in March, a joint venture in the US that will improve its access to the American fresh produce market.

"Consequently, T&G does not expect a material income statement impact to arise for the year ended 31 December 2017," it said.

T&G Foods has the capacity to process up to 200,000 tonnes of apples and other fruit at its two manufacturing sites, one in each of Hastings and Nelson.

It processes apples into apple juice and has also diversified into the production of higher margin fruit ingredient products including diced apple for the food services industry, apple sauce in bulk and small format pouches for retail consumers.

While the apple industry has been converting orchards to new apple varieties and in the last five years has added more than 2,500ha of orchards, the volume of apples available and suitable for processing has been in significant decline and has negatively impacted T&G Foods' trading, the company said.

Tim Clarkson, head of corporate finance and strategy at T&G, said the sale was a sign of the times as to how far the apple industry had come.

"There is a silver lining to this story," he told the Herald. The sector had been investing heavily in higher quality varieties, which are better eating for the key export markets.

"Orcharding practices are getting better and better as the industry matures," he said.

"There is a better quality apple going into the box, which is obviously better-returning for the orchardist and than sending it in for processing."

On world apple juice concentrate markets, prices have been dropping - in part due to increased production from the world's biggest apple grower, China.

The health-improving qualities of fruit juice had also come under the spotlight from nutritionists because of its high sugar content, he said.

Shares in T&G closed up today at $0.02.

- Additional reporting BusinessDesk