With earlier rains and harvests, later competition with Califonian producers, higher costs and a challenging exchange rate, the dynamics of Brazil's table grape industry are changing. For the country's largest grape grower Fazendas Labrunier, owned by Grupo JD, these conditions have spurred a breeding program which aims to replace inefficient varieties. At www.freshfruitportal.com we speak with Grupo JD commercial manager Daniel Watanabe about the recent export season in November and December, and what the company is doing to make the most of the current situation.

Fazendas Labrunier commercial director Daniel Watanabe

Some distributors may be trending down their Brazilian grape programs and Californian growers are keeping their produce in U.S. stores for longer, but Brazilian exporters are certainly not sitting on their hands watching opportunities float by.

Fazendas Labrunier accounts for 12% of the country's grape production with five farms in the states of Bahia and Pernambuco, selling fruit directly to some of the world's biggest supermarket chains like Wal-Mart, Carrefour, Loblaws, Tesco, Sainsbury's, Albert Heijn and Coop Norden.

The company also has an important partnership in North America with the Oppenheimer Group to supply other top North American retailers.

To help keep these strong relationships and maintain a solid export role, Labrunier is taking heed of current competitive conditions and is investing in new variety research.

"For us it’s clear that varieties like the Thompson, Sugraone and Crimson are not feasible anymore. Today there are higher production costs and one big problem which is our exchange rate - in the past we had a favorable exchange rate and even if a grower had a lower yield they could still probably afford it," he says.

"But now the currency exchange rate is very strong with the dollar and the euro, so we have to be very effective. We’re investing in a big program to find new varieties to replace the current ones, and we're currently testing 76 new varieties in partnership with different breeders from the U.S., South Africa, Spain and Brazil.

"With the new varieties we’re testing we have seen some very good results, especially in terms of yield and postharvest quality. Often in October we have problems with the coloring of the colored grape varieties, but with these varieties it is easier to get color."

He says the investment program is part of a long-term strategy, but he is still hopeful for implementation by late 2013.

"Once we find the right varieties, we need to wait at least three years to develop a view on what will work or not. We started last year so we should start selecting new varieties at the end of next year, and then will will start to replace the current ones.

"We plan to invest a significant percentage of revenue on research every year and that will be a constant investment. We will not stop once we find the good varieties; our plan is to keep breeding to get better breeding and better grapes."

The recent season

Watanabe says official figures are yet to be released, but it looks like Brazil's grape exports for 2011 will be similar to the 4,150 metric tons (MT) registered in 2010, although with different percentages in terms of destination markets.

"Compared to what growers had hoped for in the market, volumes to the U.K. were around 14% lower and to central Europe it was 6% less, so total exports to Europe were 9% less than in 2010," he says.

"We had more volumes to North America by 16%. Everyone was very optimistic about the North American market with the opening price which was very good, selling between US$32-34 per carton, against 2010 when it started at US$24.

"So most growers thought it would be a good year for the North American market, but in the end the price was very disappointing."

He explains the price fall in December was the result of Californian grapes staying longer in the market, slower sales pace and average quality of the Brazilian grapes that did not allow for storage.

"The slower sales and the necessity to move average quality grapes was a bad combination which forced the price to drop in the second half of December.

"In the last two weeks of last year we were seeing prices between US$24-28 per carton. In the previous year during the Christmas week the price was at US$38-40."

He says Labrunier managed to avoid the full extent of this problem due to its direct relationships with supermarket chains, while geographic diversification helped on the quality front.

"Our company is the largest producer in Brazil so we try to avoid work in the spot market. Most of the grapes we have, we move in accordance with a weekly program agreed with the supermarket chains prior to the season start.

"So it’s very good for us when the market’s like this, as when the price started to go down we had already delivered a good share of volumes.

"There was rain in the second and third week of October and when that started it did lead to different quality in some orchards, but instead of having one big farm in one place we have five farms that are around 100km (62 miles) from each other, which mitigates the risk of weather damaging the grapes."

He adds some of the new varieties that have been tested are resistant to rain, which will allow for later harvests and fresher fruit in November and December.

Labrunier is expected to record an increase in volumes this year.

"This year (2012) we will produce 19,000 (metric) tons, an increase of 3,000 tonnes, because we replaced some old ones and some of the new areas will reach higher yields."

He explains that Labrunier also has Rainforest Alliance certification which ensures sustainable agricultural practices.

Smaller growers look local

Watanabe says the current situation has led many growers to look domestically.

"Some growers are replacing some seedless with seeded grapes. Seeded grapes tend to have yield quality that is much higher than seedless, so they replace their grapes and sell in the local market."

But why not take the higher yield and continue exporting?

"If they sell in the local market they can get better cash flow and have their money faster. In the case of export, it takes around 60 to 90 days to get the full payment," says Watanabe.

"Having the early harvest means we need to store fruits in North America and Europe until the second half of November, which means many growers won’t get their money until the second half of January and they can’t afford to wait that long. So that’s one of the reasons why growers are shifting to seeded and selling locally, to achieve better cash flow."

Banking on the Brazilian grape market

Watanabe emphasizes that the Brazilian grape market has become very interesting.

"The Brazilian population has reached more than 190 million people and 80 million can be considered high end consumers. The consumption per capta of fruit in Brazil is around 60kg (132lbs) per habitant, per year, which is quite low compared to European consumption which is above 120 kg (264lbs).

"Lately, we have invested in two distribution center to cover the southern and central parts of Brazil where there is a concentration of high end consumers.

"Labrunier farms have also imported fruits from South and North Americas and Europe to have a bigger portfolio to be offered to our clients in the local market.  As in abroad, we supply directly the major retailers in Brazil."

Labrunier has also invested in big social projects to support local communities. One of these is a project to support local schools, which besides including the donation of school materials, involves training teachers to help with new teaching techniques to improve student understanding.

Watanabe says more than 12,000 students have benefited from the project.

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