By avocado expert Avi Crane

Hass consumption reached record levels for the first week of February 2012 with this season’s Super Bowl promotion the most lucrative ever for growers, marketers and the trade. In this column, Former California Avocado Commission vice president Avi Crane says the way the industry coordinated promotions through the Hass Avocado Board and its affiliated associations was tremendous.

For the most part, retailers had “just-in-time ripe” Hass on shelves around the country. Industry efforts from the harvest to the delivery have become a well oiled machine that, in the end, continues to provide the North American consumer with quality Hass every day of the year.  The next challenge for the Hass industry will be Cinco de Mayo promotions, which in the past two years have eclipsed the volume consumed during Super Bowl.

The future looks bright

This spring will see the start of the first full season of  Peruvian Hass in the North American market.

According to ProHass in Peru, the Hass industry will export 90,000 metric tons (MT) in 2012 - 130% of last year’s volume.   For the North American market, ProHass projects 2,000 containers of Peruvian avocado will arrive versus 436 in 2011.

The writer of this column projects a total volume of Peruvian avocados that will arrive in the North American market in 2012 at 100,000,000 pounds (lbs).

Key facts

This figure basically confirms the projection of ProHass in Peru. My rationale for this level (which arguably is a huge challenge considering  historical volumes) is based on:

- The projected harvest volumes of Hass in California and Mexican during the Peruvian avocado import period (= higher than 2011);

-  Ongoing commitments to European importers of Peruvian Hass;

- Avocado demand in Mexico during this period ;

- The overall increase consumption of Hass in the U.S., including four major promotional periods during the Peruvian import period: Cinco de Mayo, Memorial Day, 4^th of July and Labor Day.  This in addition to the historical high avocado consumption during the summer months.

Market forces

Forecasting volumes of Peruvian Hass in the U.S. is the easy part. Predicting the impact of market dynamics on movement and prices is much more challenging.  The Peruvian avocado growers have a tremendous opportunity to set the stage for many years of profitable sales in the U.S. First of all, most of the avocado growers in Peru have used the latest technology for irrigation, planting distances and varieties.

I forecast higher than world average yields for Hass in Peru. Total costs per kilogram (including production costs, cost to market and all other costs divided by yield per hectare) are one of the lowest of those Hass industries supplying the North American market. The Peruvian avocado exporters have a competitive price advantage in the North American market.

However, issues we saw in the shortened 2011 season, demonstrate the challenges for the Peruvian avocado deal in North America.

Peruvian avocado exporters and importers challenges

Crop Estimating: All avocado industries have faced the issue of inaccurate crop estimates during their growth periods.  There are new Hass hectares coming into production in Peru during the next five years and beyond. This makes it almost impossible to estimate the volume that these trees will produce.

For example, a four-year old Hass planting may surprise its owner by producing 30 kilograms (kg) per tree when no production was expected.  Multiply this by the number of four-year-old Hass trees in Peru and you can calculate that the crop could be larger.  In addition, a new grower who is estimating his first avocado crop may see 150kg per tree, but the final result might be half that amount.  The Peruvian Avocado industry needs to invest in developing an accurate crop estimating system that has helped other Hass industries around the globe.

Shipping Schedule

The North American Hass market is looking for a reliable supplier.  The current suppliers, in the past, have artificially delayed/reduced harvest for non-weather related reasons.  As the first full season of Peruvian Hass in the U.S., the trade gets its first impression of the Peruvian Hass in regard to quality and reliability of supply.  The Peruvian avocado industry could show its ‘best face’ by:

- Shipping ‘only’ when the fruit has reached the industry standard dry weight level;

- Continue to ship a consistence weekly volume to the end of the season.

Market information

The Hass industries in California, Chile and Mexico have developed sophisticated tracking and reporting systems that enable producers to understand what is taking place in the market during the period that they are harvesting in their groves. This information is crucial in determining harvest and shipping strategy.  While the Hass Avocado Board provides excellent industry information, the industries mentioned above have made the investment to have their own teams providing market information.  The Peruvian avocado industry needs to create a system in North American that can provide them feedback on the market.

Market promotion

Obviously the Peruvian Avocado Commission does not have the funds to execute a market-wide promotion in 2012. However, based on the volumes of Peruvian Hass that this writer forecasts will be marketed in North American in the coming years,  Peruvian avocado producers need to follow the steps of their fellow producers in Chile and Mexico by implementing  well thought out marketing plans that compliment  those of the HAB and its affiliated associations.  A priority for 2012 is to make certain that the trade is updated on the availability and quality of the Peruvian Hass. This can be done in a very cost effective manner. All of the major avocado importers have years of experience in this regard.

Market fragmentation

According to the information I have, there are currently 10 packing houses in Peru certified by the U.S. Department of Agriculture (USDA) for packing avocados for the U.S market.  Assuming one packing house will pack around 40% of the crop, the other nine will have more or less 7% of the volume each.  This will provide some stability in the market, even before the harvest starts.

This writer believes firmly in free markets and free competition.  However, considering the volume projected for the North American market, 10 packing houses provides the level of competition that produces the best results for the entire industry.  The issue facing the Peruvian avocado industry is on the market side.

We have seen that the best avocado markets for producers, marketers and the trade occur when the highest percent of the volume available for sale is in the hands of avocado marketing professionals that are in the deal 52 weeks a year.  While only 10 packing houses will be exporting Hass from Peru, it is unclear, at this time, how many importers will be receiving this product.  It is imperative that the product move through the system quickly.

A small amount of old inventory in the hands of in importer who cannot find a home for the product has, in the past, caused price dislocation.  In order to lay the table for a stable season, the Peruvian avocado export companies should make sure that their receivers are getting the volume that match their sales capacity.

Competitive war

This writer has always maintained that taking the tactic of “my Hass avocado is better than your Hass avocado” always leads to lower returns for producers.  Every industry needs to provide the best possible product to the market. During the harvest of the Peruvian Hass, California and Mexico will both be at peak harvest and taste periods.  The main Hass markets of the U.S. - California, Nevada, Arizona, Oregon, and Washington - will be supplied primarily with California Hass, supported by an aggressive promotion program by the California Avocado Commission.

Assuming this market remains stable, only 10-15% of the California Hass sales are projected to be in other markets.  Due to freight costs, Texas, the second-largest avocado market, is expected to be supplied mostly by Hass from Mexico,as it has been since 2007, even with large California Hass production.

The greatest need for Hass supply during the Peruvian avocado harvest is on the East Coast.  While per capita and total consumption is not at the level of California or Texas, this is the current growth market for avocado consumption in North America.  Freight costs help make Peruvian Hass competitive with both California and Mexican Hass. This writer believes that around 70% of the Peruvian Hass can be consumed at good returns in the East Coast Markets, including Eastern Canada. Rather than compete head on with California and Mexico, Peruvian avocado exporters should work with their importers to market a majority of the Peruvian Hass in the East Coast markets.

Avi Crane’s career in the Produce Industry spans 38 years.  Managing a 200 acre avocado ranch, he created innovated irrigation and planting layout regimes that increased both production and the fruit size of the Hass avocadoes.  Working for the major Avocado Industry trade association, Crane developed industry-wide crop estimating and market data collecting programs that are still in use after 25 years.

Crane worked for some of the U.S.’ top produce companies before forming his own business Prime Produce International, which closed its doors in 2009. Crane was a key participant in the growth of avocado consumption in the U.S. Market over the past 2.5 decades. He has served as a board member of the California Avocado Commission and the Hass Avocado Board, and now works on a consulting basis.

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