The word 'grenade' has its roots in the French 'pomme grenade' meaning pomegranate, and the links are obvious; the shrapnel inside the fruit, its arils, are witnessing an explosion in demand in Europe with prices only down marginally despite a 76% surge in volume to week 15. The key driver is Peruvian supply, which according to Arturo Hoffmann of Origin Fruit Direct has effectively "expelled" Chile from the market and threatens to do the same in the U.S. when access is granted. 

"Volume from Peru has increased 350% since 2011 and with prices that until week 15 have been stable every year," says Hoffmann.

He clarifies that prices tend to go down somewhat from week 15-22, due to peak supply, but movement continues with profitable returns.

Hoffmann's business is mostly involved with direct supermarket programs across the continent, and has been able to avoid some of the volume pressure present in the open wholesale market.

"We have been able to maintain prices, starting at €11-12 on average in week 5 with India, and in week 9 with Peru we continued with that price and it stayed for a few weeks. Now we’re between €9-11 and it will continue to go down a bit," he says.

"We have Indian fruit until week 11, and in week 9 we have early Peruvian fruit from the earliest zone of Arequipa. We finish with the last arrivals between weeks 25-27 and our sales window finishes in week 30."

This means Origin Fruit Direct is in the market with overseas-grown fresh pomegranates for almost half the year, but its a semester that has changed a lot since the program began as a mere add-on to support suppliers in the importer's cornerstone citrus and table grape businesses.

In 2012, the South American season was split almost 50-50 between Peruvian and Chilean pomegranates, but since then the Chilean share has dropped to just 14% with 295,097 metric tons (MT) in 2015; this compares to 452,126MT in 2012.

Chile's pomegranate industry "must re-invent itself"

Hoffmann, a Chilean national himself, explains his country's forays into pomegranates as a means make a bit of extra revenue with a "rustic" crop that doesn't need much irrigation.

It's a premise that could not be more different nowadays.

"For issues of cost, pomegranates were an alternative for Chilean growers with water problems...you irrigate it a bit, you harvest and you get good prices abroad. It effectively was this way, but that was 10 years ago," he says.

"Today the market has evolved a lot and supermarkets are very precise in the sizes they manage. For example I have programs with Coop in Scandinavia and there are certain sizes I can't sell - 8-12 counts don't work for them.

"The season changed from the roots for Chile – it was sold as a rustic fruit which didn’t need much work, but actually to have export quality in pomegranates without blemishes, they do need crop activity and that implies cost. To get the sizes that are commercial you also need more intensive irrigation management."

He adds pomegranates from northern Chile have been able to compete with Peruvian fruit quality-wise, but there have been more problems with product from central Chile with limited post-harvest life.

"The Peruvian fruit has superior quality. Speaking about the Wonderful variety, the color is much more intense both externally and in the arils, and the condition of the fruit is very good so there is very little rotting.

"In Chilean fruit, especially what’s produced in the central zone, there have been more problems with condition so it’s a very negative issue especially when they need about four weeks to be able to move stock."

"Chile enters and leaves during the Peruvian season – Chile has absolutely no comparative advantages in terms of windows with Peru," he says.

The importer takes note of some projects in Chile to promote early pomegranate varieties to make the most of market windows, but he says this misses the point; it is not timing that Chile needs to fix, but quality and competitiveness.

"In what sense does Chilean fruit have a comparative advantage? Until this year they have been able to ship to the U.S. and Peru hasn’t, because of the issue of fruit fly, but the protocol is very advanced and this year they’re doing the first tests to be able to enter the United States," he says.

"Sooner rather than later, and I think it’ll be next year, Peru will be able to send fruit to the United States and that’ll be a blow to Chile without a doubt."

On the plus side, Hoffman believes U.S. access would allow for an easing of volume in Europe that would potentially push prices higher on the old continent.

Middle East opportunities

Frank Michel of Ica-based Challapampa was also uncertain what increased volume from larger players would mean this year, but to date he's seen just a 10% dip in prices which means business is still profitable.

The biggest change for Challapampa though is its market destinations.

"This year the demand is more from the Middle East and Russia, and that’s the thing that most catches my attention," Michel says.

"Two seasons ago we sent to Europe or Russia around 70% and last year it was half-half; now it's 70% to the Middle East. It has turned around for us.

"We send to Jordan, Lebanon, Saudi Arabia, which are the three countries that have had most of the volume to date. Some fruit has been sent to Europe, to France specifically, and some fruit has gone to Russia but the Russian market has not been the same."

He says the company has 25 hectares of pomegranates and will not be planting any more as it awaits the market reaction from large supply coming on-line elsewhere in Peru.

"Volume is increasing in the market but we believe there are some investments in Peru with big intentions for pomegranates that could affect us, so we want to watch how the market responds.

"If prices can be maintained we could increase the hectares – it’s a market niche that we want.

"I’m content with the season because I didn’t know exactly what to expect out of prices this year. It’s possible we could get a good average price that's appropriate for us."

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