5 March 2018
Keeping up with smashing demand for avocados
The New Zealand avocado sector is in a good position for growth with growing demand outstripping supply. This is leading to new greenfield development opportunities in the Upper North Island, according to the latest ANZ Agri Focus.
“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,” said ANZ rural economist Con Williams.
That growing global demand along with recent opening up of the Chinese market highlights the opportunity for New Zealand with ambitions to increase the value of the industry from $146m to the high $200m mark over the next 5 years.
Currently the fresh domestic (32%) and Australian market (56%) account for the lion’s share of the crop.
Australia accounts for around 80% of export revenue with Japan (4%), Singapore (2%), Thailand (2%) and Korea (2%) being the other major markets.
The first New Zealand avocados arrived in China last month.
“China 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 which offers lucrative returns presents a tug-of-war for the sector.
“This will require some exporter discipline to strike the right balance.”
Initial volumes into China will be low and extra marketing costs will be required to establish a profile and build the brand.
Increasing supply requires significant greenfield development, currently the Bay of Plenty accounts for 60% of the growing area and Northland 36%.
The majority of new greenfields development is set to occur in the Northland region due to availability of land and favourable growing conditions. The Bay of Plenty region will also see some development, but suitable land and its cost due to competition from urban creep and kiwifruit development are key barriers.
While the economics of avocados appear to stack up well, Mr Williams said, there are many 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.”