Avocado Industry Faces Challenges Amid Success

The growth of avocado consumption is a runaway success story, but that doesn’t mean growers and handlers have no worries.

Matt Dusi, sector manager and food and agribusiness industry advisor for Wells Fargo Commercial Banking, said he sees both grower and supply chain challenges.

“For the California crop, growers are focused on how the trees handled the heat from the early summer and how they’ve done with the drought,” Dusi said.

“Water availability on the coast is challenging in good times, and the combination of minimal rainfall and high temperatures are weighing heavy on growers’ minds. Talk of stumping trees, like those experienced in the last drought, may come soon.”

Dusi said avocados and guacamole have become so popular that California is only able to provide for a portion of the demand. Nearly all the guacamole is now produced in Mexico, he said.

Dusi said Michoacan, Mexico, has been, and will continue to be, the largest producer for the U.S. market (88.5% of import volume share and 89.4% of value). Michoacan has the volume, proximity, is the only state in Mexico with U.S. market access, and has an established distribution network to effectively export to the U.S.

“While Michoacan is the largest exporter to the U.S., we also keep an eye on Peru, and the state of Jalisco, Mexico,” he said.

“Jalisco has a sizeable amount of acres, is growing, and is slightly closer to the U.S. If Jalisco can obtain the same export status as the state of Michoacan, we will see interest, and investment, grow in the region.”

Even with further growth potential in Mexico, Dusi said Peru is the real growth story now.

“Irrigation projects have been bringing water down from the Andes Mountains to turn thousands of acres of desert into prime growing areas,” he said.

“Acreage in the country has doubled in the last 10 years, and the U.S. is a prime target for this product. With the new developments in an open/arid environment, farmers have been able to lay out orchards in large blocks, driving down the farming costs and boosting efficiency. This is much different than in the U.S. where avocados are grown in hilly areas in oddly shaped and small blocks.”

Beyond the challenges faced by growers, Dusi said distributors, retailers and consumers would love to access to a stable supply of avocados at a reasonable price.

The California crop volume swings dramatically year to year because of the alternate bearing nature of the trees, while the Mexico crop is typically more stable for supply, but worker strikes and other issues have resulted in pricing moving considerably.

“Large/publicly traded buyers like Chipotle do not like volatility in ingredients, as with avocados, where they called it out in an earnings statement a couple of years ago. Per-box pricing that can swing between $25 and $75+ during a 12-month period makes it difficult to keep on a menu, or as an ingredient,” he said.

“The best thing the avocado industry could do to grow volume in the foodservice/restaurant side of the business is to ensure customers have a steady supply of quality product at a price that is relatively constant.”

Innovations that help avocado demand, Dusi said, include high pressure processing (HPP)/cold pasteurization, which has been gaining traction with guacamole producers.

“The HPP process fits in well with the health trends — no preservatives or chemicals and a natural process to extend shelf life, while at the same time keeping the fresh taste that avocado consumers are looking for,” he said.

“Food companies have been using new packaging and processing methods to get single-serving guacamole products to consumers — expanding beyond the classic trays and tubs into higher-value single-serving packages that include chips — the ultimate in convenience.”

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Source: The Packer

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