Fruit Growers Financial Bite - business | Stuff.co.nz

Kiwis soon be forced to buy imported fruit and veges year round if growers continue to be screwed down on prices locally, an industry leader is warning.

Hawke's Bay Fruitgrowers Association president Leon Stallard said his apples often retail in supermarkets for 800 per cent more than what he was paid. For example, shoppers paid $3.80 to $4 for a kilo of apples but he received just 50c to 60c a kilo from distributors - which meant little to no profit margin for the grower.

Growers deserved a greater share of the retail profits, he said. "Someone's profiteering off our hard work."

The country's two biggest supermarket operators reject claims of exorbitant margins at growers' expense, claiming they're paying fair prices which vary on seasonality. They weren't willing to say what their margins were.

Stallard maintains growers face ever-climbing costs - including for labour, fuel, electricity, meeting food safety standards such as minimum residue levels - yet the average retail price for many produce items and the prices paid to growers had not budged in years.

He feared local growers would abandon the New Zealand market and export their produce, as the returns were better. However exports are still relatively small and growth is hampered by the strength of the New Zealand dollar.

Smaller growers had been forced out of the market as scale and volume were the only way to make money, he said. "A significant number of our members and growers have exited the industry. Back in 1980 there might have been 1700 orchardists in New Zealand, now we're down to about 360. Before we realise it we'll be importing all our produce from overseas," Stallard said.

A fruit supplier, who did not wish to be named for fear of losing business, said growers typically received about 25 per cent of the retail price of produce, while supermarkets aimed to make a gross margin of about 30 to 40 per cent of the retail price. There was often little elasticity in retail prices so the retailers' margins fluctuated. "But sometimes the margins are embarrassingly high."

In contrast, the margins made by growers and distributors were "horrible", he said.

Not all growers believe they are getting a raw deal. Keith Vallabh, a Pukekohe silverbeet grower and Vegetables NZ chairman, said supply and demand, and competition were responsible for the prices they received, not the retailers. "Growers are good at blaming others. It's a free market, some days the pricing is high, sometimes low."

If growers wanted to make more money they needed to work smarter, including joining together to sell through co-operatives, he said.

Horticulture NZ chief executive Peter Silcock said the prices growers received varied a lot depending on supply and season, and at certain times could be below their cost of production. Many growers sold to retailers and food service operators through wholesalers, such as Turners and Growers, Freshmax and Market Gardeners, which typically took 10 to 20 per cent of the sell price as a cut.

It would be too broad a statement to say supermarkets weren't paying a fair price for produce, "but at times there's too much difference between what growers get and what supermarkets get", he said.

A Countdown spokesperson said it made a "small retail margin" on products, after it covered costs such as wages, transport, and store running costs. The spokesperson said its margins for fruit and vegetables hadn't changed in the past year. On average, for every dollar customers spent in its stores, Countdown made a 5 cent profit before tax but it wouldn't detail what the average margin was on fruit and vegetables alone.

Foodstuffs communications director Antoinette Shallue said claims fresh fruit and veges were marked up by as much as 800 per cent were "completely incorrect", and its gross sales margins varied.

Depending on weather, the cost could exceed the retail price and Foodstuffs made little to no margin, but when produce was in season it could make an improved margin.

- ? Fairfax NZ News

Source: http://www.stuff.co.nz/business/8256616/Financial-bite-goes-on-growers

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