The Apple Giant Poland and the Russian Embargo. Adam Paradowski CEO Plantpress, Poland

Transcription

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2 The Apple Giant Poland and the Russian Embargo Adam Paradowski CEO Plantpress, Poland

3 01 Flashback apple trade with USSR

4 01. Flashback apple trade with USSR Poland as a country with the biggest percentage of private apple farms in the whole Eastern Block (beside state farms and cooperatives) Orchard development program by Prof. Pieniazek Difficult access to new technologies, machines, varieties and know-how from Western Europe

5 01. Flashback apple trade with USSR Varieties: McIntosh, Jonatan, Spartan (later replaced by Idared and Jonagolds) Export mainly to communistic countries with USSR as the biggest market Sales via state export companies e.g. Hortex Shipments by trains (less by trucks)

6 01. Flashback apple trade with USSR Good image of Polish apples and Poland as apple supplier in the USSR Stable and profitable business for growers with strong influence on apple farm development Fruits and vegetables from private farms sold with market prices Apples were the only fresh fruit avaiable throughout winter and spring

7 02 Free market

8 Milestones 02. Free market Poland gains independence 1991 The Collapse of the Soviet Union 2004 Poland in European Union First Russian embargo on Polish fruits and vegetables 2012 Russia joins the World Trade Organization (WTO) 2014 Russian import ban on agricultural products from the EU 2018 Polish apple crop reached 4,5 Million tons

9 02. Free market Domestic sales and consumption Increasing role of supermarkets in fruit sales Decrease of annual apple consumption from 20kg/person (90 s) to 13 kg per/person (2014) Increasing consumption (and competition) of fruits from import: bananas, oranges, exotic fruits available all year round

10 02. Free market Domestic sales and consumption Increasing sales of berry fruits (with longer supply window) Very weak or lack of marketing and PR activity promoting apple consumption at the domestic market Increasing customer demands related to fruit quality

11 02. Free market Development of apple farms Changes in orchards: Jonagored and clones, Szampion,Red JonaPrince, Ligol, Golden, Gala Modern orchards with high density, mainly on M9 Higher yield per ha Development of the whole grower supplying sector Easy access to modern technologies, machines, and varieties Extended sales window driven by increasing CA/ULO room volume

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14 02. Free market Development of apple farms New machines like tractors, sprayers, platforms Access to EU funds Dynamic development of Producer Organizations Relatively low labour costs Generation of new growers/sucessors young, optimistic and open-minded Influence of Prof. Eberhard Makosz s ideas

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16 02. Free market Processing Very dynamic development of the processing sector Privatization of state processing companies/plants Foreign investments (Germany, Austria but also China and Ukraine) The increasment of processing capacity to over 2,5 million tons per season Increasing consumption of juices/role of supermarkets

17 02. Free market Processing Sourcing from many suppliers: Growers, collecting points, cooperatives Lack of long term contracts Lack of processing orchards and varieties Big fluctuation of prices year by year

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19 02. Free market Processing Production Apple juice concentrate (higher acidity as added value) NFC Juice (increasing) Export Biggest in Europe, number 2 in the world after China Over 50% of Polish apples are being sold each year to processing plants

20 02. Free market Export to Russia Russia as the main destination for Polish export Poland as main supplier of apples to RF Visible part of apples send to Ukraine, Belarus and Moldova used to be re-exported to Russia Russian custom duties, lowered after WTO- Russia agreement (2012) Increasing buying power of Russian customers / stable RUB vs USD Limited competition from other Eastern European countries like Ukraine, Moldova, Serbia Negative impact on development of Russian fruit orchards

21 02. Free market Export to Russia Russian embargo Ban only on Polish fruit sector Common interest (exporters and importers) to keep deliveries New phytosanitary requirements and certificates from Russian authorities

22 02. Free market Export to Russia Development of the whole sector Growers and PO in Poland specialisation Trading companies both Polish and Russian Transport companies Producers of packages Supermarkets in Russia (direct deliveries of huge volumes e.g. Magnit)

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24 Idared success story Main variety in Polish orchards (up to 25% ) USA origin, harvest end of October High productivity even in orchards without irrigation Very good storability even in RA rooms Bicoloured variety but with average taste, red clones available Main variety send to Russia Available till August (with ULO technology) Easy to grade (no bruising) even by simple mechanical grading machines Easy in transport (very important in case of distant destinations in Russia) Preferred by traders, especially late winter/early spring deliveries We can assume that up to 50% apples send to Russia were Idared For years the best deal for Polish growers, Russian traders and Russian consumers

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26 03 Embargo August 2014

27 03. Embargo 01 August 2014 Polish apple symbol of embargo Growers as victims of global politic Food sector with huge losses both in Poland and Russia Future of many companies focused on Russian market under question mark Spontaneous action to support Polish apple sector Initiatives on different levels with big support of social media and internet Unfortunately apple consumption increased only for few months Changes of sales directions Belarus as main importer National discussion about further direction of Polish apple production and sales

28 04 New challenges/new reality

29 04. New challenges/new reality Growers Increasing costs of production ( labour costs) Negative effect of market defragmentation: Increasing role of traders and producer organizations Huge differences in prices- grower level and supermarkets Poland vs Poland competition Negative effect of processing and fresh market apple s price correlation

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31 04. New challenges/new reality Growers Increasing quality demands (domestic and export) Exchanges in varieties portfolio Gala and Red Delicious clones, Red JonaPrince Lack of club varieties Lower level of investments (orchards and farm infrastructure) Season 2017/18 shortlasting optimism for the industry High prices/easier sales due to low crop

32 Varieties portfolio 2018 Variety Trend New markets remarks GALA UP +++ new highlycoloured clones IDARED DOWN + Red clones JONAGOLD DOWN + RED JONAPRINCE UP +++ SZAMPION STABLE + Red clones LIGOL DOWN ++ GOLDEN UP +++ RED DELICIOUS UP ++ Clones GLOSTER DOWN ++

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34 Structure of apple varieties in Poland 2018 Ligol 10% Gala 7% Golden 5% Others 13% Szampion 15% Idared 25% Jonagold/RedPrince 25%

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36 04. New challenges/new reality Producer organisations Negative impact on many POs Cancelled contracts/ lack of alternative markets Less trust from grower s side (low prices/delays in payments) Costs of running a POs vs profits from apple trade Increasments of domestic competition Declared bankruptcy : Jabłuszko, Owoc Sandomierski, Roja (two biggest POs in Poland)

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38 04. New challenges/new reality Producer organisations Importance of proper management and differentiation of sales New sale destinations Long term contracts with supermarkets Investment into marketing and quality control Transparent rules of cooperation with members

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40 04. New challenges/new reality Government and growers associations Government level Opening new markets for Polish apples: China, India, Vietnam Phytosanitary protocols for new markets Promotion activity by Polish trade missions Growers associations: Cooperation with governmental agencies on opening of new markets Bicolored apple promotion program New level of cooperation: Unia Owocowa, LubApple, Appolonia Active promotion during international fairs Participation into trade mission

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42 04. New challenges/new reality Trade Less than expected shipments to oversea markets Very long and complicated shipments (containers) Lack of experiences and long time business relations Not enough varieties requested by new markets Time needed for implementation of phytosanitary protocols e.g. China Complicated situation in North African countries Big volume of apples available for free from withdrawal mechanism Price war between supermarkets in Poland Panic sales by many growers Defragmented market sensitive for speculation Negative influence of processing apple prices Too many decision makers Increasing competition from Ukraine, Moldova, Serbia

43 Changes in Polish export per destination Russia Belarus Other CIS EU-13 EU-15 Other Countries 2013/ /2017

44 Changes in Polish export TOP 10 Country Belarus Kazakhstan Romania Germany Serbia Ukraine Czech Republik Lithuania Egypt Latvia Source Eurostat x 1000T

45 05 Crossroads

46 05. Crossroads Numbers ha of apple orchards (Statistic Office data 2017) 4,5 millions tons expected in ,4 millions tons of storage capacity with 70% CA/ULO rooms Turnover of the biggest supermarket in Poland 10 billions Euro (2017) Domestic consumption around 13 kg/person Population 38 millions Distance from Warsaw to Moscow 1272 km Record export to Russia over tons

47 Fresh consumption 15% Supermarkets 50% Other channels of sales 50% Polish apple crop Export 30% EU 30-40% other countries 60-70% Processing 55% APJ 85% NFC 15%

48 05. Crossroads Statements Apple production is a core business for thousands of farmers in Poland Polish apple sector is defragmented with weak representation Poland has to export apples as it has been done for the last 50 years Russian market can not be replaced in short time industry needed decades to become a leader in Russia Even if Russia open market tomorrow export will be lower, with different shareholders (2017 import volume 0,7 milions tons, 2014 import volume 1,2 milions ton of apples)

49 05. Crossroads Statements Nobody in Poland is producing apples for processing at the same time over 2,5 millions tons of fruits are processed to AJC Overproduction is not a main problem for the apple industry - much more important are internal competition and low level of market organization Top quality is not awarded enough by traders and supermarkets Industry is operating in a much more competitive environment then before the embargo

50 05. Crossroads Possible directions - govermental level Orchards removal program In case of go life - expected to decrease old and semi-professional orchards only, It should reduce volume of apples for industry Apple withdrawal mechanism only for bio-gas 2018 program dedicated to industry apples tons apples with fixed price 6 cents/kg unsuccessful Cooperatives (rather then POs) as a solution for market defragmentation Active promotion of Polish food industry on export markets Long term strategy for fresh food sector development

51 05. Crossroads Possible directions growers level Focus on new markets varieties, quality, safe profile, marketing Cooperation not internal competition (cooperatives, associations) Active promotion of apples for domestic consumers Investments in quality not only volume Closer cooperation with processing industry long term contracts

52 Thank you for your attention Dziękuję za uwagę