Mexico becomes a juicy exporter
When one thinks of Mexico’s largest agricultural exports, avocados and limes are more likely to come to mind than strawberries, blueberries, raspberries, and blackberries. While Mexico has actually been a notable strawberry exporter for several decades, the country has become a significant exporter of the latter three berry varieties over the past decade. This is largely due to the entry of multinational corporations, such as Driscoll’s, and strong demand from the United States. Additionally, Mexico has microclimates, which support a variety of berries. Ideally located near the Pacific and at a high altitude, the Mexican states of Jalisco, Michoacan, and Colima produce blueberries, blackberries, and raspberries. The elevation of these states allows the berries to grow without the impacts of the strong sunrays that typically affect locations at similar latitudes, and they are not far from refrigeration and shipping infrastructure in coastal port cities.
Strawberries have been a significant crop to Mexico since the mid-20th century. In 1995, Mexico exported $70 million in strawberries to the United States, and in 2004 this figure ballooned to $110 million. The surge in demand from US retailers over the past decade triggered an evolution in Mexican berry production. Traditionally an open-field operation, berry production is now more commonly conducted with protected agriculture through greenhouses and shadehouses. This technology has allowed for production to rise over 65 percent since 2000, even though planted area has remained virtually stagnant.
Mexico’s proximity to the United States, the largest berry consumption market, helped to spotlight the country as a viable alternative for Americans’ rapidly growing demand for the fruit. Between 1980 and 2015, annual US strawberry consumption per capita increased four-fold from just under 2 pounds to nearly 8 pounds, while annual blueberry consumption per capita leaped from roughly 0.2 pounds in 1980 to nearly 1.5 pounds in 2010. An overwhelming majority—upwards of 90 percent—of Mexico’s berry exports are sent northbound to the United States, though recent figures suggest this has decreased to 85 percent, likely due to newfound trade with China.
Protected agriculture is one of several benefits Mexican producers are privy to due to their close trade relationship with the United States. In addition to advanced technologies in cultivation and pest control, the United States also serves as a de facto research and development laboratory by stocking Mexican berry growers with the latest varietals. US companies comprise the vast majority of foreign direct investment in the Mexican berry industry. Furthermore, according to the National Agricultural Council (CNA), foreign companies make up 60 percent of Mexico’s berry producers, only 40 percent are owned by Mexican nationals.
Culture defies economics while labor proves to be a double-edged sword
Berries haven’t traditionally been consumed in high numbers in Mexico, but Mexicans are acquiring a taste for them. Domestic consumption, however, is fueled by cultural preferences over price: Consumers appreciate larger berries with minimal bruising, which is more typical of American berries than of Mexican. Mexico imports over $15 million US strawberries and over $1 million worth of other berries.
Impressive domestic supply growth has created a significant price differential between American imports and domestic supply. Prices for domestic berries are roughly half those of imported berries, and while consumption of domestic berries has ticked up marginally, Mexicans still only consume about 3 percent of the what the country produces, roughly 16,000 tonnes of berries.
Though Mexico’s domestic berry demand market remains quite nascent, development efforts are underway to create a stronger consumption market. Partnering with the Marketing and Market Development Services Agency (Aserca) on promotions, the sector intends to expand not just their export markets but at home as well. In Mexico, demand may be increasing, but not as quickly as Aserca would like. In the state of Jalisco, for instance, the second largest producer and consumer of berries in Mexico, organic demand growth would come nowhere close to the 30 percent increase in production expected in 2015. Not without a little prodding, at least. As Jalisco’s berry production increased, the state likewise became a focal point for domestic berry marketing, with Aserca’s campaign taking an early interest in boosting consumption in the state.
Farming on communal lands known as ejidos is quite common across much of Mexico, and multinational corporations have tapped into these communities—often made up of small-scale farmers growing for family consumption—for low-cost labor. Berry production remains a highly manual process, and so the access to a low-cost labor force is a tremendous competitive advantage. The arrangement has become a beneficial opportunity for farmers on ejidos as well, who can get paid much better for an acre of greenhouse-grown berries than for an acre of field crops.
While the entry of multinational distributors has created substantial employment opportunity across many ejidos, there have been questions regarding the treatment of farm laborers. In the spring of 2015, berry pickers in the Mexican state of Baja California went on strike, demanding better wages from growers, such as BerryMex, and distributors, namely Driscoll’s. Laborers claimed that, while Driscoll’s provides competitive wages compared with other distributors, the company has a responsibility to further increase pay, improve conditions, and set a high industry standard.
In response to the strikes, Driscoll’s did increase wages and many pickers went back to work after two weeks. However, strikes have reoccurred since last spring, as grower unions like Familias Unidas por la Justicia (FUJ) push for union recognition by Driscoll’s.
Europe’s changing taste buds
Many more developing countries intend to meet the demands of other insatiable berry markets like Europe. This year, Rabobank announced that the sky's the limit for berries in the European market. The global leader in agricultural financing projected 7 percent annual growth in blueberries, raspberries, and blackberries for the next five years. The more established strawberry variety is expected to grow at 2 percent a year for the next five years. These trends suggest that berries have become a hot commodity as their demand far outstrips growth in the EU’s total fresh fruit consumption. While many countries within the EU produce berries, the high volume demanded and desired for a year round supply has made Europe a major importer of the fresh fruits.
This demand has little reason to slacken in the coming years. With eye-catching, scientific study titles, like “Study Finds Blueberry Compound to Kill Cancer Cells,” continually popping up in the media, berry marketers have an easy time solidifying these superfruits as essential products for healthy living. While enticing buyers to incorporate berries into their daily diets, convincing them that the product provided will be consistently delicious provides an entirely different set of issues that will determine future growth in the market.
Transportation and farming technology has advanced greatly to ensure that berries purchased at distant stores always meet customer expectations. To ensure buyers of the quality of the fruits, importers have begun to market themselves individually or in conjunction with their retailers, touting the quality of their product and skill in quickly delivering these delicate fruits to market. While freshness and consistency of the berry remains paramount, new considerations have also arisen that retailers must address to entice buyers and encourage brand loyalty. Consumers increasingly value sustainable growing practices and fair trade laws when purchasing berries. In this way, the reputation and practices of the retailers, importers, and the farmers will become the lynchpin in driving greater berry consumption and determining supply.
To supermarket chains, this berry boom is the beginning of a changing landscape in consumer preferences. Joakim Bäckstäde, the sales manager at the major Swedish supermarket Hemköp, proclaimed berry shoppers as the “shopper[s] of the future.” As an impulse driven product, berries promote the purchase of a wide variety of complementary goods such as yoghurts and desserts. Most interestingly, berry’s popularity appears to be indicative of a larger trend in grocery trends where producers are placing a greater value on high quality products. Expect to see the rise of berries to coincide with the evolution of European consumer preferences.
South Africa’s berry revolution
In response to growing demand for berries, South Africa has begun to invest heavily in increasing its berry output to cash in on the growing consumption trend. Although South Africa is still a small contributor towards global berry supply, private farmers and the South African government have been working cooperatively to change this. In an attempt to address overarching issues that hinder berry production, in 2011, farmers formed the South African Berry Producers Association (SAPBA). Additionally, the South African government has identified berry production as a key economic driver, in need of investment, both for the high value it commands on the market and its potential to employ countless laborers. Both of these policy efforts will help accelerate the expansion of South Africa’s share in the berry market.
Blueberry production in the Eastern Cape forms the centerpiece of this coordinated effort. The government-created Eastern Cape Development Corporation currently leads the creation of the “berry corridor” with the expressed goal of becoming the largest blueberry producer in the southern hemisphere. At a cost of 45 million rand, the project envisions to create 500 hectares of blueberries and the necessary processing facilities in the Eastern cape by 2020.
These efforts have lead to explosive growth in production in recent years. Trevor McKenzie, a chairman of SAPBA, reported that the industry has expanded by 30 percent a year in the past few years. Concurrently, South Africa’s share in the European berry market has grown. South African berry producers possess many important assets that have and will continue to garner them greater importance in the supply of berries worldwide. Most importantly, countercyclical seasonality allows for South African farmers to supply fresh berries to Europe in off-seasons. Additionally, South Africa’s proximity to Europe, compared to other major berry producers such as Chile and Argentina, as well as greater consistency in product due to better quality control, give South African producers unique edges in the race to fill Europe’s berry demand.
While traditional import markets in Europe and North America remain the major focus for most berry producers, some look to new frontiers such as China as an untapped supply market. Most notably Driscoll’s and Costa Group formed a joint venture to begin production in the Yunnan province of China, citing “rapidly expanding Asian appetite for high quality berries” as motivation.” Costa Group, which has outgrown its home market of Australia, intends to double its exports over the next 10 years. Other major berry producers, such as Canada and Chile, have also increased exports to China to tap into the growing market.
The Chinese market continues to ripen as income increases in urban areas. In just the past decade, strawberry imports into the country have more than tripled from $4.8 million in 2005 to $14. 7 million in 2015. The blueberry market is experiencing similar, but delayed, boom in demand. In 2011, it was estimated that China’s blueberry consumption was around 10,000 tonnes. This was projected to grow by six times in just 5 years, with 2016 demand projections amounting to 60,000 tonnes.
Logistical challenges hampering this demand growth have also begun to be addressed, which will allow for fresh produce to be more accessible throughout China. In 2008, trucks traveling from major ports such as Shanghai or Guangzhou to the west took 50 hours. Now, transit time has nearly halved to 30 hours due to the success of concentrated efforts to improve transportation infrastructure. More ports and an increasingly comprehensive railroad system will also expedite transportation and encourage Chinese consumption of imported fresh fruits.
The Chinese market faces some barriers that if addressed will provide tremendous lift to the berry market. Most importantly, many Chinese consumers remain suspicious of local fruit as they recall the 1990s and early 2000s when Chinese producers compromised safety with excessive pesticide use for the sake of creating cheaper and bigger fruit. In the short term, this has produced a desire for foreign fruits that most exporters welcome. However, as many companies hope to begin building farming operations in China itself, marketing efforts will be needed to convince consumers of the high quality of Chinese produce. Lastly, an information gap persists, as the health benefits of berries remain unknown to many Chinese consumers. With increasing importance placed on personal health, greater marketing campaigns surrounding the benefits of berries will assuredly increase berry consumption in the years to come.
Well-organized and strategic marketing efforts can drive consumer preferences, which can in turn lead to the creation of robust markets and the transformation of economies. To witness the power of marketing, one does not need to look too far. Take the avocado's story, for instance: A name change for the fruit and several decades of advertising its health benefits eventually led to a 14-fold increase in US avocado consumption. Berries are just beginning to realize a similar evolution.
The United States and Europe will remain important players in the space, as their demands and seasonal limitations allow emerging producers, such as Mexico and South Africa, to thrive in an otherwise competitive landscape. The wild card will likely be China and broader Asia demand as different players vie to capture the market. This region has been largely untapped, and a successful introduction of berries into Asian diets could have a multiplicative effect upon the industry. The market should keep close watch on Driscoll’s and Costa Group’s operation in Yunnan, as the success of this venture may be a tell-tale sign of future demand.
In 20 years, berry consumption around the world will likely be much higher than it is today, with global consumers far more aware of berries’ health benefits. What they might not be aware of, however, is the decades-long marketing efforts and the great strides taken to provide them with the fruits year round at an attractive price.