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Exploit China's avocado export opportunity

Monday September 23 2019

By BITANGE NDEMO
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When President Uhuru Kenyatta signed a deal with China to export avocados, there was a celebratory mood, as farmers anticipated a new and large market for the crop.

Media continues to exaggerate the impact of the deal, with some reporting as though the country is overflowing with avocados.

The numbers, however, paint a different picture. According to Food and Agricultural Organization’s 2017 report, Major Tropical Fruits, Market Review, global production of avocado reached an estimated 5.7 million tonnes in 2017.

Mexico, the World’s largest producer, contributed more than two million tonnes, representing one third of the global production.

More than half of the global production takes place in south and Central America with Peru, Chile and Dominican Republic contributing the most.

The report estimated that the global exports of avocado reached 1.6 million tonnes in 2017, of which Mexico accounted for an estimated 58 percent of global avocado exports, with shipments predominantly destined to the US.

According to the report, Mexico shipped an average of 77 percent of its avocado exports to the US between 2010 and 2016:

Mexico’s strength lies in its ability to produce avocado in all seasons and also its close proximity to the US, which gives the country a unique competitive advantage. Other key producers included a two percent increase from 2016. On the back of rapidly growing global demand, avocado, among all the major tropical fruits, has seen the fastest production growth over the last decade, primarily due to increases in harvested area in the major producers.

The report points out that other significant exporters are South Africa, Israel and Kenya. These countries all primarily export to the European Union and benefited from fast growth in its import demand for avocado.

Mexico is a less prolific exporter of avocado to the European Union, as prices received in the US are significantly more lucrative.

SOCIAL CROP

Although Kenya is identified as one of the key exporters, FAO estimates its production capacity at a paltry 200,000 metric tons a year. Other than Central Kenya where there is some activity of formal production of avocados, the rest of the country hardly considers avocado as a cash crop. It is largely a social crop that grows randomly on its own.

A more serious farming of the fruit in Kenya is done by Kakuzi on approximately 717 Hectares. The firm exports both Fuerte and Hass cultivars.

Unlike Mexico where the crop produces throughout the year, in Kenya, the Hass season runs from June to mid-September and Fuerte season starts a little earlier in March or April.

Due to these limitations, Kenya earned $118 million (Sh11.8 billion) in 2018 compared to Mexico’s $2.4 billion (ShSh240 billion) in a $5.5 billion (Sh550 billion) global market as reported by the World’s Top Exports report of July 2, 2019.

We need more effort to commercially produce avocados and here is why.

Until 2018, China has strangely not been featured in many of the sources of data including FAO. The market is even larger than estimates show. A more realistic analysis appears in a research conducted by Transparency Market Research which estimates the value of the market to be about $14 billion (Sh1.4 trillion) as of 2018.

China is a largely new market. Qian Ding of China Central TV in his article, What's behind China's growing appetite for avocados? Explains:

Avocado, also called alligator fruit or butter fruit in China, is getting more popular among China's burgeoning middle-class. The fruit was almost unheard of in the country a few years ago and only appeared in a few premium super markets with price as high as 50 yuan (about Sh732) each, but in recent years, it has become one of the trendiest foods in the country with the price dropping to 15 yuan (about Sh219) per avocado on the domestic retail market. In 2017, China imported over 30,000 tons of avocados, over a thousand times than the amount in 2011, making it one of the top 10 markets for the "golden fruit."

China also needs the fruit to manufacture lucrative oils to meet the growing demand for natural products. As a result, consumption per capita in China is about three avocados a day, translating to about four billon fruits per day.

TRANSFORM THINKING

To make a dent in such a market, Kenya will have to produce and export 100 million avocados a day to China before thinking about other markets like Europe which has always been our traditional export destination.

To benefit from such a market, we simply have to transform our thinking by planning the next steps, understand export dynamics, begin to farm avocados commercially, learn how to safely export the fruit and educate the farmers about the yields of this crop.

Data will be key to exploiting the emerging market opportunities. While yields in Kenya average between one and two tonnes per hectare for Hass variety, Mexico does between four and eight metric tonnes of the same.

To fully exploit the opportunity, farmers will need extension officers who will constantly help them to successfully grow the fruit especially in semi-arid areas where land is plenty but people are poor.

China too is beginning to grow avocado. They have dedicated more than 7,000 hectares of land to grow the fruit, thus signalling the growing demand of the fruit in the coming days.

The avocado craze is just another new opportunity that must be exploited for the benefit of communities that languish in poverty while such opportunities exist.

The writer is a professor of entrepreneurship at University of Nairobi’s School of Business. @bantigito