Taking stock and setting direction
A working plan for the Australian Cherry Industry
Presented by the
KONDININ GROUP
Industry Mission Statement: The best cherry to meet consumer needs
(Australian Cherry Industry Strategic Plan 2002-2006)
Contents
Page
Executive Summary
Introduction
TAKING STOCK
Industry Environment
1.1
Characteristics of the industry
1.2
Industry achievements
1.3
Production trends and projections
1.4
Challenges for the Australian cherry industry going
forward
Capital investment in the cherry industry
2.1
Industry analysis
2.2
Historical market trends for price over the course
of the season
2.3
Markets and market access
The marketplace
3.1
Domestic markets
3.2
Export markets
3.3
Quality assurance systems
Industry analysis
4.1
SWOT analysis
2
5
6
6
9
10
13
15
15
20
23
24
24
28
38
39
39
SETTING DIRECTION
Industry action plan
5.1
Production issues
5.2
Market access
5.3
Domestic market development
5.4
Industry structure and resourcing
41
41
43
45
47
APPENDIX 1
48
1
Executive summary
For the Australian cherry industry to have a strong and viable future it needs a clear
understanding of the environment in which it currently operates and the challenges
and opportunities it could face into the future.
This report provides a stocktake of the Australian cherry industry and sets forth a
viable working plan to help assure the industry’s future direction.
This project is the result of a partnership between the Australian cherry industry,
through Cherry Growers of Australia Incorporated and the Department of
Agriculture, Fisheries and Forestry under the Advancing Agriculture Australia
programme.
By national standards, the Australian cherry industry is a relatively small agricultural
industry, with an estimated 701 growers spread across Australia. The industry is
concentrated in New South Wales, South Australia and Victoria and has smaller but
important production areas in Tasmania and Western Australia.
The Australian cherry season extends from November, in most mainland States,
through to late February in Tasmania, with the majority of the crop harvested during
December and January in most regions.
Australia currently produces in excess of 6000 tonnes of cherries per year. The gross
value of the cherry industry in Australia during 2001-2002 was $54.5 million ($49.9
million farm-gate value).
The Australian cherry industry has a National Industry Organisation – Cherry
Growers of Australia Inc and an executive with members representing each cherry
growing State.
Key industry achievements include the production of The Cherry Manual, Australian
Cherry Quality and Size Guide and the Australian Cherry Quality Guide. The industry has
carried out some consumer-based market research (1999) and has a detailed strategic
plan for the industry through until 2006. But the lack of on-ground extension officers
to promote adoption of these resources impedes the further development of the
cherry industry in Australia.
The cherry industry in Australia faces some major issues going forward. With the
vast number of young cherry trees in the ground and the lag time from planting to
full production, the volume of cherries in Australia is predicted to double during the
next five years. Although the volume of supply is rapidly increasing, there appears to
be a limited understanding of the potential for growth of demand within the domestic
market and limited current access to many potential export markets.
2
Another key challenge going forward is the lack of objective information currently
available on the Australian cherry industry. Industry and government must address
this issue to provide an accurate basis on which to develop future priorities and
pathways for sustainable development.
The Australian cherry industry is a fragmented industry, with a lack of
communication between industry stakeholders. Regional attitudes and differences
are quite distinct within the industry. The cherry industry is considered a high-risk
industry subject to production and marketing challenges. With the high level of risk,
the return on the capital invested in the cherry industry is commensurably higher and
should be a minimum of 20% to generate sustainable returns to growers.
The Australian cherry industry predominately focuses on the domestic market,
particularly the mainland, with only 10-15% of the national crop currently exported.
Growers often view the increasing market power of the retail sector negatively.
Opportunities exist for the Australian cherry industry to develop advantageous
relationships with the retail sector and drive domestic demand for cherries through
promotion.
The Australian cherry industry currently exports to more than 20 overseas markets.
The main export markets for Australian cherries are Hong Kong/China, Taiwan and
South East Asia. There is significant potential for growth in all export markets.
Significant funds are required by the Australian cherry industry to implement the
outlined industry action plan. Although funds are available from a variety of sources,
the Australian cherry industry currently does not pay appropriate levies when
compared to other agricultural industries.
Potential industry projects include:
 Reviewing and updating The Cherry Manual and other quality assurance
documents. The updated documents should be included in formal industry
training and extension programmes and a roadshow with industry leaders and
technical experts demonstrating and encouraging the adoption of industry
best practice.

The Australian cherry industry needs to create and assist wherever possible
with market access and protocol issues for export markets for Australian
cherries. The challenges facing the Australian cherry industry in each of the
potential markets must be clearly identified and defined, and a detailed action
plan to meet these challenges needs to be developed. As part of the action
plan, a case for an export development/market access capacity exists to
champion the Australian cherry industry.

Research and development projects relating to market access need to be
developed and implemented. Projects may include a pest and disease list for
3
Australian cherries and the development of a systems approach to area
freedom status.

Update the consumer market research carried out during 1999, to provide a
thorough understanding of the marketplace in which the Australian cherry
industry operates and the potential supply and demand issues affecting the
marketplace.

Develop and evaluate strategies for customer contact at the point of sale,
including marketing officers, point of sale material and marketing methods.
The industry could also consider implementing an Australian cherry brand for
the domestic market based on high-quality cherries produced by approved
growers and packing facilities.
4
Introduction
Australian agriculture, as a whole, faces a rapidly changing global environment and
only those primary industries that respond appropriately to these changes will
survive and prosper in the future.
For the Australian cherry industry to have a strong and viable future it needs a clear
understanding of the environment in which it currently operates and the challenges
and opportunities it could face in the future.
The aim of this project and the resulting report is to provide a stocktake of the
Australian cherry industry and from this, set forth a viable working plan to help
assure the industry’s future direction.
This project is the result of a partnership between the Australian cherry industry,
through Cherry Growers Australia Incorporated and the Department of Agriculture,
Fisheries and Forestry under the Advancing Agriculture Australia programme. The
programme focuses on the development of primary industries in Australia that are:





Profitable
Sustainable
Competitive
Resilient
Self-reliant
Specifically in this project, through the Industry Partnership programme, Kondinin
Group has focused in working with the Australian cherry industry to:




Identify industries strengths and investigate ways to capitalise on
opportunities.
Improve industries capability to respond to threats and risks.
Facilitate communications and relationships between key industry
representatives.
Improve industry and organisational capacity.
5
TAKING STOCK
Industry Environment
1.1 Characteristics of the industry
The Australian cherry industry is a relatively small agricultural industry by national
standards, with an estimated total number of 701 growers spread across Australia
(See Table 1).
Table 1. Estimated cherry grower numbers (by State).
State
New South Wales
South Australia
Tasmania
Western Australia
Victoria
Queensland
TOTAL
Number of growers
280
131
120
100
68
2
701
Source: Cherry Growers of Australia
There are about 3000 hectares under cherry production across Australia and like
most agricultural industries there is a wide range of growers from hobby producers
through to fully commercial production systems. The common rule of thumb that 20
per cent of growers supply 80% of produce also seems applicable to the Australian
cherry industry.
Unfortunately a lack of objective information is available on the Australian cherry
industry. This must be addressed by industry to provide an accurate basis on which
to develop future priorities and pathways for development.
The industry is concentrated in New South Wales, South Australia and Victoria and
has smaller but important production areas in Tasmania and Western Australia.
Key production areas within these States include the Young, Orange and Bathurst
regions (NSW), the Dandenong Ranges (Vic), Mount Lofty Ranges and Riverland
area (SA), Huon Valley (Tas) and the Bridgetown and Mt Barker areas (WA) (see
Figure 1).
6
Figure 1. Geographic spread of cherry production across Australia.
Riverland area
Bridgetown
Mt Barker
Mt Lofty Ranges
Orange and
Bathurst
Young
Dandenong
Ranges
Source: Kondinin Group
Huon
Valley
The Australian cherry season extends from November, in most mainland States,
through to late February in Tasmania, with the majority of the crop harvested during
December and January in most areas. Fruit supplies are limited during the early and
late parts of the season.
Fruit supply and quality are the key factors that affect pricing, with producers
receiving the highest prices early and late in the season when supplies are short.
Producers also can achieve premium prices for fruit that is large in size (more than 28
millimetres), firm and free from blemishes.
Australian cherry production is tending to move towards larger scale operations that
are linked to irrigation areas such as the Murray River and Goulburn Valley.
Production areas have also moved to areas that are considered more protected from
7
weather extremes (less risky areas) and areas that are achieving particular supply
windows.
Most cherries are currently sold on the domestic market. But with supply rapidly
outstripping demand and limited access to export markets, producers are being
forced to address their existing market strategies and future options immediately.
Cherry consumption
Table 2 provides some indication of the consumption of cherries in Australia by
different market segments. The Australian Cherry Industry Consumer Market
Research Report (1999) revealed that families are the largest segment of the market
consuming cherries, accounting for 59.8% of cherry consumption. The group within
this market segment which consumes the most cherries is the ‘old family’ group
(39.8%), with ‘young families’ being the second largest group consuming 20.1% of
cherries in Australia. A total of 46% of the male population and 54% of females
surveyed (1373 in total) eat cherries. And only 15% of households said they had
someone who did not eat cherries with 32% of people agreeing with the statement
‘we seem to be eating more cherries then we did a couple of years ago’. Agreement
with this statement was most marked among purchasers with young families (44%).
In light of theses findings there seems to be an opportunity for increased promotion
and awareness of cherries.
Table 2. Australian cherry consumption (year ending 30 September 2000).
Young
Young
Old
Single/couple family
Single/couple
Tonnes
123
264
171
% share
9.4
20.1
13.0
Source: Horticulture Australia Limited (2002)
Old family
522
39.8
Adult Total
household
233
1313
17.7
100
8
1.2 Industry achievements
The Australian cherry industry has a National industry organisation - Cherry
Growers’ of Australia Incorporated and an executive with members who represent
each cherry-growing State. This is a major benefit to the industry and the extensive
skills and knowledge within the executive have the potential to be better used to
further develop the industry and to allow it to be sustainable and self-reliant well into
the future.
During this project it was noted by Kondinin Group that the Australian cherry
industry has made significant progress to date, with exceedingly limited resources.
Key industry achievements include the production of The Cherry Manual (a technical
guide to cherry production and handling), Australian Cherry Colour and Size Guide and
the Australian Cherry Quality Guide. Although dated (1999), the industry also has
carried out some consumer-based market research and has a detailed strategic plan
for the industry through until 2006. But given recent changes in export market
access and escalating production levels, the existing strategic plan requires updating
to take into account changing priorities for the industry. It is important the strategic
plan has a clear focus of what is achievable by industry.
9
1.3 Production trends and projections
Australia currently produces in excess of 6000 tonnes of cherries per year.
NSW has historically been the major producer of cherries in Australia, with about
40% of the national cherry crop being grown in NSW. Young, NSW is considered
the cherry capital of Australia. Over the past decade some decline in production in
the Young region has been noted, mainly as a result of the drought. Some production
lost in the Young area has been replaced by cherry production in areas such as
Orange and Batlow. More recently large plantings have occurred in Hillston. NSW
cherry production is generally early to mid season.
Victoria is the second largest cherry producing state, producing about 30% of the
Australian crop. The major production areas use to be close to Melbourne but the
pressures of urbanisation in areas such as the Yarra Valley, have seen many cherry
growers move to new areas including Wandin, Shepparton, Wangaratta and the
ranges towards the North East of the State. Cherry production is generally mid
season and is strongly built around the Christmas market.
South Australia has a small cherry industry focused around the Mount Lofty Ranges.
During recent years cherry production has moved into other regions of the State
including the Riverland and South East. SA produces about 12% of the national
cherry crop. South Australian cherry production is early to mid season with the
Christmas market being important.
Tasmania is a relatively small producer of cherries by volume, an estimated 1200t
during 2005 representing about 12.5% of the national crop, but has advantages on
both the domestic and export markets. As the peak cherry season falls later than on
the mainland (during late January), it has access to the dwindling mainland market
during this time. In addition to this, TAS is free from fruit fly and together with the
later season this provides Tasmanian cherry producers with a significant export
advantage over mainland producers, with up to 75% of the Tasmanian crop being
exported annually. Production is mid to late season.
Until recently, Western Australia has been a closed market and production has relied
very much on local growers. Fruit from SA has only been allowed into the WA
marketplace during the last two years. WA cherry production represents 5% of the
national crop. The major growing regions are the Perth Hills and the South West
corner of the State. Cherry production is generally mid-season.
During 2001-2002, the gross value of the cherry industry in Australia (see Table 3)
was $54.5 million ($49.9 million farm-gate value). The processing sector accounts
for about 700t.
10
Table 3. The value of the Australian cherry industry.
2000-01
Farm-gate value ($M)
55.5
Gross value ($M)
60
Total number of producing
trees (6+ years) (M)
0.9
Source: Australian Bureau of Statistics
2001-02
49.9
54.5
% variance
-10.1
-9.2
0.9
0.0
Table 4 illustrates the production changes during the past five years in the Australian
cherry industry. The average percentage change in production is +10% per annum,
the average percentage change in the number of trees is +11% per annum and the
average percentage change in yield per tree is -1% per annum.
Table 4. Production changes during the past five years.
1998
1999
2000
2001
Production (t)
6985
6020
5835
8485
No. trees (‘000)
645
735
838
861
Yield (kg/tree)
10.8
8.2
7
9.9
Source:1998-2002 – Australian Bureau of Statistics
2003-2004 data has been extrapolated from trend.
2002
6702
853
7.9
2003
9460
1075
8.8
2004
10 406
1193
9
Forecast production during the next five years
With the number of young cherry trees currently in the ground and the lag time from
planting to full production, the volume of cherries in Australia is set to double during
the next five years.
Table 5 shows forecast production increases during the next five years (2005-2010)
that have been predicted assuming the average trend of the previous five years (19992004) is maintained.
Table 5. Forecast production increases during the next five years.
2005
Production (t)
11 447
No. tree (‘000)
1325
Yield (kg/tree)
9
Source: Kondinin Group
2006
12 591
1470
9
2007
13 850
1632
8
2008
15 235
1811
8
2009
16 759
2011
8
2010
18 435
2232
8
11
Figure 2 shows a graphical representation of forecast cherry production through until
2010.
Figure 2. Production (t) from 1998-2010.
20000
18000
16000
14000
Production (t)
12000
10000
8000
6000
4000
2000
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Kondinin Group
12
1.4 Challenges for the Australian cherry industry going forward
While the volume of supply is rapidly increasing there seems to be a limited
understanding of the potential for growth of demand within the domestic market and
limited current access to many potential export markets. It is important the
Australian cherry industry has a solid understanding of expected production levels in
order to plan future marketing strategies. A lack of strategic planning to identify new
markets or open access to currently restricted markets will result in domestic
oversupply and reduced returns to growers. If this occurs, there is a significant risk
that a number of growers could be forced out of the industry.
An inconsistent supply of quality produce due to uncontrollable seasonal
circumstances and a lack of industry standards is another key challenge for the
industry going forward.
The total annual supply of Australian cherries is highly variable due mainly to
climatic conditions (rain, frost, hail and drought). Cherries are considered a highly
perishable fruit and storage and transport issues need to be addressed if the
Australian cherry industry is to thrive and succeed in the future.
Some industry standards are currently available but the challenge for industry is to
get widespread adoption of these standards. It seems a logical approach to focus
adoption initially at growers and then to proceed along the supply chain to
processors and retailers.
To have in place industry standards which are adhered to across the board is critical
if the industry is to be a long-term player in the potentially lucrative export market.
Relationships with international buyers can be difficult to negotiate and being a small
player in the global cherry market, the Australian industry as a whole needs to
develop a rock-solid reputation, based on best-practice fruit production and handling
systems and processes.
There is a lack of objective information available on the Australian cherry industry.
Industry and government must work together to collate this information so as to
provide an accurate basis for the development of future industry priorities.
The costs associated with growing cherries for the export market are comparable to
those associated with growing cherries for the domestic market. But a push by
industry is needed to encourage producers to grow cherries that will consistently
stand up on the export market.
One of the major challenges facing the Australian cherry industry is the
fragmentation of the industry and lack of communication amongst industry
stakeholders. Regional attitudes and differences are quite distinct within the
industry. It appears that producers in the more traditional cherry-growing regions
tend not to be as progressive and accepting of change as those in the newer and less-
13
established cherry growing regions across Australia. Rather than the current
situation where regions work individually, the industry may be better served in the
long-term if they can work together to develop new markets for Australian cherries
and address the current challenges facing the industry.
Competition between State boundaries and the sale of produce on interstate markets
also needs to be addressed by industry. Produce being sold on domestic markets is
often poor quality, which does little to improve and promote cherries to domestic
consumers.
As mentioned previously in the report, the Australian cherry industry has the
advantage of strong leadership that has produced quality technical resources on a
‘shoestring’ budget but the lack of on-the-ground extension officers to promote
adoption of these resources impedes the further development of the cherry industry
in Australia.
14
Capital investment in the cherry industry
2.1 Industry analysis
To be successful in the long-term any business or industry must provide an adequate
return on investment. If an adequate return on capital is not achieved, over time the
capital will move to businesses and industries where an adequate return can be
achieved.
In any investment the level of return considered adequate is directly related to the
level of risk associated with the investment, with lower-risk investments requiring a
lower return and higher risk investments requiring a higher return.
The cherry industry can be considered a high-risk industry that is subject to:
 Production risks
o Weather and climate variation and events.
o Availability of irrigation water.
o Diseases and pests.
 Marketing risks
o Perishable product.
o Seasonal production cycle.
o Changes in retail market opportunities.
o Changes in access to export markets.
o Competition in export markets.
With the high level of risk, the return on the capital invested in the cherry industry is
commensurably higher and should be a minimum of 20%.
The capital cost of establishing a cherry orchard ranges from $60,000 at the low end
to $120,000 at the high end. Even greater capital cost can be incurred if rain
protection is installed.
Figure 3 illustrates the relationship between return on capital and the net return per
hectare for cherry orchards with an establishment cost of $60,000 and $120,000 per
hectare. The net return per hectare to enable a 20% return on capital ranges from
$12,000-$24,000 per hectare across this range of establishment costs.
15
Figure 3. Relationship between return on capital and net return per hectare for
cherry orchards (establishment costs of $60,000 and $120,000 per hectare).
60000
Cost of establishment
Net return per hectare ($)
50000
60,000
120,000
40000
30000
20000
10000
0
0%
2%
4%
6%
8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40%
Return on Capital (%)
Source: Kondinin Group
Production Model
In order to get a clearer picture of what the drivers for financial success are for cherry
producers, Kondinin Group developed a model to replicate cherry orchard
production. The simple production model provides a framework to estimate the
production and financial performance of a cherry business in relation to achieving an
adequate return on capital (see Table 6).
Table 6. Base production models covering the range in establishment costs
Establishment costs
Yield
Cost of production
Price
Return on Capital
Source: Kondinin Group
$60,000
10T/ha
$4.50/kg
$6.50/kg
33%
$120,000
10T/ha
$4.50/kg
$6.50/kg
17%
(Range 7.5-12.5T/ha)
(40% fixed; 60% variable)
If investing a higher amount, growers would expect to produce a more consistent
product to justify their investment. To make money in the future growers need to
invest in new cherry varieties, higher quality production systems and the knowledge
of how to manage the trees.
The impact of the lower establishment cost on the return on capital is clearly
illustrated in Figure 3. Using the assumed parameters the orchard with the low
establishment cost easily exceeds the targeted return on capital of 20%. Conversely,
16
the orchard with the higher establishment cost fails to reach 20% return on capital
and would only do so if yield or prices were higher.
Sensitivity Analysis
A sensitivity analysis provides a methodology to evaluate the impact of changes in
the different variables that contribute to the return on capital of the enterprise. The
following variables were assessed in the sensitivity analysis for both the models
outlined above.
 Cost of production: To look at cost of production in isolation a range from
$3.25-$5.75/kg was evaluated using increments of $0.25.
 Price: Price variation was assessed across the range of $5.25-$7.75/kg using
increments of $0.25.
 Yield: The impact of a change in yield was assessed across the range of 7.512.5t/ha using increments of 500kg. The impact was evaluated using a fixed
cost of production and a cost of production that varied with yield on the
assumption that 40% of production costs are fixed and 60% of production
costs vary with yield.
Figures 4a and 4b show the results of these analyses.
Figure 4a. Sensitivity analysis (low establishment cost).
60%
Return on Capital ($)
50%
40%
30%
20%
Base Model
10%
0%
-5
-4
-3
-2
-1
0
1
2
3
4
5
Variation above and below base model
Price
Cost of Production
Yield
Yield (variable COP)
Source: Kondinin Group
The key features of the sensitivity analysis for low establishment costs are highlighted
below:
17

Price and cost of production are of equal sensitivity with an increase in return
on capital of 16% for each $1 increase and decrease in price and cost of
production respectively. While the sensitivity is equal, the opportunity to
reduce cost of production may be lower than to increase price by the same
amount.
The impact of change in yield is much lower if a uniform cost of production is
assumed. An increase of 1t in yield results only in a 3% increase in return on
capital.
The more realistic scenario is a change in the cost of production with yield
given the large labour component in the cost of production. Based on this
assumption a 1t increase in yield results in a 6% increase in return on capital.


Figure 4b. Sensitivity analysis (high establishment cost).
40%
35%
Return on Capital (%)
30%
25%
20%
15%
10%
5%
Base Model
0%
-5
-4
-3
-2
-1
0
1
2
3
4
5
Variation above and below base model
Price
Cost of Production
Yield
Yield (variable COP)
Source: Kondinin Group
The key features of the sensitivity analysis for high establishment costs are
highlighted below:
 Price and cost of production are of equal sensitivity with an increase in return
on capital of 8% for each $1 increase and decrease in price and cost of
production respectively. This is about half the increase achieved for the
orchard with low establishment costs. While the sensitivity is equal, the
opportunity to reduce cost of production may be lower than to increase price
by the same amount.
 The impact of changes in yield is much lower if a uniform cost of production
is assumed. An increase of 1t in yield results only in an increase of between 12% in return on capital.
18

With the change of yield evaluated in conjunction with a change in operating
costs the impact of a 1t yield increase is a 3% increase in return on capital.
19
2.2 Historical market trends for price over the course of the season
The historical price trends for cherries follow the normal trend expected for seasonal
products – being high at the beginning of the season and reaching their lowest point
as the supply peaks in the middle of the season. This trend is illustrated in figure 5,
which shows the price and quantity of cherries in the Queensland marketplace.
Figure 5. Prices and quantities of cherries sold on the Brisbane market.
700.00
$30.00
600.00
$25.00
500.00
400.00
$15.00
300.00
Average $ / Kg
Tonnes / Month
$20.00
$10.00
200.00
$5.00
100.00
$0.00
Ju
nJu 02
Au l-02
g
Se -02
p
O -02
c
N t-02
ov
D -02
ec
Ja -02
n
Fe -03
b
M -03
ar
Ap -03
M r-03
ay
Ju -03
nJu 03
Au l-03
g
Se -03
p
O -03
c
N t-03
ov
D -03
ec
Ja -03
n
Fe -04
b
M -04
ar
Ap -04
M r-04
ay
Ju -04
nJu 04
Au l-04
g
Se -04
p
O -04
ct
N -04
ov
D -04
ec
Ja -04
n
Fe -05
b
M -05
ar
Ap -05
M r-05
ay
Ju -05
nJu 05
l-0
5
0.00
Average Tonnes / Month
Average Price / Month
Source: Market Information Services
While there was no information available on the quantities marketed in the Sydney,
Melbourne and Adelaide markets, the prices follow a similar trend to those in
Brisbane (see figures 6, 7 and 8).
20
Figure 6. Wholesale cherry prices for the Sydney marketplace.
$26.00
$24.00
$22.00
Average Monthly Price $/kg
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05
Source: Sydney Market Reporting Service
Figure 7. Wholesale cherry prices for the Melbourne marketplace.
$26.00
$24.00
$22.00
Average Monthly Prices $/kg
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05
Source: Melbourne Market Authority
21
Figure 8. Wholesale cherry prices for the Adelaide marketplace.
$26.00
$24.00
$22.00
Average Monthly Price $/kg
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05
Source: SAFF Market Intelligence Pty Ltd
The price trends over the season are similar for all markets. In some years, some
markets show a price lift towards the end of the season when supplies are dwindling.
The comparison of prices between years shows an inconsistent trend. The
Melbourne marketplace shows a decline in price during the past three years, but the
reverse has occurred in the Sydney and Adelaide markets.
22
2.3 Markets and market access
The industry vision for the Australian cherry industry is, ‘to grow the cherry industry
to capture domestic and export market opportunities through the development of
efficient and effective supply chains which maintain industry profitability and
consumer confidence.’
This vision needs to be clear in the minds of all stakeholders when marketing
decisions are made for both the domestic and export markets. Industry needs to be
consumer-focused to satisfy the needs of the customer.
A thorough understanding of the marketplace, drivers and consumer needs is
essential to any industry going forward. A high priority for the Australian cherry
industry must be the use of up-to-date market research to monitor and evaluate the
changing environment in which it operates.
Increases in cherry production are forecast during the next five years, which cannot
be expected to be absorbed by the export market alone. With limited current access
to export markets and access to a number of potential export markets considered to
be long-term projects, the Australian cherry industry must maximise the potential for
growth within the domestic market. Industry needs to focus on building the domestic
market and ensuring cherry quality is of the highest standard. By developing a
culture of premium-quality production, growers can capitalise upon their
opportunities within both domestic and future export markets.
23
The marketplace
3.1 Domestic markets
The Australian cherry industry is predominately focused on the domestic market,
particularly the mainland, with only 10-15% of cherries currently exported.
The domestic marketplace is price-sensitive and there is competition between regions
for market share. Growers also move reactively between the domestic and export
markets depending on prices. This is a large threat to the Australian cherry industry,
particularly in the export market, as the integrity and reputation of product is
jeopardised.
Growers often view the increasing market power of the retail sector negatively.
Growers often feel they are price takers rather than price makers. Although
supermarket specifications are improving, the internal store supervision and training
needs improvement. A partnership between retailers and the cherry industry is
lacking and methods to engage the retail sector in the process need to be sought. At
present retailers do not work with industry to move volume in years of ‘bumper’
crops.
Opportunities exist for the Australian cherry industry to develop advantageous
relationships with the retail sector. Horticulture Australia Limited (HAL) is doing
some work with the retail sector that is a start to the process.
An opportunity exists to drive the domestic demand for cherries through promotion.
Historically the cherry industry has relied on the Christmas environment to market
cherries. There could be a significant unplugged opportunity if the industry
promotes cherries outside this peak Christmas period. Increased promotional
activities would best profit from the inclusion of retailers and consumers in the
promotion process and the view is that promotion in-store using people rather than
literature creates an edge and excitement for the product amongst consumers.
Previous research has shown that people over 25 years of age are the primary market
for cherries and they mostly buy cherries for their own consumption. Most people
(65%) buying cherries eat them as a snack. These two key points can be used to good
advantage in any advertising and promotion of cherries.
To help understand the marketplace, the cultural issues that ‘determine’ and drive
the market also need to be understood. Consumer and in-store retail research is
essential to further develop this process.
The Australian domestic market is becoming more accessible to international
suppliers and Australian producers may be competing with producers from around
the world for a share of the domestic market. The Australian Government is
committed to supporting free-trade agreements in agriculture, which at times has
negative consequences on some local industries.
24
Australia has been a relatively small importer of cherries, but as transport and storage
technologies improve, it is likely that cherry imports will increase resulting in a yearround supply. Cherry imports during 2003 were 1767t valued at $8.4 million. Most
of these cherries were imported from the United States.
Cherries are being sourced from countries such as the US, which offer counterseasonal supply during the Australian winter months when there is no domestic
production. This raises the question, ‘has the connection with seasonality been lost?’
If so the traditional appeal of cherries as a Christmas luxury is at risk of being
usurped by out-of-season imports.
Technically, the importation of cherries from the US during winter should have
minimal impact on Australian growers. But if cherries are imported from countries
in the Southern Hemisphere, such as Chile and New Zealand, the impact on
Australian producers will be far greater.
Opportunity for growth
The Australian Cherry Industry Consumer Market Research Report (1999) looked to
gain an understanding of consumer’s attitudes, habits and purchases of cherries,
consumer knowledge about cherries, pricing issues and identify opportunities to
increase purchasing and consumption of cherries.
The report revealed that 66% of households said they normally buy cherries when in
season. Consumption of cherries is closely related to household income. As people
get older and income increases, they are more likely to buy cherries.
Most people surveyed (51%) bought cherries from supermarkets, followed by
greengrocers and fruit and vegetable shops (41%). This reinforces the need for
growers to work with and supply retailers with what the consumer wants – quality
and consistent supply.
Cherries are bought regularly by 62% of people (42% buy at least weekly and 20%
buy cherries every two weeks). It is important quality is maintained and the price of
cherries is acceptable to consumers so as to provide an opportunity for the cherry
industry to encourage the less frequent purchasers to buy cherries more often.
A large proportion (81%) of people indicated that cheaper cherries at the start of the
season would encourage increased purchases of cherries.
Although 71% of people indicated that a longer season would also encourage
increased cherry purchases, the industry must be careful as this may have a
detrimental effect on one of the key criteria – seasonality, for cherry appeal.
Research suggests that price is a key factor in people’s decision’s to buy cherries.
When asked how much they would expect to pay for good quality cherries, 58% of
25
people said $7.99/kg or less. The acceptable price decreased dramatically after
$7.99/kg. Most (66%) people have a ceiling price (maximum price they are willing
to pay) for cherries. Most (75%) people said they would not buy cherries when the
price rose above the ceiling. The Consumer fruit usage and attitude research
conducted by HAL during 2002, revealed the main reason for people not buying fruit
above the ceiling price is not the issue of value for money, but the overall experience
and quality of the fruit. If people have had a bad consumption experience there is a
sense they did not get what they paid for.
Why buy cherries
Consumers buy cherries for a number of reasons including as a special treat, extra
purchase to other fruit, the look and appeal of cherries, taste and convenience in
eating, season and the link to Christmas and the festive season.
Results from existing consumer surveys suggest that any promotion of cherries for
buying and consumption needs to focus on the positive qualities mentioned above.
But industry needs also to be aware that some of these positive qualities could easily
be threatened. For example, if counter-seasonal cherries are imported to Australia
the appeal of seasonality could disappear. This quality may also be threatened if
improved storage technologies and breeding programmes increase the overall length
of the cherry season.
Cherry quality
Almost a quarter of people surveyed said they were not satisfied with the quality of
cherries they were buying. This sends a clear message to industry to make a
conscious effort to improve the supply of a consistent high-quality product to the
marketplace.
Australian consumers are particular about what they want cherries to look like and it
is important cherry breeders bear these qualities in mind when implementing
breeding programmes. Consumers want large cherries that are deep red in colour,
have a shiny skin and are plump and firm to the touch.
Most consumers have no understanding or knowledge of the different cherry
varieties on the market and most do not appear to want to know. Rather if the
cherries have the qualities consumers are looking for they will buy them.
HAL’s Consumer fruit usage and attitude research found that consumers are less
tolerant towards quality variations in seasonal fruit. They have an expectation of the
fruit as a treat or a positive experience. Eating experiences are driven by taste and
flavour and fruit buying is based on appearance and smell.
Post-harvest quality assurance processes need to be investigated so systems are put in
place across the cherry industry that ensure a consistent supply of high-quality
cherries is made available to consumers.
26
Fruit quality will also affect pack out in-store. Consumers often hand pick their
cherries, so how much do retailers throw out? Industry needs to have a clear
understanding of wastage as this impacts on price and what retailers are willing to
pay for cherries. But retailers also need a clear understanding of how best to preserve
fruit quality in-store to maintain quality for as long as possible.
Research suggests that most consumers do not want to buy pre-packaged cherries.
Issues raised about pre-packaging included concern about the environment, what
might be ‘hidden’ in the pre packs and people would simply rather select their own
cherries for purchase. It is recommended the marketing plan for the Australian
cherry industry include marketing and packaging options for cherries. Part of this
research would include further consumer research.
Integrated Supply Chain
Cherry producers need to work together to identify economies of scale and develop
critical mass in production, handling, distribution and marketing.
For Australia to develop and maintain competitiveness in the both the domestic and
international marketplace, inefficiencies along the entire supply chain must be
reduced. More integrated and cohesive supply chains are needed to gain access into
some of the growing affluent international markets.
27
3.2 Export markets
The Australian cherry industry currently exports cherries to more than 20 overseas
markets. There is significant potential for growth in all export markets, particularly
with the supply of cherries predicted to double in the next five years. Producers,
particularly on the mainland, currently rely on speculation on the highly fluctuating
domestic market rather than committing to the development of the export market.
This attitude has delayed and prevented the development of long-term trading
relationships in many key export markets and is an attitude that needs to change if
the Australian cherry industry is to thrive and continue to go forward.
The potential to grow exports is best exemplified by the US, which exports cherries
to Australia in the off-season. The trade only developed seven years ago and has
quickly grown to about 1500t during 2004. In seven years, the US exports more
cherries to one market (Australia) than the entire Australian cherry industry exports
to the world.
US exporters can deliver high volumes of cherries to the Australian market by both
air and sea freight; they are not disadvantaged by an unreasonable import protocol;
they can fumigate with methyl bromide down to 6.0 degrees Celsius fruit pulp
temperature and US exporters are supported by industry and US government funds
to develop extensive promotional programmes at the retail level in Australia. US
exporters also have the ability to supply over a long season from a number of
geographically diverse production areas, so can overcome the risks of wet weather
and reduced supplies. Australian consumers are familiar with cherries and are
willing to pay a price premium for cherries.
Australian producers compete with producers worldwide for a share of the global
market. Developments in improved communications and transport technologies and
the removal of trade barriers open up opportunities for Australian growers to export
their produce to a wide range of overseas markets.
Most Australian cherries are shipped by airfreight and arrive in Asia within 12 hours
of leaving Australia. Cherries to the Middle East arrive almost 24 hours after leaving
Australia as trans-shipment is usually involved. Fruit sent to the United Kingdom
and Europe takes 24–48 hours depending on the route and flights selected.
Uniform quality and freshness must be selling points for this highly seasonal and
globally recognized fruit.
Currently the Australian cherry industry produces between 8000–10,000t per annum
of cherries. Exports account for 10-15% of cherry production with the main markets
for Australian producers being Hong Kong/China, Taiwan and South East Asia (see
Table 7).
28
Table 7. Australian cherry exports (volume and value) by destination market.
Importing
2001-02
Country
(T)
Hong Kong
565
Taiwan
169
UK
119
Singapore
125
Thailand
43
Malaysia
5
United Arab
Emirates
39
France
9
Indonesia
5
Netherlands
6
Other
53
TOTAL
1138
Source: HAL (2002)
2001-02
($’000)
4491
1292
657
862
340
18
2002-03
(T)
988
147
95
190
76
13
2002-03
% %
($’000) var (T) var ($’000)
7220
75
61
1752
-13
36
638
-20
-3
1676
52
94
55
77
63
96
160
433
283
80
21
62
375
8481
75
32
5
21
78
1720
480
322
34
212
751
13736
92
256
0
250
47
51
70
303
62
242
100
62
The retail sector
The retail sector of the export market is gaining market share rapidly, with
supermarkets seeking global suppliers who can provide large volumes of a range of
produce over an extended period. Unless export market trading relationships are
improved and increased, Australia may continue to lose market share in these
markets.
Examples of international supermarket and food service chains building retail
networks across the world and sourcing globally to supply them include Tesco (UK),
Dairy Farmers International, Aldi (Germany), Royal-Ahold (Holland), Wal-Mart
(US) and Carrefour (France).
In Asia alone there are five major global chains operating and at least another seven
multinational retailers with stores. These retailers are increasing their market share
and differentiating themselves from competitors by supplying consumers with
exactly what they want.
Produce is being sourced from fewer, larger and more sophisticated suppliers. The
move towards retail consolidation has seen increased supply consolidation with an
increase in the formation of horizontal and vertical alliances.
Jim Kennedy, ‘Supermarket to Asia’ (2000) reveals that the push for market position
based on offering customers something different beyond price, will give opportunities
for Australian products which can deliver on promises of quality, food safety,
consistent supply, seasonal coverage and other non-price factors.
Local grower concerns
The following points are key issues relating to the export of Australian cherries raised
at grower meetings held across Australia by Cherry Growers of Australia
Incorporated.
29









Market access still needs to be gained to the following markets:
Market
Australian cherry growers
China
Mainland, Tasmania
Korea
Mainland, Tasmania
Japan
Mainland, Tasmania
USA
Mainland
Market access to Taiwan needs to be maintained and new protocols
established for the movement of fruit into the marketplace.
Recognition of area freedom status as an acceptable process for market access
needs to be achieved.
Area freedom status for all relevant Australian cherry growing regions (for
example, Riverland (SA) and Young (NSW)) needs to be established.
Appropriate export standards for the Australian cherry industry need to be
established.
Export demand for Australian cherries needs to be built.
Development of coordinated industry export programmes (for example,
Europe and the US).
Assessment and establishment of appropriate chemical residue and minimum
residue level requirements for each major overseas market.
Research and development to be undertaken to establish appropriate
procedures for the shipment of cherries to Asia by sea.
Existing overseas markets
The following section has been compiled by David Minnis, Minnis Horticultural
Services.
Hong Kong
Hong Kong has always been an important overseas market for Australian cherries.
There are no quarantine restrictions on cherries and no import duties. An airport
handling charge of about $1/5kg carton is charged on all imports.
During 2000-2001 564t of cherries, or 46% of all exports, were officially shipped to
Hong Kong and China. Not all the cherries shipped to Hong Kong were consumed
there. With no official access to China for any fruit from Australia at the time,
importers often found it more financially viable to send some of the fruit into
mainland China via the ‘grey trade’.
When China was admitted into the World Trade Organisation during early 2003, the
rules for trade with China in all products including fruit had to be more transparent
and comply with international standards including phytosanitary standards.
As Australia had no official entry for any fruit into China because of quarantine
concerns by China, the Australian Government has commenced the process of
obtaining import clearance on a case-by-case basis. Negotiations for citrus and
mangoes commenced during 1998 and 1999.
30
During 2005 mangoes were given clearance to be shipped to China using Vapour
Heat Treatment to disinfest against fruit fly. Australian cherry producers could wait
a long time for cherries, as table grapes are next in line and stonefruit and cherries
are listed together after table grapes. A decision on citrus may be made by Chinese
authorities during 2006.
By the beginning of the 2003-2004 cherry season, the ‘grey trade’ into China had
virtually halted and the quantity of cherries shipped to Hong Kong has declined by as
much as 50%. Hong Kong is not an unlimited market and Australia faces
considerable competition from Chile.
For early season airfreighted cherries Australia can obtain about $8/kg dropping to
about $6/kg as the volume increases. Airfreight costs from Australia are about
$1.10/kg.
In Hong Kong 26-28mm and larger are the preferred sizes, but with more modest
returns compared to other markets, exporters usually try and ship 24-26mm cherries
into this market.
Taiwan
Taiwan has been one of the most financially rewarding markets for Australian
cherries and has taken up to 450t of cherries in the mid to late 90s.
During the 2002 cherry season, Taiwan authorities introduce quarantine measures
requiring cherries to be fumigated at 210C to prevent the import of fruit fly. The
Australian cherry industry believes this requirement is not commercially practical as
fruit is damaged. As a result no mainland cherries have been shipped to Taiwan
since 2002 and Chile has had no competition during the early and mid-season
markets.
Tasmania has been recognised by Taiwan as not having Mediterranean fruit fly and
can ship cherries to Taiwan without fumigation. Given the quantity of cherries now
grown in TAS, Taiwan has quickly become their most important overseas market.
Tasmanian cherries that arrive in Taiwan compete against NZ and the last of the seafreighted Chilean fruit.
The Taiwanese market favours large fruit, 26-32mm diameter cherries in 2kg and 5kg
cartons. For large Tasmanian fruit the market pays $14 –19/kg. Airfreight costs are
about $1.65/kg and there are also other pre-clearance costs incurred. The import
duty on cherries is 40% and all suppliers face this impost.
During February 2005 Taiwan’s Bureau of Agricultural Plant Health Inspection and
Quarantine (BAPHIQ) indicated to Australian authorities they intended to include
Queensland fruit fly on their list of prohibited insects for the first time. Biosecurity
Australia has forwarded to Taiwan all evidence that TAS is also free from
Queensland fruit fly.
31
Singapore
The market for cherries in Singapore has grown and is about a 150t capacity market
for Australian cherries. If Australian growers are prepared to sell medium-sized
cherries for about $5-6/kg there is potential for growth in this marketplace.
Singapore has no quarantine requirements for cherries and the only duty applied is a
3% Value Added Tax (VAT).
Early in the season and at the end of the season higher prices are obtained, but if
volume is available these are the prevailing prices that supermarket buyers are
prepared to pay. Generally supermarket chains dominate the fresh fruit and
vegetable market due to the purchasing power of the retail sector and premiums are
difficult to obtain.
The Singapore marketplace prefers 26mm and larger fruit but will take some 2426mm cherries and occasionally 22-24mm for supermarket specials at $4.50/kg.
Airfreight costs are about $1/kg so the returns are small.
Exporters have shipped cherries in 1kg consumer packs, 2kg and 5kg cartons and 1kg
and 500g clear punnets specifically for the supermarket trade.
It has taken a decade to grow imports from Australia from 75t to 150t and returns
have been consistently marginal since 2002, so Singapore is not regarded as a
significant opportunity for improvement.
Malaysia
The market for cherries in Malaysia is limited. Poor cool chain management in
Malaysia also restricts the growth of cherry sales.
Currently the market imports 25-50t of Australian cherries. There are no quarantine
restrictions and a minimal import duty. Fruit redirected from Singapore may attract
a higher duty.
The cost of air-freight is about $0.85/kg and there is probably a growing market for
the smaller sized cheaper fruit amongst ethnic groups.
Thailand
The Thai market has been a useful market for Australian cherries with Australia
shipping 70-90t to Thailand recently. With the high duty (40%), now slightly lower
under the Australian/Thailand Free Trade Agreement (FTA), importers only want
the larger, better quality fruit that is 26mm and larger. Fruit is shipped in 2kg and
5kg cartons. There is a strong market preference for mahogany coloured cherries.
32
During 2004 airfreighted cherries from Argentina appeared on the Thai market at the
beginning of the season when the prices were high and the Argentineans could
recover the high airfreight costs.
During the latter part of the season NZ cherries come onto the Thai market. The
New Zealanders sell in US dollars and are usually looking for premium prices.
Indonesia
Small quantities of cherries are shipped to Indonesia (10–20t/year) and the potential
for this market is uncertain.
Cherries need to be fumigated against fruit fly before shipment and also face a 5%
import duty.
Philippines
The market for cherries in the Philippines is more developed than in Indonesia as
both the US and Chile ship cherries to this market.
Australian exporters need their importer to obtain an import permit before they can
send cherries to this market and the Philippine authorities have issued few import
permits to Australian importers during the past five years.
Imports need to either be fumigated or cold treated against fruit fly both before
shipment and on arrival. The importer pays import duties and charges.
But Australian cherries still find their way into the Philippines via Hong Kong and
Singapore when importers re-consign the fruit to importers in Manila.
India
India is another market where only small quantities of cherries have been shipped
during the past three to four years. The lack of cool chain management has restricted
importer interest and airfreight costs are high at $1.50/kg. The main interest in the
Indian marketplace has been in smaller fruit shipped in 5kg cartons.
Middle east
The main markets in the Middle East have been the United Arab Emirates, in
particular Dubai, Saudi Arabia and Bahrain. Exports have not grown and currently
sit at 20–40t/year.
All exports are by air, with airfreight costs of $2.10/kg. This cheaper rate relies on
fruit being transhipped in Asia, as direct flights by airlines such as Emirates are more
expensive.
These markets buy 22-24mm cherries in order to keep the price reasonable, and do
pay more than $6.50/kg for this smaller fruit. All fruit is shipped in 5kg cartons, and
both growers and exporters are working on small margins.
33
There appears limited potential to grow this market as airfreight costs are increasing,
voyage times for sea freight are long and the volume that could be sold appears
limited.
United Kingdom and Europe
During 2000-2001 Australian exporters shipped 157t of cherries principally to the
UK, with small quantities going to the Netherlands and France. During 2003-2004
the volume grew to more than 200t with Germany also importing Australian
cherries.
Australian cherry exporters face considerable competition in these markets. The
Chileans export cherries to these markets during late November before Australia can
supply cherries, setting the prevailing prices. Exporters find that when volume is
available in early December, the airline industry is carrying Christmas mail and other
high yielding cargo, so availability of space is a restriction until early January.
Exporters currently pay $3.40/kg for an LD3 (260 x 5kg cartons) air freight rate to
the UK and Europe, and airlines prefer to collect cargo in Asia which returns $56/kg, compared to taking cherries from Australia to Europe for much less profit.
The preference in Europe is for 26mm diameter cherries and larger if possible and the
trade will pay $17-22/kg depending on the size for fruit in mid January and later.
In the UK there is a place for 22-24mm cherries especially if Chilean supplies have
been restricted by rain. Supermarkets will take 24-26mm and 26-28mm fruit at prices
between $9-11/kg for fruit packed in 5kg cartons.
Another difficulty in the UK, and to a lesser extent in Europe, is complying with the
European Retailers Good Agricultural Practice (EurepGAP) requirements covering
quality, spray residues and food safety. Growers have to supply spray records and
statutory declarations stating the safety of the fruit, adding another cost to exporting
to this market.
Potential export markets
The markets currently showing the greatest potential for market access within the
short term (1-3 years) are Taiwan, the United States, Canada and New Zealand.
Japan
Japan has agreed to the entry of Tasmanian cherries for the 2005 season as they have
accepted Tasmania’s fruit fly-free status. But fruit has to be fumigated with methyl
bromide (50g/m3 dose rate) at 120C to prevent the entry of codling moth into Japan,
which reduces the appearance and commercial life of the fruit.
Interestingly the Japanese accept methyl bromide fumigation of US cherries at
temperatures as low as 60C for cherry fruit fly, as does Australia. Australia accepts
34
cherries fumigated at 6-110C using a dose rate of 64g/m3 for two hours. This is the
fumigation treatment industry needs to negotiate with Japan so fruit damage can be
minimised. It is possible Japanese authorities may require more effective verification
of this treatment for codling moth.
Whether there is a large economically viable market in Japan for out-of-season
cherries (including Japanese varieties) from TAS is yet to be determined. But what is
encouraging is that Japan remains the largest market in the world for US cherries.
With the exception of Rainier cherries, many of the varieties exported by the US are
also grown in TAS.
Notwithstanding the breakthrough for TAS, there will be no opportunity for cherries
from mainland Australia to be shipped to Japan in the immediate future as no
disinfestation studies have been undertaken against fruit fly, and the industry does
not have the financial resources to fund such a project with the likely cost exceeding
$400,000.
Timeframe for market access: Immediate for Tasmanian cherries. Long term (5-7
years) for mainland cherries.
Korea
There has been commercial interest for a number of years in South Korea for out-ofseason cherries. South Korea only considers market access applications for a few
Australian fruits at any one time, and mangoes, table grapes and Tasmanian cherries
are currently being considered.
South Korea are still to complete their response to Australia’s pest risk assessment
data that was submitted at the last bilateral.
The Tasmanian industry is hopeful their cherries will get approval to enter Korea for
the first time during the next 12 months. During the initial stages it may involve trial
shipments before becoming fully commercial.
Overall Korea may be an easier market to gain access to compared to Japan for
mainland cherries as the Korean quarantine authorities are more flexible on some
issues and the public consultation process is quicker.
Timeframe for market access: Short term (1-2 years) for Tasmanian cherries.
Medium term (3-5 years) for mainland cherries.
China
The likelihood of fast market access for cherries into China is not favourable as
China is currently considering citrus, then table grape access. But the benefits that
may eventuate as a result of market access to China mean that industry must
continue to put resources into lobbying the Federal Government to keep raising the
35
issue in appropriate forums with China. The industry also needs to have all the pest
risk analysis data completed and ready to lodge when the Chinese require it.
Timeframe for market access: Long term (5-7 years).
Canada
While Canada is not concerned about fruit fly or codling moth, Canadian authorities
may have an interest in other pests including light brown apple moth.
Unfortunately there are not a lot of flights from Australia to Canada. Some flights
go via Honolulu and Los Angeles, which is in the US, and Australian mainland
cherries currently have no access to the US marketplace.
When Australia begins shipping Tasmanian cherries to Japan, it would be
worthwhile considering the possibility of shipping via Japan to a potential market in
western Canada. The city of Vancouver with its high Asian population (more than
20%) could be a useful market for mainland Cherries provided Australia can
compete with Chile or provide Tasmanian cherries at the end of the season when
Chilean supplies drop off.
Time frame for market access: Short term (1-3 years).
United States
Entry of mainland Australian cherries has been discussed at all recent bilaterals with
the US.
A pest risk assessment has been prepared and submitted to the US and they have
responded with a list of insects and diseases that are of concern to the US
marketplace.
There is some optimism amongst industry participants that entry to the US is close
for mainland cherries. Whether Australia can compete against Chile in the US is
debatable and with air freight rates of $2/kg Australian cherries will be expensive,
but there will always be seasons when Chilean fruit has been affected by bad
weather.
Fruit is likely to be air freighted to the US market so volumes will be modest but
there is no doubt US consumers are prepared to pay for quality and with a favourable
exchange rate it could be quite rewarding.
Currently Tasmanian cherries have access to the US market, which was granted
during 2002 following an approach from the Tasmanian Government. The US has
long accepted TAS as an area free from fruit fly. But during 2003 the first air
shipment to the US was picked up with unacceptable chemical residues and was
returned to Australia. During 2004 there were about three shipments sent with
further problems. Unacceptable Maximum Residue Levels (MRL’s) appear to be the
36
technical hurdle for Tasmanian growers to overcome to expand trade into the US
marketplace.
Time frame for market access: Short term (1-2 years).
New Zealand
Australian cherries cannot be exported to NZ, but an opportunity exists to supply
NZ during November and December to complement NZ supplies that are normally
available from Christmas through to early February.
The Australian cherry industry needs to prepare the submission to the Horticultural
Market Access Committee (HMAC) to seek market access for cherries to the NZ
market.
NZ has had access to the Australian market, particularly the eastern states, for many
years, but no longer ships significant quantities of cherries as there are better returns
in exporting to Taiwan, the UK and Europe.
Time frame for market access: short term (1-2 years).
37
3.3 Quality assurance systems
Reasonable cool chain systems are in place in the Australian cherry industry to
ensure quality is maintained from the farm gate to the retailer. The systems become
questionable for fruit delivery from the retailer to the consumer.
Cherries are a highly variable crop and the majority of growers have a number of
different grades for their cherries so as to protect their premium produce. There is a
lack of training and knowledge within the retail chain to deal with this variability.
Implementing education and training systems to improve the quality assurance
systems currently in place will ensure high-quality fruit is available for consumers.
Although industry standards exist, there is a lack of adoption of these standards and
many individual packers are setting their own standards.
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Industry analysis
4.1 SWOT analysis
The National Cherry Growers of Australia executive, as part of their strategic
planning process and HAL funding requirements, developed a SWOT for the cherry
industry in Australia. As part of this project and in conjunction with the workshop
held during May with the National Cherry Growers of Australia executive, HAL and
other industry stakeholders, this initial SWOT analysis has been refined.
Market research should consider both the internal and external environment in
which the industry operates. Monitoring the external environment provides
opportunities and threats to the industry and monitoring the internal environment
allows industry to see both weaknesses and strengths.
Some key points for each of the four areas are shown below. Refer to Appendix 1 for
the full industry SWOT analysis.
Strengths
 Strong leadership with vision.
 Excellent knowledge base developed on minimal resources.
 Producers of high-quality product.
 Potential of season-long supply with extended seasons.
 Established domestic market.
Weaknesses
 Fragmented industry organised around ‘State-based’ and sometimes regional
interests, resulting in lack of continuity of supply of high-quality produce.
 Industry participants not necessarily aligned behind industry leaders’ vision.
 Under-resourced industry organisation.
 Under-resourced research and development capacity.
 Lack of branding and promotion.
 Over-supply of product.
 Limited objective production and marketing data.
 High costs of production.
 Not competitive with other Southern Hemisphere producers.
 ‘Hope’ that export market access will solve over-supply issues.
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Opportunities
 High-quality well-coordinated domestic supply, better communication
amongst key players.
 Opportunities for growth and working with the retail sector.
 Export development (market access).
 Well-coordinated export approach.
 Counter-seasonal supply to Northern Hemisphere markets.
Threats
 Integrity and reputation of product (product coming off domestic wholesale
market for export and residue issues with unprofessional growers).
 Low-cost Southern Hemisphere producers with continuity of supply.
 Distrust between producers and others in supply chain.
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Setting direction
Industry action plan
5.1 Production issues
The Cherry Manual provides an excellent guide to the key risks and parameters of
cherry growing. Information is included on climatic requirements, sweet cherry
characteristics, production aspects of sweet cherries and cultural practices.
Information on maturity and harvest, cooling and packing and beyond the farm gate
(transport, handling and storage) is also addressed in the manual.
With the exception of South Australia and Victoria, no formal systems have been put
in place for training, education and extension programmes. The Cherry Manual has
the potential to be a useful resource for all Australian cherry growers. The manual
complements the Australian Cherry Quality Guide, Australian Cherry Quality Guide Poster
and Australian Cherry Colour Guide. These guides provide producers, who are grading
cherries to meet market needs, with a simple and clear explanation of what the
market wants.
Industry benchmarks defining industry targets for production and quality
performance could easily be incorporated into The Cherry Manual.
It is recommended Cherry Growers of Australia review The Cherry Manual and other
quality assurance documents and put systems in place to update these materials
where necessary. The updated documents should be included in formal industry
training and extension programmes. A roadshow with industry leaders and technical
experts showing and encouraging the adoption of industry best practice should then
be developed by industry.
Specific projects and their indicative costs are outlined below.
Projects
 Revise and update The Cherry Manual to make it the ‘Australian Cherry
Manual’.
 Project costing: $70,000
 Prepare the new ‘Australian Cherry Manual’ in a format that can be distributed
to all Australia Cherry Levy payers (for example, CD format).
 Project costing: $28,000
 Prepare and implement a national ‘quality production’ training programme
based around the new ‘Australian Cherry Manual’, quality guides and colour
cards, with the aim of implementing a national quality standard for all
Australian produced cherries.
 Project costing: $38,000
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
Develop an orchard business package for growers to use to estimate
production and financial performance of their cherry business in relation to
achieving an adequate return on capital.
 Project costings: $20,000
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5.2 Market access
Market access and protocols are the two key issues preventing access to and the
development of export markets for Australian cherries. These are issues being dealt
with by AQIS and Biosecurity Australia, but the cherry industry is competing with
other industries for limited resources from Biosecurity Australia to move the process
along. The two issues of funding levels and the development of export protocols need
to be thoroughly addressed before any work on developing export markets can be
carried out. An opportunity exists for the Australian cherry industry to create and
assist this process where possible.
The Tasmanian cherry industry has been proactive in pushing these protocols
through and in doing so, have gained access to the Japanese marketplace. The
methodology and processes implemented by the Tasmanian industry provide a
potential framework that could be adopted and further developed by Cherry Growers
of Australia for the national Australian cherry industry.
The challenges facing the Australian cherry industry in each of the potential markets
must be clearly identified and defined, and a detailed action plan to meet these
challenges needs to be developed. The industry needs to build on the newly
established Export Development/Market Access committee, set up by Cherry
Growers of Australia.
As part of the action plan, a case for an export development/market access capacity
exists to champion the Australian cherry industry.
The industry needs to take advantage of its recent membership of Plant Health
Australia to prepare an Australian Cherry Industry Biosecurity Plan.
Research and development projects that relate to market access need to be developed
and implemented. Such projects could include a pest and disease list for Australian
cherries and the development of a systems approach to area freedom status.
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Specific projects and their indicative costs are outlined below.
Projects
 Develop a project to enhance the industry’s export development/market
access capacity and the expertise to support the Export Development/Market
Access committee, including:
o Resources (people and finances) to champion the Australian cherry
industry.
o Undertake an assessment of and prepare a comprehensive list of
Australian cherry pests and diseases that will have relevance in all
countries cherries are and could be exported to.
o Prepare relevant information on the management of major Australian
cherry pests and diseases so that such information is available to the
industry and Biosecurity Australia for use in all market access
negotiations.
o Research and prepare a model for the implementation of a ‘systems
approach’ to market access for Australian cherries.
o Prepare an Australian cherry industry biosecurity plan in conjunction
with Plant Health Australia.
o Prepare and implement acceptable ‘area freedom’ models for use
within mainland growing regions to ensure market access for
Australian cherries.
o Investigate and develop a model to ensure market quality control (that
is, ensuring only export quality fruit is exported).
 Project costing: $110,000 plus operating costs per annum for
a two-year minimum period.
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5.3 Domestic market development
Under the banner of domestic market development there is the need for two distinct
projects to be carried out.
Market research
For the Australian cherry industry to develop and move forward it is important to
have a thorough understanding of the marketplace in which it currently operates and
the supply and demand issues affecting the marketplace.
Product awareness by consumers needs to be sought including issues such as ‘do
consumers understand the product they are buying?’ And do consumers want to
understand the product they are buying?
The most recent consumer research was carried out six years ago during 1999. An
opportunity exists for industry to re-visit and update this market research to assist in
moving the industry forward.
There is a need to collate objective information on the Australian cherry industry.
This issue must be addressed by industry and Government to provide an accurate
basis on which to develop future priorities and pathways for sustainable
development.
Development of a marketing plan for the Australian cherry industry
The Australian cherry industry needs to develop and evaluate strategies for customer
contact at the point of sale. Things for consideration include marketing officers,
point of sale material and marketing methods.
The Australian cherry industry needs to address the issue of branding cherries in the
marketplace. Branding allows consumers to make buying decisions with confidence
that they are buying a specific and desired product that provides value for money.
This is particularly important to consumers according to the results of the survey
presented earlier in this report.
To establish a successful brand in the marketplace a consistent product needs to be
supplied in sufficient volumes to meet consumer demand. But the relatively short
season of cherries does present some issues and makes it difficult to establish a brand.
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Through membership of Cherry Growers of Australia to ‘Australian HomeGrown’,
the industry could consider the implementation of an Australian cherry brand for the
domestic market based on high-quality cherries being produced by approved growers
and packing facilities.
Specific projects and their indicative costs are outlined below.
Projects
 Undertake new consumer research on the Australian domestic cherry market.
 Project costing: $75,000
 Collate objective information on the Australian cherry industry.
 Project costing: $40,000
 Develop a marketing plan for the Australian cherry industry. The following
points are components of the marketing plan.
o Prepare and implement a training programme for the Australian
cherry market chain to include wholesalers, transporters and retailers.
 Project costing: $45,000
o Prepare and implement a consumer education programme that can be
used in all major retail markets (for example, each capital city).
 Project costing: $50,000
o Prepare and distribute high quality point of sale material to the
Australian domestic market. This material should also be available for
use in current and new export markets.
 Project costing: $35,000
o Maintain a high quality Australian cherry industry public relations
programme.
 Project costing: $60,000
o Retail in-store market research and trials.
 Project costing: $25,000
 Using the Australian HomeGrown brand, prepare and implement an
Australian cherry brand programme for high quality cherries.
 Project costing: $30,000
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5.4 Industry structure and resourcing
The Australian cherry industry is fragmented, and growers often see interstate
producers as competition.
If the Australian cherry industry is to implement the outlined industry action plan,
significant funds are required. Funds are available from a variety of sources, but the
industry will be better positioned for support from Government programmes if it is
seen to be making an appropriate level of contribution (that is, levies paid). Kondinin
Group is of the opinion that the Australian cherry industry currently does not pay
appropriate levies when compared to other agricultural industries (See Table 8).
Table 8. Levies paid by agricultural industries.
Industry
Levy amount
Grains
1% farm gate price
Wool
2% farm gate price
Beef
0.5-1% farm gate price ($3.50/head)
Sheep
2% farm gate price
Cherries
0.1-0.2% farm gate price
Source: Kondinin Group
Based on the cherry industry being a $60 million industry, if cherry growers were to
pay a levy equivalent to 1-2% farm gate price, this would deliver $600,000-$1.2
million. The industry needs to access other grant monies from government.
Cherry Growers Australia has the opportunity to look at various models for
increasing and using the levies collected. Points for consideration include an
increase in the R & D levy for additional R & D projects only, the incorporation of
industry marketing and promotion into the R & D levy and a separate promotional
levy.
It is recommended that Cherry Growers of Australia Incorporated commit to
another ballot on levy increases.
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Appendix 1. Australian cherry industry SWOT analysis.
Strengths
Strong leadership
with vision
Weakness
Fragmented industry
organised around ‘Statebased’ and sometimes
even regional interests
Opportunities
High-quality wellcoordinated domestic
supply – better
communication
amongst key players
Excellent knowledge
base developed on
minimal resources
Export development
(market access)
Producers of highquality product
Industry participants not
necessarily aligned
behind industry leaders’
vision
Lack of branding and
promotion
Potential of seasonlong supply with
extended seasons
Strong demand from
domestic market
Poor understanding of
best management
practices
Under-resourced industry
organisation
Alliance with apple
industry (in some
states)
Established links
with export markets
Industry has a
national breeding
program
Public perception of
high-quality product
Under-resourced research
and development
capacity
Over-supply of product
Counter seasonal
supply to Nth
hemisphere markets
Development of
integrated supply
chains
Growing economies
in Asia
High costs of production
Varying skill sets
amongst industry
participants
Limited objective
production and
marketing data
Lack of competitiveness
with other Southern
Hemisphere producers
Poor supply chain
management in certain
circumstances (ie.
Domestic product
finishing up in export
markets)
Poor negotiating position
for growers with retailers
Multiple sellers
Restricted market access
to Nth Hemisphere
markets
Lack of export ethos and
culture – reactive
Well coordinated
export approach
Threats
Integrity and reputation
of product (product
coming off domestic
wholesale market for
export and residue
issues with
unprofessional growers)
Low-cost Southern
Hemisphere producers
with continuity of
supply
Distrust between
producers and others in
supply chain
Being omitted from
global supply chain
Poor biosecurity on
imports
Production risk from
weather
International
marketing alliances
Training processors
and retailers
Market power of major
retailers
Security of supply of
water
Niche opportunities
Removal of market
access
Value adding –
increasing fruit size;
packaging
Quality and price
management
Non-tariff trade barriers
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marketing strategies
Financial viability
Limited on-farm funding
for development
Lack of research and
extension people
Limited resources for
profitable processing
Lack of communication
with other Sth
Hemisphere countries
Increased reliance on
transient labour
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