One of Chile’s leading grower-exporters, Gesex has long enjoyed strong trade links with the UK thanks to its flexible and dedicated approach to supplying the retailers, in particular. Produce Business UK catches up with Felipe Casanova, market manager for Europe, to discover what lies next for the sophisticated supplier in the UK, where price pressure and consumer eating experience are presenting new demands
What’s Gesex’s background and current business in the UK market?
Felipe Casanova (FC): Gesex has been present in the UK for many years already. Firstly, through the regular route of importers, and for the last eight years we have been supplying the supermarkets in the UK through our UK office, Fruit Growers Alliance (FGA). This business evolved when the supermarkets decided they wanted to source more fruit directly. To make that step more efficient and transparent we opened our own offices in the UK and Europe. Today, we work directly with retailers, and try to be as flexible as possible depending on their needs and capacity to buy.
Who are your main customers?
FC: We work mainly with Tesco, Sainsbury’s, Asda, Marks & Spencer (through MMUK) and Aldi. We used to work with Waitrose and Morrisons too. The UK market is pushing a lot for lower prices and some retailers are changing the way they are working with growers. As such, it wasn’t possible to continue working the way we were dealing with some customers. We continue to work with those who understand how to buy more directly, be more transparent and establish what the returns will be. We’re not in a position these days to not know what the price will be before we load.
How are you coping with the UK’s continual push for cheaper prices then?
FC: We are working with our customers and they are helping us to find solutions and agreements on prices. The solution is not always to simply put more pressure on the grower by asking for lower prices. In this sense there is a contradiction from the market since, although it is constantly asking for innovation and new varieties, it is not willing to pay a premium for it. I think some of the supermarkets understand that already, and that will help us to keep presence in the UK.
Besides consolidating our supply with existing customers, we need to look for more efficiency on the operational side. The UK is pushing a lot for lower prices, so we need to be able to find efficiencies to cope with that. Nevertheless, we can improve efficiency but if prices are still under pressure it’s a never ending story. We need to be supported by the retailers to find a fair price and to generate incentives to keep innovating with the growers.
Has Gesex managed to achieve greater efficiency already?
FC: We are working on it. Our packing capacity during our peak weeks of production are limited. We don’t have enough capacity to deliver exactly what the market requires – we have some capacity to pack into punnets, and the rest is packed in bulk and repacked at the destination. We cannot pack everything in Chile but we are trying to improve the repacking process to be more efficient and to reduce costs. Currently, we hire service providers to carry out the repacking. So, we are working with different companies to compare their results. Some, for example, have new machines which could improve the process. We are actively seeking solutions. We are also working very closely with our growers to ensure they are stricter in terms of specifications at the origin. Those two points should be reflected in overall improved efficiency.
How important is the UK market for Gesex? What volume and percentage of total volume do you send to the UK? Which products?
FC: Overall, the European market represents 25% of our export volume. Of that total, 50% goes to the UK, so overall Gesex roughly exports 13% of its volume to the UK, including table grapes (our biggest product) and stonefruit. It’s a very important market because it takes a quality of fruit which works specifically for that market. We are sending a very specific quality to the UK and for that they are giving the best returns. We are not switching markets every year and we will be present in the UK for a long time.
Are you growing in the UK? If so, with which products and why?
FC: I don’t think our volume to the UK will increase sharply. It will be stable for a lot of our products, like grapes. We are very consolidated on grapes. We used to be very big with stonefruit and that’s something we want to develop again. We left the UK market [for stonefruit] for certain reasons but we see opportunities there and it’s something we’d like to develop again.
What are your UK plans for stonefruit then? How do you plan to return to the marketplace?
FC: For cherries, although Asia is taking the most of Chile’s volume today, our feeling is that the approach of the Chilean cherry industry to Europe must change. For the last two to three years what Chile has loaded to Europe are cherries that cannot go to any other market. The [production] offer will increase in the next five years, and we think Chile needs to approach the European market differently. We are trying to position ourselves with that different approach. In the coming four to five years, I think we should be active in the UK with a bigger volume of cherries.
Do you mean Chile should offer Europe better quality cherries?
FC: Yes. All other markets [than Asia] are receiving a lower quality product. We want to make the appearance and quality better for Europe and the UK, then customers will come back to buy the fruit. I think cherry volume will increase if we improve the quality on offer.
Hasn’t the attraction of Asia been the higher prices they are willing to pay for cherries? Where does this leave the UK where the focus is increasingly on lower prices?
FC: I think price will always ben an issue. We can improve the quality but prices will not increase accordingly. Some very specific, niche customers will react in this way but for the retailers we need to send good fruit that will work for them in terms of quality and returns to growers. We have to find that point where we can deliver the right product. Yes customer will react to quality with their purchasing decisions, but price will certainly have a limit.
What about the other Chilean stonefruits like nectarines, plums and peaches? Do you see a future for those in the UK too?
FC: Yes, cherries and stonefruit are separate items in the eyes of the supermarkets. Stonefruit is a slightly different situation. For many years some supermarkets have worked big volumes with South Africa. Today that is changing. South Africa is still an extremely positive supplier but I think chile has a role to play too. After all, Chile is the biggest exporter of stonefruit to Europe.
Gesex has been working with different breeders to offer new varieties to the market. Of course, it’s a very slow progress though. Just because one variety grows well in one country it doesn’t mean it’ll behave the same in another region. We have been testing for many years already, and we believe we can offer some good varieties that will travel well and offer very good eating quality. That will be our first advantage.
Secondly, normally Chilean growers produce bigger sizes of stonefruit than South Africa – that’s one of reasons why South African has been focused on supplying the UK because the market normally takes smaller sizes. But we feel we can offer the UK something different – a premium stonefruit. Thirdly, Chile is able to offer stonefruit later in the season than South Africa, although they have been developing some later varieties. That said, I think we could go until the end of march with nectarines and with plums can go up the end of April or mid-May.
What about grapes? Are you evolving that offer for the UK?
FC: For grapes we are following the same principle as stonefruit in looking for new varieties to develop a consistent offer week by week. Again we are working on breeding programmes for mainly seedless varieties on red and white grapes. In terms of characteristics, we are looking for two aspects: the variety must be good for the market and the grower. So, it must have good eating quality and good post-harvest condition for shelf-life. On the grower side we need good yields and lower labour input and there are some varieties which need less handling than others to achieve this.
What do you think has been Gesex’s secret to success in the UK?
FC: We are a grower-exporter and our growers know exactly what they need to do and pack. This is the key to success not only in the UK but in other markets too. We have a stable business and through FGA – our office in the UK – we can offer full visibility as well as the right product.
We have proven already that we’re a very reliable company. We export 80% of our total volume direct to retailers in the US, Canada, Europe and Asia, which demonstrates how reliable our products are. That’s a point of difference for us.
With regards to the UK, we know the market and we are present there with our office, which means we can be very flexible in terms of what we can offer. We can sell any product and adapt ourselves to the customer’s needs. If they want to buy on a FOB basis or they need us to deliver the goods directly to the retailers’ distribution centres, we can do it. We’re looking for long-term business and we are very retailer orientated. That’s a big point of difference.
The UK is renowned for being a mature market, but the foodservice, convenience and wholesale businesses are all thriving – do you see potential to expand in other channels?
FC: We’ll stay on the retail side mainly because it’s clear that is a market where most of the opportunities are. But we are also growing some programmes with the foodservice sector. Those are the two main channels that we are developing in the UK.
Our foodservice offer is mainly related to fruit salad business, particularly for grapes at the moment. The fruit salad and prepared/packed fruit market is growing a lot in the UK. We’ve had opportunities with some customers already and it’s moving in the right direction, so we should grow in this channel. The market is growing and we need to grow with the market.
Has Gesex made any other developments lately that will benefit the UK market?
FC: Last year we made a big investment in a new packing facility for stonefruit and cherries because our production volume is growing. We estimate that our own volume will increase by 25% in the coming four years. The packhouse is located next to the our existing packing shed in the Metropolitan region, which is very close to Santiago, and it features two big Unitec packing lines.
Read the other articles in PBUK’s Sourcing Spotlight on Chile: