With returns low, growers are withdrawing orchard investments

How is it that Aldi, the UK’s fourth largest supermarket, is selling more British apples than any other UK retailer?

“We know consumers want British if at all possible and with such great quality fruit available from British growers, we hope to see even more support from UK supermarkets,” says British Apples & Pears executive chair Ali Capper.

So why aren’t they getting more of that support?

Aldi stocks 22.5% of all British apples, equivalent to 3,414 tonnes, punching well above the weight of its 10.1% market share [Kantar 12 weeks to 16 April].

Lidl, Sainsbury’s and Waitrose also stock above their grocery market share of British apples. But that leaves Tesco, Asda, Morrisons, Co-op and Iceland all underindexing, the latest BAP data reveals.

One major supplier says some retailers “don’t see British as important at all and are just purchasing on value”.

That’s leading to poor availability, which Ged Futter, director at consultancy The Retail Mind, says is being “allowed to happen by retailers because their focus is on profit”.

This was most felt last autumn when, following a hot summer-induced glut, many retailers took on more, cheaper apples from Europe, bypassing UK apples and any need to pay a premium to British growers facing increased costs.

Futter says the combination of increased costs and a significant harvest has been “used against the growers” by the retailers, who can simply move to a different market for supply.

Now, says the supplier source, there are more British apples on the shelf than at the start of the season, partly because European apples were not high enough quality to store. But “nobody’s making the money we need to make out of it”.

Cost of production for British growers has gone up by about 23% according to the NFU’s Promar Report, something the supplier says is representative of his business. But retailers are telling suppliers they “can’t pass that inflation on to consumers”, the source says.

With only a 0.8% increase in grower returns, that’s not stopped on-shelf apple prices rising, as The Grocer reported last week. The average cost of the full range of 119 apple SKUs sold by the traditional big four, the discounters and Waitrose, was up 5.8% in a year [Assosia w/c 17 April 2023 vs 25 April 2022] – seven times the 0.8% increase in grower returns.


Source: British Apples & Pears

Cost of production for British apple growers has risen by about 23%, but they are not seeing corresponding returns, despite on-shelf price hikes

Missing out on returns

Price rises eluded growers as retailers pushed consumer prices up after supply deals were negotiated, says the supplier.

And while his company has seen returns increase this year, it has not “compensated for the cost of production increases we’ve seen”.

The issues within the sector come down to a lack of “appetite” from retailers to understand the supply chain and its pinch points, says Futter. This means contract relationships “have got exponentially worse in the last 12 months”, a situation similar to the egg crisis.

However, unlike eggs, which are expected to return to steady supply nine months after the problem hit its peak, “you can’t turn apples back on in nine months”.

In January, BAP revealed that a third of the 480,000 new trees that were expected to be planted were cancelled by growers due to rising costs.

While the supplier source personally knows “lots of growers who’ve cancelled trees or are rescheduling planting”, his company is continuing to invest in orchards, but only for premium varieties.

It is “very difficult” to see growers investing in commodity varieties like gala, braeburn and cox “unless something significant changes,” says the supplier. “Precious few growers consider they’ll make any money out of those orchards.”

He also believes it will be a challenge to get prices up this season as “retailers will be looking to keep their prices down” in what is a “very difficult market”.

However, without investment, Futter warns British supply will decline long-term, and prices will go up, while food security will fall. So one way or another, Futter says: “Retailers must pay more.” The only question is: to whom?