Strawberry crisis a wake-up for growers | OPINION

Strawberry crisis a wake-up for growers | OPINION


Opinion
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The recent needles-in-strawberries crisis should prompt growers to check their risk profiles.

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OPINION

FRUIT growers and horticulturalists across sectors should look at the needle-in-strawberry crisis as a wake-up call to check their risk profiles.

There could be dire consequences even for growers with insurance.

Australia’s $500 million strawberry sector was experiencing the kind of crisis many businesses would not think to plan for, with an overnight collapse in their markets.

The impact would mean a shortage of cash flow and job losses, depending on the way growers had structured their business.

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It depends on who these growers are. Some of them are diversified and don't only grow strawberries, that might be half their business or it might be a third.

But if all of their business is in strawberries and they're being recalled then they have clearly got more significant issues than others who might grow under multiple brands or where they might grow under hothouses, so you get effectively more than one maturing crop.

For many smaller growers, though, the impact will be devastating.

They invest, they invest, they invest — and then they sell whatever they've grown to pay back their investment first and then hopefully make some profit.

Mark Harrison, business advisory partner, Pitcher Partners.

Mark Harrison, business advisory partner, Pitcher Partners.

If that's not there, then that's the downside of all your growing costs.

A bad harvest would have a similar impact, but clearly in most trigger events you would see it coming a lot earlier unless it is hail the night before you pick.

The scale of operations also limits the ability for growers to pivot to other forms of production that might not be as badly affected, such as sliced frozen strawberries.

The problem is that there's no ready infrastructure near the farms so the crop will still spoil by the time you need to pack it up, send it off and freeze and dry or whatever you're going to do.

Coles, Woolworths and Aldi have either cancelled or reduced orders, while strawberry exports have also stalled.

There are reports importers in Russia and the UK have stopped orders while a New Zealand supermarket has also announced it will pull Australian berries from its shelves.

For crops with a short fresh life there are few options.

The problem is that there's no ready infrastructure near the farms so the crop will still spoil by the time you need to pack it up, send it off and freeze and dry or whatever you're going to do.

The infrastructure is not set up to do that in bulk or on demand.

The other question would be whether anyone would buy that product anyway.

You're going to invest all those additional costs into a fruit that no one wants when it's fresh —are they going to want it when you reposition it in some other format? You can't pivot that quickly.

For growers and wholesalers affected, the first step has to be focusing on the commercial imperatives of the business, including communicating with customers, having a public statement ready and managing the brand.

You then need to manage your internal business — your people and the bank — but it is difficult because you might not have visibility yet of what the impact will be.

Even if you are insured, you've got to be very patient.

Even so, you have to get these relationships right because if you manage them appropriately, they're more likely to be there when you need them two, four weeks or eight weeks down the track.

Many growers were likely to be uninsured for this kind of event, and even those with cover might find the delay in resolving the crisis impacts on their ability to trade through.

Even if you are insured, you've got to be very patient.

These things take a long time to run their course, there needs to be an investigation as to where and how the contamination occurs, and then you have to deal with the insurers.

So the big issue that faces any sort of product recall is the time lag between when the event occurs and when you might see some proceeds, if anything.

Fresh foods might end up being scanned or X-rayed and there will be a significant cost involved.

While there have been isolated reports of a banana and an apple being spiked, the crisis has been largely contained to strawberry growers, but it is a salient warning for other sectors to review their risk profiles.

Everyone should be making sure they actually have cover for this kind of event.

Sit down and have the conversation with your insurer now, look at your risk profile and have a disaster plan for how you respond to this issue.

Whether you have a spare finance facility and develop plans for alternate use of product — think through all of it.

This would include looking at whether new investment is needed to improve security for produce.

Fresh foods might end up being scanned or X-rayed and there will be a significant cost involved.

This just shows that while it looks on the surface to be a malicious once-off event, a local industry is also susceptible to issues with food security.

It may also not be particularly practical given you think about how bunches come off a tree for bananas or the volume of fruit that is picked.

That level of scrutiny is already increasing with manufacturers and it might end up being required for fresh produce as well.

This just shows that while it looks on the surface to be a malicious once-off event, a local industry is also susceptible to issues with food security.

  • Mark Harrison is a business advisory partner within Pitcher Partners, an association of independent firms located in Melbourne, Sydney, Perth, Adelaide, Brisbane and Newcastle.
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