Supply contracts essential for juice industry

Like any successful partnership, trust and effective communication are a great foundation to work from. The juicing industry seems to have lost its way with criticism and finger pointing being leveled on all fronts.

Many processors are not working with industry to negotiate contracts, leaving growers with no security to plan for the future. Likewise, many growers are not honouring their supply agreements and will walk away from existing contracts if they can secure a better spot price. Growers are currently being offered a price per tonne well below the cost of production, with no consideration given to rising costs of labour, power, chemicals, and fertilizers.

Processors blame the retailers, saying they are unable to increase the sale price and therefore can’t afford to pay more. The retailers are not accepting price increases, citing cost of living pressures. All the while, growers are struggling to breakeven, let alone make a living wage.

Transparency, honesty, and the spirit of true partnership seem to be things of the past. The upshot of all of this is that if industry cannot recalibrate the way it operates, there may not be a fresh juice industry to speak of. Everyone loses if this is where things land.

Australian fresh juice and its presence in the supermarket chiller is something Australians take for granted. If industry and the supply chain don’t work together to protect and preserve the fresh juice industry, it will be gone. Significant changes need to be made immediately if we hope to secure an Australian fresh juice industry and continue to build and invest in it for generations to come.

Fair contracts are essential. Growers cannot secure financial support from their bank if they are unable to demonstrate demand for their product. Contracts need to be for a minimum of two years, preferably three, with fair and reasonable settlement payment terms included. These contracts need to reflect a tonnage buy price that enables the grower to cover their costs and make a living wage.

Good growers should be rewarded with bonus payments for high quality fruit, in terms of juice yield and higher Brix levels. Current practices by processors do nothing to incentivise improvements in yield and quality or create confidence in the profitability and sustainability of the industry.

Processors need to understand what’s happening in the orchards. Crop volumes are down significantly this year but the prices being offered do not reflect this supply/demand dynamic. There was once a time when processors worked closely with growers, understanding the season, volumes, quality and varieties. This knowledge helped to inform discussions with retailers. We need to see a return to processors investing in resources to procure knowledge and insights and working in partnership with growers. Citrus Australia stands ready to facilitate this opportunity.

Growers need to honour their commitments to agreed contracts. Walking away from an agreement for the sake of a better price on the day cannot be tolerated and does nothing to develop trusted partnerships with processors. The obligation and commitment are two-way. This will only occur when reasonable contracts are developed and agreed to, which truly reflect a commitment to a sustainable and profitable industry for growers.

Retailers need to sell fresh juice at a price point that enables a fair and reasonable return for all stakeholders – the retailer, the processor and the grower. Fresh chilled juice represents excellent value for money for the consumer. However, fresh chilled juice being sold at less than $3 per litre, far below the cost of a small coffee, means there simply isn’t enough value in it for all stakeholders. Someone bears the cost of this, invariably the grower.

Australia is fortunate to have a citrus industry that is world renowned for producing premium quality fruit. Growers dedicated to producing fruit for the juicing industry are part of this proud tradition. This means Australians have access to some of the best chilled fresh juice on the market. If industry doesn’t come together and work in partnership for the long-term, all that will be left is shelf-stable imported juice made from concentrate, at best.

This article was written by Olivia Tait. Olivia is the juice development officer for Citrus Australia.
olivia.tait@citrusaustralia.com.au