Creativity is key for Del Rey in 2021
All indicators point to a very strong marketing year for the length of the California avocado season, which often means rising f.o.b. prices and the need for creativity to offer value propositions for the consumer.
Del Rey Avocado Company Vice President Patrick Lucy said the Fallbrook, CA-based shipper is looking to offer a “guac bag” that can be value priced and will also be a good outlet for number 2 fruit this season. The California Avocado Commission recently reduced its crop forecast by 8 percent as wind events during the winter created some issues and eliminated some fruit. Lucy said those same issues will result in an increase of number 2 fruit. “We are expecting a 5 percent uptick on number 2’s this season,” he said.
Lucy added that creating a bagged offering featuring this fruit and marketing it as avocados ready to be made into guacamole of for use on sandwiches can offer retailers promotional opportunities. Del Rey expects the market price on California avocados, and all avocados, to be much higher than it has been as the season moves on. Consequently, retailers will be searching for value propositions that they can promote in Lucy’s estimation.
For several months starting last fall, the avocado f.o.b. price was often in the mid-$20s for a carton of fruit, which is a market price rarely seen over the last decade. There was a definite uptick in February resulting in a market in the $30s by the beginning of March and in the $40s by the middle of the month. Lucy expects the market to stabilize in the April through July period but at a high level. He reasoned that Mexico shipments have declined, and California’s volume does not appear to be enough to satisfy demand. There will be an upward pressure on price all spring and into summer.
Lucy said it will be even more acute on organic avocados, which is one of Del Rey’s specialties. Speaking during the second week of march, the Del Rey executive said Mexico’s organic volume is on the decline and California total organic crop appears to be 20 percent less than 2020. “We expect supplies to be very tight from May through August,” he said, predicting that the f.o.b. price on organic avocados could rise into the $60s or even higher. “The f.o.b. price on organics has jumped $10-15 in just the last few weeks.”
Lucy did note that Peru is expected to have a significant increase in organic avocados this year beginning as early as late May, but he believes demand will still outstrip supply.
Overall, he reiterated that there will most likely be fewer retail promotions of avocados this spring and summer because of the higher expected f.o.b. prices. And he added an unknown is the reopening of foodservice, which is a substantial user of avocados. Foodservice sales of avocados will clearly be up, but it has yet to be seen how that will impact retail sales.
All these factors point to a very strong marketing position for California avocados in 2021.
Lucy noted that California avocados do get a premium as there are many retailers — mostly in the West but also in pockets across the country — that want the California fruit and are willing to pay for it. “You will see California avocados east of the Mississippi,” he noted.