Why Avocados Will Forever Be Expensive

Summary

The script explores the meteoric rise of avocados as a multi-billion-dollar industry over the past two decades. Highlighting the fruit's journey from being stigmatized to being dubbed 'green gold,' it delves into the avocado's economic and political significance, particularly in the US-Mexico relationship. The narrative covers the avocado's transformation through strategic marketing, its supply chain intricacies, and the impact of organized crime on the lucrative industry. It also examines the role of major players like Mission Produce, Calavo Growers, and Del Monte in shaping the industry, and the challenges posed by factors like commoditization and cartel threats.

Takeaways

• 🥑 Avocados have seen a massive increase in popularity, with American consumption jumping from 1 pound to 9 pounds per person annually since 2001.
• 💰 The avocado industry has become a multi-billion-dollar sector, with the fruit being dubbed 'green gold' by farmers due to its profitability.
• 📈 From 2011 to 2022, the average retail price of a single avocado in the U.S. increased by 60%, reflecting a growing demand that has outpaced supply.
• 🌍 Global avocado production volume grew by 200% from 2000 to 2020, while the price per pound increased by 150%, indicating a strong and consistent market appreciation.
• 🏆 The Hass avocado is the dominant variety, accounting for 95% of avocados consumed in the U.S. and 80% worldwide, due to its taste, durability, and high yield.
• 🛳️ Mexico is the world's largest avocado producer, supplying 45% of the international market and 80% of avocados consumed in the U.S.
• 🌱 Avocados are sensitive plants that require specific growing conditions, limiting large-scale production to select regions like the Avocado Belt in California and Michoacan in Mexico.
• 🔄 The avocado supply chain involves careful handling from harvesting to packing, with temperature and humidity tightly controlled to ensure quality and shelf life.
• 🏭 Packing houses play a crucial role in sorting avocados into grades based on appearance and ripeness, determining their final destination, whether it be grocery stores, restaurants, or processing plants.
• 🏢 Three major companies—Del Monte, Calavo Growers, and Mission Produce—dominate the avocado industry, each with different strategies in terms of supply chain management and product offerings.
• 🕊️ Despite challenges such as organized crime targeting the avocado industry in Mexico, consumer demand remains high, and the avocado continues to be a symbol of wealth and a staple in diets.

Q & A

How has the consumption of avocados changed in the United States over the past two decades?

Over the past two decades, avocado consumption in the United States has significantly increased. Americans now eat an average of 9 pounds of avocados annually, which is a substantial increase compared to 2001 when the average American consumed only 1 pound a year.

What has been the impact of increased avocado consumption on production and prices?

The increased consumption and global interest in avocados have led to a surge in production and prices. From 2011 to 2022, the average nationwide retail price of a single avocado rose by 60% from $1.11 to $1.76.

What differentiates Hass avocados from other types of avocados?

Hass avocados are differentiated by their larger size, higher fat content, and dark-skinned appearance. They are also known for their thick, firm skins, which provide better durability during transportation and hide bruises and blemishes, making them more appealing to consumers.

How has the avocado industry grown in terms of revenue over the past 20 years?

The avocado industry has grown into a multi-billion-dollar industry over the past 20 years. This growth is attributed to the fruit's popularity, with farmers even referring to avocados as 'green gold'.

What is the average retail price of a single avocado on the West Coast or East Coast of the United States?

On the West Coast and East Coast of the United States, the average retail price for a single avocado is as high as $2.99.

How has the global production of avocados changed in the past 20 years?

Global avocado production has seen a significant increase, growing at 200% over the past 20 years. It has expanded from 2 million metric tons in 2000 to 9 million metric tons in 2020.

Why is the avocado industry considered lucrative and a target for organized crime?

The avocado industry is considered lucrative due to its high demand and prices, which have led to significant profits. This has made it a target for organized crime, as criminals see opportunities for extortion and money laundering within the industry.

What is the Hass avocado's market share in the United States and worldwide?

The Hass avocado holds a dominant market share, accounting for 95% of avocados consumed in the United States and 80% of those eaten worldwide.

What are the key factors contributing to the high yield of Hass avocado trees compared to other varieties?

Hass avocado trees have high yields due to their vigorous growth, ability to produce avocados just 2-3 years after planting, and the fact that they can remain on the tree at maturity for an extended period without withering, allowing for flexible and continuous harvesting.

Why are avocados not following the typical path of commoditization?

Avocados are not following the typical path of commoditization because the global demand for avocados continues to outpace production. Even the world's largest producer, Mexico, cannot meet the demand, necessitating imports from other countries. Additionally, the quality of avocados varies significantly based on the growing conditions, which affects consumer preference and market dynamics.

How does the supply chain of avocados impact the quality and shelf life of the fruit?

The avocado supply chain, from harvesting to packing, processing, and distribution, plays a crucial role in maintaining the quality and shelf life of the fruit. Avocados are sensitive to temperature and humidity, so they must be harvested carefully and kept cool to prevent rapid ripening and spoilage. The packing houses must also control the ripening process to ensure the fruit reaches its final destination at the desired ripeness.

What are the three grades of avocados and how do they differ?

Avocados are graded into three categories: 'No.1' for the most visually appealing avocados without any blemishes, 'No. 2' for avocados with some visual damage but no disease, and 'No. 3' for significantly damaged or over-ripe avocados that are typically repurposed into animal feed.

Which companies are the leading suppliers of avocados in the world today?

The three leading companies that supply most of the world's avocados are Del Monte, Calavo Growers, and Mission Produce.

How does Mission Produce differentiate itself from its competitors in the avocado industry?

Mission Produce differentiates itself through vertical integration. It owns and operates avocado farms, which allows it to adjust to market pricing, minimize volatility, reduce dependence on independent farmers, and maintain higher profit margins.

What challenges do the economic significance and high demand for avocados pose in Mexico?

The economic significance and high demand for avocados in Mexico have led to issues such as extortion of farmers by drug cartels, theft of shipments, and farms becoming battlegrounds in turf wars. This has resulted in the avocado industry being targeted and exploited by organized crime.

How do the profit margins of Del Monte, Calavo Growers, and Mission Produce compare?

Mission Produce has the highest profit margins among the three companies, with an average gross margin of 13%, an operating margin of 7%, and a net profit margin of 6%. In contrast, Del Monte and Calavo Growers have thinner margins, with average operating margins of 3% and 4% respectively, and net profit margins of 2%.