Air Transport of Berries, Greens, and Fruits: a Prospect or a Dead-End?
an economist at the Investment Center of Food and Agriculture Organization of the United Nations (FAO)
The global financial crisis of 2008 had an interesting side effect as it contributed to the recovery of the airline industry. More precisely, this process, which began even before the crisis, accelerated significantly, as many countries also did not have the money to subsidize highly unprofitable state airlines. This led to the rapid development of private aviation, including low-cost airlines, expanded the geography of flights, revived many airports, and significantly reduced the cost of cargo transportation by air.
The decrease in the cost of air cargo has become one of the reasons for the rapid development of the berry industry in the last ten years. In 2008, berries were on the shelves of only the most expensive European stores in winter, and there were none at all in Ukraine. At the same time, prices were high, so the consumption of berries was also extremely low.
Currently, winter and summer berry prices in the supermarkets of the European Union differ not so much, and they are sold almost everywhere, even at discounters. For instance, blueberries have already become a standard daily product for many consumers, as familiar as an apple.
A similar situation was observed with greens, as well as with many exotic fruits. Greenery from Kenya and Ethiopia is sold everywhere in the EU, the USA and the countries of the Middle East, and is delivered by air daily.
The most contradictory phenomenon was the growth in the supply of organic products by air transport. One of the principles of organic production is taking care of the environment, and air transport is one of the primary contributors to environmental pollution. This aspect led to some issues with the air cargo. Many consumers in the USA and the European Union show an increased interest in the production and delivery of products since socially and environmentally responsible consumption is becoming a very powerful trend. Accordingly, goods delivered by air in the consumers’ eyes are less desirable, and many refuse to purchase them at all. Although this segment of consumers is not yet decisive, it is continuously growing. Therefore, manufacturers and fruit and vegetable trade and retail chains are undoubtedly paying attention to it.
How to determine what products are worth delivering by air? First of all, one should pay attention to the wholesale price of the goods. If the wholesale price of the goods is higher than $5-6 per kg in a specific sales market (and therefore the retail price is not lower than $10), the product can be delivered by air. The higher the price, the higher the likelihood that delivery by air will be possible. A vivid example is a growth in the supply of organic products, as well as berries. Also, the product must be perishable; otherwise, it can be delivered by sea. There are a few exceptions, though. For example, cherries can be shipped at least 30 days by the sea, but a significant part of them is delivered by air precisely because very often, the product needs to be put on the shelf by a specific date, for example, for Christmas or the New Year.
To understand the relationship between shipping costs and product prices, let’s consider blueberries. The retail price of blueberries in the Middle East is from $40 to $60 per kg. Raspberries are even more expensive. Accordingly, the wholesale price of the network supplier (importer) can range from $30 to $40, and the price that the supplier from Chile, Mexico, or Peru receives varies from $ 15 to $ 25 per kg. Thus, air delivery is quite possible, because its cost will not exceed three dollars per kg. By the way, a raspberry exporter can receive up to $30 per kg of revenue in this market. In such cases, the farmer will be able to receive at least $ 8-10 per kg for blueberries and at least $ 15 per kg for delivered raspberries if he or she is not a supplier or a packer. If the manufacturer carries out direct export, then the price will be much higher.
Accordingly, the countries from which fresh fruit and vegetable products are exported by air usually have a well-established logistics of such deliveries, including a “green corridor” during customs procedures, good quality roads, voluminous cold rooms for cargo at airports, well-developed logistics for delivering products on board.
Deliveries for the export of perishable goods by air are carried out by the Netherlands, the USA, Chile, Peru, Mexico, Turkey, Kenya, Ethiopia, Spain, and other countries. Of the countries of the former Soviet Union, Uzbekistan has certain ambitions for the development of such logistics. There have been reports of government investment in infrastructure for export by air and in Tajikistan. However, the main problem of these countries is the narrow geography of passenger traffic. Indeed, at the first stage, such export is carried out by placing goods in the cargo compartments of passenger aircraft. Moreover, if the flight is indirect, the likelihood of damage to the cargo is greatly increased. Accordingly, if we are talking about the export of berries, then we need to focus solely on direct flights.
The advantage of Ukraine is a large number of direct flights to Dubai and other countries of the Middle East, as well as direct flights to the United States and Canada. However, the bottleneck is a very small cold store at the Boryspil airport and a lack of understanding and responsibility for dealing with such loads as berries. For raspberries there is an even bigger problem as there are no varieties for the fresh market, there is no understanding of how to grow them, and there is no determination to do it. This is not a good tendency, because, in the Middle East, our raspberries in summer can easily get up to $ 10 per kg, while raspberries for freezing in the summer of 2018 were sold at 30-35 US cents per kg. In addition, there are real buyers who are interested in partnerships.
How much does such delivery from Ukraine to the Middle East cost? Preliminary estimates indicate that all costs, excluding primary packaging, will range from $ 1.5 to $ 2.5 per kg in the Middle East and 50 cents more expensive in the United States. You can load up to 7 tons per flight, but it is better to focus on deliveries of 3-5 tons per flight.
What can be exported? All berries without exception. By the way, even redcurrant may be interesting, since it is present in all market chains and on all shelves. Mushrooms can be exported, especially when it comes to forest mushrooms. However, tree oyster mushrooms will be in demand. As I wrote earlier, Ukraine can supply tomatoes to the Middle East in the summer. If it comes to cherry, deliveries by plane will be quite economically viable. As for asparagus, its sales in the Middle East are still small, but they are growing. Thus, it is quite possible to supply these products by air, because the prices there are very high.
However, let us get back to the prospects of air transport for quick delivery. So far, this industry is booming because the world is not limited to the United States and Europe. Consumers in Southeast Asia and the Middle East consider air transportation an advantage because the products are fresher. Therefore, on the packaging or on the price tag, they usually write – “airfreighted.” Deliveries to the USA and Europe are also growing, but here the resistance of conscious consumers is already much greater. In particular, some supermarket chains voluntarily import mandatory product labeling if it was delivered by air so that consumers can decide for themselves whether to buy it or not. And those who refuse to buy such products are becoming more and more.
The rules of organic farming in European countries will soon begin to explicitly prohibit the supply of products by air, and also limit the distance over which products can be delivered. Unexpected help in this matter may come from electric car manufacturers. Tesla Semi truck, which is expected to debut in Europe in the coming years, could become the basis for zero-emissions environmental deliveries.
Practice shows that consumer trends that prevail in the United States and Europe, eventually come to Ukraine, Russia, Moldova, and other countries of the region, and the countries of the Middle East. Moreover, the time during which these trends reach our markets is constantly decreasing. Accordingly, we need to take into account that we still have time to develop the supply of products by air, but we must hurry with this in order not to “run into” a negative trend.