Keeping the Doctor at Bay

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-By John Boley

As a chartered accountant in charge of an apple-growing co-operative in times of reduced apple consumption, increased costs and competition and international deregulation, you might think the odds were stacked against Michael Cox.

But the general manager of Lenswood Cold Stores Co-operative Society Ltd in South Australia prefers to stress the positives and says the future is bright. There have been massive improvements in apple growing techniques and the products in the shops today are better than ever. “There’s more flavour, more crunch, and excellent colour. If you went back 20 years you would have been happy with a lower coloured product. The appearance of the apple, the pressures, and the sugars within that apple are a whole lot better these days, as well as the crunch that you should be able to experience when you bite into an apple.”

As for the next generation of apples, “there’s a lot of work being done on new varieties which will take apples to the next step.”

Lenswood Co-op packs and sells more than 60 per cent of the crop that originates in South Australia and around eight per cent of total national apple consumption. Although apples represent the vast majority of the business, growers also pick, pack and sell cherries in the six-week holiday window.

Most of the growers here in the Adelaide Hills are third, fourth, even fifth-generation working in orchards that have been around for more than a century. Growing techniques have changed a lot and the tree structures, trellising, spacing and varieties have all changed for the better over time. Over the years, growers have changed their methods to improve both quality and productivity. As they progressed, they have changed the way they structure their orchards and the varieties they grow. “We’re doing a lot of work with the growers at the moment to make sure that the varieties that they grow are appropriate in terms of what we think we can sell on their behalf.”

“The six main varieties we have today are completely different to the six that would have been around in the 1900s. That’s changed as consumer tastes have changed but they’ve also improved over that period of time. The consistent theme is that the quality of apples that I see and taste here is second to none in the country due to the excellent growing conditions and the grower base located in the Adelaide Hills.”

There are a number of varieties that have come and gone over the last few years, Michael explains. For example Jonathans were probably the number one apple grown in the area about 20 years ago, but there are very few Jonathan trees left anymore because the market has moved away from it. “Golden Delicious is another one that we’ve been working with the growers on, to reduce the number of trees, because major retailers are walking away from Golden Delicious.”

Apples remain a staple of many people’s diets but, as Michael points out, there is a lot of competition on the fruit counter at the supermarket, some of it exotic and imported – mandarins, or grapes and cherries from the US – plus watermelons, mangoes, pineapples, strawberries and many other fruits that would at one time have had a distinct season, a short window of availability, are nowadays available more or less year-round. In addition there is the muesli bar and snack food market that also competes against fresh produce. “It means that the consumer has a greater choice and we need to make sure that the eating experience matches the obvious health benefits that come hand-in-hand with apples.”

Another element of competition is the rise of imports, not least from New Zealand. In August, the World Trade Organisation lifted a century-old ban on the importation of New Zealand apples to Australia but officials imposed strict guidelines, with cartons undergoing tough checks before they can be allowed into the country. According to ABC News, by early November just one per cent of projected imports had actually arrived. Quarantine officials have rejected three consignments of apples because of fears they could carry fire blight, a condition common in New Zealand, says the news organisation.

“New Zealand are good apple growers, there’s no question there,” concedes Michael. “They certainly are a quality apple-growing nation and have been for a long time. A lot of the leaders in the industry have come out of New Zealand. But our biggest issue with New Zealand is the fear of disease that can come over to Australia.” There are several potential problems, he says. “Fire blight is probably the biggest concern that we have but there are also a couple of other pests that they have which we don’t want here.”

Fire blight is a disease of apple and pear trees that infects the leaves and crops to effectively kill a tree and it’s one that will spread very quickly. “It’s a virulent disease. The disease can be spread by contact with infected matter. One key packing issue that we have is that it’s very hard to keep leaves out of a box of apples when you pack it. It is this infected leaf matter that causes the problem as it is most likely to be discarded anywhere and anyhow. If the infected leaf matter comes into contact with a tree – and it doesn’t have to be an apple tree – it can spread very quickly from tree to tree.” Once infected, the tree must be either destroyed or chemically treated. The antibiotic in use in other countries to control fire blight is not currently used or allowed on any crop in Australia, and nor should it be. With the proximity of the orchards and the fact that the apple growing region lies within the water catchment area of Adelaide, growers have little choice in the long run but to destroy the whole area, and potentially their livelihood as well.

New Zealand is a worthy competitor, Michael accepts. NZ can also produce its product cheaper than SA growers, with a labour cost effectively half, together with lower utility bills. “They’ve got some massive benefits on their side in terms of just getting the fruit to market compared to us in terms of that initial cost base.” But “we’re comfortable in saying we’ll be competitive with them. We still believe our product is of a better quality.”

Certainly Lenswood’s cost base is only increasing. “We use a fair bit of labour, while utilities costs have skyrocketed in the last three to five years. Insurance is also getting more expensive.” These are the three main overheads in terms of running the cold storage facility and the packing shed. “We’re always looking at options to reduce our costs; we’re a big shed so, for example, there’s the potential for solar [power]. We probably haven’t investigated it enough yet but it is certainly on our list of things to look at.”

Lenswood was established in 1933 as a cold storage facility for local growers. A packing facility was added in the early 1940s “and we’ve been growing bit by bit since then until three years ago we invested six million dollars in upgrading our facility. That resulted in three other apple packing sheds closing their doors and consolidating their apple packing and marketing with us, which effectively doubled our throughput and the size of the business.”

Chartered accountant Michael reckons he knows very little about apple growing. “I’ve been here for four and a half years and I’ve learned a lot about apples, but I wouldn’t profess to be able to give any advice to a grower on how to grow an apple. I’ve learned a bit but I think it’s important that you stick to the things you know and do well.”

The purpose of the co-op is to act on behalf of all its growers. “We have a board of seven at this stage; it’s made up of six growers and an independent chairman. In terms of the relationship, we want to be as fair to the smallest grower as we are to the largest.” The co-op encourages growers to spread the sale of their fruit over a 52 week period so “growers get a share of both the good and the bad times during the year.”

There are regular meetings with the growers to assess “what’s going on, what markets are doing and what changes we’re looking at making throughout the co-op.” Growers have access to an operations manager, who looks after both the packing and the selling of the apples. They have access to him at any time so he’ll talk to them about where their fruit is at, how it was packed, what percentage was first grade, what percentage wasn’t, what potentially they might need to do to improve their crop next year.

One aspect of the business that can never be relaxed is quality. “We follow very stringent quality assurance processes – we have an auditor here every few weeks, it seems. We have to comply with separate quality assurance programs for Woolworths and Coles,” both substantial clients of Lenswood. Other leading clients include most major SA retailers (Foodland and IGA), Adelaide produce markets, and also interstate markets. Quality goes hand in hand with ‘green’ awareness and Lenswood is on the leading edge when it comes to treating the fruit to the best standard possible so “by the time it gets to the customer it has met all its targets and the apple is as good as it can possibly be. The distinction between organic and conventional growing is starting to narrow and we are very cognisant of the fact that our growers are custodians of the land and need to make sure they’re treating their orchards in the best manner, to ensure that the orchards are there for future generations. Our growers are doing all the right things.”

The big message Lenswood is projecting at present, says Michael, is that “we really love the way South Australians want to buy local produce as much as they can. We really want to reinforce that we have an excellent quality product grown in the Adelaide Hills and we want people to buy local. Especially with imports coming in, we can guarantee the quality of our products, we can guarantee that the apples have been treated in the best possible way and the right quality assurance programs have been followed and have been well and truly established. So for us it’s really about us having Australians looking for the apple with the yellow sticker on it.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

June 19, 2018, 10:24 AM AEST