Tomato paste up: Consolidation in tomato growers gets underway

Tough times for Australia’s tomato industry have lead Premier Fruits Group and Mercuri Family Farms to enter into a joint venture to try to create value.

The deal between Premier, one of Australia’s largest tomato growers, and Victorian-based Mercuri only signals the beginning of further consolidation in the industry, according to Anthony Di Pietro, chief executive of Premier.

Di Pietro told SmartCompany further consolidation would “absolutely” occur in the industry following the collapse this year of Australia’s largest tomato grower, SP Exports, and the collapse of Bundaberg tomato farm Bascar Produce shortly after.

“This is another reason why consolidation rather than duplication is very important. I believe that the companies that went under were subject to sustained periods of deflation that were below what they required with larger operations to even break even,” he says.

“So consolidation and improvement in process and cost management is critical for us.”

“There needs to be economies throughout and there needs to be management of costs to ensure the value is pushed through to the consumer on the product; at a retail level we don’t need to bear the cost of duplication.”

Di Pietro is keen to emphasise that Premier and Mercuri have chosen to consolidate rather than duplicate.

“We want to ensure that we have a very consistent supply of field-grown, trellis-grown tomatoes over a 12-month period and we want to consolidate all the things we do over that period,” he says.

“Traditionally in Australia we have different farming organisations with different styles and processes, but we think we can use the same approach over a 12-month period,” he says.

“In this case, rather than us go out and buy another tract of land and add to production unnecessarily and not improve or value add, we are marrying up with existing expertise in the Mercuri family and they can concentrate on using that expertise on farming and packing level; we can use our expertise in distribution and marketing,” he says.

The deal came about after Premier and Mercuri formed a relationship as trading partners and then decided to work to maximising the benefits of their relationship.

“The relationship began as trading partners and then we started selling intellectual property and knowledge and it was just a common sense thing for everyone to do,” he says.

“We want to have a template business model which ensures consistent supply over a 12-month period.”

Di Pietro says the joint venture is not a result of pressure from the major supermarkets.

“I don’t think that’s the case at all. We base our decisions on what the consumers want and that goes right through whether it is supermarkets or independents,” he says.

Di Pietro says Premier may look to more joint ventures or acquistions of other growers in the future.

“There are none to announce at the moment but we are certainly looking at a number of opportunities,” he says.

Mercuri said the joint venture reflected the direction of the industry with strong demand for Australian field-grown tomatoes through all seasons.

“It also enhances our position in the market and our commitment to the local region,” he said.

Premier is one of the nation’s largest integrated fresh fruit and vegetable suppliers, with production farms in Queensland, New South Wales and now in Victoria, along with its wholesale outlets in all states.

Mercuri is one of Australia’s largest tomato growers, with several hundred acres under crop in Lancaster, in the Goulbourn Valley, producing over four million kilograms of tomatoes each year.