Mexican Avocado Sector Bounces Back From a Tough Season

Mexico’s smaller crop in the past season may have seen competitors like Peru step up and increase its market share, but the future remains bright for the United States’ neighbor to the south.

By Steven Maxwell

This article was originally published in the December/January issue of Vision Magazine

Avocados are a hugely important motor for the Mexican economy, and it’s easy to see why. In the neighboring United States market, the Latin American country supplies more than four in every five avocados sold. It’s estimated that Americans consume on average almost nine pounds of the fruit per person every year — a figure that is approximately quadruple what it was at the turn of the millennium. And USDA data shows that the value of avocados imported from Mexico in 2021 reached $2.78 billion, up 25% from the year before and up 57% from 2016.

The industry faced a volatile 2021-22 season, when a shortage of supply saw some U.S. customers switching sources in favor of Peru. But the sector is rebounding this season, and there are high hopes for its future in the U.S. market.

Expansion on the ground

A good indicator of the current health of the industry has been the recent performance of Frutícola Velo, a third-generation avocado marketer from Michoacán, which is by far the country’s leading production state and for a long time had been the only region with access to the U.S. market until mid-2022, when Jalisco — the second largest producer — received USDA authorization to begin exports.

Fruticola Velo began life as one of Mexico’s pioneering Hass growers in the municipality of Uruapan, before being officially constituted in 1995 by Ricardo Vega López, who now runs the company assisted by his son, sales manager Ricardo Vega Pérez.

Now present in Canada, the U.S., Europe and Asia, Velo, which markets its fruit under the brands ‘Flavocado’, ‘Velo Avocados’ and ‘Avo Value’, the latter for class 2 fruit, has spent much of the past two years focusing on expanding its facilities in the hopes of doubling capacity.

The peak of the Covid-19 pandemic brought challenges across all produce categories, but Vega Pérez, who also serves as a board member for the Mexican Avocado Association (APEAM), says the company did not face any significant setbacks, even though demand for class 2 avocados fell as widespread restrictions on the foodservice sector were implemented.

The company works year-round with 700 associated growers in Michoacán, as well as the neighboring state of Jalisco — which in large part is destined for export to Japan — and more recently in the State of Mexico to the east for export to other countries, such as Canada.

“We have found some really good growers in Mexico State in the areas close to Michoacán,” notes Vega. “It’s very good quality fruit, and the growers have been improving their quality and increasing their production levels.”

For Fernando Flores, the commercial manager at Santa Clara del Cobre, Michoacán-based Coliman Avocados, 2021-22 represented a “year of lessons” for the sector.

Celebrating 60 years in business in 2023, about 80% of Coliman’s avocado production is sourced from Michoacán with fruit packed at its Santa Clara del Cobre facility. Like Fruticola Velo, Coliman’s avocado exports are now complemented by volumes from Jalisco, which Flores says will enable the company to provide uninterrupted, year-round supply.

Arianna Sánchez, the commercial director of Michoacán-based grower-exporter Arsaz & Fruit, says the potential from other avocado-producing regions in Mexico offers real cause for optimism. “In Mexico, we have possibilities to make the most of other regions for production, not just Michoacán,” she says.

“Jalisco is looking very interesting, and from what we have seen it has the same level of quality as Michoacán. With the opening of Jalisco to the U.S. market, we are also going to see other states entering into avocado production, which will reinforce production volumes for the country as a whole.”

Sanchez predicts the central regions of Puebla and Morelos — to the south of Mexico City — will likely emerge as significant producers in the coming seasons, as well as the western, coastal state of Nayarit. “I think the entry of these other states will be very good for Mexico and will make us even more competitive,” she says.

The pricing challenge

One of the key concerns for Mexico’s avocado growers during the second half of the 2021-22 season was the impact on consumer demand from high retail prices, which came amid a smaller crop.

“These were prices that have never been seen in the history of the avocado,” says Vega Pérez. “They reached MX$110-$115 pesos (US$5.52-$5.77) per kilo, which put the brakes on consumption in the market. People who previously would buy six avocados were thinking twice about buying one or two.” The effect, he says, was that avocados became a luxury product, even within the domestic Mexican market.

According to Vega, the fall in volumes in the past season — which finished up with 2.5 million tons, 8% lower than the previous record campaign — is primarily due to the natural production cycle of avocado trees, with a high production year being followed by lower volumes, although he says a shortage of water also had a negative impact.

Another major challenge that emerged for Mexican avocado exporters during the 2021-22 deal was what Coliman’s Flores describes as “aggressive” competition from Peru in the U.S. market. “Faced with this, as a sector we had to take a small step back and reflect,” he says.

Vega says that Peru offered lower prices than Mexico, which he says resulted in a lot of grocery chains switching to the Andean country. This is “something we had never seen before in previous seasons,” he adds. Peru had a record avocado season in 2021 and is expecting further growth during the coming years as young orchards come online.

“If clients don’t have a supplier they can trust, they will look at other options,” says Vega. “We have the advantage that Mexican avocados are recognized for their quality and food safety. But the problems during the summer were a wake-up call for the whole industry to take care of our main market, the United States.”

Of course, Vega acknowledges one of the main competitive advantages Mexican exporters hold over Peru is that they are able to reach the U.S. border in less than 24 hours rather than having to rely on maritime shipments. “The challenge we now face is having the required volumes and being able to recover the trust that was lost in Mexican avocados during last season,” he adds. “But I think we will be able to because with the volumes we are harvesting we can recover our market share.”

According to Celso Castillo Macías, the sales manager at a leading Uruapan-based packer, demand for avocados is currently outstripping supply, signaling what he describes as a positive environment for growth. However, at the same time he says that the strong competition presented by Peru means Mexican growers need to adapt. “Mexico has to become more competitive, and achieving that means having to accept lower prices internationally,” says Castillo.

But while growers remain motivated to grow exports, he says placing U.S. pricing as its baseline level has led to Mexico missing out in other markets. “We have to be more flexible on pricing to be able to compete in Europe and Asia,” says Castillo.

New markets

For Frutícola Velo, which exports 85% of its annual production, the vast majority of which is destined for the U.S. market, followed by smaller volumes to Canada and Japan.

However, when it comes to looking beyond the U.S. and expanding into other markets, Ricardo Vega sees challenges. He says logistical problems born from the pandemic have proved to be a challenge for Mexico as a whole when it comes to increasing shipments to not just Japan, but also China. He echoes the view that high Mexican avocado prices have also impeded expansion into countries like Japan, as importers look to Peru for cheaper volumes.

Velo is also looking closer to home in the form of Central America, specifically to Costa Rica, Honduras and Guatemala, the latter of which was effectively closed to Mexican avocados for a number of years. Vega also sees an opportunity for Mexican avocados in Middle Eastern countries such as the United Arab Emirates and Qatar, where air-freighted fruit has been well received.
He emphasizes that the company is also careful not to neglect the domestic Mexican market, with Velo maintaining a presence in Mexico City’s Central de Abasto wholesale market. “I would venture to say that Velo is among the few Mexican exporters in APEAM that serve grocery retailers here in Mexico,” he says. “We know the importance of the domestic market because Mexicans eat a lot of avocados. We also provide ready-to-eat avocados to restaurant chains in Mexico City through our operation in the wholesale market.”

Coliman’s overseas avocado markets are also wide-ranging, including Japan, New Zealand, a number of European countries and even Colombia, which is beginning to make inroads into the U.S. market having gained access in 2017.

According to Castillo, Asia is a promising market for Mexican avocados, especially Japan and South Korea. But while China has also grown considerably during recent years as an avocado market, Castillo says there remains work to be done to encourage Chinese consumers to eat more avocados. Until this happens, he says future growth will be steady but slow.
U.S. promotions

In the U.S. market, something that has helped to drive growth, especially during key consumption periods, are promotions and marketing initiatives. For Mexican avocados, these efforts are overseen by Avocados From Mexico, a Texas-based organization that has the objective of boosting consumption of the fruit north of the border.

Stephanie Bazan, Avocados From Mexico’s Vice President of Shopper & Trade Marketing, describes the 2021-22 season as a challenging year, due to inflationary pressures, but says the season closed with strong retailer support of AFM’s national and local shopper and trade marketing activity.

“We have support that goes 365 days a year, so we activate and promote in our retail accounts year-round with an emphasis on our big tent pole occasions such as the Big Game and Cinco de Mayo. Promotional activities are crucial during October, November and December months as Mexican avocado imports hit their peak and Avocados From Mexico becomes the biggest supplier in the market,” says Bazan.

In 2022, the promotional season kicked off with National Guacamole Day on Sept. 16, followed by National Taco Day on Oct. 4. To support these occasions, Avocados From Mexico launched a grocery retail in-store campaign called ‘Guac & Tacos’, featuring displays, coupons, branded point of sale materials and digital media. “These promotions get the season started between October and December when Mexico dominates the avocado market,” says Bazan.

To emphasize the link that avocados have to health, in October, Avocados From Mexico supported leading U.S. cancer research charity, Susan G. Komen, with branded packaging and displays. “The number one reason consumers in the U.S. eat avocados is because of the strong health benefits in addition to great taste,” says Bazan.

Another key 2022 calendar date for the marketer is the world’s biggest soccer event, which takes place from Nov. 20 – Dec. 18, 2022. With this key event, Avocados From Mexico teamed up with a powerhouse pair who are icons in soccer’s biggest world games – Landon Donovan and Rafael Márquez – for AFM’s national shopper campaign, ‘Guackeepers Keep it Good,’ being featured on displays across local grocery stores. The pair also helped announce the #AlwaysGood Guac Giveaway.

Where next?

Faced with strong competition and relatively high prices, where does the Mexican avocado sector go from here? In the case of Frutícola Velo, Ricardo Vega says there is cause for optimism with the company’s direct entry into two U.S. grocery chains, which he says will help establish more stable programs.

With greater availability in recent months, he is also confident Mexico as a whole can retake market share lost to Peru during the summer with prices at around $25 per carton.
“We’ve seen that at this price the avocados move very well in terms of volume and pricing,” he says. “The bigger volumes will allow us to compete more effectively against Peru and Colombia, which year-on-year are increasing production.”

The addition of Jalisco should complement Michoacán production, Vega says, broadening the supply for buyers and making Mexico as a whole more competitive in the process. This expansion in production areas, as well as consistency of supply, is helping exporters such as Velo grow market share in North America.

He says further growth can be achieved in the U.S. by highlighting the versatility of the avocado to combine with different meal occasions, from avocado toast to a complement for evening dining. This, he says, can be built around traditional high-consumption calendar dates such as the Super Bowl.

Another important opportunity going forward is increasing consumption during November and December, which coincides with the availability of high volumes from Mexico. The principal motivating factor, says Vega, has been the participation of grocery retailers with in-store promotions, as well as very competitive pricing for the fruit. “The demand for avocados hasn’t reached its limit in the U.S., but the challenge is to target new generations who have different buying habits,” he says.

Fernando Flores also sees further growth as being achievable in the U.S., and he advocates investment in online resources to reach target consumers. “Information through the internet and web pages is key: whether that be on facts, recipes or health characteristics, and this is information we need to share with consumers,” he says.

Mexico exporters are expanding across the country and working to diversify their markets and send higher volumes of fruit to destinations around the world. Overall, the sector may have faced headwinds recently, but the signs point to a future in which it flourishes.