Mexico’s Future in the Grape Trade Looks Bright

With a coveted supply window and a huge market on its doorstep, production is set to soar over the coming years.

By Tad Thompson

It is often insightful grape growers and breeders who lead their trade with wise technology applications, driving toward an ongoing continuum of success.

Mexican grape production and exports were initially positioned for skyrocketing growth in recent decades because the climate in the primary production state of Sonora — which borders the U.S. states of Arizona and New Mexico — was unique in the Americas for growing grapes during May and June. Over the past five years, new vineyards in the state of Jalisco have extended Mexico’s grape shipping period to the major import market’s sweet spot of late March and April. In the Western Hemisphere, no other growing locations can efficiently compete in the U.S. market during that time.

Mexico’s geographic blessing is a long border with the world’s richest nation. Enacted in 1994, the North American Free Trade Agreement with the U.S. and Canada opened the door for Mexican grape producers to up their game, increase production and take advantage of a gaping market window between Chile and California to serve North American consumers. Even as Peru has entered the global grape business in more recent years, Mexico is led by entrepreneurial growers who continue to boost their position.

The Market Window

While new varieties and growing technologies have greatly benefited Mexican grape exports, it’s likely the shipping period won’t move much earlier than late March or run later than early July, given competition further north and south in the continent. But what happens in those few weeks is the essence of Mexico’s grape future. Development in Jalisco is significant and a bellwether.

The first companies to develop Jalisco were Fresh Farms, LLC, based in Rio Rico, AZ, and nearby Divine Flavor, Inc., located very near the border crossing in Nogales, AZ. Fresh Farms is a marketing company owned by grower Grupo Molina in Hermosillo, Sonora. Hermosillo is also the base of Grupo Alta, which created Divine Flavor as its marketing arm. In Jalisco, both companies continued their practice in Sonora investing in the firm, tasty varieties, which are well adapted to the sub-tropical climate and can boast a strong shelf life.

Production in Jalisco, experts agree, is expected to be the template of Mexico’s grape future. David Magaña, a senior analyst at RaboResearch Food & Agribusiness, based in Fresno, CA, predicts, “We will see more table grapes from Mexico early in the season.”
As Jalisco has increased production at the front end of the season, Magaña has taken note of “impressive operations.” He says exporters there have plans to continue to grow to take advantage of the market window, and are well-positioned to provide good quality table grapes to the U.S. market as the only growing region that is able to harvest grapes in the whole continent during late March and April. Within the next three or four years, he expects Jalisco will double or triple its 2023 production of almost three million boxes.

About 25% of the table grape volume exported from Mexico is varieties developed by plant breeder IFG, based in Bakersfield, CA. Elena Aguaron, IFG’s regional commercial manager of the Americas, notes, “Our representation is even bigger in Jalisco [than Sonora], where we are close to 85% of the harvested volume. Our varieties have helped shape the landscape and differentiate from the traditional varieties.” Overall, a little over half of Mexico’s total production is older, traditional varieties, she says.

The industry widely agrees that the future growth of Mexican grapes will come with the replacement of those traditional varieties. David Watson, senior vice president of sales and marketing at Fresh Farms, says these new varieties have the flavor profile and size to be “the tools that we need to increase consumption.”

Tom “TW” Wilson, the sales manager for The Giumarra Cos., which is based in Long Beach, CA and has grape production in Sonora, says, “Pretty much what we’ve done is eliminated the old conventional varieties.” Newer varieties “taste better and are easier to grow,” he says, noting other advantages, “We get better production, bigger sizes, and we use less acreage but get more grapes on those ranches.”

Petri van der Merwe, global licensing director for plant breeder Sun World International Inc., based in Bakersfield, CA, says replacing varieties in Mexico is practical in part because “in good climatic conditions, as is the case in Mexico, you can replace a vineyard and be back on track in two to three years.” He adds, “There comes a point in time for a grower that it’s cheaper to remove a vineyard that you’re taking a loss on than to keep farming it. As a result, in Mexico there’s always a fair amount of replacement happening.”

Some Mexican growers have said for the past five years that they were going to remove Perlettes, an older, green seedless variety that produces early. Growers had no early season alternative, notes Van der Merwe. “But once you can provide a variety for that time slot which is more grower friendly and more marketable, it is a lot easier to make the decision to replace it. You don’t want to remove something, and then have nothing. With the better variety offerings that are currently available — you’re going to see that replacement happening a lot faster. I’ve seen that the industry can react very fast,” he adds. Cautious Mexican growers wanted to see, before believing, in new varieties. Now, with others’ success at hand, the path for them is clear. With this new expediency, Van der Merwe expects Sonora’s safe but dated Flame seedless grapes — a red seedless variety that was hugely popular among Mexican growers — to be 40% replaced over the next three years.

New Export Markets

Close proximity to the enormous U.S. market was the foundation for the Mexican grape industry, and will likely always be its base. But partially because Mexico operates within a limited marketing calendar, for the industry to expand its production volume, offshore markets may need to be developed.

Fresh Farms’ Watson cites a big advantage of offshore markets: higher prices. Going offshore, he notes, “grapes are $50-$55 dollars [per box] versus selling into the United States for $35. So, there’s a little more risk involved because you’re going farther distances, and you may not know the customer at the other end as well as you know the people that you’re selling to right here. But it’s diversification. It’s another opportunity, and it pays for itself.

Magaña of Rabobank says that in the short term, the U.S. will continue to absorb most of the table grapes produced in Mexico. “However, market diversification continues to be a challenge and an objective for the industry. We’ll see in the next few years that some table grapes from Mexico will increase their presence in other markets.”

Van der Merwe says he will be surprised if the Mexican industry doesn’t develop more markets outside the United States, such as Asia, Europe and the UK. Mexican offshore supply has been limited to date, he notes, mainly “because they didn’t have enough of the right variety or a quality standard for a long period. But they’re getting there. I think once the variety is there, and the quality is there, and to have the volume, it will be interesting to see where Mexico would start developing more markets.”

Currently, ocean cargo connections from Mexico are limited mainly due to the primary production region in Sonora being closer to either Los Angeles or Houston ports. With continued expansion in new earlier regions in the south, the cargo options might change since the ocean cargo industry is mainly volume driven. As soon as there is a business opportunity with product to sell and foreign demand, “someone will address it.”

Watson notes, “A lot of those export markets up until eight or nine years ago were buying Red Globes. Now, you see less Red Globes and more red seedless. When someone gets their hands on something such as a good red seedless or good green seedless — you see that country start to jump in and want it.”

Labor in Mexico

Although Mexico is considered a cheaper labor country, in the future there, growers will still have concerns, Van der Merwe notes, “because you’re pulling the labor from the southern part of Mexico or other regions and for other crops you work the year around. It’s becoming a global trend that labor security is going to be as much of a concern as water security. It is something most of the production countries share, as in Australia and all other countries. Because it’s a product you handle by hand you need a little bit of a higher skill. It’s not just a factory worker or someone who works in a mine.”

Magaña says rising labor costs are becoming more challenging in Mexico. “It’s becoming more expensive, but it is still a competitive advantage for Mexico compared, for example to California, where the minimum wage is close to $16 per hour, plus benefits. Still, labor in Mexico is challenging. It is going to be one of the limiting factors for future growth but remains an advantage.”

Giumarra’s Wilson offers, “Labor costs in California are extremely high. It is ridiculous when you look at labor costs year-on-year-on-year.”
Van der Merwe notes, “For Mexico the key concern is to find the balance for labor. I think that’s a global thing. With labor, it is always scary to have the labor at the right time. It’s very seasonal.”

Magaña credits Mexican grape growers for developing comfortable work camps with recreational facilities. Growers provide medical assistance and many other social benefits to workers, while in California growers rely on domestic labor in the Central Valley, where for years farmworkers lived in their own housing. In the future, economic advantages may shift even more for Mexico, as emerging H-2A work programs in California require its growers to provide worker housing and additional costs beyond regular worker benefits.

Van der Merwe likes the future for Mexican grapes in part because he is impressed with growers such as Grupo Alta that are investing in dental and medical support. “I think if a lot of growers from any other country, including California, were to visit, they would be astonished and say, ‘Wow, these guys are really putting a lot into the social side of farming. These guys are really, really serious about their labor.’ If you don’t have sustainable labor, it’s the same as not having water.

“They’re putting a lot of effort to keep the labor aspect as best managed and with all the sustainability efforts that go with it. That is very impressive to see. That goes all the way from Jalisco to Sonora.” He has traveled to most grape-producing countries and says that by comparison several of the leading Mexican growers are exemplary when it comes to treatment of their workers.

Aguaron says new grape varieties will help ease labor demands. “IFG has been breeding and developing grapes that progressively need less labor, so I think that is something that is helping the growers. It’s a crop that needs to be handled a lot by people, but more and more we are developing varieties that can easily be grown with chemical applications that are machine applied and only need so much work.”

Where Mexico is Headed

Van der Merwe says he is well pleased by what he is witnessing in the Mexican grape industry and is impressed by the growth over recent years. “They are definitely more serious and focused than when the traditional industry was very Flame Seedless-oriented. This one single variety was close to 70% of the supply at some point. It was always just an early variety, and they always tried to capitalize on something early.”

Now, Mexico is led by world-class growers, he notes. “And the good thing is because those guys are setting the benchmark, it’s actually upping the game for the medium- and smaller-sized growers. All of a sudden, the marginal growers are forced to be better growers, or they actually disappear because there is no room for something marginal in this industry,” he says.

Van der Merwe says there is already a lot of collaboration from the small- and medium-sized growers with the larger ones, with the leaders recognizing it’s in their best interest to help their neighbors rather than compete with inferior fruit. “It’s nice to see the bigger boys really taking ownership and trying to get the whole industry up to good standards. You don’t always see that. In a lot of countries, the attitude is ‘Anything outside my farm is competition.’ In Mexico I think they’ve been raised a little differently, and that’s good to see,” he says.

The dominant growers already have the newer varieties in Mexico, and in many cases they help the smaller competitors to gain access to the new varieties, Van der Merwe says. They invite various plant breeder associates to Mexico to visit farms and trial their new varieties under local conditions.

The leading growers, he notes, “are driving the change to better the varieties to Mexico. You always need a pioneer in that country to have the vision to convert to new varieties. You just can’t farm with Flames because that’s how Dad and Grandad did it. We have to do things differently. We have to up our game. We have to take food safety seriously. I see a lot of that happening. I think it’s going to bring a lot of success for Mexico to continue to be north of 22 million cartons — and maybe in the future inch closer to 30 million cartons.”

Van der Merwe adds that expanding to that many cartons is very attainable over the next several years, but the growth won’t necessarily come via just additional vineyard acreage, but also through replacing older varieties and vineyards. Mexico is gaining “better varieties which are yielding higher, and are more grower-friendly, more marketable.”

Darwinism is at Hand

Carlos Bon, vice president of sales for Divine Flavor, notes that through Grupo Alta, his firm was a grower before it was a marketer. “At the time, it was only Mexican table grapes — it was a little fun window for doing table grapes. Then, we started traveling the world to meet other growers for the purpose of learning more about growing techniques and how varieties behave and perform under different weather conditions. By doing this, we met other growers who think similarly about how to operate our facilities and vineyards. We are all growers who are committed to our soil. Growers who are committed to their people and communities, and committed to the environment. And most of all, committed to flavor and quality.”

In Peru and Chile, Divine Flavor developed partnerships with growers to market together and also to provide a more stable and longer period of supply for its customers. This led to Divine Flavor being one of the United States’ largest importers of Southern Hemisphere grapes.
Bon notes that, amid high inflation, “We are experiencing Darwinism and survival of the fittest. In order to be profitable, you have to find ways to separate yourself from everyone else. This comes by having great quality, service and productivity. These are key elements to survive.”

“Sadly, some companies will disappear, and with that, the oversupply will also disappear too,” he continues. “With supply, the other key element is that it’s changing tremendously with new growing areas, new varieties and new technology. It’s hard to see exactly what is coming, but the major factors that are making an impact — new developed growing areas in Jalisco, producing second crops in semi-tropical areas, and the cost of growing grapes in some places such as the U.S. and Australia. We keep tabs on everything — trying to stay ahead of the game, but regardless, we are excited for the future.”

In a complex business such as the international table grape industry, success cannot be left to chance. While luck, such as weather, plays a role in the long run with so many moving parts, success is very difficult to achieve. But it would appear Mexico’s grape industry is blessed with a confluence of the right factors to thrive within its exclusive market window.