December 6, 2016

Only weeks ago, Costa Group, Australia’s largest produce company, announced at its Annual General Meeting held on November 17 that it has entered into an exclusive non-binding partnership with Macquarie Agricultural Funds Management to “jointly investigate compelling M&A projects in farmland, biological assets, water and infrastructure assets.”

This week, the partnership announced that its first acquisition will be in Australia’s avocado industry. The partnership agreed to acquire Avocado Ridge orchards and packing operations in Queensland from the Carney family for an undisclosed amount.

The Carney family will remain active in the management and operation of the business, lending their extensive experience and insight in avocado production to the long-term success of the business.

Under the terms of the deal, Macquarie will purchase Avocado Ridge’s operations and then will lease them to Costa Group for 20 years – an arrangement that Harry Debney, Costa’s CEO, says will advance the group in its efforts to increase vertical integration in its avocado business, saying, “…It will add significant growing capacity to our existing plantings, and ripening and marketing functions.  Avocados will become a truly vertically integrated fifth pillar complementing our existing core produce categories of berries, mushrooms, citrus and glasshouse tomatoes.”

The Costa Group has earmarked avocados as a key growth crop that aligns with the company’s goals of achieving a year-round, 52-week production model.

“Our focus is to be number one in the categories that we operate in where there are opportunities for us to create a genuine market difference and to ultimately achieve a 52-week production situation. We believe avocados is a very strong growth area that fits these criteria,” said Mr. Debney.

This deal, which is expected to close in January 2017, will add an additional 300 hectares of avocado orchards to Costa’s existing 100 hectares in the South Australian Riverland.

“Costa has been exploring opportunities to expand our core produce categories and we identified the Carney family and their proven operation as being an excellent fit with our business model.  The Avocado Ridge farms network is largely comprised of young trees which provide a strong growth trajectory into the future,” said Mr. Debney.

Costa Group

Costa Group has had a dynamic 16 months. In July of last year, the group raised A$550 million (US$404 million) in its market debut on the Australian Securities Exchange, representing the second largest new issue in the country year to date.

Since 2011 the company has shifted its focus to its core areas of competitive strength including berries, mushrooms, snacking tomatoes, citrus fruit, and now through its Macquarie partnership, avocados.

Pursuing these strengths, Costa announced a joint venture berry business in China with California-based multinational berry company Driscoll’s in February of this year. Under the terms of the agreement, Costa will control 70 percent of the operation, while Driscoll’s will control the remaining 30 percent and will market the fruit to the Asian market.

Blueberry and raspberry farms have already been established in China’s Yunan province, with the first raspberry harvest completed. Costa also stated in an announcement earlier this year to the Australian Stock Exchange (ASX) that a second farming site in China has been selected, and planting is scheduled to begin in the near future.

Costa also announced that it was investing A$80 million to expand its domestic berry production with 11 projects planned for between 2017 and 2021. ABC reports that Debney stated that the plans include significant expansions to its facilities in Queensland, Tasmania, and Western Australia.

Meanwhile, the group’s African Blue project has planted 208 hectares of berries planted across five farms in Morocco, including 13 hectares of substrate production. The venture has proven to be healthy undertaking, posting an increase in sales of 76.6 percent for fiscal year 2015, and with a planned increase in acreage for 2017.

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Lynda Kiernan