Background

HZPC Worldwide

HZPC is an international concern. We are active in over eighty countries. So how did things go for our growers and business on a worldwide basis in the past year?

EUROPE

The European harvest of seed potatoes was slow and difficult as a result of heavy rain in the autumn. This was a significant issue for the growers. Not only in terms of harvesting the potatoes but also with regard to keeping them dry and in good condition until they could be delivered.

The tricky conditions also meant it was difficult to supply seed potatoes to customers who wanted to receive potatoes early in the season.

In addition, the price of ware potatoes in Europe was lower, leading to a significant drop in the demand for seed potatoes.

Slightly more seed potatoes were sold last year in Germany, France and the United Kingdom. Sales in the strong Southern European countries, by contrast, decreased. The market share of HZPC across Europe, however, expanded.

 

RUSSIA

The Russian market for seed potatoes continues to develop. In the past year, HZPC has been able to almost double the marketing of seed potatoes.

So far, in its export boycott, the European Union has made an exception for our product, as has Russia in its import restrictions. This, however, offers no guarantees for the future. Russia is expected to continue to strive to become self-sufficient with regard to the production of seed potatoes.

HZPC is therefore working on local seed potato production in Russia. It is a difficult area for producing seed potatoes; the climate results in a very high level of disease.

In our opinion, Russia will remain a strong growth market in the future for fresh consumption and for the French fries industry, both of which are growing significantly in this country. HZPC expects its market share in Russia to increase further with the introduction of new varieties.

 

‘On a global basis, HZPC aims to become part of the local production and market’
Gerard Backx, CEO

THE MIDDLE EAST

HZPC has always had excellent sales in the Middle East. We have become accustomed to the political instability in parts of this region and can cope with it. As a result of the weather conditions in Northern Europe, some of the harvest of seed potatoes for the North African market, however, was late last year. This was costly to HZPC in terms of turnover. Luckily, however, we succeeded in compensating for this over the course of the year in other regions.

 

NORTH AMERICA

By introducing successful new varieties, HZPC is gaining an improved position in the North American market. With our Ivory Russet variety, we have created a great rival to the most widely-grown American classic, the Russet Burbank. We are thus clearly answering the demands of the American French fries industry.

In the past year, HZPC has also undertaken a thorough analysis of the food-service sector in North America. This flagged up trends upon which we can capitalise and anticipate.

 

SOUTH AMERICA

At the moment in South America, and particularly Argentina, HZPC is taking huge steps forward. We are principally applying ourselves to growing under licence in this area. Our strategy has been successful and revenues on this continent have risen significantly.

 

INDIA

The population of India is growing exponentially. This means that potato consumption per person will increase substantially in the coming decades. Potatoes are part of the traditional cuisine of India. They are also nutritious and healthy and the water consumption of the crop is relatively low. This latter aspect is becoming increasingly important in India in terms of food production.

HZPC has high expectations for the Indian market. Nevertheless, we have had problems in this country in the past year. A significant element of this was the currency crisis in India. In spring 2016, the national government suddenly decided to withdraw all of the old bank notes from the market. As a result of this demonetisation, the potato trade – which is entirely based on cash – was crippled. The consequences have been clear over the past year.

This was overshadowed by an exceptionally good harvest of ware potatoes. So many ware potatoes were available, in fact, that prices tumbled. Consequently, the demand for seed potatoes was extremely limited and HZPC and its partner Mahindra had to accept a significant negative result for the joint venture for the financial year 2017/2018.

Nevertheless, we will not dwell on an incidental setback. It is already becoming clear that the Indian harvest of ware potatoes in the spring of 2018, both in terms of acreage and yield, is much lower than last year. This will have a positive impact on the demand for seed potatoes. As a result, the joint venture expects a normal year and a more satisfactory result.

In its one-hundred year history, HZPC has gained a great deal of experience of volatility. We stay calm, even when faced with unexpected dips.

We believe that India could be a very promising market in the future and we have also shown that our company is focussing on the long term.

HZPC has now tested six strong varieties in India, which have been approved and protected. We expect to be able to develop these varieties to an annual turnover of 20,000 tons of seed potatoes in five years.

 

CHINA

HZPC has had a good year in China. Since 2008, there has been a constantly growing market with a strong demand for good quality seed potatoes. Our varieties are doing particularly well within the processing industry. HZPC has therefore put a great deal of energy into the French fries market, which is growing annually by at least 3%. Fast-food restaurants are popping up all over the place in China. We should, however, note that we have not yet been able to find a good route into the fresh market in this country.

 

J. Lekavicius / Shutterstock.com

AFRICA

Over the past few years, HZPC has gained experience in many African countries. The population of Central Africa is rapidly expanding, as is its potato acreage. We conducted a thorough analysis of this market and consequently chose Tanzania as the operating base for Central Africa. Tanzania has an open economy and is fairly politically stable. We are working with several distributors who are introducing and selling our varieties. We hope to apply this approach with the same success in neighbouring countries.

We have launched a number of varieties in Africa that are doing well in the traditional fresh market. Our Research & Development department is also using the continent for trials of the first hybrid potatoes and growing potatoes directly from seed in these trial fields. In HZPC’s opinion, this approach will be valuable on the African continent in the future.

 

LEGAL ISSUES


ARBITRATION

HZPC has an ongoing legal dispute with a company in China regarding the (un)lawful termination of a contract. HZPC believes that it terminated the contract correctly.

The counter-party, however, is disputing this. This company has also reproduced genetic materials that belong to HZPC. HZPC doubts that the genetic material has been destroyed as agreed in line with the termination. The parties have been unable to come to an agreement.

This dispute over the termination of the contract must be processed via international arbitration in Singapore, as set out in the contract. Substantial legal costs were incurred for this process in 2017/2018. HZPC expects a ruling from the court to be issued in the second half of 2018; this will then have to be further ratified.

 

MARKET CONCEPT
HZPC and its South African representative Wesgrow have been charged by the anti-cartel authorities in the country for having an excessively large market share with one variety. Wesgrow has developed a very successful market concept using HZPC varieties. However, this was undertaken entirely on their own initiative.

Wesgrow and HZPC are of the opinion that the charge is unjustified. The case should have been heard in July 2018 but has now been postponed to March 2019.