56 Business The EconomistJanuary 27th 20182The avocado marketLack of guac
A
LTHOUGH New Yorkers are not re-
nowned for their patience, they do
not seem to mind waiting their turn for a
fresh serving of avocado. At Avocaderia,
which claims to be the world’s first avo-
cado bar, in Brooklyn, long queues stretch
from the counter outward into a large
food hall.
The venue’s popularity is a sign of the
times: the avocado is fast becoming
America’s favourite fruit. Although do-
mestic production hasstayed flat, im-
ports have more than trebled over the
past ten years, according to the Depart-
ment of Agriculture. It estimates that the
annual consumption of the average
American has increased from about one
pound (0.5 kilograms) in 1989 to more
than seven pounds in 2016; total con-
sumption that year weighed in at 2.3bn
pounds.
America’s enthusiasm for avocados
may be dented, however, by soaring
prices. The wholesale price for a case of
48 avocados peaked at $83.75 in Septem-
ber, up from $34.45 a year before, accord-
ing to the American Restaurant Associa-
tion. Some restaurants were forced to add
a surcharge on guacamole, or temporar-
ily to scrap it from their menus altogether.
Others swallowed the bill. Chipotle, a
Mexican-themed restaurant chain, said
that “historically high avocado costs”
were a big reason why it posted dis-
appointing financial results last year.
Supply shortfalls, brought about by
droughts, storms and wildfires in Califor-
nia, Chile and Mexico, help to explain the
jump. Production in California dropped
by 44% in 2017. Harvests in Mexico that
year were off by 20%. Labour strikes in
the country further reduced supply.
Growing global demand is also push-
ing up prices. Both Chile and Peru have
concluded trade agreements with China,
eliminating tariffs on their avocado ex-
ports. Peru’s avocado sales to China,although small in volume compared
with Chile’s and Mexico’s, surged by
3,700% in 2016. Other countries, includ-
ing Canada and Japan, have also worked
up their appetite, raising aggregate im-
ports by 32% between 2014 and 2016.
Raising production will be tricky. This
is because avocados are a fussy plant to
grow, says Mary Lu Arpaia of the Univer-
sity of California, Riverside. Salinity
levels need to be just right, the slope of
the terrain not too steep and tempera-
tures stable. Erratic weather conditions
can easily kill the crop.
Even so, it seems a good bet that
queues like the ones in Brooklyn will
multiply. The founders of Avocaderia are
already looking for new opportunities to
expand after only havingbeen in busi-
ness for ten months. Demand is huge
says one of them, Alessandro Biggi. “On
opening day we actually ran out of avo-
cados after just 90 minutes and things
haven’t slowed down since.”NEW YORK
Droughts, storms and global demand testAmerica’s love affair with avocadoLooking for the last avocadoonline world. On January 22nd Riche-
mont, a Swiss luxury conglomerate that
counts Cartier amongits brands, offered to
buy the shares it does not already own in
Yoox-Net-a-Porter group (YNAP), a leading
luxury online retailer, for €2.7bn ($3.3bn).
Although the deal still faces hurdles, it is
likely to go ahead.
The days of double-digit growth in the
luxury industryare gone—it grew by 5%, to
€1.2trn, last year. Watches, in particular,
have had a rough time. Chinese demand
collapsed after an anti-corruption crack-
down; inventory languished, unsold. Last
year Richemont’s revenues dropped by
4%, to €10.6bn. But online sales of personal
luxury goods have continued to rise: they
now account for 9% of the total (see chart).
Bain & Company, a consultancy, reckons
that they will reach 25% by 2025.
Online sales of “hard luxury”, such as
watches and jewellery, lag: they account
for just 5% of digital revenues. But that is up
from almost nothing a decade ago, and is
predicted to reach between 10% and 15% by- And even if purchases are made in
physical stores, buying decisions are in-
creasingly made online: 68% of millenni-
als’ luxury purchases are “digitally influ-
enced”, according to EY, a consultancy.
Small wonder that Richemont wants to
expand its footprint online. Last year the
group hired a chief technology officer, as
part of a management restructuring which
also did away with the role ofCEO. It was
an early investor in Net-a-Porter, which it
merged in 2015 with Yoox, another e-com-
merce firm; it kept a 50% stake in YNAP, the
resulting combination. The hope is that
owningYNAPoutright will allow Riche-
mont to learn things about the online
world that it could not with a stake alone. It
would also increase the Swiss firm’s expo-
sure to “soft luxury”, such as clothes and
bags, a segment in which the firm has
struggled, notes Melanie Floquet of JPMor-
gan Chase, a bank.
ForYNAPitself, the deal promises add-
ed investment at a time of intensifying
competition. Moët Hennessy Louis Vuit-
ton (LVM H) has launched its own online
platform, 24 Sèvres. Farfetch, another luxu-
ry e-tailer, is planning to float. Claudia
D’Arpizio, a partner at Bain, suggests that
Amazon, an online giant, could eventually
disrupt the luxury market, too.
Not everybody is convinced a takeover
ofYNAPis needed. It is like buying an air-
line to go on holiday, says Luca Solca of Ex-
ane BNPParibas, another bank. And the
deal is not without risks. One is whether
Federico Marchetti, YNAP’s boss, will in-
deed stay on once he has sold his 4% stake
(he says he will). Ms Floquet also worries
that the lack of a chief executive could leadto feuds within the management.
Such concerns do not seem to bother Jo-
hann Rupert, Richemont’s founder and
chairman. In a statement on the offer he
mentioned how, a century ago, Alberto
Santos-Dumont, a famous aviator, com-
plained to his friend, Louis Cartier, about
the difficulty of checking his pocket watch
while flying. Cartier listened, and—eure-
ka!—the wristwatch was born. Full owner-
ship ofYNAP should, Mr Rupert seems to
reckon, allow Richemont to listen to its cus-
tomers, in person or not. 7Distinction benefitsSource: Bain & Company *EstimateOnline luxury-goods market, worldwide, €bn05101520252003 05 07 09 11 13 15 17*Online market share, %12345789РЕЛИЗ
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