Investment funds in the Spanish fruit and vegetable sector, what impact?

Since they arrived 8 years ago, they already represent more than 25% of the citrus sector's total turnover. According to Paco Borras, agribusiness consultant and former sales director of Anecoop for 40 years, he describes the export and technological development of the sector in the period 1980-2020 as a "Spanish fruit and vegetable miracle". The work of Spanish farmers and entrepreneurs changed the landscape in many Spanish provinces and quadrupled Spanish fresh fruit and vegetable production, increasing exports from 3 to 13 million tonnes and making Spain the world leader. An investment fund is an instrument made up of the assets of many individual investors, in which entry decisions are taken by a management entity, which represents and administers the fund, as it has no legal personality.

Investment in other categories much lower

The weight of the funds in citrus business already exceeds 25% of the total turnover of the citrus sector, while their weight in non-citrus fruits or vegetables is much smaller. By the end of 2023, some €1.269 billion will be invested in citrus companies and some €1042 million in other fresh fruit and vegetables, according to Paco Borras' estimates.  Investment funds, in their current format or linked to banks, have been around for many years, but they had never approached the Spanish fruit and vegetable sector until just over 8 years ago: on 26 July 2016, the first significant entry of an investment fund into a Spanish fresh fruit marketing company took place. Miura entered the historic family-owned citrus fruit firm Martinavarro, which was already in its third generation since it was founded in Almazora (Castellon) in 1946. From that moment on, the inflow of investment funds has been a constant trickle.

Miura, Proa, Abac, Alantra, Sunridge and Tres Mares

A few months after Miura's entry into the citrus fruit grower Martinavarro, Proa's entry into the seedless grape specialist Moyca has already taken place; however, fund entries have been concentrated in citrus companies. Four funds made a single operation: Abac with the greenhouse vegetable specialist Agroponiente in Almeria; Alantra with Surexport, one of the leaders in red fruits in Huelva; Sunridge with the Valencian citrus fruit company Albenfruits; Tres Mares, the fund linked to Banco Santander, made its first entry into the fresh sector with a minority stake in Bio Alcoaxarquía, specialised in avocados, mangoes and citrus fruits. Proa, after its first operation in 2017, made a second one in a completely different sector by entering Patatas Hijolusa de León four years later, in 2021. In 2022 it incorporates the Agrícola Villena group.

Citri&Co and TheNaturalFruit 2 large groups

Miura sets up a large citrus fruit group incorporating the lemon specialist Perales y Ferrer and the citrus fruit specialist BIO Riotinto Fruits into Martinavarro and buys San Miguel's assets in South Africa and Peru, as well as securing the fresh marketing in Europe of San Miguel's production in Uruguay and Argentina. It creates the Citri&Co. group. It then integrates Frutas Esther de Murcia, a specialist in stone fruit and grapes, and the Brazilian Agrícola Famosa, one of the leaders in watermelons and melons. It also acquired the wholesaler Arco Fruits in the Saint Charles de Perpignan market and its subsidiary in Murcia.

Fremman, from the Valencian company Fruxeresa and the Murcia lemon specialists Frugarva and Frutas Naturales, founds The Natural Fruit group. It incorporates the Sevillian citrus grower Naturgreen, the red citrus specialist Marzal, the melon specialist Hermanos Bruño from Castellón and in 2022 it incorporates the historic citrus and melon specialist Frutas Bollo. These two, Ctri&Co and The Natural Fruit, become two large groups, basically citrus fruit, but also with a high participation in watermelons and melons.

Two other citrus groups emerge

Atitlan, well known for its investments in olive trees and pistachios among other investments, which, from the Sagunto (Valencia) firm Romu, then incorporates Guillem Export from Xeresa (Valencia) and then the historic family firm Frutas Tono, also in the Valencia area. MCH creates the Iberian Premium Fruits group, but in Castellón. It started with Llusar from Chilches, closely linked to the Sanlúcar Group, followed by Naranjas Torres from Almenara and has just incorporated the specialist in mandarins with leaves Vicente Ros from Alquerías del Niño Perdido, also in Castellón. These two groups are important because of what they add up to; in one case they are specialists in certain premium market niches and in the other they cover the entire citrus range. Magnum first bought Agrupapulpí in the north of Almeria and then created the Greentastic group, specialised in open field vegetables by integrating the Murcian companies Amaco and Natve, and a few months ago transferred the group to the Harvard-related fund Solum.

What is the impact on citrus growers?

It is interesting to note how, at the beginning, the funds were directed towards different sectors within the whole range of Spanish fruit and vegetable sectors and then progressively focused on the citrus sector. The citrus groups that are being built up are reaching unimaginable levels and this will have repercussions for citrus growers in one way or another. The cooperatives and their members will have to concentrate and enter the game of global citrus growing. A general classification of the Spanish fruit and vegetable sector tells us that the total turnover of fresh fruit and vegetables currently produced in Spain is worth 22,000 million euros. By sector, citrus fruit represents 22%, non-citrus fruit 33% and vegetables 45%. The weight of the funds in citrus fruits already exceeds 25% of the sector's total turnover, while their weight in non-citrus fruits or vegetables is much smaller.

The "Spanish fruit and vegetable miracle" is attracting investors while the latest crises are affecting other sectors.

The first reason is that they were in other sectors that gave them more profitability, until the arrival of the 2008 crisis and the great fall in the value of money and interest rates. When looking at agriculture, one could think of the futures markets and stock exchanges for cereals, coffee, sugar and other more standardised products. But going down to the detail of fresh fruit and vegetables with highly volatile and weather-dependent prices in both production and consumption seems not to have appealed to them. Meanwhile, new milestones of the "Spanish fruit and vegetable miracle" continued to be reached, as the best Spanish export sector between 2008 and 2016 was fresh fruit and vegetables: it grew by 62% while Spanish exports as a whole only grew by 35%. While millions of jobs were being destroyed in Spain due to the real estate crisis and the bailout of banks and savings banks, the sector continued to generate employment, absorbing a large part of immigration and growing in many productive areas.

Diversification and green washing

The fruit and vegetable sector was one of the productive sectors that, due to its very essence as a producer of essential foodstuffs, did not need any public aid nor proceed to restructuring plans during the pandemic. In addition, the new European policy and new global trends, which have been boosted by the post-pandemic movements related to sustainability and very much focused on the UN Sustainable Development Goals (SDGs), made this sector one of those that by its very essence easily fulfilled many of these goals. It is common sense to think that participating in fruit and vegetable companies could provide a certain "green face" to purely financial entities while at the same time providing them with diversification in their investments. If we add to this the ongoing controversies about food security, it is clear that investing in food looks good.

Citrus fruits account for 55% of investments

Citrus is in third place deciduous fruit and vegetables by export value, but it is clear that it is the most mature and the one that has undergone a great process of concentration between 1994 and the present day due to its own dynamics. When Spain joined the Single Market there were 773 citrus exporters, with an average of 6,500 tonnes per company, private or cooperative. In 2019 there were only 290 with an average of 25,000 tonnes per company. Companies were beginning to take shape beyond the concept of small and medium-sized companies, with a level of market penetration, including the marketing of citrus fruits from the Southern Hemisphere, essential to cover the market all twelve months of the year, which, as we have seen, have been of interest to the funds. On the other hand, the family nature of many of these companies, which were entering their third generation with the intrinsic complexity of any family business and the relationship between cousins, has meant in some cases a way out of the internal family conflict of the owners. The other sectors, non-citrus fruit and vegetables, are made up of much younger companies and more dynamic and therefore more volatile sectors, which probably explains the slower pace of fund entry.

What impact has the inflow of funds had on the Spanish citrus sector?

Until the end of the last century, the Spanish citrus sector was concentrated in the Valencian Community and was based on smallholdings on the one hand and a large number of exporters on the other. This structure not only created wealth but also distributed wealth. Today, the model is in crisis: the largest and most “technified” plantations are being established and have advanced most rapidly in Southern Alicante, Murcia and Andalusia, while Castellon and Valencia are recording constant losses of citrus-growing area. On the other hand, marketing companies have been growing and funds are being directed towards them.

The funds are generating large citrus groups, positioned in different production areas and in different hemispheres, which implies integrated management throughout the twelve months of the year of the category and this reinforces Spain's leadership over the category. In fact, it takes away part of the management of imports from the southern hemisphere from the Netherlands, as these large groups now have a global strategy for the category. This is similar to what has happened with avocado, where the Spanish leaders from the Andalusian tropical coast have gone in just a decade from being marketers of their local production to integral managers of the category in Europe regardless of the product's origin.

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