Israel Banana Project
Setting Up an Export Quality Bananas
for European and Mediterranean Markets
The banana industry worldwide is increasing gradually wherein the main bulk of the import export of the fruit worldwide is banana. Exporting countries in the South American continent are serving mainly the European markets and some parts of the Mediterranean area while the Philippines is exporting bananas to Asia Pacific region and mostly the Middle East market.
Average prices differ on each market and also on its packaging. In the European Union and Mediterranean markets, the packaging of its standard box is 18.5kg while in Middle East and Asia-Pacific region, the packaging is 13.5kg box. In the EU market, the average price of Cavendish bananas is US$18.00/box CNF while in the Middle East and Asia-Pacific markets has an average price of US$11.00/box CNF. Each market also has its own major players offering high quality fresh Cavendish bananas with brands from Dole, Chiquita and Del Monte.
Moritz Banana Kingdom Corporation has been exporting fresh Cavendish bananas from the Philippines since 2000through a Kuwaiti Company and was able to penetrate the Middle East and Asia Pacific markets. As the company gradually increased its market share, so too its customer base in Kuwait, China, Japan, Russia, and our prospective markets in Italy, Greece, Turkey, Germany, and other parts in European Union countries is ready to be served if there are viable or alternative shorter transit routes for these markets . The company is gradually increasing its capacity to cater the major markets in Middle East and China markets from 40 containers per week shipment to 50 containers shipment per week.
The main issue of these markets is the transit time if the company will source its fresh Cavendish bananas in the Philippines. To cater these markets, Moritz Fruits AG is setting up its sourcing facility in Israel in partnership with Zemach Co. where the transit time is shorter and will be able to penetrate these markets easily competing with Dole, Chiquita, Del Monte to name a few.
Competition with these brands is not only by its quality but also its price. The partnership is projected to export 32,000 tons of bananas every year to market the Moritz brand. The packaging will be in 18.5kg boxes, cluster packs and bio-bananas will also introduced by Moritz Fruits AGto compete with other brands. Since the sourcing facility is very close to EU countries, the maximum transit time to a certain market is only 8 days. Thus, transit time is a major factor in quality and also with the price. With such average transit time, the average cost per box for the ocean freight is between US$1.50-US$2.50 per box.
The projected volume of this facility is to reach 1,750,000 boxes in just 7 months with projected average export sales of US$31,500,000. The average price of the fruit alone per kilo is 1.6 Shequel with an average packaging of 18kg and Moritz Fruits AG will provide the box and other packaging materials to start the export to EU countries. The average FOB price is US$8.22 for the 18kg box and since the average price of 18kg box of bananas for example in Hamburg is US$18.00 CNF, Moritz Fruits AG will also offer the same price of US$18.00/box, the partnership will have an average profit margin of US$7.28/box (US$8.22 + US$2.50 freight = US$10.72) to compete in this market. In this case, the average profit base from the projected volume is US$12.7 Million in just 7 months operation alone.
Now, the local market in Israel alone is also a big potential in earning additional profit and the projected volume for the local market is 43,500 tons in just 12 months or equivalent to 2,400,000 boxes. The average local price of these bananas is 2.1 Shequel or equivalent to 90,720,000 Shequel. In the local market, the cost of sales of the banana is 1.5 Shequel including operation expenses, box and packaging materials (0.60 Shequel is the profit margin per box). Moritz Fruits AG will target the total sale for the local market is US$7.4 million in 12 months operation. In total, the partnership will have a profit margin of US$20 Million in one year operation.
Since the profit margin for export is higher than the local market, it is advantageous to put majority of the fruits for export to maximize the potential capacity of the Israel sourcing facility and to expand its operation locally, EU markets and even in the Mediterranean markets. The partnership between Zemach and Moritz Fruits AGhas all the potential to become a major supplier in the EU markets where the transit time is the advantage factor compared to South American banana suppliers. EU markets are looking for quality, bio-bananas and affordability of the fruits and the Israel facility can and has the capability to pursue the export quality of fruits. The longest transit time for export is 8 days and as far as Rotterdam port in The Netherlands and the nearest transit time is just 2 days like in Mersin port in Turkey and with these transit time, the Israel facility can compete below the average selling price of these markets and gradually increase its profit by expanding its volume and also expanding its customers in the EU market and Moritz Fruits AG has the right linkages and has the right contacts in specific markets to expand its presence in each major destination.