Having gained a bad press in the 1980s, when low-fat diets were all the rage, it took a marketing makeover in the late 1990s/early 2000s to turn the weirdly shaped, bumpy fruit that people didn’t know how to cut, in to the Instagrammable superfood that is today.
So super is this fruit, that it has its own national holiday – celebrating its health, beauty and skincare benefits on 31st July each year.
Here, Bianca McMillan, Associate Director at Gravis, explores the popularity of the avocado, the impact that its demand is having on our environment, and the action we as investors can take to improve outcomes.
Avocadon’t get me started!
Avocados have, for some time, been the subject of financial debate. It all started when Australian millionaire Tim Gurner suggested Millennials would struggle to get on the property ladder because they were spending too much money on “smashed avocados and coffee”.
New research, however, has shown that Baby Boomers are actually purchasing more of the fruit than their younger peers. A recent report from the World Avocado Organisation found that 28% of avocado purchases in the U.K. were made by people aged 65 and older, with a further 19.3% being eaten by those aged between 55 and 64*. This equates to nearly 17,000 tonnes, while younger people consume around 10,000 tonnes.
While we could argue all day about who is or isn’t buying and consuming the fruit, and the difficulties of getting on the housing ladder, another debate is more important in my view: how we make avocado farming more sustainable. Because however much we love avocados, it's important to recognise how cultivating them affects our planet.
Between a guac and a hard place
Avocado farming has an increasingly negative reputation, owing predominantly to the over exploitation in Latin America where increasing global demand has led to unsustainable practices. As the impacts of climate change continue to result in extreme weather conditions, central and south American countries are destroying large amounts of land to establish new avocado farms to meet the demand, leading to an increase in deforestation.
The high water consumption needed to grow an avocado also causes significant issues with drought, with rivers left dry after pipes and wells have been diverted to avocado farms. These impacts are compounded by the air miles the avocado travels to reach the end consumer.
One obvious solution could be to reduce global demand for avocados – Boomers please take note. We see this as an unrealistic answer, however, due to the worldwide popularity of the superfood, which is rich with nutrients, antioxidants, vitamins and “healthy fats”. So what else can be done?
It doesn’t avo to be the pits
Spain is the largest avocado farmer in Europe, producing 90% of Europe’s crop. Yet it only supplies 10% of the European market. So an obvious solution would be to bring production closer to the consumer, to reduce the carbon footprint of avocados.
More can be done, however, by applying more sustainable practices to fertilisation and phytosanitation (fungicides, insecticides etc.). Sustainable farming can also result in reduced energy load - a much flatter orography, for example, can mean less pumping required. And if more of the energy comes from renewable sources, the carbon footprint falls further. What’s more, avocado trees also have significant potential to sequester carbon in both biomass and soil during the life of the tree.
Another advantage of growing avocados in countries such as Spain is that water use is highly regulated by the government. The water used by each landowner cannot exceed certain levels and is monitored remotely using meters and controlled valves. Modern irrigation systems with sensors to prevent over-watering and a wire mesh to reduce evaporation can also help to reduce water usage by up to 30%.
It is estimated that food production accounts for 27% of global emissions, so significant investment within the food production sector is vital if we are to reach net zero by 2050.
Sustainable food production is one of five areas Gravis is targeting in its investment plans to facilitate the transition to net zero. The other four are energy transition, decarbonisation of transport, resource use and natural capital.
You can find out more about these areas in this short film.
**Source: McKinsey Quarterly, TRANSITION TO NET ZERO, 1st August 2022, Food and Agriculture
Important Information
This article has been prepared by Gravis Capital Management Ltd (“Gravis”) and is for information purposes only. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this article outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction and are treated as having represented that they are able to receive this article without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.
This article should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction in a fund affiliated with Gravis.
No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Investment Manager or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this article and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise. In addition, the Investment Manager does not undertake any obligation to update or to correct any inaccuracies which may become apparent. The information in this article is subject to updating, completion, revision, further verification and amendment without notice.
Past performance is no guarantee of future performance.
Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; and its principal place of business is 24 Savile Row, London W1S 2ES.
