Jan 29, 2015

South Tyrolean growers cooperate to survive

South Tyrol’s apple industry gives new meaning to the word “cooperative.” Members of the International Fruit Tree Association (IFTA) saw that firsthand in November during a tour of the Italian province, which is nestled in the Alps in the northeast part of the country.

Industry stakeholders gave the IFTA audience an overview: South Tyrol – which contains Europe’s largest contiguous apple area – produces about 1.2 million tons of apples annually on more than 45,000 acres. The province supplies about half the Italian apple market, up to 15 percent of the European market and about 2 percent of the world market. The main export market is Germany, followed by Scandinavian and Mediterranean countries. South Tyrol also is the continent’s largest supplier of organic apples.

The speakers credited the survival, and success, of the South Tyrolean industry to its many-layered, cooperative structure. The first layer is the growers – roughly 8,000 of them producing apples on orchards that average 2.3 hectares (about 5.7 acres) in size. The growers own the cooperatives – the second layer – which handle duties like storage and packing for their members. The cooperatives, in turn, own two associations, which handle sales for them. And on top of the associations is the South Tyrolean Apple Consortium, which focuses on branding and marketing all of the province’s apples.

Today, the cooperative system controls about 95 percent of South Tyrol’s apple production – and there’s nothing like it anywhere else in the world, said Gerhard Dichgans, chief executive officer of VOG (Association of South Tyrolean Fruit Growers’ Cooperatives), one of the marketing associations.

So, what are the origins of such a singular system?

History

South Tyrol contains about half a million people, most of whom speak German and don’t relate much to Italian culture. Situated in a narrow valley that surrounds the Adige River as it threads its way through the Dolomite Mountains (a sub-range of the Alps), the province’s chief fruit-growing area is protected in the north from the more extreme elements of the Alps, but still open to the mild Mediterranean climate to the south. On both sides of the river, the mountains rise to more than 3,000 meters above sea level. Apples and wine grapes are important crops there, and agritourism is a vital industry, said Kurt Werth, a consultant to the South Tyrolean apple industry who helped organize the IFTA tour.

After running east for a while in the higher elevations, the Adige curves sharply south. The higher, east-west valley is called Vinschgau (500 to 1,000 meters above sea level), and the lower, north-south valley is called Etsch (200 to 250 meters above sea level). Both are covered with orchards today – but it wasn’t always that way, according to speakers.

The origins of South Tyrol’s commercial apple industry go back to the mid-1800s, when the Austrian empire (which controlled South Tyrol for nearly six centuries) started managing the Adige River. Management made more land available for plantings. By 1870, an infrastructure was in place and apples were being exported to other parts of Europe, Dichgans said.

About this time, economic survival compelled growers in southern Germany and Austria to start forming cooperatives. Friedrich Wilhelm Raiffeisen, an important man in the region’s history, started the cooperative movement based on principles of “mutual help, self-governance and self-responsibility.” These tenets remain part of the cooperative system’s “genetic code” to this day, Dichgans said.

“There is a saying in South Tyrol today: ‘If you have a problem, form a cooperative. You can solve it,’” he said.

Italy took control of South Tyrol in 1919, in the aftermath of World War I, but the province has gained a significant amount of political autonomy from the Italian government since then. Except for taxes and the military, South Tyrol basically governs itself, Werth said.

“If you ask one of our growers the name of the minister of agriculture in Italy, he doesn’t know,” Werth said. “But he knows his own minister here (in South Tyrol).”

The South Tyrolean apple industry founded its first marketing association, VOG, in 1945, in an attempt to open up export markets after the disruptions of World War II, Dichgans said.

Werth said more markets opened up in 1957, when the European Union was formed.

That same year, a group of growers founded a private (but nonprofit) Extension service for the province, seeking independent information about plant protection products. There were 57 grower-members in the beginning, a number that has grown to about 6,000 today, said Extension Coordinator Robert Wiedmer.

By the 1970s, growers had discovered Holland’s slender spindle system, which “changed everything.” All apple plantings became intensive after the 1980s – a more efficient use of the limited land available, Werth said.

Intensive practices and increased productivity helped to keep the industry alive through some difficult periods, Dichgans said.

The number of apple cooperatives peaked in the late 1990s, with about 40. Since then the number has shrunk to 23, thanks to mergers and restructurings in pursuit of greater efficiency, Dichgans said.

For decades, South Tyrol mostly focused on traditional varieties like Golden and Red Delicious and Granny Smith. Starting in the 1980s and ’90s, its growers began diversifying with newly popular varieties like Gala and Braeburn, and in the last decade or so club varieties like Pink Lady have become popular. Golden Delicious, which sells well in Italy, Spain and other Mediterranean countries, still makes up nearly half the province’s output, but it’s not as popular in other European markets, Dichgans said.

Golden Delicious led to a major shakeup in the cooperative system in 1989, when growers in the upper (Vinschgau) valley split off from VOG to form their own marketing association, called VIP (Val Venosta Group). The upper valley wanted to stick with Golden Delicious, which made up about 90 percent of its output at the time and gets “fantastic quality” in the upper elevations. Growers in the lower valley never produced as much Golden Delicious, and were more interested in varietal diversification. Looking back, Dichgans said the split might have been a mistake, but the two associations have operated independently of each other ever since.

The industry today

The apple industry’s current goal is to increase income through improved production practices and variety innovation. It’s easier to earn more money by investing in new techniques and varieties than by cutting costs, Werth said.

In pursuit of that goal, the industry is aided by certain advantages but hindered by certain disadvantages. Advantages – besides the cooperative system – include being partially subsidized by the European Union; national and provincial governments that are pro-agriculture; and a “minimal” tax load, speakers said.

There also are institutions like Extension and the government-supported Laimburg Research Centre for Agriculture and Forestry, which both conduct applied research and disseminate useful information to growers.

Mechanization – including tractors, pruners and platforms – is relatively well developed in South Tyrol, even on small farms. Because of that, labor hours have been cut in half in the last 40 years, while production has tripled and quality has gone up, Werth said.

The disadvantages: On the macro level, the industry has been forced to concentrate supply to meet the needs of European buyers. For example, five companies buy 83 percent of the apples sold in Denmark. Four companies cover almost the entire Swedish market, Werth said.

On the micro level, the cooperative mentality has limited the sense of business practices among growers. Some have a hard time keeping up with the speed of change. Many of them grow fruit part-time and get their main income from another source. Some rely on spouses with outside jobs, he said.

Because available land is so scarce and orchards are so small, the borders between rows, and between orchards, are extremely close. This can lead to spray drift problems, especially for organic orchards, Werth said.

And it’s virtually impossible to buy or sell farmland in the province, thanks to cost (600,000 to 1 million euros per hectare) and the province’s “closed farm” policy, which protects property from being divided, he said.

– Matt Milkovich