A USDA report comparing different countries’ promotional approaches to China’s fast-expanding food import market has highlighted 'work to do' for the fresh produce sector.
Backed by sizeable government subsidies, the US is way ahead of competing fruit and vegetable exporting countries to China in terms of its promotional presence, but the report identifies room to extend its already substantial activities in key product groups.
Meanwhile, other leading fruit exporting countries to China from across the Southern Hemisphere or elsewhere are doing very little to promote their products, the report said. Most of these countries are focusing their promotional spend and activities on other sectors such as wine, meat or dairy. The wine market, for instance, is drawing heavy promotional efforts, with imports enjoying an annual growth rate of 57 per cent over the past five years to reach US$458m last year.
But the size of the fresh fruit import market far exceeds that of wine, with the USDA report valuing it at around U$1.2bn last year. Growth has also been impressive, averaging 24.6 per cent over the past few years. Such expansion has come despite a relative lack of promotional work by suppliers, suggesting there is good potential to accelerate gains.
The US continues to play a leading role in China’s temperate fruit/citrus import markets, far outstripping the performance of other Northern Hemisphere competitors like France or Japan, the report said. In the Southern Hemisphere, meanwhile, Chile is the top exporter, with South Africa and New Zealand performing well in some product sectors.
US needs to tailor apple promotions
China’s apple and pear imports have seen dramatic growth, with values for official trade more than doubling since 2006 to reach US$54m, the report found. While the US and Chile have been the chief beneficiaries, the former has also lost some market share to the latter. And the report identified the need for US promotions to maintain competitiveness against supplying countries from both hemispheres.
Good packaging and promotional activities have enabled US apples to carve out a strong position in China’s high-end gift market, with Red Delicious apples bearing dragon emblems selling well for Chinese New Year, the report said. But it warned that competing nations are catching up on packaging, and that products and promotions must be adapted to China’s diverse and changing market demands.
“US exporters need to work with importers to improve the appeal and tailor sizes and packages of fruit to the differing market demands in North and South China,” the report said. “Regional differences are significant: consumers in North China prefer large Red Delicious apples and larger gift packages where buyers in South China tend to prefer smaller sizes fruit and containers.”
Chinese grapes extend reach
China’s grape import market has also seen rapid expansion since 2007, with official import values rising from US$81m to US$189m last year. Again, the US and Chile dominate that deal, together controlling around 80-90 per cent. And while Peru’s growing presence has the potential to impact on the tail end of the US season, China’s rising production, which grew 8 per cent to reach 7.7m tonnes in 2009/10, is the biggest competitive threat, the report found.
In particular, Chinese grapes are extending their reach into southern China, which has been a traditional stronghold for US grapes, aided by improvements in cold chain distribution, the report found. As such, there is work to do for the California table grape industry on extending its promotional presence.
“Competing with Chinese grapes requires building new markets and making more consumer familiar with US grapes,” said the report. “Work with importers and retailers on fresh fruit handling is also important to maintain US advantages in freshness and enable product to reach the rapidly growing cities of China’s interior.”
Chile drives cherry boom
The US cherry sector is another industry for which expansion into the Chinese interior is a priority. However, a lack of proper cold chain distribution systems and handling practices in China are key impediments on this front. While a growth in US cherry exports has helped the US to increase its share of China’s stonefruit imports from US$3m in 2006 to US$15m last year, it is Chilean cherries that have driven a surge in the Chinese stonefruit deal.
Indeed, Chilean cherry exports to China have soared from less than US$1m to some US$40m last year. That figure gives Chile a very dominant position in China’s overall stonefruit market, whose size has consequently swelled from less than US$15m in 2007 to reach US$55m last year, according to official figures. Competitive prices and timing have been key to Chile’s success with cherries. China’s cherry market. In particular, its shipping season enables it to supply cherries during the Chinese New Year festivities when red fruit, such as cherries, are highly sought-after.
Competitive pricing spearheads Chilean gains
Promotional activities from Chile, meanwhile, have been limited, according to the report. As with apples, Chile’s gains have primarily been built on low prices. Although China is a much smaller market in the overall scheme of Chile’s fresh fruit exports compared with the US or Europe, Chile is nevertheless a leading player in the China’s fruit import market. According to official figures, it ranked as the fourth-largest supplier to China in 2009 after Thailand, Vietnam and the US, with shipments valued at US$168m. Conversely, Asia currently accounts for less than 10 per cent of Chile’s total fresh fruit exports, and most of those go to Japan and Korea.
Chile’s export promotion in China is handled by ProChile, which focuses on supporting small and medium enterprises (SMEs) to attend trade shows and such like, the report said. Participation by the Chilean Fresh Fruit Association in trade shows is currently the main plank of promotional activities for fresh fruit. Although ProChile has expressed some interest in staging retail promotions for Chilean food and beverages in China in the future, participation in trade fairs and hosting visits by Chinese quarantine officials to Chile represent the full extent of the promotional activity on fresh fruit to date.
Promotions to widen with market access
With a few exceptions, such as New Zealand kiwifruit marketer Zespri’s efforts, promotional activities by other major exporting countries also remain relatively limited, the report said. Nevertheless, this looks likely to change as China’s fruit imports grow and more countries secure market access for their products. For instance, the entry of Southern Hemisphere apple producers, such as Argentina (and potentially Brazil and South Africa in the future), could see such countries step up their activities.
A number of supplying countries have gained access to China for key products over the past year, and the report notes that during recent bilateral discussions between Brazil and China, China showed interest in importing South American country’s temperate stonefruit while Brazil expressed more interest in exporting oranges from the northeast.
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