China represents a huge opportunity for kiwifruit giant Zespri. That’s a message the company has been broadcasting for several years now, and over that time Zespri’s growth in kiwifruit sales to the market has surely proven its point. But the company is now weighing up a significant change to its business in China, and it’s by no means an easy call to make.
Simon Limmer, the general manager of Zespri’s Global Supply division, is at the forefront of the examination into the potential for production of kiwifruit in China. It's serious, he told Asiafruit Magazine, but that potential also comes with serious challenges.
“The big opportunity in Asia is China,” he said. “There’s significant growth there for us with New Zealand product, and ultimately we need to consider how we supplement that with offshore production.”
China is the origin of and world’s largest producer of kiwifruit, and production in the country is rising at a steady clip. The opportunity to move beyond Zespri’s limited Asian production in Japan and Korea is something the company can’t afford to ignore, according to Mr Limmer.
“We have to be considering what we’re doing in China in the future,” he said. “The big concern is how we structure that, and are `the Chinese` growing really top quality kiwifruit that’s consistent with our strategy.”
Quality is one of Zespri’s key concerns. Through its other production bases outside New Zealand, the company has learned that attaining the premium quality the Zespri label is based on is not as simple as following standard operating procedures from New Zealand orchards.
Current Chinese production for the domestic market generally doesn’t meet Zespri’s requirements, explained Mr Limmer, and finding a local partner who is able to produce fruit at a high-enough standard will be central to Zespri’s future there.
The other main challenge for Zespri is the issue of plant variety rights protection. Following the pattern of the company’s other offshore production operations, Zespri Gold is likely to account for a significant amount of any eventual production in China, and the difficulty in protecting exclusive varieties in China presents quite a risk to Zespri’s golden child.
That’s a concern backed up by the experiences Zespri has already had in China with its brand. “Our brand is very valuable to Zespri,” Mr Limmer said. “And we link that to the quality coming out of New Zealand. People are attempting to piggyback on that illegally in China, and we’re constantly battling that.”
Zespri’s non-New Zealand kiwifruit operations produce 8-10m trays per year, roughly 10 per cent of the company’s overall production. That figure is split fifty-fifty between the Zespri Green (Hayward) and Gold (Hort16A) varieties.
The company’s production in Japan and Korea hold a minor share in that, with 300,000 and 750,000 trays respectively last year, although both countries are on track for 1m trays each in the next few years.
The quality of fruit coming out of the two countries has steadily improved over the last few seasons as Zespri has acclimatised to their individual environmental conditions and grower bases.
However Zespri decides to proceed with its offshore production, there is plenty of room to stretch in the category, according to Mr Limmer. “There’s a lot of activity in the kiwifruit space worldwide.”
This article appears in the March edition of Asiafruit Magazine. For details of how to subscribe, please contact subscriptions@fruitnet.com.
