The growing Asian markets promise great opportunities for the globalfresh business, as the economic juggernauts of China and India facemounting pressure to feed their increasingly affluent populations, butsuppliers need to be wary of the region’s complexities and thechallenges entailed in realising this huge market potential.
These were some of the key takeaways for the 650 internationaldelegates who attended the 11th annual Asiafruit Congress in Hong Konglast week.
The leading conference and networking eventfor Asia’s fresh fruit and vegetable business, which is organised byAsiafruit Magazine, took place on 10-12 September alongside ASIA FRUITLOGISTICA, the region’s only fruit and vegetable trade fair.
The Asiafruit Congress attracted high-level executives from throughoutthe international fresh fruit and vegetable business, with delegates inattendance from 40 different countries.
Such diversityreflects the global interest in Asia’s fresh produce markets, and theprogramme of top-level international speakers and expert panellistsprovided delegates with plenty of grounds for optimism about theirfuture prospects for trade in the region.
While theglobal economic downturn has taken its toll in many western markets,China’s diverse and dynamic consumer market continues to undergo rapidevolution as the dragon economy steams ahead, putting pressure onsuppliers to keep pace with changing demands, delegates heard.
“Domestic retail sales are a huge opportunity `in China`, and theywon’t slow down any time soon,” said Josef Mueller of Accenture. “TheChina consumer market is expanding westward and deeper into ruralareas. At the same time, there is a migration into urban clusters orthree mega-cities along the East Coast where 50 per cent of thepopulation will live.”
Rabobank’s Brady Sidwell wasequally bullish about the Chinese economy, and the power of the Chineseconsumer. “The global environment has changed, but near double-digiteconomic growth is still forecast for China in the next two years,” henoted.
Rising per capita incomes are driving changes inthe Chinese diet, with strong increases in consumption of products likefruit and pork, according to Mr Sidwell. Urban migration is alsofuelling China’s food needs, with some reports indicating that 30,000people will leave China’s rural areas for the cities each day over thenext decade. These factors, coupled with rising land and labour costs,will intensify the “battle for acres” in agriculture, and spur a shifttowards more higher value products, Mr Sidwell predicted.
John Chapple of food testing laboratory Sino Analytica sought tocounter traditional threat perceptions concerning China’s role as afresh produce exporter, arguing that its future will be as a domesticmarket supplier and an importer. With some 5m tonnes of fruit,vegetables and related products being exported from China each year,the country has made a major impact on the world market in certainproducts, he conceded. But this figure only represents around 1 percent of China’s total production, and it stands to be wiped out by the200m new Chinese consumers that are forecast to relocate from rural tourban areas over the next 10-15 years, he argued. “They `China` couldeasily become net importers of 5m tonnes,” said Mr Chapple.
While China’s rising domestic market demand is commanding moreattention from local fresh produce suppliers, the Asiafruit Congressalso turned the spotlight on some of Asia’s other rapidly emergingeconomies, such as India and Vietnam.
Sanjay Sethi ofTechnopak Advisors told delegates that greater awareness of globaltrends among India’s increasingly affluent and westernised socialgroups give it enormous potential sales growth, but there remains anurgent need to improve distribution channels and boost the amount ofprocessed, packaged food products that are available on the market.
Elsewhere, Vietnam has enjoyed the second largest growth in FMCG salesoutside China this year, while share of consumer incomes spent on freshproduce is now larger than all other Asian markets except India,according to Ralf Matthaes of TNS Vietnam. With Asia’s second-youngestpopulation, its third-largest female workforce and a comparativelysmall urban population that is “set to explode”, Vietnam’s continuedindustrialisation and the emergence of a wealthy middle-class arelikely to provide good opportunities for suppliers in the future, henoted.
Despite these encouraging trends, the messagefrom Des O’Rourke of Belrose Inc was one of caution. The Asian marketis a many-headed beast, which cannot be approached with simplemarketing models, he explained. Mr O’Rourke cautioned againstoverenthusiasm in Asia, which he said must not be treatedhomogoneously.
“How big is the market? How big can itbecome? Don’t be misled by the huge population of Asia, examples ofspectacular economic growth or big retail growth,” he said. “Thepicture is more complicated.”
“The economic reality ofAsia is there’s only one country with a big population and largewestern levels of income, and that’s Japan. The three most populouscountries in Asia are China, India and Indonesia, and their per capitaincome is relatively small.”
Economic growth has beenuneven across Asia, Mr O’Rourke added, and global suppliers continue toface stiff competition from regional producers as well as tariff andnon-tariff barriers.
Indeed, the results of a survey ofAsian buyers, which were presented at the Asiafruit Congress by JohnHey of Asiafruit Magazine in conjunction with data and analysis fromIsabel Quiroz of iQonsulting, revealed that key global suppliers werestruggling to effectively service the complex demands of the Asianmarkets.
A panel of global suppliers, which included EdKershaw of Domex Superfresh Growers (USA), Danie Kieviet of Freshworld(South Africa), Andrew Wallace of San Clemente (Chile), Andrew Fentonof Horticulture New Zealand and Silvio Ermini of Vanguard International(Italy), testified to the numerous challenges of meeting the diverserequirements of these markets. Mr Kieviet said the only way to succeedin the Asian market is to fully commit to it, and build a reputationfor consistent supply. “The buyers pay a lot of money, and we need togive them exactly what they want, because they’ve been burned so manytimes in the past,” he commented.
Asiafruit Congressdelegates also received a unique insight into the future sourcingstrategies of major global retailers in the opening session of theconference.
Major changes to the way retailers in Asiasource their fresh fruit and vegetables are likely to have asignificant impact on suppliers during the next couple of decades asthe big supermarket and hypermarket operators look to globalise theirprocurement programmes and develop more direct links with producers,delegates heard.
John Glover, food director at MetroGroup Buying based in Hong Kong, said he expected his company andothers like it to look more closely at the possibility of adoptingglobal procurement strategies as competition and demand for regular,high-quality volumes continues to intensify, and as food safetyrequirements become ever more exacting.
“Given the largevolume of product we source every year, Metro is looking to pulltogether the group’s international procurement and source as onecompany,” said Mr Glover. “With the billions we are going to beinvesting in future, there is a great concern that we need to lookagain at the way we buy and source our products. Over the next 10years, the retail and wholesale sectors are set to double theirbusiness, but many countries are already consuming more than can beproduced.”
Next year’s Asiafruit Congress and ASIA FRUITLOGISTICA takes place on 2-4 September 2009 at the Hong Kong Convention& Exhibition Centre in Hong Kong, China.
Afull report on this year’s Asiafruit Congress and ASIA FRUIT LOGISTICAwill be published in the September/October edition of AsiafruitMagazine. Please email subscriptions@fruitnet.com
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