Depending on whether you’re a grower or an importer, the very mention of China can strike fear into one’s heart or cause it to sing.
Well-worn clichés such as the sleeping tiger is beginning to stir are finally ringing true. Already the world’s largest apple producer, China’s other fruit and vegetable operations are also considerable.
“Without quantifying any aspect, there is no doubt that China will diligently aspire to expand its fresh produce production, diversity, and quality as it operates under WTO guidelines,” says David Anderson, vice president of Del Monte Fresh Produce Asia-Pacific.
“Recent free trade agreements, investments in private industry production and packing technology, and internal policies to assist the agriculture sector are clear initiatives to support the above assumptions and assertions.”
Indeed, with Chinese growers investing heavily in their fruit growing and post-harvest operations, many other suppliers are resigning themselves to greater competition from the mainland.
According to one California-based table grape exporter who declined to be named, US grapes are facing ever-greater competition from Chinese grapes. While the quality may not be as good as the US, many believe it’s only a matter of time before Californian market share is eroded by the Chinese, particularly in Asia and perhaps elsewhere.
Finding an outlet for fruit and vegetables is obviously a priority and many more overseas retailers are beginning to realise the opportunities in China. The vast majority of fresh produce is still sold in wet markets (street stalls) but in recent years, a large number of supermarket operators have invested in China’s major cities.
These include the US behemoth Wal-Mart and French retailer Carrefour. “The expansion of multi-national supermarket chains throughout China with sophisticated fresh produce departments is another indication that the Chinese fresh produce industry will grow and improve in terms of quality, food safety, product assortment and packaging,” says Anderson.
However, it isn’t always easy when east meets west. “The biggest challenge is that China as a fast growing economy wants to do business and does not always follow the correct procedures and protocols that you need to supply European customers,” says Capespan’s Rod Hill. “This can lead to a range of different qualities and grades exported at different values, many of which can, as we have seen, undermine the market for the product.”
But Hill notes that producers are learning very quickly that to get a reasonable return from their fruit, they will have to employ techniques and procedures required by European customers and refrain from sending speculative volumes to the market.
A number of Chinese growers are already targeting the UK and are hoping to increase their exports in the coming years.
Jining Sanlong Vegetable and Fruit Co Ltd exports apples, pears, ginger and garlic to the UK and cites Fuji apples, Ya pears and garlic as its biggest sellers. The Shandong Province-based company works with a UK-based importer to supply wholesalers and retailers.
“The UK is a good market for Chinese fruit and vegetables and so long as we meet their high quality demands, good profits can be made,” explains Mike Su, adding that the company is both EurepGAP and HACCP certified.
Su believes that it’s vital only high quality fresh produce is shipped, otherwise there’s the risk that exporters will lose current and, perhaps more importantly, future sales.
As well as the UK, Sanlong also ships to a range of European markets including the Netherlands, France, Italy and Russia.
This year, Sanlong plans to increase the products it supplies to the UK. Already known for its Fuji apples, the company will for the first time begin exporting Golden Delicious and Red Chief apples. According to Su, Red Globe grapes and kiwifruit will also be exported.
Alfa Far East Trading is also hoping to make a splash with its bagged Fuji apples this season. The Hong Kong-based firm set up shop last September and 2005 represents its first full year of packing apples in China’s Shandong Province.
“We have a co-operation agreement with Washington State based-firm Black Oval Growers Inc, and through their London office we have supplied Fuji’s to the UK market this season,” says Alfa’s Marty Topham.
While its only offering will be Fuji apples this season, by 2006 the firm plans to add the apple varieties Gala and Red Star as well as pears.
Alfa’s packing house sizes 2,250sqm and its cold storage room is capable of holding between 5,000-8,000 cartons of packed fruit. The company’s state of the art automated packing line was imported from Dutch firm Aweta.
“All of our apples are washed prior to being colour sorted and sized before being stickered,” Topham says. “We are very flexible with 14 “drops” so we are capable of packing many sizes and grades into different size boxes at the same time. This reduces the handling of the fruit.”
As well as packing 10 and 20kg cartons, the company also custom packs and before the 2006 season, will add new washing and drying equipment to its facilities.
Because the UK receives apples from a wide number of suppliers throughout the year, Topham believes it’s vital that new players can offer value added products in order to gain market share. “The principal opportunity is to establish our Alfa brand as a market leader from China,” he notes. “UK buyers have high standards not only in the quality of the fruit but under the conditions in which they are produced and packed.”
“There is an insistence on total transparency in all aspects of growing, packing and pre- and post-harvest treatments but that is a good thing for those like us who are fully committed to satisfying the most stringent criteria,” Topham says.
Indeed, according to Alfa, many packers and shippers in China can’t meet these requirements but Topham believes that with Alfa’s modern packing facilities and as it hopes to gain EurepGAP certification in the coming year, there will be great opportunities for the firm to increase its business in the coming years.
“We need to be seen to be enthusiastic about complying with client specifications, provide maximum traceability and supplying value for money with top grade product,” he says.
While Topham notes that the UK has always attracted international high quality fruits, he doesn’t believe there’ll be a change in varietal range or seasonal mix following the accession to the EU of other apple producing countries.
On the import side, Empire World Trade Ltd began importing Chinese fruit in 1996. The company worked with Singaporean group FHTK, whose Chinese operations were based in Longkou, Shandong Province.
“FHTK was chosen because of its world class infrastructure and facilities,” says Richard Lowes, managing director of Empire World Trade. “It was also chosen because of its commitment to food safety, diligence and desire to serve the UK market.”
Lowes adds that in the mid-1990s, FHTK had already installed controlled atmosphere (CA) storage facilities. This was highly advanced compared to some other suppliers who used the ground under trees and caves for packhouses and cold storage.
“We see China as an important supplier of Fuji apples but do not feel they will dominate the world,” Lowes says. However, he believes that China has a strong future, not just in the UK but elsewhere.
“As a large part of their population is becoming more affluent and the fruit is predominately being sold in the Pacific Rim, we see a long-term future in China, and envisage we will be importing Chinese fruit for the next 10 years.”
As well as apples, Empire World has also imported a number of Chinese pear varieties and is currently looking at other products. “More recently, we have added another supplier, based in the Shaanxi growing region,” Lowes says.
Capespan’s strategy in China is to work directly with producers and producer organisations. “This has been a major challenge in China as a lot of the production comes from small farmers,” says Hill. “We now have a producer base which produces most of its own export fruit which is an advantage when supplying key customers and retailers in Europe.”
The company imports a range of fruits including kiwifruit and lychee but the mainstay of its operations is top fruit. According to Hill, Capespan will increase its varieties from Fuji apples and Ya, Su and Fragrant pears to include 21st Century pears and Royal Gala apples.
“We are also involved with our partners in the development of new, exciting pear and apple plantings which will extend our range in the next 2-3 years,” Hill says.
Capespan began operating in China in 2000. “Our business is to optimise sales in all market sectors, always working directly from producer to end customer,” Hill explains. “Our focus is on key customer programmes and to reduce speculative volumes in the market. This has been very successful and we expect an increase of around 25 per cent for the 2005/6 season.”
As UK consumers become more accustomed to Chinese fruit, marketers forecast rising sales. This is already apparent for Chinese Fuji apples. Originally sold primarily in Oriental supermarkets, they are now sharing shelf space with other northern hemisphere apples in mainstream retail stores.
According to Hill, it’s a different story for Chinese pears as these fruits aren’t like European varieties. Nevertheless, he notes that mainland pears have an increasing following and some of the new varieties can extend sales outside the traditional consumers.
Capespan continuously assesses its operations in China and according to Hill, the company’s partners have made, and will continue to make, major investments in their farms and packing operations.
“Capespan’s focus in China is to bring fruit from farms that comply with internationally recognised standards of accreditation, traceability and health and safety,” Hill says.
“There has been an intensive programme of investment in technical and marketing assistance to producers and regular visits to the suppliers. The commitment long term will be to provide customised products for key market segments, with recognised quality products and quality brands.”
Meanwhile, in recent years, a number of Chinese producers have been keen to reduce the number of pesticides they use in cultivating fresh produce. Some producers are also introducing ‘green foods’. While still grown with chemicals, marketers maintain that the product grown is more environmentally and consumer friendly.
The organic fruit industry is still at an early stage although steps are being taken to expand production. The Chinese government is encouraging the development of the industry and local governments are implementing incentive policies to support output.
A lack of funds and technology, however, continue to hamper the organic deal. In addition, shipping organic fruits from China to the UK could be problematic, importers note. “One of the major challenges to organic production must be the sea voyage of 4-5 weeks,” says a marketer who declined to be named.
While some questions remain over to what extent China will supply the UK, a number of producers have already secured a future in the market.
ACH FUTURE IS ORANGES
China’s biggest orange grower is aiming to satisfy investors’ thirst for the surging Chinese economy with an £80m flotation on the Alternative Investment Market in the summer.
Asian Citrus Holdings, which turned a £10.9m profit from supplying oranges to the Chinese market last year, is looking to raise around £15m in London to grow its business.
The company wants to upgrade its two plantations, build a national sales network and pay for advertising to raise brand awareness.
Demand for oranges has rocketed in China in recent years in line with rising living standards for its 1.3billion people.
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