In the next 10 years, Asia’s population will increase by more than 10 per cent - an extra 430 million people - which represents well over half of the world’s additional population in the period.
China alone is expected to account for 10 per cent of the world’s economy by 2020. The economic growth of both China and India are fundamental to the ongoing recovery of the global economy. They are seeing GDP rates of around eight per cent compared to the much more fragile levels being experienced in the Organisation for Economic Co-operation and Development countries. This includes the UK, where a “patchy recovery” is expected to prevail in at least the immediate future.
For the UK and other EU countries, the rapid recovery of the Asian economies is fundamental to leading them out of recession over the next few years.
The ascent from poverty of large proportions of the population of India and China is well documented, as is the challenge of how these increasingly affluent countries will be fed. Agricultural production in China and India receives substantial investment and in many cases, is rising at an incredible rate. It is by no means focused only on the domestic market. Combined with their phenomenal geographic size, production volumes dwarf most other leading agricultural producing countries. Horticulture is no exception.
For instance, China’s apple crop, at
30 million tonnes, is almost seven times larger than its nearest rival, the US. Exports, at 1.2mt, have soared by almost 400 per cent in the last 10 years and still account for less than five per cent of the crop. This comfortably outpaces other leading apple exporters, such as Chile, France and the US, which typically export some 700,000t a year. To date, Chinese apple exports have focused primarily on other Asian markets, as well as Russia and the Middle East. Asia’s presence and influence as a supplier of fresh produce to European and other international markets is only set to grow.
For example, China exported some 20,000t of apples to the EU last year and 6,000t to Canada. Pear exports to the Netherlands and Canada have already begun too. UK imports are modest to date, but improving quality, allied to a highly competitive price structure, makes China an attractive supply proposition. It might be in processed products to begin with, but the best Chinese fresh produce companies are rapidly developing their market both through knowledge and technical ability.
In India, the mango and grape industries, among others, are specifically targeted by the government for export development. Other products such as soft fruit and cut flowers follow behind. India accounts for about 70 per cent of the world’s production of mango. The Maharashtra State Agricultural Marketing Board, based in Pune, as an example, has a key objective to promote exports of fruit, vegetables and flowers, improve production technology, harvest, handling, grading, packing and postharvest management and create new infrastructure facilities for export.
The development of such facilities is now enabling exports to Japan, the Middle East and Europe, including the UK. India is already a major force in areas such as tropical fruit juices and dehydrated vegetables. Leading Indian food companies are expansive in their view of what they want to achieve in international markets, well informed, business savvy, invest in the best and are strongly customer focused. The UK is an obvious market they look at.
Elsewhere in Asia, Thailand has already established itself as a major player in processed horticultural produce, such as canned pineapples and more niche products such as individual quick frozen products, as well as exotic items such as babycorn, speciality Asian vegetables and asparagus. Thailand’s role in international agri food is not confined to the horticultural sector either, it is also a major player in the seafood and poultry industries too.
Shifting social trends are changing the face of consumption, the Asian consumer and in time, the development of the supply chain. Urbanisation, migration, higher levels of education, rapidly growing incomes, increasing numbers of women working and exposure to international influences all lead to a more demanding and aspirant consumer attracted to brands, packaged goods, convenience foods and imported products. Tradition, however, still prevails at all levels of society and significant numbers of people have been left behind by the tide of economic development.
One of the key features of the development of the supply chain in Asia is the rise of modern forms of retailing. In India, this only accounts for around five per cent of the market at the moment, but in China it is already around 25 per cent and growing fast. The so-called Pac Rim markets, such as Korea and Taiwan, are also seeing the rapid growth of more modern forms of retailing.
There may be niche opportunities for European produce in Asia, but the overall balance of trade is likely to be in the other direction. Will the UK be exporting fresh produce to the East? Probably not, but there will be niche opportunities for higher added-value food products in markets such as Hong Kong and Singapore. British speciality dairy products can already be found in Indian supermarkets. Established exporters from the EU such as the Netherlands, France and even southern Europe, however, are probably better positioned to supply produce into Asian markets and/or from joint ventures in distribution, production and exports.
That is not to say there are no opportunities for the UK supply chain to profit from this unprecedented growth in Asia. Far from it, in fact. UK retailers, for example, led by Tesco, are already eyeing the future potential of these markets. And no wonder. The Chinese and Indian grocery retail markets are expected to be valued at $207 billion and $308bn respectively in 2013. Making an entry to these markets is no mean feat, however, and one that is tackled most often through establishing joint ventures with partners within the chosen market (in India, this is the only way foreign investment in retail is permitted). Building business in Asia will test even the most experienced international retailer or food supplier.
Everything appears difficult, but the adage that at the same time, nothing is impossible is never truer than in Asia. Legal systems, distribution and logistics, finding good people, keeping good people, respect for internet protocol systems, financial arrangements and understanding consumer behaviour and culture can be challenging in any market. In Asia, they are especially difficult, but the size of the prize is large and tempting. It can only be accessed by having a genuine long-term, yet flexible view. Asia is no place for the short termer.
As both export and organised modern urban retail markets develop in Asia, there will also be an increased need for high-class traceability, accreditation and food safety systems, supply chain logistics, environmental technologies, corporate social responsibility strategy, new product development, innovation and processing technology.
This is where the UK is inherently strong. A foreign education is still highly valued in Asia. Many UK agri food-oriented universities and colleges are already actively marketing and recruiting in Asia, particularly in China, to help provide the skills and knowledge these food industries of the future will require. The UK is not alone, though, in wanting to export knowledge-based services to Asia. Many others in the likes of the US, Canada, New Zealand and Australia would like a slice of the action too, as will others in the EU, such as the Netherlands and France.
Whichever opportunity is to be targeted, a clear strategy is vital to target specific locations, market segments and customers. A well chosen local partner is essential, as is a thorough understanding of the market, regulations, competition and cultural considerations. Making it work in Asia needs a lot of preparation and understanding. Timing is everything.
Asia’s growing influence on world produce and other agri food markets presents both an opportunity and a challenge to the UK industry. The UK is already inter-linked to Asia in terms of economic recovery. Asia is poised to supply more produce, both fresh and processed, to international markets. While the EU and the UK might have not been the top priority to date, it is only a matter of time before we come much more strongly onto the Asian radar.
Asian companies have already invested in Western manufacturing sectors, banks and IT services. With 60 million relatively affluent consumers, UK companies of all shapes and sizes are looking for a combination of investment and access to new customers. This market is an attractive one for Asian-based agri food entrepreneurs.
Asian agri food businesses will not just cause a ripple in Western markets in the next 10 years - it could be more like a tidal wave. The UK produce sector needs to ensure it can ride with the wave, not get caught in its wake and only wishing it had seen it coming. It’s already on the way.
This requires vision and planning because once the wave arrives, it could already be too late. How we respond to all of this will be critical. A positive response could see new investment in production and distribution, as well as the opportunity for the UK to develop knowledge-based services back into Asian markets.
A negative or closed response might well see Asia look elsewhere in the EU or in the US, Latin America or Australasia and leave the UK out in the cold. A case of catching Asian flu - or not - as the case might be?
Rebecca Lewis is a consultant with Promar International, a leading agri food marketing and business development consulting company and a subsidiary of Genus plc. Promar has carried out a good deal of work in the international fruit sector. This includes projects in India and China, as well as analysis of key international markets in the EU, eastern Europe, Middle East and North America. She can be contacted at: rlewis@promar-international.com
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