USDA FAS: Who is fighting for market share for fruit exports to China

12/11/2010 06:01:49 AM
Tom Karst

This 29-page report from U.S. Department of Agriculture's Foreign Agricultural Service gives a profile of competitor promotional activity in China. Perhaps more than any other argument, this report suggests the value of continuing the work of U.S. export promotion through the Market Access Program. The report also provides a nice overview of the fresh fruit import picture.

Here are some highlights;

China continues to attract interest from food exporters across the world, many with promotional support from their industries and governments. This report provides a partial profile of competitor promotional efforts.

Chile

While the Chilean Fresh Fruit Association (CFFA) undertakes promotions in Chile?s major export markets in North America and the E.U., it has not identified China as a priority market (only 8% of Chilean fresh fruit exports went to Asia in 07/08, mostly Japan and Korea). At present, member participation in trade fairs and tours for AQSIQ officials to Chile constitute the full extent of promotional activity in China. Of $2.5 million in support that CFFA received from ProChile for global promotions in 2008/2009, $73,000 was allocated for Japan and Korea for media and importer education through workshops and tours of Chile.

More on the fresh fruit sector:

Fresh Fruit
Import Market Size: $1.2 billion in 2009 24.6% annual growth (2005-2009) Major Exporters to China: Thailand, Vietnam, U.S., Chile, Philippines, New Zealand Major U.S. competitors: Chile, Peru, Japan, France Chinese fruit imports are divided into tropical products, where the U.S. does not have a major presence; and temperate and citrus fruits where the U.S. is a major exporter to China.

This is further divided by hemisphere, with growing seasons in the north and the south tending to complement each other, but competing during certain months of the year. Thailand, Vietnam, the Philippines, and Myanmar (Burma) dominate the tropical market, while the U.S. is in the lead among Northern Hemisphere producers in the temperate/citrus market with France and Japan trailing far behind. In the Southern Hemisphere, Chile is the strongest exporter to China with South Africa and New Zealand doing well in some product sectors.

Apples and Pears: There has been a dramatic increase in demand for imported apples and pears in China since 2006 (trade figures use commodity code 080800, which also includes quinces). By 2009, import value increased to $54 million, as compared to $25 million in 2006. Both the U.S. and Chile benefited from the increase in demand, although much of Chile?s gains came from replacing off-season demand from New Zealand. New Zealand?s share fell from 50% in 2000 to 16% in 2006 and continued, reaching zero in 2009.

Despite the difference in shipping seasons, the U.S. also lost some market share to Chile. Chile?s promotional activity in China is limited, the primary reason for their gain in market share being low prices. As a Southern Hemisphere exporter, Chile also does not compete directly with Chinese producers, as does the United States. The recent entry of another Southern Hemisphere producer, Argentina (and potentially Brazil and South Africa in the future) into the Chinese apple market should not have a major impact on fresh U.S. exports in the fall and winter months, but could lead to a further erosion of overall U.S. market share.

Promotion is required to maintain U.S. competiveness against southern hemisphere competitors during certain months, as well as other potential competitors in the Northern Hemisphere, such as Japan and France, and other varieties of fruit.

Good packaging and promotional activities, along with high quality, have helped Washington Red Delicious apples to compete with Japanese Fujis in the high-end gift markets. One importer has noted that Red Delicious apples in packages with dragon emblems sell well as gifts for Chinese New Year, but that competitor nations are catching up on packaging.

 U.S. exporters need to work with importers to improve the appeal and tailor sizes of packages and fruit to the differing market demands in North and South China. Regional differences are significant: consumers in North China prefer large Red Delicious apples and larger gift packages, whereas buyers in South China tend to prefer smaller sized fruit and containers.

Citrus Fruit: Chinese imports of citrus have grown more slowly than apples, but the market has nonetheless expanded from $45 million in 2005 to $74 million in 2009. U.S. market share during that period rose from 58% to 84%. Major U.S. competitors South Africa and Thailand have seen their market share decline. Taiwan is still a minor exporter to Mainland China, but its citrus exports have been increasing and will likely be stronger still once the 13% tariff on its oranges is phased out.

Taiwan citrus peaks in freshness about the same time as U.S. oranges, making them a direct competitor. Should Brazil gain access for its fresh citrus in the future, the U.S. will acquire a major new competitor in China with very low prices. The Brazilian orange harvest runs July-January and can compete with fresh U.S. oranges in the later part of the season. Promotional activity by competitors remains minimal in this category.

Grapes, fresh or dried: China?s grape consumption has been rising 10% per year. Imports have also been rising rapidly since 2007, more than doubling from $81 million to $189 million in 2009. Chile and the U.S. collectively hold 80-90% of the market. The two countries have limited competition with seasons that do not greatly overlap. Peru has obtained a 5-10% share of the market in recent years putting it in third place.

Peru, which harvests grapes October-March, has the potential to compete with U.S. grape exports towards the end of the U.S. harvest season. However, it is China?s domestic production of 7.7 MMT of table grapes– up 8% in 2009/2010 – that competes most strongly with fresh U.S. table grapes. The expansion of cold transport and increased grape production in southern China has allowed fresh domestic grapes to reach the South China markets where U.S. table grapes have been very successful in the past. Competing with Chinese table grapes requires building new markets and making more consumers familiar with U.S. grapes.

Work with importers and retailers on fresh fruit handling is also important to maintain U.S. advantages in freshness and enable products to reach the rapidly growing cities of China?s interior. Stone Fruit: Chinese imports of stone fruit (code 080900, apricots, cherries, peaches, plums, and sloes) have soared from an average of less than $15 million in 2007 to $55 million in 2009. Much of this gain has come from rapid growth in Chilean plum and cherry exports to China. Total Chilean exports in this product category have gone from less than $1 million in 2006 to $40 million in 2009. Similar to the case for apples, pears, and quinces, Chile?s entry has more or less forced New Zealand out of this market. Chile benefits from a shipping season that allows it to supply China during the Spring Festival holiday when red fruit, such as cherries, are particularly popular.

The U.S. has also gained from growth in cherry exports. U.S. exports in the entire category have risen from $3 million to $15 million between 2006 and 2009. The taste, color, and large size of U.S. cherries make them popular as gifts. Similar to the case for Red Delicious apples, U.S. cherries can sell well when packaged as gifts for the annual “Dragon Boat Festival” (Duanwu Jie) in late summer. Similar to table grapes, the competitive strategy for fresh U.S. cherries is to expand the reach of their products in inland China. However, cold chain distribution systems and handling practices in inland China are largely inadequate. Competitor promotion has been limited in this category.



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