John Hey

The fickle finger of exchange rates has rocked the produce trade over recent months, turning the tables for global suppliers. This time last year, Southern Hemisphere exporters such as Australia and New Zealand were buoyed by a slump in their currencies against the surging US dollar. With most deals in Asia done in US dollars, or in local currencies that mirror its movement, the strong greenback made these suppliers much more competitive in the region. Alas, such exchange rate relief appears to have been a short-lived result of the financial crisis, which saw the hot money flee to the relative safety of the US dollar.

The greenback has since reversed course, leaving these Southern Hemisphere suppliers to watch in dismay as their currencies climb again. The contrasting fortunes are underlined in the November/December edition of Eurofruit Magazine, with the weaker US dollar boding well for shippers of California navels or Washington apples, but signalling a tough season for key Southern Hemisphere exporters getting into stonefruit or grapes.

It’s easy for exporters to get despondent about exchange rate volatility. After all, there’s little they can do to mitigate the impact, but global suppliers should draw consolation from the more steady trends in Asia’s produce trade that stand out in this issue. The growing purchasing power of Asia’s twin engines of economic growth – India and China – is becoming clear. If we take apples, for instance, domestic shortages in India are fuelling impressive import growth, while China’s hungry domestic market is pushing up prices and hitting its exports. Although China’s supply footprint across South East Asia remains large, its internal demand and rising prices are creating opportunities for other global suppliers to the region’s markets where consumers are broadening their horizons.

In another encouraging trend, suppliers and buyers are now responding to these opportunities by building partnerships to ensure products are effectively promoted to the consumer. The modern retail trade is a good platform to introduce new items, but Asian retailers need supplier-support to realise the benefits to their bottom line of selling a high-value product like cherries for instance. Whether it be Zespri’s kiwifruit push in Malaysia, Australian stonefruit promotions in Thailand or a generic campaign for US fruits in Indonesia, a little supplier push can trigger the consumer pull that takes the game beyond a price contest decided by the fickle finger of exchange rates.

John Hey

These are tough times for China’s fruit export sector. Much of the pressure is coming from a hungry domestic market, which has in certain cases driven up prices to the point where export hardly seems like a risk worth taking. Throw in rising production and compliance costs, more price-conscious export markets and a strong currency that is squeezing returns – and you can see why fewer suppliers are taking that risk nowadays. It’s a far cry from a decade ago when China was leveraging its labour cost advantage to foray into some of the world’s most demanding markets, notably with its bagged Fuji apples to Europe. Back then, the export sector enjoyed strong government support, but the funding focus now appears to have switched to spurring domestic consumption.

Or has it? Just as China’s role in the international marketplace appears to be receding amid rising costs and lack of innovation, there’s a vast amount of work going on in research institutes across the country on plant genomics and varietal development that could redefine its direction as a supplier in the future.

With its diverse climate, low production costs and large agricultural base, China is often seen by international plant breeders as an opportunity to introduce their new and/or superior varieties to produce higher value products, but the most exciting varietal developments appear to focus on what could come out of China itself, rather than what might be brought in. China’s huge biodiversity and rich repository of germplasm make it an Aladdin’s cave for finding and developing new products. And China is ploughing remarkable resources into breeding and selection that are well funded, managed and targeted, reflecting the government’s policy to boost rural wealth.

At a time when varietal development in many parts of the world is stunted by lack of funding or resources, China’s major focus on this field, and the opportunity for commercialisation of new varieties, present good scope for foreign entities to engage with these research bodies for mutual benefit. Government support for initiatives that involve foreign funding tends to be strong, particularly when they’re designed to lift rural incomes. With their capacity to create wealth, new varieties fit the bill, and could replace low labour costs as one of China’s next great competitive advantages.

John Hey

This month marks the biggest-ever edition of Asiafruit Magazine – a bumper issue to mark what promises to be another bumper show for ASIA FRUIT LOGISTICA and Asiafruit Congress. It may seem like a daunting task producing a magazine of such large proportions, but we had no problems filling the pages, so great is the volume of news pouring forth from the world’s fastest growing market for fresh fruit and vegetables, and so strong is the interest among global suppliers and buyers vying for a share of the trade.

Many of them will be out in force at ASIA FRUIT LOGISTICA and Asiafruit Congress. Australia, whose exports have enjoyed a strong showing in Asia this year, has expanded its pavilion by a third. Other key trading nations such as the US, China, France and Holland have also beefed up their presence while Chile and Brazil are making their debut appearances – and our TRADE CHILE Special brings you in-depth coverage of the country’s growing focus on Asia. These are just a few of the 30 nations that will be represented among the 200-plus exhibitors. They will meet with trade visitors from across the world looking to source new products, meet new customers and find out where the market is moving.

Visitors to the show will find plenty on offer. From a consumer market perspective, most Asian nations have weathered the economic crisis well and present excellent marketing opportunities. China and Vietnam are two good examples profiled in the magazine. Asia’s aspirational consumers are trading up in their produce purchases, a trend revealed by the rising demand for products such as seedless grapes, cherries and organics. And the region’s growing modern retail trade is a great place to capture these shoppers – as our interviews with senior buyers from ParknShop, Tops and NTUC Fairprice show. Asia also holds big sourcing potential, and this edition provides a flavour of the myriad of products on offer, from staples like Chinese apples through Thai exotics and Vietnamese dragon fruit to newer lines like pomegranate arils from India. Indeed, opportunities abound on both sides. Of course there are challenges to overcome and there is a lot to learn, and the Asiafruit Congress plays a key role as a forum to debate the big issues.

Asia is vast, vibrant and diverse – a bit like the latest edition of Asiafruit Magazine – so part of the challenge is knowing where to start. I hope I’ve given you some guidance on the edition, and that the trade show provides you with the pathway to the markets – those that commit to them are bound to reap the benefits.

John Hey

Japan’s morning banana diet craze (page 30 of this month's Asiafruit Magazine) which has seen the fruit flying off retail shelves for eight months now is an intriguing story. While there is something uniquely Japanese about the phenomenon, it has a broader relevance when it comes to marketing to consumers in Asia. The diet craze shows the extent to which fruit is part of people’s lifestyles in Asia and how consumers are more engaged with dietary concerns. Clearly if marketers can identify specific health benefits in their product that respond to these concerns and can promote them effectively, there are major gains to be achieved with this receptive audience.

Having said that, the banana diet craze occurred more due to luck than design. And it was via Japanese social networking site ‘Mixi’ that the word spread so fast. Copycat diets launched for other fruits have yet to achieve the same impact, and engineering such a craze is a hit and miss business.

Other methods of marketing to consumers in Asia have a more consistent success rate, such as training retail store managers on how to handle, display and promote your product or in-store tastings. This is the type of work the California Table Grape Commission conducts in many Asian markets, and a case example is with the Indonesian retail chain AlfaMart, which saw a substantial growth in California grape sales last year (page 19 of this month's Asiafruit Magazine).

AlfaMart operates convenience stores, and is adding new ones at a rapid rate, with more and more of them stocking California grapes. Indeed, with a profusion of convenience stores opening across Asia and many carrying produce in their range, there are opportunities for suppliers to extend their consumer reach by working with such chains.

Without doubt the Asian markets offer important growth opportunities for global suppliers, particularly in the current economic climate. And there is significant latent consumer demand in the region to be tapped through marketing and promotion. Alas, this is a much-neglected area for most suppliers and supply countries to Asia.

A fragmented supply base and budgetary constraints are the often-cited reasons for this lack of activity. The reality is that all too often suppliers show no interest in following their product through the supply chain, and prefer to divest ownership at port of arrival. With a more structured approach, they would begin to open up a whole new market that comes from getting closer to the consumer. But first they must find the right trade partners and understand the market. Events like ASIA FRUIT LOGISTICA and Asiafruit Congress are the best place to start.

John Hey

On a recent visit to India, I was struck by an innovative cold chain solution for fresh produce retailing. It consists of a refrigerated push-cart for the street vendors that dominate fruit and vegetable sales in the country. Based on a thermal management system using passive cooling, these modernised trolleys are fitted with battery-charged refrigerated plates designed to help the street vendor deliver the best produce to the consumer, often to their doorsteps.

Here was a cost-effective cold chain service tailored to Indian conditions, something that has eluded the big corporates at the other end of the retail scale who, until lately, had been throwing up supermarkets at a dizzying rate across the country. When these players burst onto the scene two years ago, they were going to become the panacea for the problems that plague India’s fruit and vegetable sector. With their grand plans to develop supply chains, they would forge a direct “farm-to-fork” model that would slash huge wastage levels, raise farmer incomes and close the “service” gap for the Indian consumer. Pundits confidently predicted that India’s “unorganised” retail market was about to be transformed by the “modern trade”.

After all the hype and the hoopla, the dream seems to have turned sour, with many big players in retreat. Managing fresh produce supply chains has proven to be a lot more tricky than they bargained for. With India’s fragmented production base, buying direct from the farmer is fraught with difficulty, forcing retailers to rely on the intermediaries they sought to remove. The realisation has dawned that these middlemen often add value, not cost, and can perform tasks far more nimbly and cheaply than they can. The so-called organised retail sector is now in disarray, and must go back to the drawing board to find a cost-efficient sourcing model tailored to India’s complex conditions. For instance, the cost of eliminating wastage through forging an integrated cold chain, as many players set out to do, outstrips that of alleviating wastage levels through just-in-time supply chain management – surely a more realistic model for retailers.

In failing to master the supply chain, organised retail has failed to win over Indian consumers, who continue to cross the road to buy their fresh fruit and vegetables from the street vendor. Indeed, rather than India’s retail sector learning lessons from Western-style supermarkets, it appears that India has a lesson for the rest of the world – one that is particularly pertinent to produce – about the role the little man can play along the supply chain, not least in servicing the consumer.