Asian markets on brink of major changes
01 July 2008 14:25 |
Permalink
John Hey
Hong Kong is often described as one of Asia's most international cities, so as we gear up for the Asiafruit Congress there, it's worthwhile glancing at what impact some of the major “global” issues of the day – from the credit crunch to rising food costs – are having on Asia's fresh produce business.
The global food “crisis” has been keenly felt across Asia, where soaring prices of staples like rice and wheat are driving inflation rates. Rising living standards in India and China are often cited as one of the key factors in upsetting the food supply/demand equation, and the produce trade has also begun to witness their power as consumer markets “kick in”. Over recent years, global fresh produce suppliers have been casting nervous glances towards China and India, anxious that these powerhouses of production would become marauding export giants, but the latest signs are that both countries will have their work cut out to meet internal demand for fruit and vegetables in the future.
While the rising cost of staple foods such as rice stands to affect spending on high-value fruits across Asia, recent trends reveal that many consumers are “trading up” in their produce purchases, as the rising sales of seedless versus seeded grapes bear testimony. Further evidence of more sophisticated consumer demands can be found in the nascent interest in organic produce across the region. Traditionally, 'organic' has barely registered on consumers' radars, and significant hurdles remain to market development. However, food safety concerns and health trends are spawning interest in the concept. The environment too could become more of a factor in people's purchasing decisions in the future, as events like the Beijing Olympics, branded by the local government as “a clean-air event”, raise awareness of the dire problems at stake.
As for the credit crunch, Asia has weathered the impact of soaring inflation to shrug off the worst effects of this global malaise to date, but surging fuel and energy prices pose a serious economic threat. Low energy and shipping costs have underpinned the growth of China and Asia's other export-based economies, so the recent price hikes, coupled with weakening global demand, could very easily undermine the region’s manufacturing models. When it comes to the fresh produce trade, rising transport costs may render more distant origins of imported fruits, such as Latin America, a less attractive option for Asian buyers, while making the increasingly affluent domestic market a more attractive option for producers in China and India.
Clearly, the Asian markets are on the cusp of some profound changes that challenge many of the “received” ideas about the region. And such rapid evolution is sure to generate much lively debate at the Asiafruit Congress in Hong Kong.
Hong Kong is often described as one of Asia's most international cities, so as we gear up for the Asiafruit Congress there, it's worthwhile glancing at what impact some of the major “global” issues of the day – from the credit crunch to rising food costs – are having on Asia's fresh produce business.
The global food “crisis” has been keenly felt across Asia, where soaring prices of staples like rice and wheat are driving inflation rates. Rising living standards in India and China are often cited as one of the key factors in upsetting the food supply/demand equation, and the produce trade has also begun to witness their power as consumer markets “kick in”. Over recent years, global fresh produce suppliers have been casting nervous glances towards China and India, anxious that these powerhouses of production would become marauding export giants, but the latest signs are that both countries will have their work cut out to meet internal demand for fruit and vegetables in the future.
While the rising cost of staple foods such as rice stands to affect spending on high-value fruits across Asia, recent trends reveal that many consumers are “trading up” in their produce purchases, as the rising sales of seedless versus seeded grapes bear testimony. Further evidence of more sophisticated consumer demands can be found in the nascent interest in organic produce across the region. Traditionally, 'organic' has barely registered on consumers' radars, and significant hurdles remain to market development. However, food safety concerns and health trends are spawning interest in the concept. The environment too could become more of a factor in people's purchasing decisions in the future, as events like the Beijing Olympics, branded by the local government as “a clean-air event”, raise awareness of the dire problems at stake.
As for the credit crunch, Asia has weathered the impact of soaring inflation to shrug off the worst effects of this global malaise to date, but surging fuel and energy prices pose a serious economic threat. Low energy and shipping costs have underpinned the growth of China and Asia's other export-based economies, so the recent price hikes, coupled with weakening global demand, could very easily undermine the region’s manufacturing models. When it comes to the fresh produce trade, rising transport costs may render more distant origins of imported fruits, such as Latin America, a less attractive option for Asian buyers, while making the increasingly affluent domestic market a more attractive option for producers in China and India.
Clearly, the Asian markets are on the cusp of some profound changes that challenge many of the “received” ideas about the region. And such rapid evolution is sure to generate much lively debate at the Asiafruit Congress in Hong Kong.
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Can Japan’s ‘designer’ fruit ride the
Cool wave?
01 May 2008 12:43 |
Permalink
John Hey
In his first speech to the Diet (parliament), Japan’s former PM Shinzo Abe pledged to formulate the Japanese Cultural Industry Strategy, which would “boost the competitiveness of areas that represent the good traits and uniqueness of Japan and present them to the world”. It’s more likely he was thinking of “areas” like film, fashion, art or animation rather than fruit. For the country’s role as a cultural exporter and global trendsetter has flourished in recent times. The leading manufacturer of goods like cars, cameras or stereos is now fast becoming the world’s foremost creator of “Cool” – from Pokémon to Issey Miyake.
But Mr Abe’s words might easily be applied to the country’s fresh fruits, which represent a form of art and are certainly “unique”. In fact the Japanese government is now on a mission to “present its fruits to the world” through trade fairs and other promotional vehicles. This push forms part of its broader multi-million dollar campaign to double the country’s food – and fruit – exports within five years.
It’s an ambitious target, and sceptics have singled out the sky-high prices of Japanese fruits as a sticking point to their catching on in world markets. But these exceptional prices reflect the exceptional methods used in growing the fruit, which often result in products with exceptional appearance and flavour. Japanese growers spend considerable time and energy creating better and better varieties, as well as carefully nurturing each piece of fruit on the tree or vine. The result is a luxury product like no other, which explains why it is so often presented as a gift.
With the growing purchasing power of Asian economies, and consumers elsewhere in the world increasingly seeking out something unique in a commodity-led market, people may well be ready to pay the premium for this delicious ‘designer’ fruit.
Indeed, the major challenge is unlikely to lie so much in market acceptance as in the operational and logistical issues of getting this fruit to market. The industry has to establish an efficient supply chain to service new markets beyond the tried and tested destinations like Taiwan and Hong Kong. For all the money the government is ploughing into the export push, it is unlikely to achieve its goals unless the actual growers and exporters can be engaged in a coordinated strategy. With their traditional focus on the domestic market where consumers still pay a premium for their prized locally-grown fruits, few growers are geared up for export, so a change in mentality is required.
Interestingly, a key driver of the government’s campaign is to revitalise rural Japan, where an ageing population of farmers is threatening the country’s ability to supply consumer demand for local produce. Even if the campaign falls short of its export target, it may well succeed in lifting local supplies at a time when anxieties about the safety and integrity of imported products appear to be as strong as ever.
In his first speech to the Diet (parliament), Japan’s former PM Shinzo Abe pledged to formulate the Japanese Cultural Industry Strategy, which would “boost the competitiveness of areas that represent the good traits and uniqueness of Japan and present them to the world”. It’s more likely he was thinking of “areas” like film, fashion, art or animation rather than fruit. For the country’s role as a cultural exporter and global trendsetter has flourished in recent times. The leading manufacturer of goods like cars, cameras or stereos is now fast becoming the world’s foremost creator of “Cool” – from Pokémon to Issey Miyake.
But Mr Abe’s words might easily be applied to the country’s fresh fruits, which represent a form of art and are certainly “unique”. In fact the Japanese government is now on a mission to “present its fruits to the world” through trade fairs and other promotional vehicles. This push forms part of its broader multi-million dollar campaign to double the country’s food – and fruit – exports within five years.
It’s an ambitious target, and sceptics have singled out the sky-high prices of Japanese fruits as a sticking point to their catching on in world markets. But these exceptional prices reflect the exceptional methods used in growing the fruit, which often result in products with exceptional appearance and flavour. Japanese growers spend considerable time and energy creating better and better varieties, as well as carefully nurturing each piece of fruit on the tree or vine. The result is a luxury product like no other, which explains why it is so often presented as a gift.
With the growing purchasing power of Asian economies, and consumers elsewhere in the world increasingly seeking out something unique in a commodity-led market, people may well be ready to pay the premium for this delicious ‘designer’ fruit.
Indeed, the major challenge is unlikely to lie so much in market acceptance as in the operational and logistical issues of getting this fruit to market. The industry has to establish an efficient supply chain to service new markets beyond the tried and tested destinations like Taiwan and Hong Kong. For all the money the government is ploughing into the export push, it is unlikely to achieve its goals unless the actual growers and exporters can be engaged in a coordinated strategy. With their traditional focus on the domestic market where consumers still pay a premium for their prized locally-grown fruits, few growers are geared up for export, so a change in mentality is required.
Interestingly, a key driver of the government’s campaign is to revitalise rural Japan, where an ageing population of farmers is threatening the country’s ability to supply consumer demand for local produce. Even if the campaign falls short of its export target, it may well succeed in lifting local supplies at a time when anxieties about the safety and integrity of imported products appear to be as strong as ever.
Rise in costs signal change in China's role
01 January 2008 16:53 | Permalink
John Hey
Is cheap Chinese produce set to become a thing of the past? Is the country losing its competitive advantage as an exporter? Certainly, a sharp increase in the country’s fresh produce prices over the past year has led people to wonder.
The farm-gate price of Chinese Fuji apples, which have come to symbolise the country’s rapid rise as a produce exporter, is up by around 30 per this year. When combined with a jump in seafreight costs, this is leading to market prices in Europe that are 50 per cent higher than last year, and resulting in limited demand. While a drop in this season's apple production partly explains the price hike, there are other forces at work here, and apples are not an isolated case.
Soaring food prices drove Chinese inflation to its highest level in more than a decade in October, with fresh vegetable prices leaping 30 per cent from a year earlier. As the consumer price index keeps climbing, suppliers note that the cost of everything is going up in China, including that of key inputs like fertilisers and packaging. In particular, the cost of labour is rising at double-digit rates. The appreciation of the Chinese currency, the yuan, and sharp increases in shipping costs are further eroding the country’s competitive edge in export markets, while the government’s move to tighten quarantine export controls has caused complications for shippers. At the same time, domestic demand is taking off as Chinese incomes rise. And speculation among traders is only bumping up prices as they store fruit in anticipation of a hot local market for the upcoming Olympic games.
So what does this all mean for China's role as a fresh produce exporter? While a slowdown in growth rates appears inevitable, the country's supply role is also changing. China has made inroads into export markets on a low-cost strategy, often gaining "share of throat" without increasing "share of wallet". But recent figures show that total fruit export volumes plateaued in 2006, while values increased 22 per cent, reflecting rising costs and a greater focus on quality and value-adding.
From the perspective of fruit imports to China, the rising cost of domestic fruit should have a positive impact in maintaining overall market prices at high levels. However, this is likely to spur more Chinese producers to explore the domestic market and to raise their quality standards, ultimately intensifying competition. As a result, we can expect to see a hardening of the trend whereby imported fruit boasting outstanding quality commands a handsome premium, but any product that is slightly "off-top" takes a big step down on price, as many suppliers have found out to their cost over recent months.
Is cheap Chinese produce set to become a thing of the past? Is the country losing its competitive advantage as an exporter? Certainly, a sharp increase in the country’s fresh produce prices over the past year has led people to wonder.
The farm-gate price of Chinese Fuji apples, which have come to symbolise the country’s rapid rise as a produce exporter, is up by around 30 per this year. When combined with a jump in seafreight costs, this is leading to market prices in Europe that are 50 per cent higher than last year, and resulting in limited demand. While a drop in this season's apple production partly explains the price hike, there are other forces at work here, and apples are not an isolated case.
Soaring food prices drove Chinese inflation to its highest level in more than a decade in October, with fresh vegetable prices leaping 30 per cent from a year earlier. As the consumer price index keeps climbing, suppliers note that the cost of everything is going up in China, including that of key inputs like fertilisers and packaging. In particular, the cost of labour is rising at double-digit rates. The appreciation of the Chinese currency, the yuan, and sharp increases in shipping costs are further eroding the country’s competitive edge in export markets, while the government’s move to tighten quarantine export controls has caused complications for shippers. At the same time, domestic demand is taking off as Chinese incomes rise. And speculation among traders is only bumping up prices as they store fruit in anticipation of a hot local market for the upcoming Olympic games.
So what does this all mean for China's role as a fresh produce exporter? While a slowdown in growth rates appears inevitable, the country's supply role is also changing. China has made inroads into export markets on a low-cost strategy, often gaining "share of throat" without increasing "share of wallet". But recent figures show that total fruit export volumes plateaued in 2006, while values increased 22 per cent, reflecting rising costs and a greater focus on quality and value-adding.
From the perspective of fruit imports to China, the rising cost of domestic fruit should have a positive impact in maintaining overall market prices at high levels. However, this is likely to spur more Chinese producers to explore the domestic market and to raise their quality standards, ultimately intensifying competition. As a result, we can expect to see a hardening of the trend whereby imported fruit boasting outstanding quality commands a handsome premium, but any product that is slightly "off-top" takes a big step down on price, as many suppliers have found out to their cost over recent months.
New varieties to spice up kiwifruit category
01 November 2007 15:22 | Permalink
John Hey
TURN to our kiwifruit feature this month and you will read about some of the new varieties that are generating excitement in the category. Zespri Gold excepted, the global kiwifruit market has been something of a ‘monoculture’ up until today, with green-fleshed Hayward by far the dominant variety. But the sector looks set for a burst of innovation and major diversification over the next decade as new varieties with gold/yellow, red and other coloured flesh emerge onto the scene to rival or compliment Hayward.
Many of these varieties are originating from China, where multiple strains grow naturally in the mountains and are brought to horticultural institutes for development. Major foreign interest and investment in nurturing and commercialising such cultivars is now beginning to produce results with the launch of varieties bearing interesting points of difference to those currently on the market, whether it be a striking appearance when cut open, higher sugar levels or enhanced health benefits.
While they still only account for a fraction of total production, the big commercialisation plans for these varieties mean it will be interesting to see what influence they have on the global market. In China itself, securing adequate protection of privately-owned varieties to ensure controlled market development is always going to be a challenge, particularly where cultivars have already been accessible to growers before plant variety rights were secured. On a broader scale, such new varieties must also live up to expectation levels in the competitive international market, especially in terms of factors such as shelf life.
As Zespri notes, the investment in research, development and commercialisation of a new variety is hefty. Indeed, it took several years for the New Zealand kiwifruit marketer to come up with Zespri Gold. Despite rumours that it is well on its way to developing a red kiwifruit variety, Zespri remains conspicuously quiet on its plans, and it may be waiting for the right time to launch such a cultivar while Gold continues to ride high in the marketplace.
Zespri does, however, sound a note of concern that there will be new varieties that do not have the characteristics to satisfy the trade or consumers in the short-term. While the recent burst of innovation should expand the kiwifruit category, it could also destabilise it. After all, variable eating quality remains one of the key hurdles to realising the great growth potential that exists for kiwifruit consumption. Before Hayward is branded a tired, commodity variety, we should also take heed of the distinct quality grades within the Hayward market, the difficulties consumers have discerning them when fruit ‘looks’ so similar, and the room for improvement that this reveals.
TURN to our kiwifruit feature this month and you will read about some of the new varieties that are generating excitement in the category. Zespri Gold excepted, the global kiwifruit market has been something of a ‘monoculture’ up until today, with green-fleshed Hayward by far the dominant variety. But the sector looks set for a burst of innovation and major diversification over the next decade as new varieties with gold/yellow, red and other coloured flesh emerge onto the scene to rival or compliment Hayward.
Many of these varieties are originating from China, where multiple strains grow naturally in the mountains and are brought to horticultural institutes for development. Major foreign interest and investment in nurturing and commercialising such cultivars is now beginning to produce results with the launch of varieties bearing interesting points of difference to those currently on the market, whether it be a striking appearance when cut open, higher sugar levels or enhanced health benefits.
While they still only account for a fraction of total production, the big commercialisation plans for these varieties mean it will be interesting to see what influence they have on the global market. In China itself, securing adequate protection of privately-owned varieties to ensure controlled market development is always going to be a challenge, particularly where cultivars have already been accessible to growers before plant variety rights were secured. On a broader scale, such new varieties must also live up to expectation levels in the competitive international market, especially in terms of factors such as shelf life.
As Zespri notes, the investment in research, development and commercialisation of a new variety is hefty. Indeed, it took several years for the New Zealand kiwifruit marketer to come up with Zespri Gold. Despite rumours that it is well on its way to developing a red kiwifruit variety, Zespri remains conspicuously quiet on its plans, and it may be waiting for the right time to launch such a cultivar while Gold continues to ride high in the marketplace.
Zespri does, however, sound a note of concern that there will be new varieties that do not have the characteristics to satisfy the trade or consumers in the short-term. While the recent burst of innovation should expand the kiwifruit category, it could also destabilise it. After all, variable eating quality remains one of the key hurdles to realising the great growth potential that exists for kiwifruit consumption. Before Hayward is branded a tired, commodity variety, we should also take heed of the distinct quality grades within the Hayward market, the difficulties consumers have discerning them when fruit ‘looks’ so similar, and the room for improvement that this reveals.
Quality at what price?
01 September 2007 10:37 | Permalink
John Hey
ONE of my personal highlights from the recent ASIA FRUIT LOGISTICA trade fair in Bangkok was sampling the delectable array of fruits in the Japanese pavilion. Not only did these items look amazing, they set the taste buds racing, whether it be muskmelons with a melting sweetness or purplish-black, perfectly-formed Pione grapes bursting with a rich flavour. If only all fruits tasted this good, I thought, the industry might not be facing such a challenge to boost global consumption! I was even more blown away, however, when told that the melon I was munching would cost me upwards of US$100 in Japan, or the pretty peach US$10 each. Makes five-a-day a bit of a challenge!
Those Japanese fruits are notoriously expensive, largely due to the extraordinary lengths that growers go to in nurturing their crops. Back in the conference room, the issues of price and quality kept cropping up at the Asiafruit Congress. Will Japanese consumers still pay a premium for fresh produce? Some thought so; others not. Are the expanding supermarket retailers in Asia prepared to share in the cost of programmes to promote socially responsible management practices or food safety by paying more for the produce they buy? Has China’s method of winning market share on low price forced it into a commodity trap or is it shifting to more value addition? And what is more important to the Asian consumer: quality or price?
“Price, price, price” was the answer from one respondent in a survey of Asia’s fresh produce business conducted by Asiafruit Magazine, the results of which were presented at the Asiafruit Congress by Rabobank. But some delegates countered that Asian consumers are actually value-conscious in general, which is not surprising when they often have an abundance of inexpensive, good quality local fruits at their disposal.
Delegates could find an answer to this question of price or quality in Bangkok itself on a tour of the city’s diverse range of retail outlets. At the upmarket Central Food Hall visited by delegates, there were premium-quality fruits selling at prices to match. And while this store obviously appeals to the top tier of society, it nevertheless reflects the segmentation that is increasingly being seen in Asian markets as affluence grows in the region. Thailand is a market where low-priced, “acceptable” quality Chinese fruit has made major inroads, but it is also one where high-quality fruits from sources worldwide are finding favour by offering new flavours to the aspiring consumer.
ONE of my personal highlights from the recent ASIA FRUIT LOGISTICA trade fair in Bangkok was sampling the delectable array of fruits in the Japanese pavilion. Not only did these items look amazing, they set the taste buds racing, whether it be muskmelons with a melting sweetness or purplish-black, perfectly-formed Pione grapes bursting with a rich flavour. If only all fruits tasted this good, I thought, the industry might not be facing such a challenge to boost global consumption! I was even more blown away, however, when told that the melon I was munching would cost me upwards of US$100 in Japan, or the pretty peach US$10 each. Makes five-a-day a bit of a challenge!
Those Japanese fruits are notoriously expensive, largely due to the extraordinary lengths that growers go to in nurturing their crops. Back in the conference room, the issues of price and quality kept cropping up at the Asiafruit Congress. Will Japanese consumers still pay a premium for fresh produce? Some thought so; others not. Are the expanding supermarket retailers in Asia prepared to share in the cost of programmes to promote socially responsible management practices or food safety by paying more for the produce they buy? Has China’s method of winning market share on low price forced it into a commodity trap or is it shifting to more value addition? And what is more important to the Asian consumer: quality or price?
“Price, price, price” was the answer from one respondent in a survey of Asia’s fresh produce business conducted by Asiafruit Magazine, the results of which were presented at the Asiafruit Congress by Rabobank. But some delegates countered that Asian consumers are actually value-conscious in general, which is not surprising when they often have an abundance of inexpensive, good quality local fruits at their disposal.
Delegates could find an answer to this question of price or quality in Bangkok itself on a tour of the city’s diverse range of retail outlets. At the upmarket Central Food Hall visited by delegates, there were premium-quality fruits selling at prices to match. And while this store obviously appeals to the top tier of society, it nevertheless reflects the segmentation that is increasingly being seen in Asian markets as affluence grows in the region. Thailand is a market where low-priced, “acceptable” quality Chinese fruit has made major inroads, but it is also one where high-quality fruits from sources worldwide are finding favour by offering new flavours to the aspiring consumer.