China: Opportunities & Challenges for Produce from South America Mabel Zhuang Director, M.Z. Marketing Communications PMA China Consultant
Agenda A Little Background: China s Economy Overview Setting the Context: China s Fruit Imports The Opportunities for South American Produce to China
China s GDP in 2011 has reached $7.5 trillion with annual growth rate at 9.2% China has surpassed Japan and become the second largest economy over the world only next to the United States The predicted growth rate for would be 7.5%
Map of China (Major Ports)
China s Production of Food & Agriculture Products and World Rank
China Opportunities - The Magic of 22/7 China has 22% of the worlds population yet only 7% of the world s arable land. Over 200 cities in China with a population 1+ million people only 35 in all of Europe In early 2012 became the largest grocery market in the world Third largest ag importer and moving up
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Chinese Imports are Outpacing Exports Proportion of China's food trade volume in the world's total 6.00% 5.00% 5.04% 4.00% 3.95% 3.00% 2.00% 1.00% 0.00% Export Import Source: WTO
Rising Middle Class in China Import Opportunities
In short, here is the opportunity for suppliers Net food import Initial Industrialization period Interim industrialization period Late industrialization period Time Net food export Reform and opening up China joined WTO Food trade deficit begins Now Source: COFCO
China Fruit Imports (2010 [blue] vs 2011 [red]) Imports in units of 100,000 dollars Thailand Chile Philippines Vietnam USA others New Zealand Peru Indonesia South Africa Sweden Taiwan Province 0,0 100,0 200,0 300,0 400,0 500,0 600,0 700,0 Source: China Ministry of Commerce
2011 Imported Fruit based on value 2% 2% 3% 4% 5% 18% 16% banana grape longan durian dragon fruit 13% cherry apple orange kiwi 13% plum 7% watermelon others 8% 9%
Future Opportunities Fruit and vegetable imports well positioned especially for branded products. Large and growing middle class Domestic production costs rising Willingness to source globally
Consumer Fruit Consumption Trend Daily consumption habits & recognition of its general health benefits Fruits used as a major gift item for holidays, family visits, and specials occasions Preference over imported fruits and more choices of varieties compared with two decades ago Growing concerns over the food safety
South American Fruit Export to China, 2011 Statistics (Source: Ministry of Commerce, PRC) Country Import Volume(kg) Import Value($) Percentage Chile 172,693,095 451,858,045 89.84% Peru 15,777,084 43,387,978 8.63% Ecuador 9,105,773 5,475,537 1.09% Argentina 874,517 2,206,379 0.44% Columbia 19,237 40,236 0.01% Total 198,469,706 502,968,175
Peru Fruit Export to China In 2011, Peru achieved growth of 126%, which increased its market share from 1.2 to 1.7 percent. Peru is the third largest exporter of grapes to China after Chile and the U.S.
Chile Fruit Export to China Chile is the number one supplier of cherries and grapes to China, and one of the major suppliers of apples along with the U.S. In 2011, Chile s fruit export to China has enjoyed a growth rate at 78.5%, increasing their market shares to 18% next to Thailand only.
Permissible Fruits to China Import country Panama Ecuador Colombia Costa Rica Catalog Bananas Bananas Bananas Bananas Uruguay Argentina Chile Peru Citrus (mandarin, orange, grapefruit, lemon) Citrus (orange, grapefruit, tangerines and their hybrids), apples, pear Kiwifruit, apples, grapes, plums, cherries, blueberry Grapes, mangoes, citrus (tangerines, orange, grapefruit, lime)
South America Advantages Good bilateral relationship More market access Counter Season Low Tariff for fruits (Peru 5.2%, Chile 3.9%) Competitive Price Improved Quality Strong Interest from the Chinese Trade
China Challenges Language & distance barriers Low consumer awareness-south American Fruits often labeled as from other origins Under-developed cold chain infrastructure
Fruit Distribution in China Export to H.K. still dominates but declined last year due to tight government control Jiangnan Wholesale Market in Guangzhou is the largest for imported fruit in China, distributing to many secondary wholesale markets in China Direct Import from major wholesale markets with on-site CIQ office: -Shanghai Longwu Fruit Wholesale Market - Shanghai Agricultural Products Wholesale Market (SAP) Importers on the wholesale market makes the purchasing decision, while the market provides logistic service.
Vendor s booth Wholesale Market in Shanghai
Fruit Retail in China Modern Retailers Chains, like Wal-mart, Tesco, Metro, Carrefour, along with local chains mostly sourcing from whole-sale market Mom & Pop Stores/Wet Market Specials channels: --Fruit Shop Chain Stores growing fast --On-line Fruit Shops with home delivery ---TV shopping Food Service: Restaurants, Bakeries & Juice Bar
The First China Fruit Chain Store Summit
Fruit Juice Bar
Import Documents Required Phytosanitary Certificate Certificate of Origin Invoice Packing List Bill of Lading Non-wood packing materials certificate or Fumigation Certificate if wooden Pallet used
Quarantine Requirement The only stricter quarantine requirement to Chilean fruit: Pallet must bear the pallet number and the pallet number must show on the phytosanitary certificate for air shipments. Cold Treatment: only to fruits from V & RM, conditions normally 0.5 degree Celsius for 15 days. Ocean - Air: this is forbidden to all origin, but other origin does not use this transportation, while Chile does. On the site inspection, the same to all origins.
Projection for Future Increased consumption for both domestic and imported Fruits, per capital fruit consumption is expected to increase from 40 kilos to 48 kilos in 2020. More direct import to mainland China. Volume will continue to increase, but the growth rate will slow down. High value products will have good future, like blueberries.
Some Suggestions Commitment to the Market & Exploration of New development Trade Education-seminars, trade delegation, trade shows in China Consumer Promotion & Branding-retail promotion, Advertising, P.R., Social Media Chinese-speaking supporting staff on the market
PMA in China Extensive Research & Market Development Strong relations with Chinese associations and importers PMA Roundtable with China Produce Industry, June, 2012 Two-day Produce Cold China Training, Sep., 2012 Chinese Buyer s Delegation to Fresh Summit Presentation at the Logistic Forum of China Chain Store and Franchise Association s annual convention Presentation at China Fruit and Vegetable Trade Fair Engagement with American/Chilean Embassies in China Global Development Council Meeting in Shanghai, March,2013
Thank You! For More Information: Mabel Zhuang E-mail: mabel@mzmc.com.cn www.mzmc.com.cn