Market Information
Asia Pacific

The Fruit Market in the Yangzi Delta region

June 2003

Canadian Consulate in Shanghai
Suite 604, Four Shanghai Centre
1376 Nanjing Xi Lu
Shanghai, China
200040
Tel: (86-21)6279-8400
Fax: (86-21) 6279-7456
E-mail: henry.deng@shanghai.gc.ca
Internet: http://www.shanghai.gc.ca

Market Overview

The fruit market is changing and fast restructuring, Yearly, fruit consumption increases, production improves and varieties increase. The Chinese consumer is increasingly health conscious and view fruit as the nutritious alternative. As a result, fruit stalls are lined with various assortments of fruit all catering to meet the market need.

Shanghai is an excellent market for imported fruit. The Shanghai residents have an average annual disposable income of $2258.48 (nearly double the national average), which has been increasing by roughly 10% a year. Domestic demand for fruit has risen proportional to China’s increasing income levels. The average Shanghai resident spends $40.70 on fruit purchases, also twice the national average of $22.09. In addition, the city houses a substantial expatriate community and an established five-star hotel and restaurant industry. Within this target group, there is a demand for high-quality fruit at all times of the year.

China National Statistics

Canada’s exports of edible fruits and nuts reached $2.04 million Canadian dollars in 2002, a significant increase from its 2001 level of $0.8 million. Frozen fruit was the largest and fastest growing segment. Of the total imports, none arrive at the port of Shanghai. The frozen fruit arrives in Qingdao and Nanjing (capital of Jiangsu province), and the fresh fruit in Guanzhou. Popular Chinese exports to Canada include citrus fruit, apples, pears, and frozen fruit.

World Trade Statistics

Domestic fruit largely captures fruit purchases and provides intense competition to imported varieties. China is the largest consumer and producer of fruit in the world. Their vast geographic territory allows for a wide variety of fruit to be produced from apples in the north, to mangoes and bananas in the south. China yields 66 580 000 tons of fruit annually. Of which, Shanghai accounts for 267 000 tons, Zhejiang province for 2 506 000 tons, Jiangsu province for 1 953 000 tons, and Anhui for 1 471 000 tons. In apple production alone, it is estimated that China produces 1.5 billion bushels a year, approximately half the world’s production. Farmers produce 12 million tons of oranges annually.

Despite the large amounts, the fruit industry lacks the processing technology and sophistication to maximise their production. Although recent years have witnessed drastic improvement, the majority of the fruit does not reach the market or the end-consumer. The appearance of foreign competition in the market and China’s accession to the World Trade Organisation (WTO) is forcing local producers to adapt their process and to enhance competition.

In the eastern coastal cities, as Shanghai, imported fruit has gained market share. Imported fruit appeal to the consumer as they offer superior quality, variety, and uniqueness compared to domestic fruit. They are often better in appearance and packed in attractive packages.

The fruit industry is expected to continue to grow, evolve and increase in effectiveness. The Chinese government has placed significant time and investment into its development. The government has recently shifted their agricultural policy from land intensive to a labour intensive production, such as fruit and vegetable cultivation. Initiatives include research and development, increased training for farmers, introduction of processing technology and efforts to improve quality. The government views these initiatives as necessary to maximise their resources and assist in WTO competition.

KEY PRODUCTS AND PLAYERS

Popular imported fruit include Sunkist Oranges, Dole Bananas, New Zealand Kiwis, Chilean Grapes, Thai Mangoes, Granny Smith Apples or Washington Apples. Currently, there are no known Canadian fruits in the market.

China grows a wide variety of fruit. Traditional fruits such as apples, oranges and peaches account for 80% of the total orchard area. Over the last few decades, new forms of fruit varieties have been introduced or commercialised for the market. Fruit that once grew in the wild (strawberries, kiwis), now account for 10% of the orchard area. New technology, nurseries and greenhouses are now beginning to grow improved and imported varieties of fruit.

Chinese fruit production continues to be largely decentralised. Farmers are loosely and locally organised. They transport their products to the regional or wholesale markets to be sold. In the current structure, there is no real significant market leader in terms of fruit production.

OPPORTUNITIES

• Processing equipment: The Chinese fruit industry lacks the processing capability. As a result, the majority of the fruit never reaches the market. Official statistics believe that the total apple processing capacity is less than 6% of total final output. A similar problem occurs for other fruits.
• Value-added fruit products: Fruit products as juice, jam, dried snacks or syrup may have success on the market. Traditionally, dried fruit products have been the snack of choice for the Chinese. Also, annually, consumers drink more fruit juice. The juice market is expected to yield good potential, as the average person drinks 1 litre of juice a year, compared to the 50 to 70 litres consumed by Europeans and North Americans.
• Fresh and frozen fruit: Given the right characteristics and price, there is an opportunity to export fresh or frozen fruit to the market. Canadian products are viewed as clean, high quality and safe. As consumers are eager to try new products, certain products, native to Canada, as blueberries, cranberries, raspberries or saskatoons may appeal to the Chinese taste.
• Technology and training: The Chinese fruit industry is considered to be at an infancy stage. There is a need for improved infrastructure, distribution, warehousing and marketing capabilities.

MARKET ACCESS

Consumer

Price is the key factor for consumers purchasing fruit. With the large choice of fruit on the market, consumers undoubtedly can afford to be choosy when and what they purchase. Prices are higher in Shanghai, as the city is not a huge producer of fruit products and needs to import from other areas in China (mainly the south). Imported foreign fruit is significantly more expensive than local fruit. For the same price of 500gr of Granny smith apples, a consumer can purchase half a dozen eggs and bread. The adjacent table depicts the average price for fruit within larger retail outlets. Certain fruits are priced too high to be successful in the general market. For example, importing and selling strawberries is not feasible. In 2003, the tariff remains 24.2% and the VAT 13%. Plus, domestic strawberries sell well in the market.

As domestic fruit increases in quality and prices are maintained low, branding will become crucial for success. Exporters wishing to enter the market should be willing to commit the finances, develop marketing plans and commit long term. Sunkist oranges have invested significant time and money in the market to develop their brand and promote their oranges since they entered the market in 2000. As a result, Sunkist has become a recognised brand name. As the majority of fruit are sold in various markets in the city, marketing and education are not easy. In addition, a brand name assists in differentiating between imported or locally produced fruit. Recognising the importance of branding in competition, Chinese fruit growers are attempting to create brands for their products.

Another key preference is taste. Matching the product to the local taste palette is important. It is advisable to perform market research before entering the market. Though many new tastes have been introduced to the market, certain fruits have not had success. A local fruit importer quoted Jackfruit as such. Its strong smell and messy characteristics have inhibited its success in the market.

Market

Though retail habits have changed drastically for most food goods, fresh fruit products are still commonly procured from fruit kiosques or markets. Neighbourhood supermarkets carry a limited supply of fruit products, but it is the view they are more expensive and less fresh. Larger stores have fully equipped fruit and legume sections. It is in these outlets and up-scale restaurants and hotels that the largest selection of imported fruit appears. Please refer to the Canadian Consulate General in Shanghai report entitled “The Retail Market in Shanghai” for further information on the different retail structures.

Especially prevalent in wet markets and neighbourhood fruit stalls are “fake imports”. Though the Chinese government has taken action to control and stop copyright infringement in China, the problem continues to occur within the import fruit industry. Import brand name stickers are not hard to re-produce and are placed on local brands. Local fruit can than be sold at the same price as its foreign counterpart. As domestic varieties improve, it has become increasingly difficult to differentiate between the two.

Fruit sales are seasonal, as not all varieties are commonly available year round. Farmers flood the market with the same variety resulting in lowered prices and over-supply. For example, during the summer months of June, July and August, the markets are 80% filled with watermelons. The best import fruit sales are reported to occur in January and February. Imported fruit is usually purchased during special occasions and festivals. At Chinese New Years (January-February), consumers will purchase the more expensive foreign fruit as gifts for friends and relatives. The month after corresponds with low fruit supply in the market.

The price of fruit for both domestic and imported brands has been declining in recent years. China’s WTO entry will lower the import cost, but will increase profits for import fruit. Fruit prices are set daily and are posted at the entry to wholesale markets.

The majority of the imported fruit in Shanghai enters through the Longwu Imported Fruit and Vegetable Market. Home to the largest wholesale distributors, imported fruit is fanned out to Shanghai-based wholesale markets, regional markets and certain end clients (hotels or restaurants). The market provides various services from locating distributors, customs formalities, bonded warehouse, and warehousing.

There are two types of import fruit at Longwu market. A quarter of the fruit enters directly from abroad, and the remainder from the south of China. The largest import fruit market is located in Guangdong province. Officially, the fruit enters at the Guanzhou port, and is subsequently distributed throughout China. Unofficially, fruit is first shipped to Hong Kong, and then to China. Importers avoid the time consuming application for import licenses, and are able to avoid quarantine examinations. This route is not advisable as it uses grey channels to enter the country. In the past year, the Chinese government has taken serious steps to control grey channel traffic of products through Hong Kong.

Officially, fruit importers require a special import license from the China State Administration for Entry-Exit Inspection and Quarantine Headquarters (AQSIQ). Once the shipment arrives in China, it must first be inspected and released by AQSIQ quarantine officials. The goods will subsequently pass customs where the tariff and a value-added tax (VAT) apply. Tariffs rates defer for each fruit product, whereas the VAT ranges from 13 to 17%.

KEY CONTACTS

Canadian Government Contacts in China

Canadian Consulate General in Shanghai
#604-1376 Nanjing West Road
Shanghai, 200040
Contact: Mr. Henry Deng, Commercial Officer
Tel: (86-21) 6279-8400 Commercial Assistant
Fax: (86-21) 6279-7456
E-mail: henry.deng@dfait-maeci.gc.ca
Internet: http://www.shanghai.gc.ca

Canadian Consulate General in Shanghai
#604-1376 Nanjing West Road
Shanghai, 200040
Contact: Ms. Shirlie Wu, Commercial Assistant
Tel: (86-21) 6279-8400 Commercial Assistant
Fax: (86-21) 6279-7456
E-mail: shirlie.wu@dfait-maeci.gc.ca
Internet: http://www.shanghai.gc.ca

Shanghai-China Government Contacts

Shanghai Customs of The People’s Republic of China – Responsible for the regulations and inspections on import and export documents and certificates

Address: 13 Zhong Shan Dong Yi Lu
Shanghai 200002
Tel: 86-21-63232410
Fax: 86-21-63232095
Internet: http://www.shcus.gov.cn
Shanghai Entry-Exit Inspection and Quarantine of People’s Republic of China – Responsible for the inspection of imported and exported goods

Address: 1208 Minsheng Road, Pudong
Shanghai 200135
Tel: 86-21-68563030
Fax: 86-21-68565939

Shanghai Import Food Enterprise Association – Provides assistance for the application and approval of labels for imported foods

Address: Room 1702, Hero Building
2669 Xie Tu Road
Shanghai 200030
Tel: 86-21-64398189
Fax: 86-21-64398191

Bibliography

Print

Shanghai Statistical Yearbook 2002, Shanghai Municipal Statistics Bureau, China Statistics Press

China Statistical Yearbook 2002, National Bureau of Statistics of China, China Statistics Press

The Fruit Market in the Yangzi Delta Region, Canadian Consulate General Shanghai, Department of Foreign Affairs and International Trade, September 2000 (available by contacting the Shanghai consulate)

Electronic

World Trade Statistics, Global Trade Information Services Inc. Nov 2002 Internet Version 4.2a

Barboza, David, In China, apple crop is producing trade fight, International Herald Tribune, April 5, 2003

Various Pages from http://www.fruitnews.com A portal dedicated to the Chinese fruit market. Last accessed: June 16, 2003

Great Potential in Western China’s Fruit Industry Jan 6, 2002 People’s Daily, China Internet Information Centre http://www.china.org.cn/english/2002/Jan/24786.htm Last accessed: June 16, 2003

Other

Market visit and interview with Mr. Xu Zheng, General Manager of Shanghai Longwu Imported Fruit and Vegetable Wholesale market, http://www.slwfruit.com

Market visit to Shi Liu Pu fruit wholesale market.

Useful Information

The Canadian consulate has prepared and published a series of market reports on the different food sectors in Shanghai and the Yangzi Delta region. Please contact us directly for a complete list of available reports or visit our website at http://shanghai.gc.ca/ag_food.