Slide 1

China: Opportunities & Challenges for Produce from South America Mabel Zhuang Director, M.Z. Marketing Communications PMA China Consultant Slide 2 A Little Background: Chinas Economy Overview Setting the Context: Chinas Fruit Imports The Opportunities for South American Produce to China Agenda Slide 3 Chinas 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% Slide 4 Map of China (Major Ports) Slide 5 Chinas Production of Food & Agriculture Products and World Rank Slide 6 Fresh Apples (U.S. 2 nd ) Fresh Pears (U.S. 3 rd ) Fresh Tangerines (U.S. 4th) Fresh Apricots (U.S. 5th) Fresh Peaches (U.S. 6th) Fresh Plums (U.S. 2nd) Fresh Grapes (U.S. 6th) Pork (U.S. 3rd) Pork (U.S. 3rd) Rice (U.S. 10th) Rice (U.S. 10th) Cotton (U.S. 3rd) Cotton (U.S. 3rd) Dairy, Dry Whole Milk Powder (U.S. 13th) Dairy, Dry Whole Milk Powder (U.S. 13th) Peanuts (U.S. 4th) Peanuts (U.S. 4th) Walnuts (U.S. 2nd) Walnuts (U.S. 2nd) Source: USDA/FAS PSD online China is the worlds largest agricultural producer Slide 7 China Opportunities - The Magic of 22/7 China has 22% of the worlds population yet only 7% of the worlds arable land. Over 200 cities in China with a population 1+ million peopleonly 35 in all of Europe In early 2012 became the largest grocery market in the world Third largest ag importerand moving up Slide 8 Source: WTO Chinese Imports are Outpacing Exports Slide 9 Rising Middle Class in China Import Opportunities Slide 10 Time Net food import Net food export Initial Industrialization period Interim industrialization period Late industrialization period China joined WTO Food trade deficit begins Reform and opening up Now In short, here is the opportunity for suppliers Source: COFCO Slide 11 China Fruit Imports (2010 [blue] vs 2011 [red] ) Source: China Ministry of Commerce Slide 12 2011 Imported Fruit based on value Slide 13 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 Slide 14 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 Slide 15 South American Fruit Export to China, 2011 Statistics (Source: Ministry of Commerce, PRC) CountryImport Volume(kg)Import Value($)Percentage Chile172,693,095451,858,04589.84% Peru15,777,08443,387,9788.63% Ecuador9,105,7735,475,5371.09% Argentina874,5172,206,3790.44% Columbia19,23740,2360.01% Total198,469,706502,968,175 Slide 16 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. Slide 17 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, Chiles fruit export to China has enjoyed a growth rate at 78.5%, increasing their market shares to 18% next to Thailand only. Slide 18 Permissible Fruits to China Import countryCatalog PanamaBananas EcuadorBananas ColombiaBananas Costa RicaBananas UruguayCitrus (mandarin, orange, grapefruit, lemon) Argentina Citrus (orange, grapefruit, tangerines and their hybrids), apples, pear ChileKiwifruit, apples, grapes, plums, cherries, blueberry PeruGrapes, mangoes, citrus (tangerines, orange, grapefruit, lime) Slide 19 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 Slide 20 Challenges China Challenges Language & distance barriers Low consumer awareness-South American Fruits often labeled as from other origins Under-developed cold chain infrastructure Slide 21 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. Slide 22 Wholesale Market in Shanghai Vendors booth Slide 23 Fruit Retail in China Modern Retailers Chains, like Walmart, 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 Slide 24 The First China Fruit Chain Store Summit Slide 25 Fruit Juice Bar Slide 26 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 Slide 27 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. Slide 28 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. Slide 29 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 Slide 30 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 Buyers Delegation to Fresh Summit Presentation at the Logistic Forum of China Chain Store and Franchise Associations 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 Slide 31 Thank You! For More Information: Mabel Zhuang E-mail: mabel@mzmc.com.cnmabel@mzmc.com.cn www.mzmc.com.cn