Overseas Study Tour - Export

Transcription

1 Overseas Study Tour - Export Claire Fitchett Apple & Pear Australia Limited (APAL) Project Number: AP11708

2 AP11708 This report is published by Horticulture Australia Ltd to pass on information concerning horticultural research and development undertaken for the apple and pear industry. The research contained in this report was funded by Horticulture Australia Ltd with the financial support of Apple & Pear Australia Limited (APAL). All expressions of opinion are not to be regarded as expressing the opinion of Horticulture Australia Ltd or any authority of the Australian Government. The Company and the Australian Government accept no responsibility for any of the opinions or the accuracy of the information contained in this report and readers should rely upon their own enquiries in making decisions concerning their own interests. ISBN Published and distributed by: Horticulture Australia Ltd Level Elizabeth Street Sydney NSW 2000 Telephone: (02) Fax: (02) Copyright 2012

3 AP11708 (project completion date 30 November 2012) Milestone Final Report Apple Industry Study Tour Prepared by: Claire Fitchett, Market Development Manager, APAL

4 AP11708 Project Leader: Claire Fitchett, Apple & Pear Australia Ltd (APAL) Ph: , M: , e cfitchett@apal.org.au Purpose This is the final report for project AP11708, Apple Industry Study Tour. The study tour was conducted in September The report outlines objectives, learnings, outcomes, recommendations and participant feedback from the study tour. Funding sources This project was funded by Horticulture Australia Ltd with voluntary contributions from participants. A budget reconciliation is provided at Appendix 5. Any recommendations contained in this publication do not necessarily represent current HAL policy. No person should act on the basis of the contents of this publication, whether as to matters of fact or opinion or other content, without first obtaining specific, independent professional advice in respect of the matters set out in this publication.

5 Media Summary This report outlines the objectives, activities, learnings, outcomes and recommendations of an industry study tour of Australian apple growers and exporters to Asia in September This report analyses and details the prospects for Australian apples in target export markets in Asia. Based on the outcomes of this report, it is expected that Australian industry is better placed to make informed decisions about the opportunities for Australian apple exports in Asia. The report also considers broader implications for the Australian horticulture industry. Against a backdrop of fragmentation within the industry, this report details the opportunity for greater collaboration in the horticulture space, to overcome challenges and leverage future market opportunities. The Australian apple industry currently exports less than 2% of marketable crop, which has remained stable over the last decade. Until recently, prices on the domestic market have been favourable meaning growers have not needed to export (also protecting them from the risks associated with export) in order to be competitive. This has resulted in an industry that is not particularly export focussed. Prices on the domestic market are now softening due to increased price competition from the two major retailers and several years of high yield. Added to this is the risk of imported apples competing with Australian fruit for the consumer dollar. Other drivers influencing the Australian apple industry, and horticulture more broadly, is the rise of Asian affluence. Across the region, consumers are becoming increasingly wealthy and discerning in their purchasing habits. In China alone, the dramatic shift from rural to city living and the associated increase in the proportion of consumers now considered to be high income earners means that an astonishing number of consumers have the disposable income to upgrade their purchasing habits moving from lower quality Chinese-grown produce which is perceived as inferior, to better quality imported produce. Consumers purchase imported fruit for the premium quality, health benefits, safety credentials and lifestyle image it provides and Australia is well regarded as a clean, safe and reliable supplier of produce to the region. Apple & Pear Australia Ltd (APAL) in conjunction with Department of Primary Industries Victoria (DPIV) has embarked on an Asian export market development project for Australian apples (AP11023). This project is in direct response to the ambitious industry target of achieving exports of 10% of marketable product by 2015.

6 To assist industry to become more export focussed, APAL and DPIV conducted a study tour of Australian growers and exporters to key Asian export markets (AP11708). Whilst significant barriers around market access exist within several key Asian markets, it is believed that the region will offer good opportunities for premium Australian fruit in the medium to longer term. Visiting the market and seeing first-hand what is happening on a macro and micro level, allows Australian growers and exporters to: Understand market requirements (including importation requirements, labelling etc); Understand consumer preferences (colour, size, taste profile); Analyse what Australia s competitors are doing (including both northern and southern hemisphere producers) to see what we can learn from them; Understand and articulate Australia s competitive advantage (where Australia s niche is in the Asian market place); and Develop meaningful relationships with the people who will support Australia s export sales in to Asia.

7 Background The Apple and Pear Industry Plan New Horizons 2015 highlights the following issues for industry: consumer demand is in decline domestic competition has intensified significant import competition is likely within two years exports are declining grower numbers and profitability are declining the industry could contract 20-40% within five years environmental issues are placing pressure on sustainable farm practices. The Australian apple industry currently exports less than 2% of marketable crop, and has done for most of the past decade. This is primarily due to the domestic market offering better returns for growers than export markets. However, with prices on the domestic market softening and the opening up of new export markets, industry is encouraged to look at export. Having a successful export business will allow industry to remain competitive and viable in the future. Across Asia, consumers are becoming increasingly wealthy and discerning in their purchasing habits. In China alone, the dramatic shift from rural to city living and the associated increase in the proportion of consumers now considered high income earners means that an astonishing number of consumers have the disposable income to upgrade their purchasing habits- moving from lower quality Chinese-grown produce, to better quality imported produce. Consumers purchase imported fruit for the premium quality, health benefits, safety credentials and lifestyle image it provides. Australia is well regarded as a clean, safe and reliable supplier of produce for Asian markets. Despite being a higher-cost producer than our southern-hemisphere competitors in South Africa, Chile and New Zealand, Australia still has a strong value proposition to sell premium quality fruit in select markets in Asia. Thailand increased its imports of Australian apples to a total of $1 million in 2011, out of a total import value from all countries of $132 million. Hong Kong currently imports small volumes of Australian apples. Opportunities exist for Australian Pink Lady apples in this sophisticated market with well-developed retail channels.

8 Mainland Australian apples do not yet have access to China. However, if / when access is granted, Australian apples have strong potential in the premium end of the Chinese market. It is important to acknowledge that Australia will not be able to compete on high volume, low margin product. Instead, our focus should be on targeting smaller volumes for the premium end of the market.

9 Outcomes & results of discussions This project was designed to give key Australian apple growers and exporters first hand insight into key Asian export markets. The study tour assisted participants to: Understand market requirements (including importation requirements, labelling etc); Understand consumer preferences (colour, size, taste profile); Analyse what Australia s competitors are doing (including both Northern and Southern hemisphere providers) and see what we can learn from them; Understand and articulate Australia s competitive advantage (where Australia s niche is in the Asian market place); and Develop meaningful relationships with the people who will support Australia s export sales in to Asia. The mission included a variety of activities including: Briefings with Austrade and Australian Agriculture Counsellors in Thailand and China Retail visits & briefings by relevant category managers in Bangkok (TOPS, Tesco & Makro) and Guangzhou (Jusco & Sam s Club) Participation in the launch of Australian Pink Lady apples in Thailand Networking dinner with Thai importers, retailers and distributors Meeting with Vachamon Foods, Thailand s major fresh food importer and agent for Jazz apples. Visit to Jiangnan wholesale market in Guangzhou to meet with importers and market management to understand the process and requirements of imported fruit Briefing by Shanghai Leader, PR Agency for Pink Lady Briefing by Golden Wing Mau in Guangzhou, a leading importer of fresh fruit and one of the 3 licenses Pink Lady importers in China. Attendance at Asia Fruit Congress in Hong Kong Visit to Asia Fruit Logistica in Hong Kong

10 The following learnings and outcomes were achieved. For full details please see Appendix 1. Understanding market requirements Cool store management is still in its infancy in China. There is a role for exporters and importers to facilitate improvement in cold storage and transportation. Across Asia, middle and high income consumers are choosing to shop in supermarkets rather than wet markets. They feel it is more sophisticated and will reflect well on them and their families. Whilst there is still a place for fresh produce in local markets, imported fruit is primarily sold in chain supermarkets. Chinese government policy is attempting to change the economy from export led to consumer led. As a result wages are rising and living standards are improving. Unlike the west, Chinese consumers will spend a high proportion of this increased income on food and in particular fruit. China s ability to produce fruit is declining and prices for locally produced fruit is increasing. This has meant that imports have become much more competitive Understanding consumer preferences A key aim of this study tour was for growers and exporters to gain a clear understanding of consumer demand. Without knowing what consumers in our Asian target markets want, industry is likely to fail at providing the right product and achieving export success. The delegates discovered the following: Consumers from across Asia including Thailand and China, traditionally prefer sweeter varieties of apples such as Fuji. However, examples of other varieties (such as Jazz) succeeding was evident. Based on this, industry can have confidence in the Pink Lady offering. Despite it having a more complex taste profile- with a combination of sweetness and acid- than other varieties, with good marketing and targeting the right demographic (younger, health conscious consumers), newer varieties can succeed. Colour is paramount in purchasing decision. High red content (80%+) is preferred. This poses an issue for growers- in order for colour to develop, fruit needs to stay on the tree longer, risking internal quality. However, Pink Lady can successfully be marketed as a bi-colour apple. Size preference: Larger fruit have traditionally been more popular. Fruit is often given as gifts in hamper packs or at annual celebrations so size is valued. In addition,

11 apples are less likely to be eaten as a whole snack however this is changing and there is an opportunity for marketing a range of sizes in the future. Packaging: In supermarkets, apples are sold loose (primarily in high end supermarkets) and in in pre-packed bags of 6 apples. The packing is done in store. Firmness: Crispness is highly valued. This is a promising sign for Pink Lady which is naturally crisp. Competitor analysis New Zealand Pink Lady apples were on promotion in Jusco, Guangzhou. It was noted that the quality was below what Australia can achieve- with pale skin and older fruit on display. However, this was reflected in the low price.

12 New Zealand Divine apples were retailing in Bangkok for 99 THB (A$3.07) per 6 pack (just under 1kg). This variety has had a significant amount of promotional support and as a result is now equivalent in sales to Royal Gala in many stores. US Red Delicious from Washington were featured at all retail outlets. Tesco in Bangkok was retailing bags for 58 THB (A$1.80) per 6 pack (just under 1kg). These apples are pitched as a bulk staple rather than a premium high end apple. Australia would be unable to compete at this end of the market.

13 Understanding Australia s competitive advantage Australian Pink Lady apples are premium quality and able to achieve a premium price. The tag line So much more than an apple! pitches Pink Lady to the right niche. Australia can leverage its clean, safe, reliable credentials in Asian markets where food safety and quality are big concerns. The strategic approach of penetrating the market with Australian Pink Lady apples first, then allowing other varieties to follow through has a strong likelihood of success. Strengthening relationships with key stakeholders in market This tour provided participants with an opportunity to network and build relationships with key stakeholders in Asia. Details of people met are included in Appendix 1. Relationships will continue to be developed and strengthened. Foreign government officials as well as importers and select retailers will be welcomed to Australia to meet with growers and gain an appreciation for Australian quality.

14 Participant feedback A copy of feedback provided by participants is provided at Appendix 2. In summary, the study tour was found to be very worthwhile. Key learnings and comments include: Gaining first hand insight into local markets by talking directly with importers and retailers was very valuable, particularly in Thailand. Opportunity to learn from and network with others in the industry was invaluable. Opportunities exist for Australian produce in Asia, particularly for new varieties such as Jazz and Kanzi. Asia offers good opportunities for Australian fruit, even if we just send small volumes initially. The study tour has put exporting back on the radar for most participants. Implications for Australian horticulture This study tour demonstrated that Australia needs to do several things to remain competitive in the international horticulture space: Continue to push for market access for Australian fruit to priority markets including China. Without legal access for mainland Australian apples to China, and with the grey trade channel through Hong Kong becoming increasingly difficult and more expensive, Australia is missing out on opportunities that our competitors are taking advantage of. Pursue Free Trade Agreements (FTAs) with Asian countries that will level the playing field for Australian horticulture. New Zealand has aggressively pursued FTAs with ten countries/ regions (nine in the Asia Pacific region) and is negotiating an additional 10, plus the Trans- Pacific Partnership. By comparison, Australia has negotiated six FTAs and is negotiating an additional seven. Even with legal market access for mainland Australian apples, without an FTA, our fruit may be up to 15% more expensive than our competitors who have zero tariffs. Work collaboratively across the horticulture, and broader agriculture, sector to access opportunities. There is a wealth of experience in the agriculture space; by sharing knowledge and past experiences, industry collectively can leverage opportunities with greater knowledge and confidence.

15 Dissemination of information Various articles and media clips have been published highlighting the purpose and outcomes of the study tour. A copy of these is provided at Appendix 3. To further build the export capability of the industry, a series of export workshops are to be delivered in November 2012 in key growing regions throughout Australia. The workshops will be jointly delivered by DPIV and APAL. At these workshops, APAL will communicate the outcomes of the mission to growers and help them evaluate whether export is an option for their business. Quarterly market focus reports will be published in APAL s Australian Fruitgrower magazine and DPIV s Food Business newsletter, highlighting export opportunities for Australian growers in Asia. Itinerary A detailed itinerary is provided at Appendix 4. Recommendations This trip was a valuable way for growers and industry representatives to better understand target export markets. As a result of the study tour, APAL makes the following recommendations to industry: Australia should approach export in a coordinated manner. Whilst recognising that individual companies want to maintain their competitive edge, it is important that industry works together to meet the target of 10% exports by An industry reference group- Team Australia - which will be coordinated and assisted by APAL, will enable the Australian apple industry to: Improve efficiencies in the supply chain to reduce the fragmented nature of the industry; Share knowledge and overcome common problems. This study tour was the first step in bringing several key industry representatives together; and Address quality issues to ensure Australia s brand integrity is retained.

16 Support the promotion of Australian Pink Lady apples into Thailand as a priority. Other varieties will piggy back on the success of a well branded product. The initial promotional work for Pink Lady conducted as part of HAL project AP11023 has introduced the product to Thailand but ongoing support for the brand will be important in building brand awareness and increasing sales. Ongoing engagement and relationship development with target markets and people in Asia. This will be delivered through further study tours to market, trade show participation and working closely with importers to develop direct relationships. Explore opportunities in other high priority Asian markets, including Indonesia and Malaysia. Based on the findings of desk top and in-market research, industry may benefit from an exploratory market visit to these markets in 2013/14 or 2014/15. Continue to monitor and explore opportunities in non-asian markets (such as the UK). Contact List- participants Organisation Representative Phone AFPC Exports Geoffrey Hagarty Apple and Pear Australia Ltd Claire Fitchett Batlow Fruit Co-Op John Power Carinya Orchards Michael Cunial Department of Primary Bruce Tomkins Industries Victoria Department of Primary Bryan Balmer Industries Victoria Holman Fresh Pty Ltd Colleen Dangerfield Joyson Orchards Mark Joyce Lenswood Cooperative James Walters Montague Fresh Michael Silm Newton Brothers Orchards Paul Good