China Business: Zespri increases tempo in China

By Graham Skellern

Global marketer Zespri has refreshed its China Strategy to take advantage of the increasing consumer demand for good tasting, quality kiwifruit, reports Graham Skellern.
The 2016 season launch in China, with PM John Key.
The 2016 season launch in China, with PM John Key.

China is about to become New Zealand's biggest kiwifruit customer and global marketer Zespri is investing $40 million there to further increase sales.

Tauranga-based Zespri expects to sell 24 million trays of kiwifruit - made up of an even balance of the Green and SunGold varieties - in China this year, a 40 per cent increase on last year's sales.

Japan has long been New Zealand's largest kiwifruit market and sales this year are expected to remain steady at about 23 million trays.

"The industry's recovery from the Psa outbreak has been a big story and now China is the next chapter," says Zespri chief operating officer, Simon Limmer.

"The Chinese consumer is looking for quality and safe products and is prepared to pay more. Zespri has a powerful brand - of consistently producing good tasting kiwifruit with health attributes.

"We have sufficient confidence that the market in China will continue to grow - despite the volatility of the exchange rate.

"Not only will China be the biggest in volume but also it will become our most valuable market. Over the next two years it is expected to generate better returns than Japan," he says.

According to ANZ Research, 300 million new middle class consumers will emerge in urban areas by 2030 and China's urban disposable income will almost quadruple. ANZ says the Chinese will not only eat more but also eat better. Premium agricultural products will continue to enjoy strong demand.

Zespri, which will hit $2 billion in total sales this year, has a quality, premium brand, and it has just updated its China Strategy. Zespri's biggest move is to take control of the supply to China and become an importer of record.

The first containers in the new kiwifruit selling season arrived in China under the new system two weeks ago.

"In the past we have relied on Chinese partners but it's a more hands-on business now and we are masters of our own destiny," says Limmer.

 Simon Limmer says Zespri has to fully understand the local growing conditions before rushing in and producing kiwifruit in China. Photo / Jamie Troughton
Simon Limmer says Zespri has to fully understand the local growing conditions before rushing in and producing kiwifruit in China. Photo / Jamie Troughton

Zespri has created new logistics and transport partnerships to move the kiwifruit after the containers have landed in China, and it has opened more offices to sell the fruit.

Zespri will also hold stock on the China mainland. Previously, the kiwifruit was already accounted for with a fixed price before it left Port of Tauranga.

"We have control of our whole importation and inventory process and we have the opportunity of being flexible with our pricing - when we can make that," says Limmer.

"By stepping further into the supply chain, we can capture more value from the Chinese market, as well as maintaining overall control of our quality delivery in the market and offering an enhanced level of service to our distribution customers.

"We can focus our marketing spend on where the fruit is heading and be more aligned with our customers.

Above all, we can provide more value to our growers-shareholders rather than leaving (some of it) with our Chinese partners," he says.

Limmer says Zespri has to consider how much exposure it wants in China - in terms of supply and quality. "China is (presently) taking up 17-18 per cent of the total crop. Over the next five years up to 25 per cent of total sales may be going into China."

Zespri, which has sold kiwifruit in China for more than a decade, is spending $40 million over the next 18 months to increase its positioning and marketing on the mainland.

The company is broadening its distribution and sales from Tier I and 2 Chinese cities and the Eastern Seaboard by expanding inland into other large provincial cities, and especially more Tier 2 and 3 cities.

It is opening new regional offices in Guangzhou, Xian and Chongqing, alongside existing Beijing and Shanghai (head office). The present number of 25 Zespri staff in China will grow to more than 80.

Lately, Zespri has put in a lot of effort into promoting its new SunGold variety, which was developed to withstand the Psa disease. Its marketing campaigns in China have associated SunGold with vitality, fun and wellness. Zespri wants to show Chinese consumers SunGold offers all the positive qualities of its kiwifruit, full of taste and juiciness.

SunGold production in New Zealand is hitting a record level and the latest crop will push Zespri's supply to 140 million trays this year - 80 million green kiwifruit, 50 million gold and the remainder organic.

Last year Zespri handled 122 million trays, including 30 million gold, and total sales reached $1.9 billion.

 Zespri's quality and health benefits are promoted in China.
Zespri's quality and health benefits are promoted in China.

To maintain an all-year-round supply, Zespri is looking at growing kiwifruit in China, the home of the chinese gooseberry (since renamed).

Zespri already has growers and post-harvest partners in Italy, France, Korea and Japan.

But China is the world's largest kiwifruit grower, with production volumes of about 1.5 million tonnes a year and equal to the rest of world put together.

Limmer says the prospect of growing Zespri kiwifruit in China is only at the investigation stage.

"We are going through trials, and developing scientific and commercial partnerships to understand the local environment there. "We need to be sure of the safety and quality standards and the consumer perception in Asia of putting the Zespri brand on kiwifruit grown in China.

"The proximity to the biggest market is an advantage but we won't be rushing in and making a decision.

"We have to look at the opportunities and threats, and the prospect of growing kiwifruit in China is still a few years away," says Limmer.

- NZ Herald

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