NZ SunGold, which saved kiwifruit industry after disease plague, is being grown unlawfully in China. Photo / File
Kiwifruit marketer Zespri, working diplomatically to limit a serious threat from rogue growing of its blue chip SunGold variety in China, is still chasing payment of court-awarded damages against the Chinese grower who unlawfully took it out of New Zealand.
The High Court in Auckland in February last year awarded $15m damages to Zespri after it took civil action in 2018 against grower Haoyu Gao, his wife and their company Smiling Face Ltd, after discovering two of its protected varieties were being propagated in China by Gao and his associates.
Now Zespri believes there are at least 4000ha of the SunGold plantings in China - already around half of plantings in New Zealand. And another round of grafting in Chinese orchards gets underway this month.
China is the grower-owned company's biggest market alongside Japan, with Zespri sales in greater China in 2019-2020 totalling $926 million.
Kiwifruit is New Zealand's biggest horticultural export, with Zespri the main seller, last year posting revenue of more than $3 billion.
Fruit from the unauthorised crops is being sold in China under various brands and as counterfeit Zespri fruit, the company told the Herald.
Zespri is working with national and regional governments in China on a plan to try to control the spread of unauthorised plantings and protect New Zealand growers' IP.
Meanwhile, a spokesman said it is hoping the court damages award sends a strong message that Zespri will enforce its IP protections.
But Herald inquiries reveal Zespri has yet to receive the money.
"We are continuing to consider and pursue enforcement steps both in New Zealand and China with respect to the court's decision.
"We understand that Mr Gao is in China and is actively involved in the propagation of unauthorised plantings there. The 4000ha is predominantly smaller growers. A major part of our focus is on mitigating the potential for the unauthorised fruit to create disruption in our supply channels in China," the company said.
"We have seen a small number of local Chinese G3 brands emerge and enter mainstream retail and we are monitoring this closely to gauge any impact on Zespri sales, noting that Chinese kiwifruit is counter-seasonal to New Zealand."
Zespri has also begun legal action against a Chinese nursery it said was propagating SunGold.
"The complex legal system in China, however, means it's not a quick process, reinforcing our concerns around relying solely on the legal process to address our PVR (plant variety rights) concerns, which is why we're adopting a multi-faceted approach."
That approach has hit a snag at home, with Zespri's proposal to do a trial in China partnering with the unauthorised growers to find a commercial solution to the problem, being rejected by regulator Kiwifruit NZ.
Zespri, a near export monopoly and subject to New Zealand statute, wanted to do a three-year trial of a commercial procurement model for Chinese-grown SunGold, involving close to two million trays of fruit. The plan's been devised in consultation with Chinese government officials, and Zespri's advisors in China.
The company had signed a memorandum of intent with a Chinese state-owned entity in Sichuan province, where most of the unauthorised plantings are.
But Kiwifruit NZ this month ruled the trial, while meeting its obligation to engage in activities that "support core business", carried three areas of risk that posed "more than a low risk to the interests of producers".
Carol Ward, Zespri chief grower, industry and sustainability officer, told the Herald the company was entitled to instead take the proposal straight to Zespri's nearly 3000 growers for a vote, but given concerns by growers' representatives as well as the regulator, it was redrawing the application to cover only the first year of the trial.
This would involve about 200,000 trays and 50 of the unauthorised Chinese growers. The trial would determine if the fruit met Zespri's quality standards enough to carry the Zespri brand and how it was perceived in the market.
Zespri would apply to Kiwifruit NZ again for a trial after closely consulting with growers, she said.
Asked about the risks of the trial, Ward said in any trial there was a risk to business.
"Zespri is really concerned about the risk of doing nothing. The primary purpose of this trial is to mitigate that risk. We need to make sure we manage it well, ensuring the quality of the fruit as it goes through the supply chain and carries our brand.
"And we want to build positive relationships with growers and the Chinese government through the trial. Regardless of the outcome of the trial or how it concludes, it is important there is a positive relationship there.
"We need to be able to explain to growers how we are managing the risk but also recognising there is business risk and the greatest risk is to do nothing."