China: Xinjiang Aksu apples hit by regional conflict - FreshFruitPortal.com

China: Xinjiang Aksu apples hit by regional conflict

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China: Xinjiang Aksu apples hit by regional conflict

Since early this year, the escalating conflict in China's western province of Xinjiang has not only had social impacts, but has also made life difficult for apple growers in the area. According to a Zhejiang-based apple trader, the number of Xinjiang-origin apples is expected to drop significantly against previous years. At the moment, the only distributors willing to fly out west in person are those who have had long-term partnerships with local orchards. 

Chen Haiwen is the General Manager of Hangzhou Paiyang Trading Co, the general agent representing Hongqipo Orchard's sweetheart apple, grown in the Xinjiang prefecture of Aksu. Speaking with www.freshfruitportal.com, she expressed concern aobut where the sector was headed. Xinjiang aksu apples - sq

"We've long had a partnership with the local cooperatives in Xinjiang. Without this carefully maintained partnership, procurers and distributors from elsewhere can't just come in and say 'I wanna trade Xinjiang apples'," she said.

"In the fruit business, you must have close supervision of the planting process in order to guarantee product quality, which means you need to find the right local partners to make sure things are going as planned.

"As far as I know, the Shanghai agent only started his apple business after he secured a partnership with a local orchard. He grew up in Xinjiang. As for myself, I lived in Xinjiang for 20 years."

When asked about the apple industry outlook for the coming year, the executive was unsure what 2014-15 might bring.

"Last year was a good year for Xinjiang apples, but there's a lot of uncertainty this year. As you already know, occasional small-scale terror attacks have generated considerable political instability, which caused people elsewhere to start avoiding Xinjiang as a travel destination," she said.

"Despite efforts by the provincial government to stimulate tourism, such as a campaign to award every Xinjiang-bound traveller a CNY500 (US$81) coupon, many of my friends still canceled their plans to travel to Xinjiang. Don't get me wrong, I have been an avid Xinjiang traveler in the past few years, but now I only go there during the procurement season.

"For those who do not have long-term partnerships with local orchards, it takes a lot of guts to travel to Xinjiang alone just to procure local apples."

According to Chen, the Xinjiang Aksu sweetheart apple is one of the late varieties, and the harvest season begins around October every year.

"We have been selling the variety in Zhejiang for two years now - we've already found a place in the local market, so we are traveling back to Xinjiang every year to secure our supply no matter what.

Unique taste from natural cultivation

According to Chen, there are now many products labeled as Aksu apples, but those produced by the Hongqipo Farm are the best sweetheart apples, which have were designated by the organization committee of the 2008 Beijing Olympics as one of its official recognized produce products.

"Actually, the number of authentic Aksu apples on the market is tiny. Fake Aksu apples are almost pervasive. Most customers have never had a real Aksu sweetheart apple, so they can't really tell the difference."

"But for people like us, who have been in this business for a while, we could just tell which is authentic from the shape of the apple.

"Generally speaking, those produced in Gansu and Shaanxi have a smooth-looking shape, while Xinjiang apples usually have a natural, or simply disproportionate shape. I mean, the selling point here is not the shape, but its unique taste, which comes from Xinjiang's unique climate."

She said this uniqueness also came from a purely natural cultivation process.

"In places like Shandong and Shaanxi, where there's a lot of precipitation and pests, it's almost impossible to not use the fruit bagging technique, yet with Xinjiang's dry climate, pest control can be kept at minimal level, which renders apple bagging unnecessary in the production process.

"Plus, the Hongqipo Farm only uses organic fertilizer. All these factors contribute to its apples' extraordinary taste."

Chen went on to explain that Hongqipo Farm's apples were different to both apples from other regions in China and those from other areas in Xinjiang, giving the product an even greater competitive advantage.

"It is generally understood that Xinjiang apples have a relatively short shelf life, especially after March. It does not take long before the sweetheart apple begins rotting from inside out.

"But those apples from Hongqipo Farm are an exception. Due to their organic nature, they enjoy an unexpectedly long shelf life; for instance, they can be stored in cold storage from October to June next year without compromising their premium quality."

Logistical challenges

Chen said it was difficult to market Aksu apples at a national level, with the biggest difficulties coming from the logistical end.

"The biggest barrier for a national marketing campaign for the sweetheart apple would be logistical problems. As summer approaches, the temperature has been hiking up gradually and the use of cold chains has become inevitable.

"As of now, only Shunfeng and a few other big firms have been reliable with cold chain services, but their services are limited to intra-city or intra-province. Any inter-provincial project would be difficult and subject to content loss.

"Only in Guangdong and Zhejiang, where we can have the general agents to truck all the products there in one run."

This March, Chen experimented with online sales for the fruit on e-commerce platform Ju.Taobao  (聚划算). Within three days, she eceived 3,000 orders from various provinces and cities. However, due to the high attrition rate during the transportation process, she immediately stopped taking orders from outside the Shanghai-Jiangsu-Zhejiang area.

"Our attrition rate went as high as almost 10% - the logistics company threw around our fruits like throwing away clothes and caused huge damage to them. It's not like we don't want to expand nationally, but the cost is too high and the profit margin is slim."

Chen gave a telling example to illustrate this tricky situation.

"We have been working with Shunfeng Express, but now its price, especially for air shipments, has gone far too high.

"For instance, it costs CNY40 (US$6.45) to ship a case of apples, with the net weight of around 10kg (22lbs) I think, but just the apples per se cost only CNY78 (US$12.58).

"This way, the price of the apples jumped to more than CNY10 (US$1.61) per kilo (2.2lbs), which is no longer affordable for consumers. That's why we are focusing on Shanghai and its surrounding areas."

The limited volume of Aksu apple production has also led to limited market scope.

"The overall of production of this type of apple is capped at around 3,000- 4,000 metric tons (MT). For the Shanghai market alone, its consumption can hit over 1,000 tons, and the rest of the harvest is divided across Beijing, Zhejiang and Guangzhou."

Since market expansion is not a viable option in the foreseeable future, why have the Aksu apples shied away from brand marketing, another effective way to increase value? Chen's answer is that the variety was not widely known until the 2008 Beijing Olympics. Despite that boost, production and marketing have continued to follow a rather traditional model, which did not include high-end branding.

"Before 2008, the Aksu apples were mainly distributed through the wholesale market, which kept its price low. Many producers have had difficulty making any profit at all. As for myself, I only started building direct channels to local farms and became the Zhejiang general agent two years ago."

In addition, the unstable quality of the Aksu apples in previous years is another barrier that has hampered branding efforts.

"Even in the same region, different producers tended to produce different qualities, which is affected by the individual producer's application of new technology and his or her commitment to details."

Aksu apples too demanding on distribution channels, say traditional retailers

Chen told www.freshfruitportal.com the trade of Aksu sweetheart apples in the Zhejiang province last year stood at around 500MT. Due to challenges with retailers however, Hangzhou Paiyang is opting not to spread much further afield with the product.

"Based on our past experiences, the traditional retailers do not fit well with Aksu apples. We have worked with some commercial supermarkets. There, larger apples are generally priced higher, so the Xinjiang apples have been set at a higher price.

"But it turns out that those who frequent the supermarkets are usually older folks, who are keen on finding good bargains but not premium products. So overall, our sales have not been up to expectation.

"We have also worked with state-owned markets located in various neighborhoods, but these small markets are more like convenience stores ... which again did not give us a large sales volume."

She said that after these trials and errors, the company realized local e-commerce platforms, telemarketing channels and premium fruit stores were more suited to the product.

When asked about her opinions on the fast-growing sector of produce e-commerce sites, Chen believes their main competitiveness was based on two things: quality and service, with the latter relating mostly to the speed of product delivery.

Finally, Chen added that she's also hoping to export this unique Xinjiang-based apple variety, but was still searching for the right channels.

www.freshfruitportal.com

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