China: Pagoda aims to reform weakening domestic produce industry

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China: Pagoda aims to reform weakening domestic produce industry

The head of one of China's fastest-growing fruit retailers believes a 'crisis' could be coming for the domestic produce sector, as volumes of imported products soar at the chain.

Pagoda chairman Yu Huiyong

Pagoda chairman Yu Huiyong

Pagoda chairman Yu Huiyong said imported fruits accounted for 10% of the chain's sales in 2002, but two years later that figure had skyrocketed to 60%.

"Given the higher quality of imported fruits, this trend is likely to continue at Pagoda, " Yu told at the recent Asia Fruit Logistica, where Pagoda picked up the Best Fresh Produce Retail Chain award.

The chairman explained despite the success of the retailer's imported fruits, he wanted to see positive changes to the Chinese domestic production sector, claiming it had been hindered by a lack of development and rising labor costs.

"I sense a crisis is coming, as we see a continual fall in competitiveness with our domestic industry," he said.

"We hope we can do something about it."

Pagoda, which plans to triple its number of stores to 3,000 by 2017, is currently partnered with more than 50 producers across the country. To achieve this, the group recently completed a US$63 million round of capital raising, with support from Tiantu Capital, Gf Xinde  and other investors.

"Today, Pagoda received a huge sum of capital investment. This indicates the immense potential  in the fruit retail chain industry," Yu said at a press conference on Sept. 22," he said.

"We hope to become a leading player in the fresh produce industry, and now it's our opportunity.

"I had never seriously dealt with venture capital until this collaboration, but I have heard about all the pros and cons of the power of venture capital. But for us, honestly, I've only seen pros so far, and I'm grateful for their help."

For many years, the chain has been working closely with upstream growers, but Yu anticipates more integration will be made in the future.

"It's not moving as fast as expected, so now I'm making some bolder moves, with the hope of creating strong alliances and pushing for further integration with our suppliers in order to drive the whole industry forward," he said.

Yu also highlighted the company's production partners had a stimulative effect on their surrounding regions as a whole.

"The orchards we have worked with have improved significantly since the beginning of our partnerships, and their good farming practices have often been followed and adopted by other producers in the region," he said.

"From our perspective, we want more quality fruits, and we are glad to see how our efforts are also positively changing the whole industry on a larger scale.

"That's why we are willing to devote more time and energy to this area."

Companies like Pagoda and Joyvio are among a group of industry players planning to restructure the supply side of the Chinese produce industry, having been working with the Minister of Agriculture's High-Quality Agricultural Development Center.

"It takes far more than one or two companies to turn the tide, we need to raise the awareness in our society as a whole," Yu said.

"That is why I tell people we need to build an alliance among growers and suppliers."

Details of the project will be released by mid-November.

Yu added the company would expedite its progress in online growth as well, while continuing its efforts in the expansion offline business. He believes the combination of "online marketing and offline stores" will allow the company to strategically provide supply chain services for e-commerce platforms.

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