Q&A: Chile's challenging Chinese cherry future - FreshFruitPortal.com

Q&A: Chile's challenging Chinese cherry future

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Q&A: Chile's challenging Chinese cherry future

Harvest delays have led to an unusual overlap between cherry varieties and growing areas in Chile, while in the country's leading market China, consumption trends are changing along with the economy. As the sector adapts to its fruit shifting from luxury to common good, Gesex China general manager Gonzalo Matamala speaks with www.freshfruitportal.com in greater depth about the current season. Gesex China general manager Gonzalo Matamala

How is the cherry season going in China after the delayed start?

Like all seasons in the fruit business it hasn't been easy, since it doesn't just depend on the work we do every season in the fields, packing and trading. The effect from nature is always there and this time it was in the harvest delays, very early rains and their effect reducing production.

This was perceived little by little by Chinese receivers, leading to confusion during the first weeks but it settled and became evident after harvests in the central and southern areas of the country. The delays had a greater impact for the early cherry sectors as they started to mix with the first harvests from the southern zone, leading to a market that had different varieties like Royal Dawn, Santina and Lapins, with the last two being the most popular amongs Chinese consumers.

As the season moved on they were joined by the Bing variety, easily the most popular of all, so at the level of varieties and production zones the delay has had different and will have different levels of impact.

It is striking how prolonged the airfreight shipments of cherries have gone on, due to the large quantity of charters around during this season compared to the last one. These charters had to be complemented with blueberries at the start of the season to be able to palliate the high costs implied by the cherry harvest delays and the lower volume.

How much do you think will be sent to China, according to your estimates?

Total cherry export numbers have varied between growers, exporters and receivers, so today it is difficult to estimate a number, but around 12-14 million boxes will be moved, constituting a reduction on last year.

Despite this, the quality of fruit has been good, exceeding sugar, firmness and condition levels from last year.

And how have prices been for Chilean cherries in China?

Despite the lower volume, I believe prices have behaved more similarly than expected. While the volume of cherries exporters will be similar to previous seasons, the macro and micro conditions in the Chinese economy are not the same.

On the one hand, imported product is getting more expensive because of the effect of the yuan. Secondly, the economy is no longer growing at double digits like it used to two seasons ago, and the anti-corruption policy of president Xi Jinping has continued to strengthen, leading to a state with lower costs and therefore fewer purchases on gifts.

Additionally, the "cherry equals luxury" effect has been disappearing. Three years ago or more, cherries were considered a luxury good - a gift of the highest order, particularly during Chinese New Year. today, due to the high increase in volume from Chile, as well as other countries being allowed to sell cheries in the Chinese market and during different seasons, the product has been transforming into a more common good amongst local consumers.

And how are Chinese consumers receiving Chilean cherries? How do you think consumption will grow?

Consumption can grow, as there are many second and third tier cities in China that could be satisfied directly from Chile with quality product. But we can't just trust in that. While these cities are close to large economic centers like Shanghai, Beijing and Guangzhou, they have populations that are more greater than two to four million people, they have the available resources in terms of income and their provinces are growing above the national average; they are consumers who adapt and can change quickly, so the same supply we offered Shanghai, Beijing or Guangzhou two to three years ago is not the same as what we can offer these cities.

What I mean is that if the most popular varieties in the big cities today are Bing, Regina or Kordia, the second or third tier cities will demand this standard or greater. To that, we must also have better packaging, brix, promotions and brand recognition.

What are the main challenges and difficulties seen this season?

The logistics of distribution will mark this season, due to the lower amount of maritime routes to the north of China available for the cherry season. A large quantity of shipments in the zone of Guangzhou, Shenzhen and Hong Kong will put more pressure on the Jiangnan market and its surrounds, as well as on land transport used for transporting the fruit to other consumption areas.

The price appreciation of at least 5-6% for imported products, due to the effect of the yuan, will lead to changes in results and expectations this season.

A challenge in this area will be exploring coverage models for the yuan, if there is a working formula for payments in renminbi. We'd have to wait and see what happens with announcements from last year in setting a Yuan-Peso exchange swap model due to the opening of the China Construction Bank in Chile.

Finally, it will be a year of getting to know the capacity of new actors in the Chinese wholesale markets. I am referring to new receivers, who have taken a step forward and become importer-wholesalers due to the continuous adjustments in the sector's value chain in margins, economic pressures, commercial capacity.



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