China: Fruta Cloud founder upbeat for Chilean cherry, nectarine deals
The founder of a fast-growing B2B trader in China takes an in-depth look at upcoming summer supply deals from the South American country.
While frost and rain events may end up cutting back Chilean cherry production estimates by a third, a China-based trader believes the reduction may actually be "healthier" for the market.
At www.freshfruitportal.com, we recently caught up with Fruta Cloud founder George Liu - whose company is funded by importer Kingo Fruits - during his visit to Chile to brush up on expectations for the season ahead.
"People are talking about how initially the projection was a 30 million box total in cherries, but now due to some frost events back in September and also some rain, I think the estimate is about 20 million," Liu said.
"It’s good and bad – if last year it was 18 [million] and this year it was going to be 30 [million], I think the growth might be a problem because you'd have to find more outlets.
"Now it's steady growth and I think that might be healthier for the industry."
He said the group's first shipment of Chilean cherries for the campaign arrived in Hong Kong on Sunday, Oct. 23, and the feedback has been good for quality. Moreover, the group has found giant-size cherries to be its best seller in Alibaba pre-sales for Single's Day, a popular date for online sales which takes place on Nov. 11.
He added 2016-17 would also bring in two significant logistical advantages for the Chilean cherry deal, in the form of faster vessels as well as a recent MoU signed between the Chilean Fruit Exporters Association (ASOEX) and China Eastern Airlines.
"With the fast vessel the majority of it will be able to arrive before the Chinese New Year. That’s very good for the industry because five days on the ocean is going to make a huge impact on the quality," he said.
"I think the future of the game is going to be charters, because charters are obviously going to take a lot of time out of transit.
"You don’t have to transit in different airports where it can get lost for a few days. You avoid that problem, so it’s more direct, fresher, so from the beginning to the middle it’ll be charters and then fast vessels."
Additionally, Liu was upbeat about increased efforts planned by the Chilean Cherry Committee in China this season.
"Even though the Chinese market has taken 80% of the Chilean cherries, in the future Chilean cherries are going to continue to grow and then it’s very important that not only first tier cities like Beijing, Shanghai and Guangzhou know about Chilean cherries.
"It's important for the second and third tier cities to know about Chilean cherries and know when they’re coming.
"It’s like in the United States during Superbowl with guacamole the avocados are sold out. I think cherries are going to be a New Years item, it's going to be a winter item that people are going to start consuming daily and not just for gifts."
He added South Korean trends could be a good gauge for the potential of Chinese market growth for the crop.
"For example, the past season for U.S. cherries to go to Korea and to China was two-to-one. So when there's a two-to-one ratio from the U.S. and you imagine how many people are in Korea, if everybody in China gets to that economic level, I think two to three times this current volume is still going to be okay."
Introducing new or unrequited varieties
With regards to U.S. cherries, he said the group also introduced a new variety, Sonnet, to the market this year.
"It's a pink-fleshed high sugar content cherry, and Fruta Cloud proved to be a very effective channel for this new kind of variety introduction, because if you throw these new varieties into the wholesale environment you can get lost in the noise," Liu said.
"You need a good platform. If you go to a single chain store you don’t know if you hit the right customer, so the strength of Fruta Cloud is our end channels go across a different range – we have high end premium and volume games, so when you introduce these new varieties you get to know which is the best channel for your new varieties."
Getting to end channels and refining the supply available to markets, particularly in second and third tier cities, has been a big part of Fruta Cloud's efforts in recent months.
"There are some recent developments here [in Chile] where a lot of people will buy a machine for smaller packages of 500g or 1kg instead of a loose 5kg package, and with those you kind of need to get closer to the customer to get the real feedback," he said.
"Also, if you want to do pre-ripened avocado you can’t really sell it in the wholesale market. With those you need to get closer to the customer," he said, showing how the group's Chilean supplies went far beyond just cherries, with grapes as the leading product and other imports including avocados, blueberries, kiwifruit, apples and nectarines.
Liu commended online retailer Fruitday for its pioneering work in introducing new varieties, but highlighted a platform like Fruta Cloud could be harnessed for introducing new products to areas that might not be just for the e-commerce space.
"They [Fruitday] did a great job introducing cherries as a very important item for online sales, but I believe e-commerce still occupies I would say maybe 10% of the total volume moving through the market.
"There are a lot of interesting ways to sell fruit in second and third tier cities - there are a lot of chain stores, premium chains, discount chains, big stores like Sam’s Club...it's important you find the right one."
However, Fruta Cloud's reach for new opportunities is about much more than just new variety introductions.
"I think some varieties may have had missed opportunities in the past. For example, Pink Lady was a variety that wasn't received very well in the wholesale market because some people think it’s too acidic, but Pink Lady obviously has been a very good seller in the European market.
"So this summer we also sold a good amount of Pink Lady on our platform because we were able to find the right customers for it. That was from Chile.
"Sometimes it's about storytelling, sometimes it’s about finding the right customer - a lot of the time you don’t know why it doesn’t work in the wholesale market because the feedback is only price."
Outlook for Chilean nectarines in China
Liu said he was very excited about the recently announced opening of the Chinese market for Chilean nectarines.
"Chilean nectarines will have a big market in China and then we are working with a lot of the major suppliers for nectarines and giving them our expertise," he said.
"We've been doing U.S. nectarines to Taiwan for many years, so we know what type of varieties to use and what packaging to use for the Chinese market.
"But then again the [mainland] Chinese market and the Taiwanese market share similarities but a lot of the time they’re very different. I think this year and in the future there’s going to be a lot of trial and error, but I believe the future is bright for the nectarines from Chile."
It is understood Chinese consumers often have a preference for white-fleshed nectarines, while most of Chile's production is in yellow-fleshed varieties. Liu however doesn't think this will be a problem.
"First of all I think the sugar content will be important, whether it’s yellow or white.
"I think even with yellow varieties there is still a big opportunity. I think now only with Australia and Chile it’s open during the time, and I believe Chile will have some more advantages in terms of pricing."
Expectations for other crops
Liu mentioned avocado volumes from Chile were good at the moment, but the market was a bit depressed.
" But that’s just how the normal season goes, and you need time. In the long run I think consumption is big, but if the consumption is not there and you suddenly put in too much, the market is going to find a balance.
"We’re working with the Chilean Avocado Committee. For this season I think we’ll work with e-commerce platforms and restaurants to do more promotion about how you can eat avocados in your daily life, and I think as more people eat avocado they will come up with creative ways to use it.
"It doesn't matter what cuisine you have; it's a good item."
He added the group started selling avocados online last year and received very positive feedback.
"You get the firsthand experience of how people are eating avocados, and we realize avocados are being used a lot in juicing instead of cuisine.
"That will change in the future but right now that’s just how people take the avocado back home - they ripen it at home and they put it into juices or baby food."
The entrepreneur added the season was looking "normal" for Chilean grapes and blueberries this year.
"With grapes there are a lot of patented varieties coming into production and I think that’s also going to be a very important trend in the future.
"As the consumption of Red Globe is steadily decreasing, seedless varieties are going to be very important for the future," he said, noting how seedless varieties had become dominant in the South Korean market for example.
"And then it's the same thing in the Taiwanese market where seedless is gaining a lot of traction, so I think it’s about introduction to the people in China so they get to know seedless varieties, pricing, etcetera. I think eventually seedless varieties will be the mainstream."
The group also did "a lot of kiwifruit" this year and Liu said the market was very good.
"Some big suppliers tried the pre-ripened kiwifruit with higher sugar content, and we did trials in supermarkets and the customers received it very well.
"I think in future we’re going to do more Chilean kiwifruit for the chain stores, because the New Zealand kiwifruit are priced at the higher end and that gives room for the Chilean kiwifruit to shine."
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