Philadelphia-based AgroFresh Solutions (NASDAQ) has announced an alliance with leading Chinese fruit retail chain, Pagoda, which will see the establishment of an innovation center in the country to address some of the market’s challenges.
The center is due to be built later this year at a Pagoda distribution center in the southeastern Guangdong province.
Speaking to Fresh Fruit Portal, AgroFresh CEO Jordi Ferre explained that the company’s business in China is modest and has been largely limited to distributing its 1-MCP technology.
Seeking new growth opportunities, in April 2017 Ferre traveled to China to meet with the chairman of Pagoda, which owns some 3,000 high-end fruit stores throughout the country and plans to triple that number by the end of next year.
Last summer the chairman visited Washington State to view AgroFresh’s facilities and learn more about its programs.
“That is when we made a decision to open an innovation center in China,” he said.
The approach in China will be different to other countries, as it has its own unique set of challenges, he explained.
“The issue with China we cannot solve is the infrastructure issue. You don’t have cold storage, you don’t have the system,” he said.
“But China’s consumers are becoming more savvy and more demanding…so you’ve got this consumer and this supply chain system disconnect.”
Ferre said AgroFresh was therefore going to focus on the retailer-end of the supply chain, describing Pagoda as “the perfect partner” in the sector. He said the rapidly expanding company has a well-recognized brand across China, especially in the tier 1 cities like Beijing and Shanghai.
“What Pagoda has done is take a traditional fruit store in China and completely upgrade it,” he said.
“When you walk into a Pagoda store it’s like walking into a Candy store for fruit – in that the store has bright colors, the packaging is impeccable, the fruit is displayed in a very gracious manner, and all the fruit there is very fresh.”
The innovation center will develop solutions both for domestic fruit as well as imports, which Ferre said make up around half of its sales.
He also noted that China consumes large volumes of tropical fruits from Southeastern Asia that weren’t common in western countries where AgroFresh has a stronger presence.
“Every fruit has its own way and physiology and needs,” he said.
“We want to have an innovation center which is thinking firstly about the Chinese market and Chinese consumers – those fruits that need a solution beyond the ones that are more popular in the west.
“Having said that, it doesn’t mean that we will not have a solution for those more traditional types of fruits, but there is something there in terms of innovation that needs to be created.”
Ferre said that AgroFresh may later also provide solutions it develops to other companies in the country.
“Pagoda is going to help us focus on fruit, it’s going to help us focus on improving quality, it’s going to help us prioritize the fruit that is relevant for China…but also it’s going to help us support other trends emerging that are growing very fast like e-commerce and other retailer trends,” he said.
And while the innovation center is going to be focused on China, Ferre said that AgroFresh might consider taking suitable solutions to other countries where they are needed, such as elsewhere in the Asia-Pacific region or Latin America.