Global Cherry Summit: Forming a union to overcome obstacles
The Global Cherry Summit successfully brought together industry professionals -with in person and virtual presentations- from around the world, with a clear call to action to find common ground to overcome successive challenging seasons and an uncertain future.
Opening the event, Cristián Tagle of the Asoex Cherry Committee gave a simple but succinct synopsis of the past year that not only was repeated in different panels and presentations, but seemed to resonate with the audience:
“What a season, what a season we have had, I can’t remember one that was more difficult”, he said in his opening remarks, but ended on another note which also was repeated in different instances and from different sources: “Together, all of us together can contribute to a solution to the obstacles which we are confronting”.
China and the new year: A threshold for the industry
Tagle said that at the beginning of the season, hopes were high that this season would overcome a difficult situation in the 2020-22 season, and leading up until the end of the year, that is how things appeared.
But as the season advanced and volumes increased, “then with logistics issues the market changed dramatically” said Claudio Vial, General Manager of Ranco Cherries.
In his presentation using statistics from the market and his own data, Vial showed exactly how the bottleneck started to impact the business and the quality of the fruit arriving to Chinese consumers.
In week 51, the bottleneck in China started to increase, with 25% of shipped fruit taking more than 40 days to be sold. By week 2, cherries were seeing up to 60 days delay in being sold, greatly affecting its quality and position.
Vial remarked he was surprised that consumers were able to still absorb so much volume despite the challenges.
Incredible growth: where will it go?
This highlights the principal challenge of the industry of the host nation of the Global Cherry Summit. Who will eat up the increased production capacity which is coming? Vial expects that the Chilean cherry harvest alone could reach over 127 million boxes of fruit by 2025, compared to 89 million in the last season.
In fact, according to numbers presented to the summit, only 49% of Chile’s harvest capacity is being exported currently.
In another estimate provided to the event attendees, he considers that in order to process the 6,500 containers required during peak weeks of the harvest, up to 3,600 processing lines are needed as the industry grows. Currently, that number is at 2,100, thus improving productivity at the processing level is a critical concern going forward.
This late season fruit is now dominated by the Regina variety, and George Liu, the director of ecommerce of China’s Kingo Fruit, told attendees that the market is willing to keep on purchasing cherries past the traditional cut off at Chinese New Year.
However, quality is a must, and the instances of internal browning forced some retailers in China to cut their retail programs earlier than expected this last season.
This is a particular issue considering that 40 percent of the Chilean harvest now arrives in China after the new years, when that figure used to be in the single digits.
This explosion of fruit volumes is creating waves in the Chinese industry, with a reorganization of the supply chain from certain players. According to the presentation of Peter Zhu, Head of the fruit retailer Pagoda's International Procurement Business, building its position as a fruit expert and offering a portion of its inventory to customers as a distributor through an omni-channel approach has allowed it to grow and absorb more fruit from its suppliers.
Last year, Zhu said that the chain sold 6% of the fruit it received to partners, but is working to grow that figure as high as 40% in coming years.
Calls for diversification
Jaime Sánchez, product manager for SanLucar put it clearly, growers in Chile must think past Asian markets, and Europe could absorb a greater portion of production. Much of the southern region of the continent still only consumes cherries when they are in season locally, presenting an opportunity.
One of the obstacles for growers past the seasonality of EU consumption habits is that prices paid are not nearly the same level as in a market like China. Currently 25 percent of the world’ cherry consumption occurs in Europe, and that figure has not changed much over the past 10 years.
Sánchez said that strategies like those seen in the blueberry category are needed. The supply window must also be expanded past a three week peak currently, and more fruit from growers nations past Chile are also needed.
The U.K. provides an interesting case, Joseph Shaw Roberts, Consumer Insight Director – Produce for Kantar Research said that the consumption here has been driven past the seasonal trends seen in the main European continent.
The cherry buyer in the UK today is shaped by women, and led by older consumers, particularly retirees. It is not the premium market, but rather a less affluent demographic which likes to buy from discount retailers. This group also tends to look for smaller packages, and takes more trips to the store than other categories.
This gives a glimpse into the cherry buyer, and where the target needs to be if growers are able to increase consumption in Europe to diversify away from China.
Mark Hancock, Managing Director of Norton Folgate the diversification need has been on the docket for some time, and upon receiving the “Cherry Innovation Award” during the summit, he hoped that this need would translate into a clearer call to action with follow up.
Another element which he thinks is important to grow consumption in the European market is to offer small package formats, around 2.5kg instead of a standard 5kg box. But he urged as well, that the key to expanding the consumption and shipments to Europe for cherries is centered on “Quality, price and availability”.