Leading industry players and analysts, including Vanguard International’s own Timothy Li, provided updates on the latest trends and developments in Asia’s fresh produce market at the Asiafruit Congress Online Preview. For anyone who missed that preview, here is a look at that discussion:
Asiafruit: The two months lockdown in Shanghai had a significant impact on the fruit business in China. Can you tell us what some of the major challenges were, and if things have returned to normal now in China?
Timothy: The resulting delay in cargo circulation and customs clearance had a major impact on the quality of fresh fruits and vegetables. Even though the Shanghai port did not completely stop operations, under the requirements of epidemic prevention, only vehicles with a permit were allowed to go into the port. Other cities had very different policies for vehicles with a history of travelling to Shanghai. Some ports required drivers to be isolated on the spot for at least 7 days, causing drivers to resist picking up goods in Shanghai. The serious shortage of transportation capacity made many, many containers stranded in the port, which had a negative impact on the quality of the products with short shelf lives, such as grapes, avocados, and so on. This led to a sharp rise in logistics costs and overdue charges of containers, which seriously increased the operating pressure on importers and wholesalers.
With Shanghai returning to ‘normal’ life with far fewer Covid cases, port clearance is back to pre-pandemic operations and releasing pressure on the industry. However, the normalization of epidemic prevention and control will directly impact the wholesale market, leading to more frustration around pricing for importers and wholesalers.
Asiafruit: What changes/adjustments (products, channels, operations, etc.) has Vanguard made since then to cope with the ‘new normal’ in China?
Timothy: I think our Chinese clients will be more cautious about their medium and short-term order plans. They can’t make order decisions solely on the market experience of previous years. We will exchange more arrival volume data and changes in different markets with them to support our clients’ needs.
The epidemic controls prompted the development of community group buying and live streaming e-commerce in China. The ‘fans’ behind these business models have high potential purchasing power, but they need to have strict requirements for the logistics cold chain. Vanguard is already in discussion with our clients regarding how to develop the business of supply cold chain, and how to cope with market changes to grow and support our business together.
Asiafruit: With China sticking to zero-Covid policy, after Shanghai’s lockdown in June, we are seeing frequent lockdowns or at least tightened controls in regional cities. How is this reshaping the industry in China? What are some of the key issues that will continue to affect the supply chain in the short-term future?
Timothy: As I already touched on, we predict new business models such as community-group buying and live streaming e-commerce will see faster development! At present, supermarkets and traditional wet markets are still the main sales platforms. The main buyers of fruits and vegetables are the elderly and housewives. They are more accustomed to in-store tasting and purchasing on-site, and the elders aren’t wanting to adapt to live streaming e-commerce. The supermarkets and fresh markets still occupy the biggest market share in short-to-medium term buying. The industry needs to be prepared for the changing consumer buying habits of the generations coming up. This generation values convenience and flexibility, so we will dedicate time and resources to make the e-commerce model more profitable.
The high operational cost of setting up cold storage and repacking lines near communities remains the key issue affecting the supply cold chain. Freshness, efficiency, and flexibility are the key factors for success. Resources need to be committed to review the data and ensure the turnover volume consumers purchase can be profitable for their investment.
Asiafruit: What about Chinese consumers? How have they been changed in terms of their fresh produce shopping and consumption habits?
Timothy: Freshness, seasonal availability, and value for money are the main considerations for Chinese consumers when purchasing fresh produce. E-commerce not only gives consumers convenience and flexibility, some of the live streaming platforms also enhance the produce knowledge of consumers on grading, ripeness, and origin. I expect Chinese consumers will become more knowledgeable around where their produce is coming from.
Asiafruit: Customs clearance and logistics are challenging the world, and in China especially so. What are traders doing in China to alleviate the problems？
Timothy: In short term, the custom clearance time and process are out of traders’ control. The only solution is to facilitate more direct charter flights and vessels to China. Opening more imported fruit routes to and from China also would release the current pressure on ports like Hong Kong and Shanghai. Adding port destinations in Nansha and Dalian in the future has potential, as I know some key Chinese importers already have large cold storage capacity near these locations. Local governments are willing to provide faster custom clearances to attract more shipping lines to open new routes.
Asiafruit: Ending on a positive note, for the global suppliers, are there any new opportunities in China that will drive business growth in the short-to-mid term future?
Timothy: There still is an approval list of imported fruit origins and varieties by China Custom. It takes time to open new origins and varieties, so I think the new opportunities are on the improvement of plantation techniques and improving the quality of China domestic fruits. I take Driscoll as an example. They are very successful with planting berries in Yunnan. The quality of Chinese berries is outstanding and can sell with a strong price in the market. China is a very big country with plenty of planting areas, however, most domestic fruit growing regions are operated by individual farmers, and there is no organization to unify the quality standards. I believe that there is still room for development for fruit planting in China. When we can apply systemic planting methods and achieve quality and crop standardization, it can lead to big growth potential and attract international investment.