Asia's Changing Markets

In Asia, imported red globe grapes are winning over Asian consumers; while in China, California Table Grapes and Washington Apples are becoming widely-recognized brands. These signs hint of a growing Asian market that is transforming in size, and moving increasingly from traditional spheres into modern retail facilities. While price remains king, there is more buying power for counter-seasonal produce and greater variety. In fact, taste, quality, safety and packaging are all playing major factors in attracting consumers.

A series of free-trade agreements and bilateral trade deals in Asia have also made imported goods increasingly affordable to the everyday consumer.

“So the overall state of this business is considered very healthy with good growth,” says Patrick Vizzone, Rabobank, head of Food & Agribusiness Asia. “We continue to see big changes in the Asia market as competition from China increases—its infrastructure and quality has been improving every year.”

The China factor

Currently, China is Thailand’s biggest importer of fresh fruit, and Thailand imports a lot of vegetables in return. It’s a good relationship for both countries. This is an indication that China still has an import market for fruit in the next few years; but that is expected to eventually shrink. China can grow anything that other countries can grow (some say as good as anybody else); so imports will be increasingly restricted to seasonal-based shipments. Nevertheless, South-East Asia will always have an advantage as a supplier, since China—and most of Asia—is located in the northern hemisphere. The key issue is to understand that the China market demands only the best. It is a misconception to think that the China import market is a dumping ground for second-grade or substandard fruit. China imports products that are not cheap. Instead, it brings in products that tend to be resource- or land-intensive commodities from resourcerich countries. (It tends to export products that need a lot of labor.) But importing to China is not an easy process. Challenges for exporters to China are establishing partnerships; uncertain import protocols; competing local produce; understanding local requirements; and differentiating products as high-end, quality, new and exotic, branded, safer or healthier products. The shift from tariffbased import restriction to a quarantine-based system has also been problematic. This lack of transparency, combined with uncertain inspections has caused many exporters to hesitate to ship to China, as well as other markets. When governments are slow to inform the other governments, slowing the export process down, it can only damage commercial relationships in the region.

China’s reach

In terms of exports, China has positioned itself as a low-cost player; and that is an image that will take a lot of effort to break. “The problem stems from the fact that there are no standards for different qualities,” says Vizzone. Nevertheless, this could change. The continual climb of the yuan is forcing exporter costs up the value chain. Then there is the rapid infl ation of agricultural-produce prices, driven by internal markets. Nevertheless, the price of fresh-produce exports has climbed over the wholesale market price.

Still China’s status as a large net exporter remains certain for the medium term; domestic fruit-and-vegetable demand should only slightly increase. But dwindling water supplies, degraded soils and unchecked pollution will ultimately limit long-term export growth. The country’s trade surplus has grown at approximately 21 percent per year over the past fi ve years. While net imports have been accounted for, the overall direction is apparent.

Understandably, China is having an impact on fruit-andvegetable markets in the region. Its grip on Japanese and Korean markets is expected to only get stronger in the coming years. Nevertheless, food-safety concerns remain a major obstacle for China’s exporters. China should adopt internationally-recognized food safety and quality assurance standards.