Big opportunity for producer/supplier brands to build a consumer following in Asia

The 20th edition of Asiafruit Congress reflects on the evolution of the Asian market, and asks what lies ahead for suppliers to the region. Asia has shaped the international fresh produce landscape over the past 20 years and will set the agenda for global suppliers in the coming decade as rising income levels continue to fuel demand for premium imported fruit. This was one of the key messages from the 20th edition of Asiafruit Congress, which drew more than 450 delegates from 41 countries to AsiaWorld-Expo in Hong Kong on 4 September. Opening the conference with a look back over key developments during the past two decades, Asiafruit editor John Hey described how Asia had gone from being a destination for global suppliers’ surplus production to a priority market where there is still huge potential for growth. The Asiafruit Congress has charted the evolution of the Asian market throughout its 20-year history. While noting that there were many doubters in the early years who questioned whether Asia would take off as a market, Hey said its growth had far exceeded expectations. Fresh fruit imports from all sources, both within and outside Asia, have more than doubled over the past 20 years, increasing 140 per cent to almost 12m tonnes. Asia’s fresh fruit exports have more than trebled in the same period to top 10m tonnes. China’s emergence as a trade force – both in terms of domestic supply/exports and consumption/imports – has been a key driver of growth, but the evolution of the market has often defied predictions, Hey explained. When it emerged as a low-cost exporter in the late 1990s and early 2000s, China was perceived by some international suppliers as a major competitive threat that would overrun global markets with cheap produce. But the growth of domestic demand – driven by rising incomes – coupled with increasing labour costs, then put pressure on China to feed its own consumers. Today, China is seen by global suppliers as a market of enormous opportunity for the future of their business. Nevertheless, China is exerting a growing influence as a supplier, as investments in domestic farming lift quality and productivity levels, he added. Asia’s food retail landscape has also evolved in ways few could have forecast, Hey noted. The incursion of modern food retail into Asia in the 1990s led some analysts to predict that traditional forms of retail would be eliminated. ‘Big-box’ formats increased their footprint, driven by the expansion of global retail giants; but today those large formats are under pressure as the retail landscape has shifted to “a multi-channel market with a digital dimension”. Smaller formats are now driving growth, whether it be specialist stores, convenience stores or fruit store chains, while the blurring of online and offline (020) is speeding the pace of change. Fruitnet’s managing director Chris White – who has moderated every edition of Asiafruit Congress since its launch in 1998 – was then joined by a panel of industry experts who have made key contributions to the conference as speakers over the years, to look at where the Asia market is heading. Feeding Asia While describing the growth of the market as “staggering”, Patrick Vizzone, international head of food, beverage and agribusiness at ANZ Bank, agreed that “we’ve only touched the surface”. Nevertheless, he said changing demographics meant that markets in ASEAN would player a bigger role in driving future growth. “Clearly demand is going to continue rising [in China], but it’s a different situation now from 20 years ago in terms of demographics. China is getting older, while emerging economies in ASEAN make up a market of 640m people with 1.2 trillion in nominal GDP, and they’re young populations.” While the panel identified great opportunities for the growth of intra-Asian trade, Noel Shield, CEO of JWM Asia Holdings, said Southern Hemisphere suppliers were in pole position to capitalise on future growth in demand, with a dynamic of south feeding north. “We only need to look at the population numbers,” said Shield. “Around 51 per cent of the world’s population lives in that corridor from India to Japan – that represents 3.7bn people. “We probably only service a quarter of those people right now, so there’s still enormous room for growth.“That doesn’t mean they’re all going to start buying imports tomorrow, but if you look at the next eight years, the growth of Southern Hemisphere imports into Asia is probably going to go from reaching 10 per cent of the population to around 25 per cent. “Our modelling shows that if demand continues to grow at the same rate, we’re not going to have enough food in the Southern Hemisphere to feed the north. There are essentially three trade lanes – South America, South Africa and Oceania. Right now, the weakest trade lane is Oceania as they haven’t got the volumes or investment yet.” Vizzone also identified a need for the entire industry to consolidate and invest to capitalise on the great opportunities moving forward. He singled out China as an area ripe for development, noting there has been “a dearth of investment in large-scale production in China”. Brand future Turning to the changing retail landscape, the panel identified a big opportunity for producer/supplier brands to build a consumer following in Asia. “I believe there are two factors that are going to control the growth of retail in Asia,” said Shield. “One is brands and the other is taste.” Shield said suppliers needed to focus on building brands that deliver consistency to win the trust of consumers. “If a consumer has a choice between two brands in a store, they’ll probably take 13-15 seconds to make a decision. If they have a positive experience, the time shortens each time they come back.” Shoppers are increasingly displaying “a grab and go mentality”, he said. “If they’ve got confidence in your brand, they’ll go for it straight away.” Shield also highlighted the different taste requirements of markets across Asia, noting that suppliers needed to tailor the taste profiles of their branded products accordingly. Bill Young of major US-based grower-shipper Stemilt agreed there was a growing brand consciousness among younger Asian consumers, and a desire to try new varieties and tastes. While retailers traditionally prefer to promote their own brands, he confirmed the growing opportunity for ‘producer brands’. “We invest alongside the retailer to promote the brand,” said Young. “A retailer can have their own brand, but what control can they gain over the integrity of the product or where it’s coming from?” Vizzone said the growth of e-commerce in Asia would also propel the market for branded produce. “Because of the inherent variability of produce in taste or grade, what brands deliver is the promise and reliability. You want that assurance if you’re going to buy something online.” Looking at the future retail landscape, Vizzone said omnichannel – driven by the merging of online and offline – would continue to grow in the next five to ten years. ‘Supplying Asia’s food retail market of the future’ was a focus for the second general session at Asiafruit Congress. Shirley Zhu, Asia programme director of grocery analyst IGD, explained how new opportunities were opening up for fresh produce as both large supermarkets and smaller local stores react to the rise of digital shopping: (see session report http://www.fruitnet.com/asiafruit/article/176515/major-opportunities-in-asian-retail). Asia gets ready for its future The final general session at Asiafruit Congress – Asia gets ready for its future – looked at the keys to future business success in Asia through to 2030. Fruitnet kicked off the session with some its own predictions, followed by a round-up of some of the fast-moving products, markets and suppliers in Asia’s fresh produce business. Fresh Studio’s Siebe van Wijk provided a spotlight on the opportunities for imported fruit brands in Vietnam’s fast-growing supermarket sector, while Tommy Padilla, Asia sales director at Mission Produce, discussed the booming demand for avocados in the region. Mette Knudsen, managing director of business consulting company Knudsen&Co, then wrapped up the conference with a look at future trends in the Chinese market. She identified the five most important Chinese consumer groups that will shape demand for fresh produce in the future – describing a market of contradictions. On the one hand, there is a growing obesity problem in China, particularly among children and teenagers. Fresh produce marketers who can target this problem by reaching out not only to consumers but also to dieticians and health professionals will benefit, said Knudsen. On the other hand, there is a fitness-obsessed group in their 20s and 30s who represent an ideal target audience for marketers making functional or health claims about their products, she noted. Another key driver is the Chinese middle-class demanding “safe, unpolluted food” for their families, and to a lesser extent the traditional luxury gift fruit market. While there is an upper-middle class consumer set in their 50s that favours premium imported and packaged produce (“the traditionalist”), Knudsen also identified an aspirational health-conscious group in their 40s-50s known as the “zen generation”. They demand fresh produce through a lifestyle centred on detox, raw-food and cold-pressed juice, but they also support minimal packaging and transport of food for environmental reasons. Knudsen predicted they would have a growing influence in the future as they are also inspiring the “Z generation” of millennial consumers. The Chinese government’s increasing focus on food safety also has huge implications for food imports moving forward, Knudsen warned. “The Chinese government decided in 2015 that it wanted to introduce the strictest food safety regulations in the world,” she said. “That’s happening now, and the law will be implemented later this year. It’s extremely strict with regard to packaging, labelling and functional claims and it affects everyone in the supply chain. “Suppliers of imported food have an advantage because we’re talking imported products which have a tradition of food safety – the winners will be the ones who are strong in traceability.” Wide-ranging workshops In addition to the general sessions, Asiafruit Congress delegates were able to choose from a range of afternoon workshop sessions that went into more detail on specific subjects. The first two concurrent sessions focused on the opportunities in the dynamic Korean market, and on marketing to Asia’s traditional retail trade, with case studies from India and Indonesia. The second pair of workshops looked at Asia’s next boom in citrus, and at the keys to capitalising on the rapidly growing convenience market in Asia. Asiafruit Congress also hosted the presentation of the Asia Fruit Awards (read about the winners here: http://www.fruitnet.com/asiafruit/article/176518/marketers-scoop-asia-fruit-awards) before the Networking Lunch. The Networking Lunch was sponsored by Alibaba’s fresh produce supply chain management arm Win-Chain, which signed MoUs for cooperation on future fresh produce supplies with Tmall and RT Mart as well as with Forever Fresh Asia – a China-based joint venture between Chilean cherry grower-packer-marketer San Francisco Lo Garces and Peruvian table grape exporter Verfrut.