An expert panel at the APAL Industry Forum in June roundly agree that export is the way forward for apples and pears, just as it was for table grapes and citrus.
“You guys have to export.”
This was the short and to-the-point summary of the apple industry’s situation from Jeff Scott, CEO of the Australian Table Grape Association.
Scott was joined on stage at APAL’s 2019 Industry Forum by Ben Cant (Chairman, Citrus Australia) and Scott Montague (Executive Director, Montague). This session, facilitated by APAL’s Industry Services & Export Manager Justin Smith, explored what we can learn from other industries about tapping into the global export market as negotiations for market access into China continue.
The challenge is that Australian producers currently rely on a single, domestic market to absorb a growing volume of apples. Twenty years ago, exports made up 18% of the market but this has now dropped to 1%. While the long-term direction of marketing in the industry is a hotly-debated topic, there is shared agreement that marketing should pivot to overseas customers in a bid to reverse this trend.
China is seen as an immense opportunity as it is the largest premium fruit market in the world. With a population of nearly 1.4 billion, the sheer number of potential consumers is mind-boggling. To illustrate this point, Scott explained that every crate of grapes exported from Australia to China is absorbed by Guangzhou and Shanghai only, with dozens of Chinese mega-cities (all with populations in the tens of millions) still untapped.
Australia is a high-cost producer, so instead of trying to compete with the likes of Chile, the strategy is to send premium apples to China where branded product will attract a premium price. Success in this area will drive investment back into the industry.
While APAL is creating a structured and collaborative approach to its export strategy, the industry can learn a great deal from other industries that have gone through the same process and now have mature export markets around the world, including China. The panellists had the following key pieces of advice:
Focus on quality
“Quite simply, better quality fruit will bring better overseas returns”, says Scott. APAL’s research has identified a target market of fairly affluent Chinese consumers who use food choices (such as more expensive fruit) as a subtle way of displaying their wealth. They are also strongly concerned with the quality, appearance and particularly with the food safety of a product.
“I can’t underestimate the focus on MRLs (maximum residue limits) when exporting”, says Cant. “Japan, Korea and China are hot onto food safety and MRLs. The apple industry will need to resource that significantly.”
Leveraging his company’s experience in exporting to Europe, Montague says they can’t afford to have issues around quality. “Only the best produced, best-condition fruit goes over”, he says. Montague also reiterates that MRLs are a major factor to take into account when exporting – and overseas buyers are very concerned about food safety. “During the strawberry needle scare, all our export customers rang us to ask if our fruit was okay. At one point I was concerned they would freeze orders until we could prove our supply chain was secure”, he said. “Overseas customers’ focus on quality has focused our attention to detail, including doing the right packing job.”
Reduce risk by diversifying into multiple markets
While the Chinese opportunity is understandably at the forefront of the apple industry’s collective mind, the panellists all warn that it’s vital to widen and secure your customer base.
Cant gives the example of a lesson learnt in 2010 when Australia was supplying 40% of its orange exports into the US, but lost that market during the global financial crisis when American buyers swapped to cheaper oranges coming out of Chile. “We were pushed out by a cheaper competitor”, he says. “We went back with our tails between our legs, and were forced to re-think.” Since then, the orange industry has diversified its customer base to include markets including China and Japan, but also markets that pay lower prices including the Philippines and Indonesia. “They haven’t been able to pay the same returns [as China], but they’re important”, Cant says. “We have a good market or two in the bank; now we’re in insurance mode”.
Scott is also aware of the risk of putting too many grapes into a single basket. “China currently takes 40% of our product, so losing that customer is a big concern. That’s why we’re putting a lot of promotional work into Japan, South Korea, Thailand, Singapore, Malaysia and the Middle East. It’s about diversification in case we lose China.”
Markets can be lost. Cant says that the political landscape with China keeps him awake at night. “With 110,000 tonnes a year going into China, political issues can affect clearance for containers. So when Aussie politicians start talking about China in a way that might affect the trade relationship, it can make exporters a bit nervous.”
Change grower mindsets to become export-focused
The other way an overseas market can be lost is through a failure to meet quality specifications.
Scott talked about the steep education curve that grape growers went through immediately after gaining access to the Chinese market. “Cultural practices were very lax – we were field packing and sending crates to China containing leaves, soil, ants, and more. This got us into trouble – after working so hard to gain access, we were suspended in the first 18 months and it took a lot of effort to get it back”, he says.
“We then had to reinforce the requirements, protocols and cultural practices with growers. Packing was moved to sheds, and quality and presentation became a lot better. Overseas prices went up while domestic prices went down. But it took a lot of education to get there.”
The apple industry’s need to familiarise itself with overseas protocols will become even more of a complex challenge as we diversify our export base across multiple countries, each one having its own set of protocols, including differing MRLs.
APAL CEO Phil Turnbull on export: