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Logistics, key to future of cherries in China

"The increase in Chile's cherry production in recent years has been closely linked to China's growing demand; in fact, we are increasingly shipping less fruit to the United States and Europe. As a company, we allocate between 85% and 90% of our production to the Chinese market," explains Ricardo Monge, Account Manager at Frusan.

The Chilean company, founded in 1979, has over 5,000 hectares planted, where it grows cherries and a variety of other fruits, which are exported to clients in more than 52 countries. Additionally, Frusan has associated producers in different parts of Peru.

The current campaign's results have been negatively affected by heavy rainfall during the harvest, reducing the country's export prospects by about 15%.

"At company level, we lost approximately 30% to 40%, as our fruit production concentrates mostly in the region of Maule, which was the most affected by the rains," says Ricardo, add that "with favourable climatic conditions, we would have exported about 450 containers of cherries to China, but in the end we will ship about 235."

Taking into account that Chile is the world's largest cherry exporter, with a production expected to reach about 17 million boxes this season, such an important loss in production will certainly have an impact on the markets.

"Our Chinese customers haven't felt the effects of our drop in volume, yet. At the moment, we are not close to any period when cherry consumption usually increases; thus, importers are acting conservatively, only purchasing when they are offered the best prices. As a result, we are noticing a downward trend," says Ricardo, adding:" Eventually, the loss in volume will be more noticeable, and in the weeks leading up to the Chinese New Year (19 February) the market pressure will be higher and we believe the FOB price could increase by about two dollars per kilo."

Usually, the price per kilo does not fall below $ 3.50, and at times of peak demand it reaches US$ 7, but for Chinese customers, quality is the most important factor. Ricardo says that "the fruit shipped to China has to be of the highest quality, as prices in the market are heavily differentiated. Between cherries of poor and excellent quality, the price difference can be as high as $ 8 per box."

Making sure that the fruit arrives in perfect condition to China is not an easy task. Frusan sorts the cherries prior to their delivery to the packing facilities for long, medium and short term, which depends on the fruit's estimated shelf life; afterwards, controlled atmosphere techniques are used to ensure the fruit retains its qualities for longer.

But in a country the size of China, the adventure is not over on arrival to the port; the fruit's distribution nationwide is the biggest challenge.

Until now, the fruit's marketing has focused on coastal areas, where the markets of Shanghai, Guangzhou and Beijing are located. From these, some of the fruit goes to secondary and tertiary markets.

"Shipping the fruit to the saturated primary markets and waiting for it to be sold is not the way. Our goal is to find importers able to reach the secondary markets without intermediaries, thereby making the most of their potential and obtaining the best prices for our fruit," explains Ricardo.

These more affluent provinces only have one third of the population, but with the improvement of the road networks, cold storage and logistics as a whole, arriving to the inner regions has become increasingly less difficult.

"We estimate that an annual per capita income of $ 10,000 or more allows Chinese consumers to regularly purchase imported fruit. Most coastal provinces have this income level and the central provinces are catching up, so we predict a considerable growth in consumption over the coming years," concludes Ricardo.

More information:
Ricardo Monge I.
Account Manager
T: +56 2 2657 3300+56 2 2657 3300
M:+56 9 6468 6055+56 9 6468 6055

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