The Covid-19 pandemic continued to affect the Chinese fruit market this year. The professional services of fruit importers and exporters have not yet returned to a pre-pandemic level. Moreover, many fruit companies have adjusted their strategy in response to the global economic environment. This report looks back on the Chinese fruit market this year and summarizes some of the most important trends.
Sales volumes were adjusted, and premium domestic fruit excelled
The global distribution of fruit was interrupted when the pandemic broke out. And domestic consumers were afraid that import fruit was infected with Covid-19, which weakened the market position of import fruit. Some domestic consumers switched their attention to premium domestic fruit instead. They quickly discovered that premium domestic fruit can compete with import fruit in terms of product quality and flavor, and that the prices of premium domestic fruit are often lower than import fruit.
The purchasing power of consumers in second- and third-tier cities is growing, and import fruit gradually loses its elevated and expensive status. Import fruit can now be seen in many second- and third-tier market. But for some of the staple import fruits that have never been expensive, the cost price is now nearly as high as the retail price, which leaves traders with a very narrow profit margin. That is why some importers shift to premium domestic fruit instead. In addition, as the export volume of Chinese agricultural products is growing and premium domestic fruit is doing well, a number of brand formation companies have focused their attention on the domestic fruit industry. Premium domestic fruit is now slowly catching up with import fruit in terms of refined packaging.
Export of fruit products with low added value drastically declined, while solid exporters took advantage
The shipping fees continued to rise this year. Some Chinese fruit and vegetable exporters had to change their strategy and reduce their export volume. They focused on the domestic market instead.
The impact of high shipping fees was particularly obvious for fruit products with low added value. In some cases the shipping cost was higher than the product value. Some exporters had to carry the burden of the additional cost to guarantee supply for overseas sales channels. But exporters without the financial resources to carry the cost had to reduce their export volumes. In some cases they simply stopped exporting certain fruit and vegetable products. Smaller exporters reduced their export volumes or stopped exporting altogether, and that created a supply shortage in overseas markets. More solid exporters took advantage of this situation. Exporters with subsidiary companies in overseas markets or strategic partners with cold storage facilities enjoyed the advantage. Exporters with facilities in overseas markets were less affected by shipping uncertainties than small exporters. Clients with demand could pick up their orders directly from cold storage warehouses. Moreover, the supply shortage for some products pushed the price up and solid exporters who still supplied the overseas markets enjoyed a larger profit margin.
Consumers pay more attention to the product quality of import fruit
The 'cherry incident' last year had a significant impact on the import fruit market in China. And the influence carried over into this season. Some consumers have adopted a more hesitant and careful attitude. In addition, retailers are more apprehensive of the risks in this challenging environment. The Chilean cherry export volume for the Chinese market has been adjusted twice this year. Consumers pay more attention to product quality. The Chinese market is rapidly recovering, and relevant information is shared on social media. Questions of product quality and food safety always attract a lot of attention.
Import volume of Western products declined, while import volume of Eastern products expanded
The wholesale conditions of Western fruits such as Egyptian oranges, Chilean oranges, and Australian plums, were not great last year. Many importers suffered financial loss as a result. The trade volume of Eastern products, however, was barely affected by the pandemic. On the contrary, many first-tier wholesale markets saw the import volume of Eastern products grow.
As the spread of Covid-19 is largely brought under control in China, market forces are gradually recovering. This year the sales conditions of Western products improved compared to last year, especially fruit products from the Southern Hemisphere such as blueberries and cherries. In recent years, the Chinese government has given permission to a growing number of countries to export a wide variety of fruit products to the Chinese market. And fruit production areas in the Southern Hemisphere are ideally located to supply the Chinese market during the slack season of the Chinese fruit industry. And even when fruit production areas in the Northern Hemisphere attempt to stand out in terms of product quality and price, there is still a difference in product variety with the Southern Hemisphere.
Import volume of fruit from temperate zones declined and import from tropical zones increased
The pandemic created many obstacles for international fruit distribution, including a shortage of shipping containers, limited global shipping capacity, high shipping costs, interruptions in production areas due to outbreaks of Covid-19, and delays due to preventative measures. Another issue was the occasional news of Covid-19 traces found on the packaging of fruit products. All of these circumstances created new problems for importers. And as a result, the product mix in the domestic market changed. The import volume from temperate zones declined and import from tropical zones increased. The fruit products imported from countries in temperate zones often have to travel a long distance to reach China, whereas tropical fruits, especially from Thailand and Vietnam, can easily reach China. The rising shipping costs thus had a stronger impact on long-distance shipping from temperate zones than short-distance import from tropical zones.
The problem of limited cargo capacity improved, but the shipping cost remains high
International shipping has been chaotic for more than a year, but conditions now slowly improve. Shipping fees are not soaring at the same pace as before, although they remain high. And cargo space is not as scarce as before. However, global distribution remains far too slow. Even though the spread of Covid-19 is largely brought under control in China, overseas markets still struggle with recurring outbreaks. Many ports have very strict procedures for docking ships. And ships can expect to be delayed for 3-4 days in every port of call. Moreover, many import harbors have a backlog and docked ships have to wait before they are unloaded. This all delays the arrival time of shipping containers, which has serious consequences for importers and exporters.
Fruit from the Southern Hemisphere now supplies the market, but different production areas struggle with different problems
Shipping problems are not likely solved in the short term. The global shipping network is connected, and problems in one area carry over into other areas. As fruit growers from the Southern Hemisphere begin to supply the market, they too encounter problems with shipping.
The greatest struggle for Chilean cherries is distribution. Suppliers hope to sell 70%-80% of their cherries before Chinese Spring Festival [1 February, 2022], but time is short and the task sizable. The pandemic already created a difficult situation, and the shipping crisis only exacerbates the problem. However, the cherries that do arrive in the Chinese market are all absorbed by the market. Consumer demand for Chilean cherries is still huge. Australian fruit struggles with a different problem. Diplomatic relations between China and Australia were tense last year and this situation continued into this year. The biggest problem for Peruvian fruit is the uncertainty of cargo shipping, especially backlogs in ports and delays. The one month shipping period between Peru and China now takes even longer, which affects the product quality of the fruit products and has an impact on the price fluctuations. South African orange and tangerine exports will likely suffer from a shortage of shipping containers, at least in the short run.