Innovation and competitiveness in the fresh produce sector

China as a leading producer and strong importer
The expert addressed a series of cliches regarding the Chinese market that could confuse entrepreneurs. One of the main trends in the global fruit sector between 2007 and 2017 has been the significant increase in fresh fruit imports, as China has grown both in terms of production and import-export, becoming the fourth exporter and second importer in the world.

"While it's true that China represents the main producer of many types of fruit, this doesn't mean it doesn't need to import large volumes. Great producers are often great exporters and importers."

Italian produce grows in China, but it's not enough
According to the latest data, Italy is among the 10 leading fruit exporters in the world and, although quantities exported to China are limited, the growth has been much higher than that of other countries. This is due to the Chinese logic that tends to diversify suppliers: the Chinese don't want to depend on US supplies any more and are therefore looking for alternatives.

Between 2012 and 2016, the growth rate of Italian fruit imports was of over 60%, proof that the sector worked well. In 2017, food exports increased by 15% with a value of over €448 million. But this is only the beginning, as the aim is to establish bilateral relationships and diplomacy and to sign phytosanitary agreements. "Just think about Australia, which managed to start exporting a lot of products thanks to good diplomatic relations."

The importance of logistics
The factors that have led to an increase of imports have been: better access to the market, changing consumer preferences and an increased purchasing power. All combined with enhanced logistics. We mustn't forget that China is a very large country and often ports are far from potential markets. An improved management of the cold chain and storage can favour the transfer of perishable goods.

Among the most useful innovations logistics-wise there are new quicker (yet more expensive) railway routes: the experiment made to connect Chengdu (capital of the Sichuan region) and Mortara (near Pavia) through a sort of railway Silk Road is rather interesting, as it would only take 16-18 days to transfer the goods rather than the 45 required by sea transport.

Trends
"The Chinese middle class gathers 100 million inhabitants with a per-capita income much higher than the Italian one. Often, we don't realise China cannot be considered as a single market. Multiple markets can only be tackled by structured companies, as it would be too easy for others to finish quantities available should consumption increase."

A Rabobank study confirms that the average per-capita fruit consumption varies between 32 and 80 kg depending on the income - the value is still far from the European average (132 kg per-capita) but it's growing rapidly. While the potential is incredible, the sheer dimension of the Chinese market is a big question mark for companies. Just think about apples, a favourite with Chinese consumers: consumption is expected to reach 25 million tons, i.e. twelve times what's harvested in Italy!

Chinese consumers are increasingly obsessed with healthy food and are willing to spend a lot to purchase healthy organic or certified products. This also applies to the younger generation between 26 and 35 years old. Considering the few organic products available in China compared to other countries, there is great potential for this segment. Online purchases are also popular.

Another trend is the growth in demand of frozen fruit, while the sales of fresh produce is indeed growing, but only outside traditional consumer towns. Just think that frozen fruit demand, driven by the soft fruit segment, increases by 5% every year while the demand of other preserved fruit (cans, bags or bottles) is stable. In addition, sales of avocados and blueberries (superfoods) have tripled, also thanks to the information provided through social media.

Easier said than done
Although interesting, the Chinese market may not be very accessible. "What is sure, is that our negotiations on phytosanitary protocols have slowed down due to the fact that the Chinese phytosanitary service is merging with the customs one," explains Marco Salvi.

In addition, unlike other countries like Spain, Italy doesn't have enough resources to destine to promotion: in 2017, in fact, no fresh produce project was approved within communication plans on a Community level. According to the President, it would be helpful to stop promoting fresh produce only in stores to find a way to promote it together with other sectors.

In 2017, the Italian fresh produce segment did rather well, as exports increased (€4.9 million, +3% compared to the previous year) and a positive final balance (see photo below), but some questions still remain unanswered and the willingness of companies to innovate and invest is often not enough to provide that answer.



According to Marco Salvi, the latest geopolitical events demonstrate the relative weakness of Europe and a lack of authority in case of international crises between superpowers. So far, the Russian ban has caused billion of Euros' worth of damage and the recent expulsion of Russian diplomats from western countries (Italy included) will not ease the tension between western countries and Russia.

The macroeconomic context is finally showing good results (the GDP at +1.5% is the highest since 2010), which is a sign that the economy in general might be recovering. However, a strong authoritative government is needed as well as policies that diminish labour costs and fiscal pressure. What is more, businesses and institutions should talk more to reduce bureaucracy.



Marco Salvi explains why the first national table on fresh produce is a strategic tool to highlight sector priorities such as the update of agricultural land registers or the study of internationalisation and promotion measures.

As regards the role of innovation, the president of Fruitimprese listed the various aspects included by this term: varietal, technological, logistic and organisational innovation as well as actions to improve communication. Unfortunately, innovation is indeed rather expensive - it would take €20 million to apply a varietal development type-project on 100 hectares. "And we're talking about 100 hectares which, compared with some Spanish cooperatives, is very little."



Ismea and the credit needs of businesses
Access to credit, possible at conditions that are not too expensive, is therefore of strategic importance. Ismea general director Raffaele Borriello retraced the recent stages of the merger between Ismea and Isa, thanks to which Ismea can now be an essential support to access credit as well as to provide warranties to reduce the cost of loans.

In addition to illustrating the activities undertaken to guarantee access to land to new entrepreneurs and support generation turnover in agriculture, the director invited businesses to log on to Ismea's website and have a look at the Institute's work. Unlike the former Isa, Ismea can intervene in various steps, from production, processing and logistics to distribution. €100 million should be made available to companies by the end of the year.

As regards the international scenario, director Borriello stressed that the new trade war between the US and China should make us reflect on the fact that the globalisation model is going through an unprecedented crisis. This is due to the fact that new actors are growing, they are no longer "emerging countries" but rather nations that are attacking the market and gaining importance. Saying that protectionism could lead to advantages for Italy or Europe is premature, also because it would be difficult to regain market shares once they had been given up. Rather than a simple government, Italy would need a ruling class that could tell it how to tackle challenges deriving from the globalisation crisis.

Europe after Brexit
Hon. Paolo De Castro, vice-president of the European Parliament's Commission for Agriculture seemed more positive about the role Europe could play in the new international asset. The British House of Lords voted to maintain the customs union, a sign of the difference between the concept of Brexit and its problematic application. According to De Castro, Brexit has been a vaccine rather than a virus, as Europe is now stronger.

Nonetheless, Italy should preserve policies that support the wine-making and fresh produce sector, in which the EU is often considered more as an imposition than a partner. "I'm sure none of you know the Italian members part of the Commission for Agriculture, while the Spaniards know fully well who they are and how to get in touch. You need to be more responsible, get ready with plenty of time and learn how to lobby."

As for what concerns the CAP reform and the so-called Omnibus regulation, De Castro recognised that Italy managed to strengthen the power of POs and PDOs while defining trade policies. As regards the reform of CAP, De Castro referred that there's no time for voting, so it should remain unvaried until 2020. The proposal of a EU directive to put a stop to unfair trade practices between businesses is instead promising and should be approved by the end of the years. "Regulations will have to be applied within two years and anonymous reports will be accepted."

A round table moderated by Rai journalist Franco Di Mare followed. Leading companies (Unitec, International Paper, New Factor, Rivoira and REWE) talked about innovation and competitiveness.



Angelo Benedetti ("products are rewarded if quality is recognised and guaranteed; our Unitec technologies are strategic to achieve this result"), Luca Molari ("on top of protecting the produce and making easier to handle, cardboard packaging can bear producer brands"), Alessandro Annibali (he retraced the success of the promotion campaign focusing on nuts, stressing how "ever-changing consumers are the focus of innovation"), Marco Rivoira (presented the new plant and retraced the success story of Ambrosia apples) and Ulrich Spieckermann (talked about the relationship between producers and distributors and about the crucial role of perceived quality, as "consumers don't accept being disappointed") intervened.