China: Opportunities & Challenges for Produce from South America

1. China: Opportunities & Challenges for Produce from South America Mabel Zhuang Director, M.Z. Marketing Communications PMA China Consultant

2. Agenda • A Little Background: China’s Economy Overview • Setting the Context: China’s Fruit Imports • The Opportunities for South American Produce to China

3. China’s GDP in 2011 has reached $7.5 trillion with annual growth rate at 9.2% • China has surpassed Japan and become the second largest economy over the world only next to the United States • The predicted growth rate for would be 7.5%

4. Map of China (Major Ports)

5. China’s Production of Food & Agriculture Products and World Rank

6. China Opportunities - The Magic of 22/7 • China has 22% of the worlds population …yet only 7% of the world’s arable land. • Over 200 cities in China with a population 1+ million people…only 35 in all of Europe • In early 2012 became the largest grocery market in the world • Third largest ag importer…and moving up

7. Chinese Imports are Outpacing Exports Source: WTO

8. Rising Middle Class in China – Import Opportunities

9. In short, here is the opportunity for suppliers… Initial Industrialization period Net food import Interim industrialization period Late industrialization period Time Food trade deficit begins Now China joined WTO Reform and opening up Net food export Source: COFCO

10. China Fruit Imports (2010 [blue] vs 2011 [red]) Source: China Ministry of Commerce

11. 2011 Imported Fruit based on value

12. Future Opportunities • Fruit and vegetable imports well positioned – especially for branded products. • Large and growing middle class • Domestic production costs rising • Willingness to source globally

13. Consumer Fruit Consumption Trend • Daily consumption habits & recognition of its general health benefits • Fruits used as a major gift item for holidays, family visits, and specials occasions • Preference over imported fruits and more choices of varieties compared with two decades ago • Growing concerns over the food safety

14. South American Fruit Export to China, 2011 Statistics (Source: Ministry of Commerce, PRC)

15. Peru Fruit Export to China • In 2011, Peru achieved growth of 126%, which increased its market share from 1.2 to 1.7 percent. • Peru is the third largest exporter of grapes to China after Chile and the U.S.

16. Chile Fruit Export to China • Chile is the number one supplier of cherries and grapes to China, and one of the major suppliers of apples along with the U.S. • In 2011, Chile’s fruit export to China has enjoyed a growth rate at 78.5%, increasing their market shares to 18% next to Thailand only.

17. Permissible Fruits to China

18. South America Advantages • Good bilateral relationship • More market access • Counter Season • Low Tariff for fruits (Peru 5.2%, Chile 3.9%) • Competitive Price • Improved Quality • Strong Interest from the Chinese Trade

19. China Challenges • Language & distance barriers • Low consumer awareness-South American Fruits often labeled as from other origins • Under-developed cold chain infrastructure

20. Fruit Distribution in China • Export to H.K. still dominates but declined last year due to tight government control • Jiangnan Wholesale Market in Guangzhou is the largest for imported fruit in China, distributing to many secondary wholesale markets in China • Direct Import from major wholesale markets with on-site CIQ office： -Shanghai Longwu Fruit Wholesale Market - Shanghai Agricultural Products Wholesale Market (SAP) • Importers on the wholesale market makes the purchasing decision, while the market provides logistic service.

21. Wholesale Market in Shanghai • Vendor’s booth

22. Fruit Retail in China • Modern RetailersChains, like Walmart, Tesco, Metro, Carrefour, along with local chains mostly sourcing from whole-sale market • Mom & Pop Stores/Wet Market • Specials channels: --Fruit Shop Chain Stores growing fast --On-line Fruit Shops with home delivery ---TV shopping • Food Service: Restaurants, Bakeries & Juice Bar

23. The First China Fruit Chain Store Summit

24. Fruit Juice Bar

25. Import Documents Required • Phytosanitary Certificate • Certificate of Origin • Invoice • Packing List • Bill of Lading • Non-wood packing materials certificate or Fumigation Certificate if wooden Pallet used

26. Quarantine Requirement The only stricter quarantine requirement to Chilean fruit: Pallet must bear the pallet number and the pallet number must show on the phytosanitary certificate for air shipments. Cold Treatment: only to fruits from V & RM, conditions normally 0.5 degree Celsius for 15 days. Ocean - Air: this is forbidden to all origin, but other origin does not use this transportation, while Chile does. On the site inspection, the sameto all origins.

27. Projection for Future • Increased consumption for both domestic and imported fruits, per capital fruit consumption is expected to increase from 40 kilos to 48 kilos in 2020. • More direct import to mainland China. • Volume will continue to increase, but the growth rate will slow down. • High value products will have good future, like blueberries.

28. Some Suggestions • Commitment to the Market & Exploration of New development • Trade Education-seminars, trade delegation, trade shows in China • Consumer Promotion & Branding-retail promotion, Advertising, P.R., Social Media • Chinese-speaking supporting staff on the market

29. PMA in China • Extensive Research & Market Development • Strong relations with Chinese associations and importers • PMA Roundtable with China Produce Industry, June, 2012 • Two-day Produce Cold China Training, Sep., 2012 • Chinese Buyer’s Delegation to Fresh Summit • Presentation at the Logistic Forum of China Chain Store and Franchise Association’s annual convention • Presentation at China Fruit and Vegetable Trade Fair • Engagement with American/Chilean Embassies in China • Global Development Council Meeting in Shanghai, March，2013

30. Thank You! For More Information: Mabel Zhuang E-mail: mabel@mzmc.com.cn www.mzmc.com.cn