Agriculture Press Release
July 17, 2000
Department helps Florida growers move quickly to capture share of newly opened mainland China market
VERO BEACH -- Only weeks after Florida Agriculture Commissioner Bob Crawfords historic delivery of the first commercial shipment of Florida citrus to mainland China, the Florida Department of Agriculture and Consumer Services is helping Florida growers prepare to venture into this newly tapped, complex foreign market.
An exporting seminar held June 28 in Vero Beach drew a capacity crowd of Florida agricultural producers eager to learn how to capitalize on this huge new exporting opportunity. Held at Disneys Vero Beach Resort, the daylong seminar featured presentations by marketing representatives from the Florida Department of Agriculture and Consumer Services, the Florida Department of Citrus, and Chinese distributors, and covered topics such as culture and demographics, packaging and shipping requirements, phytosanitary certification, consumer preferences, trends and distribution channels.
China is the fourth-largest land mass in the world, behind Russia, Canada and the United States. Because much of the land is geographically unsuitable to farm, only 7 percent of the entire land mass can be utilized to feed what is equal to roughly one-fourth of the worlds population, or 1.29 billion people. Chinas growth rate cannot be supported by its proportionately small percentage of farm land. Scarce agricultural land is further threatened due to increasing modernization needs for industry and business construction. This alone, identifies China as a foremost target for global agricultural trading. It is now just a question of who will supply the Chinese consumers.
Florida Agriculture Commissioner Bob Crawford envisions Florida producers fulfilling much of Chinas growing needs. Beginning with grapefruit (poo taw yod, as it is called in China), Florida is preparing to take its place in the global agricultural market, competing with such countries as Australia, Israel and South Africa. Trade with China will help relieve Floridas domestic markets of over supply of citrus, while providing much-needed fruit to the Chinese people.
"The market specifics are compelling and the timing is right to assist Florida producers in their quest for a substantial share of the Chinese market," Crawford said. "However, it will require strong planning and long-term commitment."
Market research indicates that Chinas 1.29 billion citizens are health-conscious, prefer natural sugars in their diet and consume large amounts of fruit. Recent taste tests conducted by the COFCO Corporation among Chinese school children in Beijing showed a clear preference for the juicer taste of the "Western culture fruits," more specifically, Florida grapefruit.
The Chinese are knowledgeable consumers, and more than 250 million have an adequate disposable income to afford imported fruit. It is this "affluent middle class" that is changing the buying habits of the country. Fruit is a large part of the Chinese daily diet; it is also given as a gift during holidays, especially during the January celebration of the Chinese New Year.
Chinas citrus-producing areas provide primarily Mandarin oranges and pomelos to their markets. The local citrus tends to have less juice and more pulp and pales in comparison to juicier Florida citrus.
China lacks the post-harvest technology to extend the shelf life of locally produced citrus. The Chinese citrus-growing season is short -- mid-November to mid-January, sometimes extending to late January. Due to the short season and limited selection, it is essential to import citrus fruit to satisfy demand. As Chinas growing season comes to an end, fruit consumption actually increases due to the January festivities associated with celebrating the Chinese New Year. The time frame of Chinas yearly increase in market demand aligns with Floridas citrus-producing season. As the Chinese fruit supplies dwindle, Florida citrus is at its peak and ready to meet consumer demands.
A typical supermarket in China is comparable to a large, sophisticated, food chain store in the United States -- minus the parking lots and cars. A routine day will bring in about 25,000 shoppers. Sixty-percent of the fruit purchased in China is supplied by street vendors, in what is termed the "wet market." Similar to Europeans, the Chinese go to market nearly every day to replenish food supplies. Cultural buying habits dont require refrigeration for perishable goods and the economy does not support electrical demands most Westerners would expect. Since the average home does not include a refrigerator, purchases are not made with extended cold storage in mind. Even when there is refrigeration, it is a small unit in contrast to Western standards. Packaging and size are important purchase factors. Products must be in metric units, lightweight, and packaged in small quantities to transport on foot or by bicycle.
With 250 million Chinese having annual incomes over $30,000, the market for imported products is substantial. Imports into China in 1998 exceeded $140 billion. During the next 10 years it is projected that Chinas imports will increase 300 percent, exceeding $500 billion. It is clear that exporters must do their homework, know the culture and consumer, and have a solid marketing strategy.
The Florida Department of Agriculture and Consumer Services is actively working to identify private sector partners to facilitate Floridas citrus trade. A Department office was established in Beijing to make Floridas market presence known and to help facilitate the effective movement of Florida products through China. The Beijing office will assist in consumer and trade education, and serve as a liaison to establish contact with government officials, wholesalers and retailers.
Floridas primary objectives for the China citrus market include the establishment ofproduct distribution channels. There are seven approved ports of entry -- Dalian, Tianjin, Guangzhou, Hong Kong, Qingdao, Shanghai and Haikou. During Chinas non-access period, goods entered the mainland at the port of Hong Kong and were then shipped to Guangzhou and other areas for distribution. Chinas admission to the World Trade Organization (WTO) will have a major impact on port of entry and distribution patterns as trade volume increases.
Florida will focus on the ports of Guangzhou and Shanghai. Currently, more than 80 percent of all fruit entering China enters through the port of Guangzhou. Shanghai is dubbed a priority port because the city alone has 30 million residents.
Establishing product awareness and recognition of Florida citrus is a priority. Chinese consumers know what they like, but with the exposure to more and new products they experience "brand confusion." Marketing and promotional activities will promote the taste and juiciness of Florida citrus in an effort to establish product recognition and brand loyalty.
When sampled at the SIAL trade show in Beijing, Florida citrus was most appealing to the Chinese because of its good taste and juiciness. Marketing efforts will utilize on-site promotions, a multi-faceted media campaign, trade seminars and product merchandising activities to familiarize wholesalers, retailers, importers and food service operators with Florida products. The Florida Department of Agriculture and Consumer Services is also planning to produce and air a documentary in China to promote Florida citrus.
Access to product, recognition, and a preference for a particular brand are key elements to successful marketing. To help promote brand identity and loyalty among Chinese consumers, the Florida Department of Agriculture and Consumer Services is offering exporters a uniform logo for Florida citrus -- the "Fresh from Florida" logo, translated into Chinese. The establishment of a Florida citrus identity, along with consumer awareness events, will create a preference based on the identification of the Florida products.
Once Floridas initial shipments reach the mainland, demand is expected to grow with market exposure. This exposure will be maximized by the presence of the Beijing office and local business partnerships to stimulate trade. Local partners, or brokers as they are called in the U.S., serve as intermediaries between Florida and China and are also designated as the importer of record. These local partners, in turn, sell to the Chinese retailers and wholesalers.
Phytosanitary certification is required for all citrus shipped into the Peoples Republic of China. The U.S. Department of Agriculture (USDA) and the Florida Department of Agriculture and Consumer Services must verify that the fruit meets the plant health requirements of China; specifically that it is free of any plant pests of quarantine concerns, as specified in the protocol for export to China.
Phytosanitary certification is not just a requirement of China, but also of Japan and many other markets. Florida has a long-standing protocol program that allows phytosanitary certification of citrus groves without the need for post-harvest treatment. China is primarily concerned with the Mediterranean and Caribbean fruit flies.
In addition to the protocol certification and specific packaging requirements, fruit can be sent to China only from approved packing houses in seven counties: Indian River, St. Lucie, Martin, Palm Beach, Collier, Hendry and Lee. The Commissioner has asked USDA to work with China to implement the other counties listed in the agreement that will be allowed to ship from approved packing houses after the 1999-2000 season. They are: Brevard, DeSoto, Glades, Hardee, Highlands, Okeechobee, Manatee, Lake, Osceola, Sarasota, and Volusia. The Commissioner spoke with officials in Beijing in March about his desire to add these counties, also including Polk County. Polk had been left off the list when the agreement was originally negotiated because they were within 2 years of a medfly outbreak. There is no phytosanitary reason they cant be added now. If solid -wood pallets containing conifer (pine) wood are used, they must be certified heat treated. If solid- wood packing is used, it must also have a statement of certification that it contains no conifer wood. This eliminates the possible transmission of a microscopic pinewood nematode from the United States to China.
All fruit shipped must comply with the requirements of China or it can become what is termed "frustrated freight," meaning it is detained at port or denied entry until compliance is met. Although all fruit is subject to multiple inspections while en route, it must be shipped in closed containers. Each container must be clearly labeled with the place of production. Documentation will reflect the packing house and it will be checked against the approved list of packing houses upon reaching destination. The USDA and Chinese government are currently holding discussions to resolve and simplify shipping documentation issues.
Shipping time to China can take from 26 to 29 days, depending on the port location. Floridas shipping options include weekly departures from Miami and Port Canaveral. The U.S.
West Coast also has many avenues to ship to China. However, the additional cost of transporting Florida shipments to the West Coast for departure to China further erodes profit margin.
Produce exporters are encouraged to work with a bank that has an international department. Financial officers can help ensure that factors such as transaction time, value and costs will be considered and calculated correctly. This is especially important because the Chinese government does not pay out money up front. The buyers want more control of the business deal so it is very important to know who is involved (buyers, agents, ultimate purchasers, etc.). This is another reason it is good to utilize an intermediary who is familiar with the culture and specific requirements and who can help expedite solutions in the event of a shipping problem or "frustrated freight."
The Florida Department of Agriculture and Consumer Services is planning to send a trade delegation to China in October 2000. Florida producers planning their first trip to China should begin preparations early. A visa application must be obtained from the Consulate Office in Houston, and an official letter of invitation must come from the Chinese government. Businesses or individuals must write an official letter of purpose to the Consulate Office on company letterhead specifying the intent of the visit.
For more information about exporting to China, contact the Florida Department of Agriculture and Consumer Services, Division of Marketing and Development, at (850) 488-4366.
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