E-retail, not e-commerce: China’s fast-changing online market for fresh fruit

In China the question isn’t whether you sell online but how. In the fruit trade it pays to understand the nuances of various e-commerce platforms, so much so that Frutacloud CEO George Liu believes ‘e-retail’ is a better term for the phenomenon which is sweeping its way towards 20% penetration in the fresh produce market.

“If you do business in China you have to use WeChat,” said Liu early on in his presentation at the Global Cherry Summit in Chile last week.

For the experienced China hands Liu was merely stating the obvious but for others his comment was likely a wake-up call to get accounts with the service, which is like Facebook meets Whatsapp with a digital payment element as well.

And in modern China digital payments have become the norm. Liu highlighted there were now 731 million Chinese citizens on the internet, which is more than the United States and India combined. Of these people, 70% make regular payments online.

“And with many of these Chinese internet users, they first went online through their mobile phones,” Liu said.

“A lot of these people don’t have email accounts. So we call these people mobile digital natives – they conduct their daily lives through mobile apps.

“It is very common in China that the small merchant will only accept digital payments.”

He said this evolution meant shopping habits could be tracked, analyzed and charted.

“This gives a huge advantage to those people who hold the data. Here’s another thing for consideration – the national disposable income growth has been increasing every year,” he said.

“Some of you may have heard that GDP growth is slowing down in China, but I think this [disposable income growth] is a better indication of the overall growth in China.”

Liu pointed to a 9% growth rate in the national resident disposable income level last year, up from 8.4% growth in 2016.

“Such high growth of income is what you would call the consumption upgrade,” he said.

“Consumption upgrade means that Chinese people with money now want to buy better food, they want to buy imported product instead of domestic, and they want to buy fresh fruit instead of mass-produced junk food.

“This is wonderful for the Chilean cherry industry.”

The disposable income growth measure also helps for understanding opportunities in the interior. It is now common knowledge that fruit exporters need to break through the first tier cities, but Liu made a deeper argument than the sheer business case.

“The disposable income here is rising faster compared to the first tier cities, and the housing cost is more affordable so people have more money to spend on other items,” he said.

“In the past one of the obstacles in developing market share was the lack of cold chain logistics, but now many players including us are investing heavily in the distribution network.

And while in the first tier cities of Beijing, Tianjin, Shanghai, Guangzhou and Shenzhen there are around 78 million people, Liu emphasized the population in second tier cities was around 236 million.

A brief summary of China’s e-retail platforms

Liu broke down China’s e-retail market into four broad categories that have evolved over time. The original of these is ‘comprehensive e-commerce’, dominated by Alibaba’s and Tencent’s

Both these companies incidentally own or have connections to various alternative e-retail platforms as well as conventional retail, with notable examples being Tencent’s partnership with Walmart in China as well as investments in Fruitday.

“However I think this type of [comprehensive] e-commerce is getting very saturated. Growth has slowed down and also the delivery and packaging costs for this type of e-commerce, especially for fresh fruits, are very high,” Liu said.

He said these services tended to use third-party providers like DHL, with the cost of using a box, a bag and including ice packs making up approximately 30% of the final selling price.

The second category is known as ‘vertical fresh produce’, involving players like Benlai, Fruitday and Missfresh which “don’t sell anything else except fresh product”.

“Usually they build their own logistics system to deliver better fruit to the customer,” Liu said.

Vertical integration requires heavy investment in cold chain logistics and warehousing, according to Liu, so players in this space tend to focus on specific geographies, such as Missfresh in the north and Fruitday in Shanghai.

“They’re facing similar challenges including high building costs, high packing costs so a lot of them are diversifying through acquisition in traditional retail, or they invent something new like a self-service kiosk,” he said.

The third type of platform is ‘fresh specialty O2O’, which stands for online-to-offline.

“Here there are two leaders. Pagoda and Xianfeng combined have about 4,000 stores in China. These stores are small and close to residential areas, so in such close proximity they can deliver fruit to their customer within an hour,” he said.

Liu described the final category as ‘new retail’, including such outfits as Hema, 7Fresh and Super Species.

“This was started only three years ago by Hema Fresh, which is also owned by Alibaba, and this is no doubt the hottest and most competitive retail space in China,” he said.

“I think there are three key aspects that differentiate new retail from the regular supermarket – first these stores are built from the ground up to support online development.

“They often have a unified imagery management system and some mechanism to support fast pick-up from within the store. Second of all they place a big focus on fresh product and shopping experience. Fresh produce will usually account for more than half of the floor space.”

But in Liu’s view the most important aspect of new retail is that you can only make digital payments, and the experience serves as a hook for mobile digital natives.

“Together with all the data they have about you they can give you the most personalized suggestions,” he said.

“The eventual goal for all the ‘new retail’ is for you to first experience in store but then for the repeat purchase to go through your mobile phone.

“You place an order on your mobile app and somebody in the store will pick up all your products, put it in a little bag, and it will be transported to one of these guys on a bike or a motorbike outside to deliver to you.”

Liu said the model required a lot of capital investment, which is why most of the players involved are large companies.

“In the U.S. people have heard big news about Amazon buying Whole Foods but this has happened on a much bigger scale in China.”

Costa Group recognized for efforts in China

Costa Group has been announced as a finalist in the prestigious 25th Annual AustCham Westpac Australia-China Business Awards.

Nominated for the Business Excellence Award for Agriculture, Food & Beverage, Costa has been recognised for its operations in China with its focus on the development of large scale berry fruit (blueberries, raspberries, blackberries) farms in Honghe and Xishuangbanna Yunnan Province.

Costa’s investment to date represents one of the largest by a foreign owned company in Chinese agriculture in recent years with land secured for further expansion as demand in the market grows.

Costa was nominated for the award due to the success of its agricultural developments in China based on a number of key factors including:
The introduction of high tech growing and management systems
Recognition of key national agricultural policies focusing on sustainable production and improvement in the economic and social well-being of the local population
A strong and harmonious working relationship with local authorities
Implementation of safe and healthy work practices

Paul Lai, Westpac’s Regional Head and Head of Corporate & Institutional Banking Greater China said, “Given its size and incredible pace of transformation, it’s fantastic to see these Australian businesses that have worked hard to get their China strategy right, reaping the rewards and propelling their business forward.”

The presentation of the 25th Annual AustCham Westpac Australia-China Business Awards is to be made at a Gala Dinner in Shanghai on Thursday 17th May.

For more information:
Costa Group
Business Support Centre
275 Robinsons Road, Ravenhall
VIC 3023
T: 03 8363 9000

Publication date: 4/23/2018



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AQSIQ dismantled in Chinese government restructure

The notable changes in government have seen AQSIQ dismantled and merged into a new regulatory body
On 17 March China’s National People’s Congress approved the most comprehensive government restructure in nearly 50 years.

The new plan will be rolled out over the coming months, and includes the establishment of a State Market Regulatory Administration (SMRA).

The SMRA will acquire the responsibilities held by a number of individual government bodies as follows:

• State Administration for Industry and Commerce (SAIC)
• General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)
• Certification and Accreditation Administration (CAC)
• Standardization Administration of China (SAC)
• China Food and Drug Administration (CFDA)
• Price Supervision and Anti-Monopoly Bureau (NDRC)
• Anti-Monopoly Bureau of the Ministry of Commerce (MOFCOM)
• Anti-Monopoly Commission of the State Council
• State Intellectual Property Office (new)

As part of the restructure, the newly formed State Intellectual Property Office (SIPO) will take on the task of regulating intellectual property rights, and be governed under the SMRA umbrella.

The CDFA body will be dismantled and reformed as the State Drug Administration (SDA) operating under the SMRA, and the SAIC and AQSIQ will also be dismantled and absorbed by the SMRA.

All other bodies will remain but have their functions merged into the SMRA. The Anti-Monopoly Commission, the CAC and the SAC will keep their offices despite the merge.

Ropes & Gray reported that Chinese officials have pinned the newly proposed SMRA as the single most powerful market regulator. It will address China’s concerns over product safety, regulation, compliance, intellectual property rights, and overall quality by through comprehensive management and supervision in these areas.

The SMRA will be led by the administration’s Communist Party secretary, and deputy director, Jingquan Bi (former director of the CFDA), alongside the administration’s deputy Communist Party secretary and director Mao Zhang (former director of the SAIC).

Communist Party Secretary Li Li (formerly deputy governor of Jiangxi Province) will lead the SDA, alongside director Hong Jiao (formerly deputy director of the CFDA).

Despite significant upper level appointments, the SMRA will not begin operations until mid-April, and will likely not reach full capacity until after June, according to Ropes & Gray.

The mergers give the SMRA more resources and enforcement tools to deal with unfair market behaviours, which in the past would be dealt with separately by either the NDRC or the SAIC. It runs in line with China’s efforts to improve market regulation and overall quality of life for its residents.


Author: Camellia Aebischer


"China enters a golden age of investment in Australian farms"

The AATI (Australia Agriculture Technology Investment Holding Pty. Ltd.) was established in November 2017. It is an Australian holding with a Chinese background that invests in Australian agricultural technology.

AATI has two main services:
1. The company introduces new product varieties and promotes plantation and retail. For example, the company promotes a new variety of French plums, Israeli citrus, and Japanese strawberries. The core of this service is to locate high-quality new product varieties worldwide, introduce them to Australian plantations, and then sell them to overseas markets. At the same time AATI seeks excellent vegetable and fruit products in China. AATI hopes to create brand awareness among Chinese consumers. AATI also provides off-season fruit.

2. The company purchases fruit farms to annex and integrate the industry. The AATI team believe that China will enter a golden age of investment in Australian farms, because bilateral agreements between the two countries have increased since November 2017 when China amended the rules for Australian cherry import. At the same time, China also opened up for import of Australian plums, wild peaches, and apricots.

There have been numerous Chinese companies in the last 10 years that have failed in their attempt to annex Australian agricultural companies.
The main reasons for their failure are as follows: 1) choice of farm; 2) regulations; 3) funding; and 4) localization of management

The shareholders of AATI include senior agricultural specialists and the company receives support from Australian specialists in agricultural technology. AATI also employs analysts with a deep understanding of the Chinese market demands to facilitate export to China. At the same time, AATI has extensive experience with Chinese online marketing channels, which makes AATI a low-risk investment.

David Yang
E-mail address:

Publication date: 3/29/2018

Fruit trade could be caught up in trade war

Peak bodies warn proposed tariffs on Chinese products could come back to bite US suppliers

Industry bodies in the US have raised concerns over what proposed tariffs on Chinese imports could mean for their own trade to the People’s Republic.

US President Donald Trump has suggested US$60bn in annual tariffs could be imposed on over 1,300 Chinese products bound for the North American nation. The move comes in retaliation to allegations of intellectual property theft and the desire to boost local employment in the US.

Speaking with the Yakima Herald, Mark Powers, president of the Northwest Horticultural Council, asked what the outcomes would be for US fruit growers and exporters.

“The question is, how does China react?” Powers said. “For us, China is an important export market.”

China is the largest importer of cherries from Washington State, taking 3m cartons in 2017, while it is also a top five market for the state’s apple suppliers.

Should Trump’s proposal come to fruition, economic experts expect China to impose their own tariffs on US products. Fresh produce products would be a prime candidate for such action based on their contribution to the US economy, according to Washington Apple Commission president Todd Fryhover, who was also interviewed by the Yakima Herald.

Fryhover said the apple industry was keen to avoid a repeat of a similar scenario in 2010, which saw Mexico impose a 20 per cent tariff on Washington apples following a dispute relating to trucking.

“We often see ourselves in the apple industry as being collateral damage,” Fryhover told the Yakima Herald.

China announces tariffs on US fruit

China has announced a proposed 15 per cent import duty on US fresh fruit and nuts in response to Trump's planned tariffs on Chinese steel and aluminium

China has announced proposed tariffs on US goods worth US$3bn – including a 15 per cent duty on fresh fruit and nuts – in response to US levies on Chinese steel and aluminium imports, according to various reports.

US fruit categories affected by China's proposed tariffs include cherries, citrus, grapes, apples and pears (see full list below).

If the tariffs come to fruition, they could make trade difficult for US fruit exporters to China, pundits said.

China is the largest importer of cherries from the US state of Washington, taking 3m cartons in 2017, while it is also a top five market for the state's apple suppliers.

Washington Apple Commission president Todd Fryhover told the Yakima Herald this week that the apple industry was keen to avoid a repeat of a similar scenario in 2010, which saw Mexico impose a 20 per cent tariff on Washington apples following a dispute over trucking.

China responded to news earlier this month of President Trump’s planned steel and aluminium tariffs by saying that, while it did not want a trade war, it was "absolutely not afraid" of one, the BBC said.

"If things get very nasty, they can make life very difficult for US companies doing business in China," Deborah Elms, executive director of the Asian Trade Centre in Singapore, told the BBC.

Fears of a trade war today pushed Asian stock markets down sharply, with shares also trading lower in Europe and the UK on the morning of Friday 23 March.

Trump's aluminium and steel import tariffs are a response to allegations of intellectual property theft by China, and a desire to boost local employment in the US.

The US president has railed against the US trade deficit of about US$375bn with China. He said he had asked the Asian country to cut that deficit by $100bn "immediately".

The list of US fruit and nut categories affected by China's proposed tariffs include: citrus (oranges, mandarins, clementines, tangelos etc, grapefruit, pomelo, lemon, limes); grapes; melons; papayas; apples; pears; quince; stonefruit (cherries, nectaries, peaches, plums); berries (strawberries, raspberries, blackberries, cranberries); kiwifruit; durians; persimmons; pomegranates; dragonfruit; starfruit; lychees; sapota; custard apples; bore/jujube; starfruit; bananas; avocados; dates; figs; pineapples; guavas; coconuts; and several types of nut (brazil, cashew and others).

Source: Author: Luisa Cheshire

Australian fruit and nut exports to China up 500% in last four years

ANZ Future of Fresh reports that fruit and nut exports from Australia to China have increased by 500% in the last four years.

This report, which appeared in China this week, shows that the development of horticulture already shows great improvement. It has turned into an industry that is worth 10 billion Australian dollar [7.7 billion USD]. Furthermore, it is the fourth largest category of agricultural export products. The industry was only worth 3 billion Australian dollar [2.3 billion USD] in 2016.

Trends and figures show that the middle class has become a strong supporting community for the Australian fruit and nut industry. The consumers particularly favour almonds, macadamia, tropical fruit and stone fruit, and traditional apples and fresh grapes - and they are willing to pay for quality.

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Publication date: 3/19/2018
Author: SanderM Molenaar

Australia needs infrastructure for export

Insight from China could help the country reach its A$100bn agriculture goal by 2030

China does infrastructure better and more cost-efficiently than just about anybody, according to KPMG’s Asia business adviser, Doug Ferguson.

Ferguson believes that Australia has something to learn from this, and could improve our infrastructure plan to align with China’s Belt and Road program, fostering trade.

The Land reported that successful regional hubs like Toowoomba’s Wellcamp Airport in Queensland offer considerable opportunities to service direct exports of perishable fresh produce to markets in Asia and elsewhere.

The National Farmer’s Federation has a goal to lift the value of farm production in Australia to A$100bn by 2030. Ferguson believes this is “unattainable” unless the country takes an assertive approach.

Building better regional transport, strong water infrastructure and international airport hubs are just some ways that Ferguson believes Australia could improve.

Australia’s current inland rail project offers considerable opportunity to transport produce to airport hubs. “If an airport already exists, these aren’t big ticket projects,” said Ferguson.

“You’d only need A$50 million to A$100m (each) to get these facilities handling product from various food production zones around the country.”

According to The Land simply sealing rural roads could cut transport costs by around 24 per cent.


Author: Camellia Aebischer

China: Consumption trends - JD 2018 Report on New Year consumption of fresh food

The JD Data Research Institute issued the "Global search for tastes, Chinese year of innovation-2018 report on New Year consumption of fresh food". JD data shows that the sales volume of fresh food in 2017 increased by more than 330% in comparison with 2016. The retail value increased by more than 240% in comparison with 2016.

As far as products during Spring Festival 2018 are concerned, consumers particularly enjoyed fresh food products as New Year's gifts. The sales of fresh food products increased explosively during the Spring Festival season. The retail value of fresh food sold during the Spring Festival period increased by 198.8% in comparison with the same period in 2017. The categories of fresh food with the highest retail value during Spring Festival season 2018 were seafood and aquatic products, fruit, and pork and mutton.

As far as areas during Spring Festival 2018 are concerned, the overall consumption level of fresh food in each area maintained a growth rate of more than 100% on average in comparison with the same period in 2017. There were preferences for different kinds of fresh food in different cities and areas. Fresh food consumption in typical coastal cities has local characteristics. The online purchase preferences for fresh food also varied.

The most welcomed imported fresh food products based on retail value during Spring Festival 2018 were, in order from high to low, Chilean cherries, Argentinian wild shrimp, Ecuadorian white shrimp, Vietnamese Red Heart dragon fruit, and Chilean handpicked blueberries. The provinces where fresh food consumption during Spring Festival 2018 increased the fastest in comparison with Spring Festival 2017 include Chongqing, Shaanxi, Liaoning, Fujian, and Hubei. Their retail value increased on average by more than 300% in comparison with the same period in 2017.

Source: via 

Publication date: 3/12/2018

China's Import volume of fruit & nut increased by more than 40%

The large database of ASKCI shows the following: the overall import volume of fruit and nuts throughout China in 2017 was 4.51 million tons. This adds up to an increase of 11.1%. The overall import value in 2017 was 6.2 billion USD. The import volume of fruit and nuts in China showed growth in every single month of 2017.

The newest data show that the import volume of fresh and dried fruits and nuts in February 2018 was 430 thousand tons, which is an increase of 43% in comparison with February 2017. The accumulated import volume of fresh and dried fruits and nuts in China in January and February was 932 thousand tons, which is an accumulated growth of 22.6%.

The import value of fresh and dried fruits and nuts in February was 751.5 million USD, which is an increase of 102% in comparison with February 2017. The accumulated import value of fresh and dried fruit and nuts in January and February was 1.84 billion USD, which is an accumulated growth of 63.8%.

Source: via 

Publication date: 3/12/2018

China: First batch of Australian peaches arrive in Shandong

According to the official website of the Shandong Entry-Exit Inspection and Quarantine Bureau, the first cargo aircraft with 1,300 kg of Australian fresh peaches on board arrived at Qingdao Airport a few days ago. This special cargo port of Qingdao Airport has been open in January 2018. Since then, the Australian peaches are the 3rd shipment of high-end fruits.

China Inspection and Quarantine Bureau officer examines nectarines

Qingdao Airport has the biggest port for fruit import in Shandong Province. Up to now, there have been five batches of fruits imported through Qingdao Airport, with a total weight of more than 6 tons and a value of nearly 100,000 US dollars.

Source: via 

Publication date: 3/14/2018