Market Development Research in China

September 02 – 12, 2007

In-market Research to Identify Prime Target for Future Market Development under

the auspices of Australia – Pakistan Agriculture Sector Linkages Program (ASLP)

Compiled By

Muhammad Sohail Mazhar

Reviewed By

Dr. Aman Ullah Malik

Dr. Timothy Sun

Contributions

Sosheel Solomon Godfrey

Babar Ehsan Bajwa

Muhammad Iqbal

Waheed Ahmed

Australian Center of International Agricultural Research (ACIAR)

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Table of Contents

1. Introduction 02 2. Market Potential of China 02

3. New Market Development Research in China 03 3.1 Project Research Team for New Market Development Research in China 03 3.2 Getting Chinese Visa 04 3.3 Preparation of Consignment 04 3.4 Travel to China 05 3.5 Custom Clearance in China 05 3.6 Visit to Urumqi Yuqi Biological Science and Technology and Development. 06 3.7 Visit to Plant Quarantine Office, AQSIQ, Urumqi, China 08 3.8 Visit to Superstores/markets, Urumqi 09 3.9 Meeting with the Management of Xinjing New Cooperation, Jiajiale

Supermarket Co., Ltd. (NCS) 10 3.10 Visit of Fruit & Vegetable Wholesale Market, Urumqi 11 3.11 Meeting with Freight Forwarder: Railways Department, Urumqi 13 3.12 Running the Focus Group 1, Urumqi 13 3.13 Visit to Golden Wing Mau (GWM) Agricultural Produce Co. Ltd, Shenzhen 14 3.14 Visit to WalMart, Shenzhen 15 3.15 Running the Focus Group 2, Shenzhen 16 3.16 Meeting with General Manager, Shenzhen Agriculture Products Logistics Co. Ltd., Shenzhen 17 3.17 Visit of Shenzhen Agricultural Wholesale market 18 3.18 Visit to Guangzhou Jiangnan Fruit and Vegetable Wholesale Market Development Co., Ltd. 19

4. Consumer’s Section 20 5. Conclusion 20 6. Follow up Actions 22 7. Acknowledgements 23 Annexes 24

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1. Introduction

Mango is the fifth largest fruit being produced in the world in terms of production and Pakistan stands 5th among eminent mango producing countries. The total mango production of the world is 27.96 million tonnes and the Pakistan’s share is around 5.97 % in it. Pakistan has got a wide range of cultivated mango varieties in its two provinces, Sindh and Punjab, and thus its mango remains available in the market from May to September. Although Pakistan is the 4th largest mango exporter in the world, yet its export volume is very low (10% of total production) and the average price earned by mangoes from its existing importers is also far less (US$ 307.48/ton) than earned by many other mango exporting countries (FAO, 2005). Owing to the immense potential of Pakistani mangoes for increase in export quantity and to improve the unit price of mango, Australian Center for International Agricultural Research (ACIAR), in collaboration with Pakistani collaborators has initiated the ASLP Mango Supply Chain Management Project in Pakistan on “Optimising Mango Supply Chains for More Profitable Horticultural Agri-enterprises in Pakistan and Australia”. The aim of this ASLP project is to address key constraints currently limiting the competitiveness of supply chains for Pakistan and Australian mangoes. The specific objectives of this project are: 1. To improve and maintain mango quality from harvest to consumption. 2. To identify present market needs and likely future opportunities for Pakistan

mangoes, using this information to inform the analysis of existing supply chains and the development of improved supply chain management systems and practices.

3. To work with selected mango supply chains so that they can demonstrate to the rest

of the industry the impact of improved supply chain management on competitiveness. 4. To build capacity in Pakistan mango R,D&E institutions to conduct supply chain

analysis and implement improved supply chain management practices. The current activity of market development research in China was conducted to explore the future opportunities for Pakistan mangoes.

2. Market Potential of China

China is the thickest populated area of the world (Fact sheet of China is provided as Annex 1). Although China is the second largest world mango producer with an annual production of 2561.5 thousand Mt, with its mango season prevailing from March to September, even then it imports mangoes from Australia, Philippines, Thailand, Taiwan and Brazil round the year. Annual import of mango in China is around 28.23 thousand Mt, valued about $28.98 million (FAO, 2005).

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China has been identified as a major export market for Pakistani mangoes owing to its large potential of mango consumption. The two governments (China and Pakistan) have signed a protocol of phytosanitary requirements for exporting mangoes from Islamic Republic of Pakistan to the People’s Republic of China (Annex 2) in a meeting of General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), China and Ministry of Food, Agriculture & Livestock (MINFAL), Pakistan in Beijing on 3rd November, 2003. Also a free trade agreement (FTA) has been signed by the two governments at Islamabad on 24th November, 2006 to promote the trade between the two countries (available on www.minfal.gov.pk).

3. New Market Development Research in China

3.1 Project Research Team for New Market Development Research in China The ASLP mango supply chain management project research team for market research in China was comprised of following four persons, one being from Australia three from Pakistan.

1. Dr. Timothy Sun (Project Research Officer ASLP, University of Queensland, Australia)

2. Mr. Muhammad Sohail Mazhar (Project Development Officer, ASLP, Pakistan) 3. Mr. Babar Ehsan Bajwa (Manager Technical, Pakistan Horticulture Development

and Export Board)

4. Mr. Sosheel Solomon Godfrey (Programme Officer, ASLP, Australian High Commission, Pakistan)

ASLP mango supply chain management project team conducted the “New Market Development Research in China” between September 02 to 12, 2007 (Annex 3) in three cities (Urumqi, Shenzhen and Guangzhou) identified as potential markets for Pakistani mangoes.

Market Development Research Team

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The specific objectives of this activity were as follows

1. Identify the market access issues when entering China 2. Identify the internal distribution channels for Pakistan fruit in China 3. Evaluate both the wholesale and retail market opportunities within Urumqi,

Shenzhen and Guangzhou and determine the potential way for Pakistan mango reaching targeted market segment 4. Examine consumer’s perceptions on Pakistan mango, including:

• Identify the factors that influence the purchasing decision– How do people decide when to buy mango and, having made the decision to purchase, how do they decide which Variety /brand or domestic/imported to buy?

• Determine the importance, relative and absolute, of mango attributes – What value do consumers attach to them and why?

5. Identify and evaluate current and potential competitors of Pakistan mango in the market 6. Financial feasibility analysis for Pakistan mango entering Urumqi, Shenzhen and Guangzhou.

The research methodology, planned for the activity, included;

• Individual interviews from people including importers, wholesalers, retailers and consumers, Custom and Quarantine officers, freight forwarders and transport companies

• Two Focus group discussions

• Market observation: whole sale and retail markets

3.2 Getting the Chinese Visa The team applied for a Chinese business visa. To apply for such type of visa, one needs to get an official invitation from an authorized company or local government official in China. The process should start at least two months prior to the planned visit. For official tours, it is easier to come formally through Ministry of Commerce or Ministry of Food, Agriculture and Livestock (MINFAL) to Ministry of Foreign Affairs thus getting Note Verbale for the visa.

3.3 Preparation of Mango Consignment The consignment, comprising of 30 kg mangoes of cv. White Chaunsa, was to be taken to China with the project team to exhibit at different places. The consignment was prepared by a research fellow, Muhammad Amin, working on sapburn management at postharvest research laboratory, University of Agriculture, Faisalabad. The fruit was sourced from the orchard of Mr. Saleem Khan Alizai, in Multan, where they were harvested along with up to six inches pedicles. Desapping was performed within the field using 1% solution of commercial grade lime followed by washing of the fruit. The fruit was brought to Iftikhar Ahmed & Co. (IAC), Karachi (IAC is one of the three approved HWT plants by AQSIQ, China. The two others are Durrani Associates, Karachi and Questpak, Karachi) for hot water treatment (HWT). HWT (48° C for 60

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minutes) was given to the fruit and it was packed in six corrugated boxes of 5 kg each. A HWT certificate was obtained from the processing plant and the quarantine certificate, being the import requirement of the China, was obtained from Plant Protection & Quarantine Department, MINFAL (Karachi) before transferring the consignment to Islamabad. The export procedure for China is given below;

3.4 Travel to China: Urmuqi is 1720 km away from Islamabad & it is two and half hour flight. Urumqi, with a population of three million people, is the capital of Xinjiang province, which is one sixth of the total land mass of China. The China Southern airline flies thrice a week from Islamabad to Urumqi. The famous Karakuram Highway or silk road also connects Islamabad to Urumqi via Gilgit, Khunjrab and Kashgar.

3.5 Custom Clearance in China: The project team carried a consignment of 30 kg mangoes with them, which was brought with an aim to have an idea of consumer tastes & preferences as well as to show the

Exporter

Fruit Harvesting

Taken to one of three approved HWT plants

HWT and certificate of HWT, Packing

Quarantine certificate from MINFAL

Export

Importer

Importer obtains the import permit from AQSIQ

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mangoes to potential importers and also to understand the quarantine drill required to bring fruit into China. Although the project team had got the necessary documents to fulfill the quarantine requirements of AQSIQ, but still the mangoes were held by the quarantine officer at airport till getting a confirmation from Beijing office of AQSIQ, China. Dr. Timothy Sun was present at the airport to receive the Pakistani delegates, and the team traveled together to the accommodation in Urumqi.

3.6 Visit to Urumqi Yuqi Biological Science and Technology and Development Ltd.

The project team conducted a meeting with Ms Lee Chang See, the General Manager of the company (Annex 4.1). The company deals in fresh fruit import, distribution & export. This company imports mangoes mainly from Thailand & Philippines, repacks & re-exports mangoes to Singapore and others. In near future the company is planning to enter the central Asian countries as well. The GM of the company expedited that they carried out the market promotion of Pakistani mangoes three years back in Shenzhen, China. The experience was not good because the appearance and the packing of the fruit were very poor; however the taste of mango was not bad. The company showed willingness to support import of Pakistani mangoes but with the involvement of such an agency which should ensure the quality of the produce.

Ms. Lee Chang See at her Office Project team at the Coldstorage facility of YUQI

The quality characteristics as desired by the company are given as under:-

1. Blemish and scratch free surface, physical appearance and uniformity in size.

2. Weight of fruit ranging from 500 – 750 g.

3. Effective pre-cooling and transport in reefer container to maintain the fruit quality.

4. The fruit should have yellow color with blush (20%).

5. The preference of the importer was to have stickers on the Pakistani mangoes.

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Further, Ms Lee provided the following information to the project team;

• The cost of freight from Urumqi to Guangzhou or Shanghai is 550Yuan per ton and each container carries 25-30 tons.

• Travel time between Urumqi to Shenzhen by road is 6 to 8 days.

• Air freight charges from Islamabad to Urumqi are 8.5 Yuan (Rs. 68) per kg.

• Cost of packing is 1 Yuan per box & the cost of 8-9 kg box is 4.5 to 6 Yuan (the price varies as per quality of packing).

The project team visited the vineyard of Ms Lee Chang See, where the harvesting, grading and packing of fruit for domestic as well as export market was being practiced.

Vineyard of Ms Lee Chang See Temporary packhouse established at vineyard

Ms Lee requested the support of Pakistani partners to establish an export market of these grapes in Pakistan. Also the project team visited the under construction cold storages of the Urumqi Yuqi Biological Science and Technology and Development Ltd., which has a blast chiller of 60 tonnes capacity along with nine cold rooms of 60 tonnes each having the facility of adjustable temperature and humidity at different levels. The postharvest handling flow chart of the Red Globe grapes is as follows

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Postharvest handling of Grapes

3.7 Visit to Plant Quarantine Office, AQSIQ, Urumqi, China

Mr. Yimit Rosol, Plant Quarantine Officer (Annex 4.2), gave a briefing to the project team on behalf of AQSIQ. He defined the following requirements for the export/import of Mango and Citrus in China;

1. The Chinese importer has to apply for the import permit with AQSIQ at least one month prior to the import of consignment from Pakistan.

2. The phytosanitary certificate from MINFAL and a hot water treatment (HWT) certificate from one of the approved HWT plants by AQSIQ must come with other documents of the consignment.

3. The phytosanitary certificate should have written the statement given in the letter of AQSIQ to the project team (Annex 5).

Harvesting with clippers in the field

plastic bins of 20 Kg

Carriage to the field

packing shed on trolleys

Grading and removal

of deformed berries

Weighing

Packing (Polyethylene

bags) : 2 Kg

Packing (Polystyrene

boxes): 9-10 Kg

Transportation to the

respective markets

Price: 70 ¥/10 Kg

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Meeting with AQSIQ officer

3.8 Visit to the Superstores/markets, Urumqi

The project team visited the major superstores of Urumqi to explore the opportunities and to evaluate the potential competitors of Pakistani mangoes in the retail market of Urumqi. They also observed the comparative prices of mangoes available on display in different superstore chains. Following is the feedback taken from different superstores.

Colour mango on display in retail stores Apple mango on display in retail stores

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Description Superstore Variety Origin

Skin Colour Appearance Sap Grading Disorder Price

Carrefour Color Mango

Domestic Yellow, Red Blush

Smooth No Yes Lenticel spots

15.8 ¥/Kg 5-6 ¥/piece

Color Mango

Domestic Yellow, Red Blush

Mixed (smooth & rough)

No Yes Blemishes & softness

9.98 ¥/Kg Hou Gia

Xiang

Apple Mango

Domestic Green & Yellow

Rough No Yes 16.80 ¥/Kg

Jiajiale

Chain

Color Mango

Domestic Yellow with blush

Mixed No Yes Softness 12.8 ¥/Kg

Wet

Market

Color Mango

Domestic Yellow, Red Blush

Non-uniform

Present on some mangoes

No Softness and bruises

14 ¥/Kg

General Observations

• Only the domestic mango varieties (Color mango being dominant and Apple mango at small scale) were available in fresh fruit markets of Urumqi.

• The average sale of mangoes depends on the level of market, i.e., the average sale per day of low end markets is less than high end markets.

• Average mango weight per piece was recorded 700 g for both the Color mango and the Apple mango.

• The packing of six mangoes is preferred (also people like to purchase in even numbers) for gift purposes.

Colour mango on display in Wet market Weight of a sample mango fruit is nearly 900 g

3.9 Meeting with the Management of Xinjing New Cooperation, Jiajiale Supermarket Co.,

Ltd. (NCS) The superstore chain had many outlets throughout the country and the one visited by the project team had a total area of 184,000 square meters & 32,000 items were displayed for selling on the shelves. The management told the team that they already have initiated a partnership in Pakistan and is going to open its outlets in Islamabad and Lahore on 10th of March 2008.

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The General Manager of the company, Mr. Chia Ze Yan (Annex 4.3), and his team welcomed the project team in their office. After introduction of the two groups, Dr. Timothy Sun (Project Research Officer) explained the purpose of the visit of project team to China. Mr. Muhammad Sohail Mazhar (Project Development Officer) gave a presentation on the mango varieties of Pakistan and their characteristics. The General Manager of NCS opined that the selling of fresh Pakistani mangoes in the Chinese market will be a difficult task as compared to value added form due to the availability of indigenous mango varieties for extended duration. The small mangoes start coming to the market in March-April, with retail price 8 to 10 Yuan per Kg. However, they appreciated the features of late mango varieties (End of August-Sept) of Pakistan and added that these can make a pace in the Chinese market. Further they mentioned that their super markets cater and target the high income category, therefore require the premium quality. It was also advised to target the same consumers for introducing the Pakistani mangoes.

Meeting with Management of Jiajiale Super stores Chain

The management of the company offered to provide free space for promotion of Pakistani mangoes and Kinnow in their markets. They also advised the promotion of Pakistani mangoes at the moment of Festivals in China which are scheduled every year in end of September. Since there is a higher demand due to the festivals, the Pakistani late varieties can capture the Chinese market.

3.10 Visit of Fruit & Vegetable Wholesale Market, Urumqi

The objective of visiting the fruit and vegetable wholesale market was to know about the marketing channel, the product flow mechanism and the potential of Pakistani mangoes in the local markets. In order to ascertain the first hand information the two wholesellers were also interviewed.

The markets operate through government supervised system. The auctioneers/wholesale agents carry out the selling business while, the supplier gives some incentive to the wholeseller or to the bidder. The market also depends upon the importers who import fruit from other provinces of China to this market (source of export to destinations like Kashgar which links China to Pakistan and Russia). Generally the fruit business is being carried out in the open vicinity. The hygienic conditions were not appropriate conforming to food safety standards.

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Mango wholesalers: briefed by Dr. Tim

There were only two wholesalers, dealing in mango. One of them had got only Chinese Color mangoes. She told the team that mangoes on display were taken from southern China, where the harvest season starts in the month of March. The selling price at this wholesale shop was 13.3 Yuan/Kg. Regarding the consumers preference, she told that they prefer big mangoes (600g) and average sale was one ton per day, 50% of which goes to wet markets & variety stores. The wholeseller was unaware of any Pakistani mango variety and showed interest in importing mangoes from Pakistan. The preferred size was 300-400 g with red or pink blush. The level of firmness was desired as sprung mangoes & 0-10% yellow color with one to two weeks of shelf life.

Colour mango and Apple mango in wholesale market, Urumqi

The other wholeseller was the supplier to the retailers. He told the group that the consumer’s demand of mangoes is maximum between May and September (2.5 tons/ day). Average price of good quality mango ranges from 13-16 Yuan per Kg and the profit margin of wholesaler was 1-2 Yuan per Kg. The person showed keen interest to source mangoes from Pakistan with a medium size (300-400gram), hard mangoes at color stage of 0-10% yellow skin.

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3.11 Meeting with Freight Forwarderer: Railways Department Urumqi

This meeting was scheduled in order to ascertain the possibilities of rail transport and to understand the possible transport mechanism within China. The contact person told the team that the refrigerated trains are available in China traveling from Urumqi to Guangzhou, Shanghai or other parts of China. The freight charges in a compartmentalized rail lorry carrying 45 tons weight is 131,250 Yuan from Urumqi to Guangzhou. Additional costs of 8.6 Yuan per ton (loading cost) and 0.50 Yuan per ton (road maintenance cost) add up for the total cost of freight through rail. The travel time from Kashgar to Guangzhou is 10 days by train. There exist possibilities for the road and rail transport but all depends upon the cost effectiveness. The freight costs calculated back in Pakistan by PHDEB for export to China are given in Annex 6.

3.12 Running the Focus Group 1, Urumqi

The Pakistani team got their mangoes from AQSIQ on September 05 after fulfilling the quarantine requirements of China. The AQSIQ had taken some samples from the consignment to observe if all the quarantine requirements were meeting.

The project team ran the first focus group in the office of Yuqi Biological Science and Technology and Development Ltd. Urumqi. Purpose of the focus group meeting was to undertake the sensory evaluations of the Pakistani late Chaunsa variety (White Chaunsa). The focus group was comprised of six women from different areas, who had previously experienced eating mangoes.

Pakistani mangoes in Urumqi First Focus Group, Urumqi

Feedback

1. The middle income group generally buys mangoes for their children, on festivals or as gift whereas low income group does not buy mangoes at all.

2. The ladies had no experience about Pakistani Mango.

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3. The size of Pakistani Chaunsa was liked very much by the focus group participants.

4. The preference on color was full yellow, a bit soft & sweet. The golden color was liked most.

5. The price of 10 Yuan per Kg was acceptable to the participants.

6. At special events, like Chinese Moon & Spring festivals (mid September) even more price was also acceptable.

7. The number of fruit in each box should be of even number that is 6 or 12 mango fruits per box.

It was further revealed from the focus group meeting that the Chinese market is new for the Pakistani mangoes. If the Pakistani exporters manage the supply of good quality mangoes, the market is certainly big and open for Pakistan.

The focus group meeting was followed by informal discussions on various issues of trade of perishables between Pakistan and China.

3.13 Visit to Golden Wing Mau (GWM) Agricultural Produce Co Ltd., Shenzhen China

The GWM is dedicated to fresh produce export, import, wholesale and distribution to supermarkets, to become an integrated agricultural produce corporation with produce development in origin, distribution and logistics and terminal sales. The company claims to be the largest importer and distributor of fresh produce throughout China. The company supplies fresh produce in 20 cities of China and its main buyers include Wal-Mart, SAM’s Club, METRO, JUSCO, Lotus, Hymall, CARREFOR and some Chinese superstore chains.

Meeting of Project team with GWM Management

The ASLP team briefed the company about the Mangoes of Pakistan. The quantity of production, export and the time window was also discussed with the company’s executives. The company has already been importing the Pakistani Kinnows. The company executives also informed the ASLP team that the major functions of export to Chinese markets were presentation of the fruit, attractive packing, cost effectiveness and above all the taste where consumers are most important to make choices. The project

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team was told that the company has been importing mangoes from Australia, Philippines, Thailand, Taiwan & Brazil. The Brazil mango has taken its position in the China market for the reason of late variety and supply at the time of moon festival (Mid September). Regarding the presentation of mangoes the following information was shared with the team:-

Appearance and General Characteristics

1. The Chinese market prefers rich taste of mango (strong taste sensation)

2. Good pink/red blush (20-30% red or blush firm / hard mangoes and 10-30% of yellow color ripening stage)

3. Preferable size of around 600grams

4. Mangoes to be 70% ripe at the importers destination (China)

5. 7-8 days shelf life is required after reaching the importer

6. Mangoes with stickers (pasted on skin) in order to distinguish from local produce

Mango Prices at the Superstores

1. Brazilian mango, 40-80 Yuan per 5 Kg box

2. Philippines mango, 120-180 Yuan per 12 Kg box

3. Thai mango, 70-80 Yuan per 5 Kg box

4. Taiwanese mango, 80-120 Yuan per 10 Kg box

5. Australian mango, 180-220 Yuan per 10 Kg box

The project team assured the company that the involvement of project and PHDEB will help them obtaining desired quality at the destination, and it was mutually decided to undertake trial studies in the coming crop season (2008).

3.14 Visit to WalMart, Shenzhen

The project team visited the two different outlets of WalMart in Shenzhen to explore the opportunities and to evaluate the potential competitors of Pakistani mangoes in the retail market of Shenzhen. The team also observed the comparative prices of mangoes available on display in different superstores. Following is the feedback taken from the visit;

Country Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec China √ √ √ √ √ √ Taiwan √ √ √ √ √ √ Philippines √ √ √ √ √ Brazil √ √ √ Australia √ √ √ Thailand √ √ √ √ √ √ √ √

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Philippine mangoes and Domestic mangoes on display in Wal Mart, Shenzhen

Variety Character

Philippine Mango Chinese Mango

Skin Colour Green and Yellow Yellow with blush

Size Small (250 g) Medium (500 g)

Appearance Smooth Smooth

Sap No No

Uniformity Graded for size Graded for size

Specific Observation Mangoes suffering from softness The appearance was not uniform

Price 41 Yuan/Kg 20 Yuan/Kg

3.15 Running the Focus Group 2, Shenzhen

The Pakistani mangoes arrived Shenzhen on September 09, 2007. The mangoes were fully ripe at this stage and the colour was 100% yellow, even some of the mangoes had turned soft due to over ripening. The project team took the mangoes to a family apartment, where three women and three men participated in the focus group.

The objective of this focus group meeting was to undertake the sensory evaluations of the Pakistani Chaunsa variety among the customers of this city. Since, Shenzhen is one of the high income cities within China, and the customers have buying/purchasing power as high as 41 Yuan/Kg (as reflected during the retail market visit – WalMart), so, knowing the consumer’s preference for mango is very important.

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Pakistani mangoes in Shenzhen Second Focus Group, Shenzhen

Highlights

1. The retail price of mangoes from mid May to mid July is 3-5 Yuan per Kg and the price increases after July.

2. One of the participants liked the Pakistani white Chaunsa as it had strong flavor.

3. One of the participant told that this Mango resembles in taste like Durian fruit.

4. One of the group participants informed that she purchases 2 to 4 pieces of mangoes every day while another told that she buys mangoes once or twice every week.

5. The focus group revealed that mostly people purchase mangoes at least once every week during the peak season & there is no particular reason to buy mangoes.

6. Most of the Chinese people buy certain variety where as rest buy on appearance and presentation on the shop.

7. The focus group highlighted that important attributes to buy mangoes are variety, color (red & yellow), firmness and cost. Regarding the taste the group informed the ASLP team as “the most important and develops consumer’s loyalty to a certain variety”.

8. One of the group participants disclosed that he would check aroma of the mango before buying. Regarding the pricing of Pakistani Mangoes the group informed the ASLP team that if Pakistani mangoes taste sweet and give aroma they can pay the price up to 12-16 Yuan/Kg.

9. The group members also mentioned that sticker on mangoes is important and symbolic of good quality.

3.16 Meeting with General Manager, Shenzhen Agriculture Products Logistics Co.

Ltd., Shenzhen, China

The Shenzhen Agriculture Products Logistics Co. Ltd., Shenzhen operates through the network of farms in China and supplies the fruits and vegetables to different cities of

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China through JUSCO, WALMART, CARREFOUR, SAMS CLUB, Trust Mart (China) and A-best (China).

Mr. Fang Li Zun, the General Manager of the company met the project team in a hotel. Dr. Timothy Sun (Project Research Officer) described the objectives of the project activity and introduced the mago varieties of Pakistan to Mr. Fang Li Zun. Also Mr Zun evaluated the Pakistani Chaunsa mangoes and disclosed that “Ta Thai Long is a Taiwanese variety of mangoes imported to China and it tastes similar to the White Chaunsa”.

The company was keenly interested in the route & travel time to Shenzhen along with costs of Pakistani Mangoes. The possibilities of by sea transport of mangoes to China were also discussed. (A study of PHDEB on routes and cost of export to China is attached as Annex 6).

Mr. Fang evaluating the external fruit quality Mr. Fang evaluating the internal fruit quality

The possibilities of trading Pakistani Kinnows in China were also discussed during the meeting. The company showed keen interest in import of Kinnows from Pakistan. The Manager Technical, PHDEB also gave briefing about the harvesting season, price, quality and quantity of Kinnows.

Mr. Fang the General Manager of the company also showed interest to visit Pakistan in February 2008 to see the Kinnow Industry of Pakistan. He suggested that we need to promote two way trade in the interest of both countries. He wished to be linked up with Pakistani exporters and processors.

3.17 Visit of Shenzhen Agricultural wholesale market

The Shenzhen Agriculture Products Logistics Co. Ltd also operates the wholesale market in the Shenzhen. The project team was welcomed at the wholesale market of Shenzhen by Mr. Fang and was introduced to the management of the market. The whole group visited the wholesale shops in the market to evaluate the potential of Pakistani mangoes in this market. It was observed that imported mango was also displayed on some wholesale shops; particularly the Australian R2E2, imported from Taiwan was being sold at wholesale price of 18.8 Yuan per Kg. Similarly the market was abundant in supply of Australian Murcot mandarin being sold at 18 Yuan per Kg. Navel Oranges from South

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Africa (Capespan) were being sold at wholesale price of 13.8 Yuan per Kg. (It reflects the enormous potential of Pakistani Mango and Kinnow in these markets, provided

mango are supplied in end of August and Kinnow in End of March)

Meeting of project team with management of Shenzhen Agricultural wholesale market

Dr. Timothy showed the White Chaunsa variety to the wholesalers which was evaluated for sensory parameters. The contact persons informed that grading is very important for Pakistani mangoes to enter in this market. Similarly, the number of count in each box must be of uniform size and weight.

Quality evaluation at wholesale market, Shenzhen

3.18 Visit to Guangzhou Jiangnan Fruit and Vegetable Wholesale Market

Development Co Ltd.

This market is one of the largest wholesale markets in China. The market operates by different segments divided by the origin of the produce. Different countries had their sections in the market and their fruit comes in their section and gets sold by the company operators through profit sharing percentage. Mr. Guan, the General Manager Assistant, was given a briefing by Dr. Timothy Sun regarding the activities of the ASLP project and the purpose of the current activity. The White Chaunsa mangoes were also presented to the General Manager, who liked the taste and welcomed the import of Pakistani mangoes to this market.

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Meeting of project team with General Manager of Guangzhou wholesale market

The highlights of the meeting are given as under;

1. The Jiangnan fruit market offered the support to promote the Pakistani mangoes, provided the PHDEB develops understanding with their company

2. The company also offered Pakistan to set up its section in the market

3. The General Manager of the company asked for invitation to Pakistan by PHDEB for his visit to mango Industry of Pakistan in end of May 2008

4. Consumer’s Section

China is not a homogeneous market. There are huge differences in markets between Xinjiang and Guangdong. As a result the marketing strategy should be different between these two provinces.

Market of Xinjiang

In Xinjiang, the volume of mango consumption is much less than Guangdong. This is because

1) Xinjiang itself produces a large amount of fruit which has very cheap retail prices (For example grapes 2 Yuan / kg, Melon 0.5 Yuan/ Kg) and can be as substitute for Mango,

2) Most male in Xinjiang are not used to the flavour and taste of mango, which results in female as the main consumption group

3) the income in Xinjiang is relative lower than other provinces near the coast areas and its purchasing power has limitation

4) Xinjiang has much less population than Guangdong. As a result the market is relative smaller.

However, people in Xinjiang regard Mango as a luxury fruit, which has been used regularly for gifts. In the focus group conducted in Urumqi, one mentioned that many government organizations (such as taxation, legal system and police) or state own monopoly companies (such as power supply, banks, petroleum, airline, telecommunication and railway) are often purchased luxury fruit for their staff as fringing

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benefit. This purchase is happened before Chinese festivals such as spring festival, moon festival, Chinese national day and New Year. Focus group also indicated that some wealthy consumers (women in particular) will buy mango regularly regardless the price. A taxi driver indicated that the mango price in winter can be as high as 90 RMB per kg. However price in May or June can be as low as 4 RMB per kg.

In the interview of 9 taxi drivers in Urumqi, five mentioned that people in Urumqi had the concept that all the mangoes taste the same. Taxi drivers believed that most people in Urumqi had tried only one varieties of mango in their life time. This was often in the pick season when price was very low. Often the mango they tasted was not so good due to farmer’s deliberately harvesting very early so that the fruit was not easy to decay during the long distance transport from South China to Xinjiang. Three taxi drivers interviewed indicated that the mango they had before was not sweet at all. They also mentioned that they only try once in a year. This point was confirmed in the focus group that low income people do not purchase mango at all.

Given the conditions of Xinjiang market described above, the marketing strategy in Xinjiang should focus on wealthy people and top markets. Due to people in Xinjiang do not have experience in good quality of mango, promotion is needed. Mango quality is absolutely essential given most buyers for gifts. Pakistan companies need to work with local retailers to deicide what packaging is best to suit local taste.

Market in Guangdong

Guangdong is the richest province in China. People in Guangdong are used to tropic fruit such as mango. They love mango and it has become one of the important fruit for most people in Guangzhou. As indicated in the focus group, most people purchase mango at lest once a week regardless seasons. The consumption of mango is therefore much larger than Xinjiang. Mangoes are used mainly for self-consumption. Some are used for gift. However the proportion of mango used for gift is much less than Xinjiang.

People in Guangdong have experienced all different variety of mangoes from different countries. They know which variety is better than another and they know how to choose mango in the markets. Two ladies in the focus group described the process of the way they chose mango. For a new variety, they judged by the appearance. If the appearance is attractive (free of blemish, golden or yellow in color, even in size), they will try some. If they like the taste and flavor of the new variety, they will stick to it. If not they will not buy it anymore. Once they like the taste and flavor of a new variety, the appearance of the fruit is becoming less important to them. They can tolerant some defects on the fruit surface if they purchase for self-consumption. The mango has to be perfect if used for gift. This point was confirmed by visiting supermarket where the Thai mango was displayed with less attractive appearance but high price. This is purely because some people like its taste and flavor.

Pakistan mango is new to people in Guangdong. However results from sensory evaluations of the Pakistani Chaunsa variety in focus group discussion showed very promising sign. The common comment is that Pakistani mango is sweet although its texture is not as smooth as other mangoes which are much less or no fiber. A participant

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in the focus group indicated that she likes to pay 3 to 6 Yuan extra per kg for Pakistani mango in the markets because of the sweetness and flavor.

Given the situation in Guangdong province, the marketing strategy has to start with promotion. The promotion is not just let people know that a new variety mango is coming. It has to give people opportunity to try it. The target group should be much wider than Xinjiang, given the most people purchasing mango regularly. The quality of mango for promotion has to be perfect in both appearance and taste.

How to send mango to these markets?

• Local Infrastructure and transport

• Cooling system

• Cost

• How many days

Way of transport Days needed

------------- By road or train 14 – 16 days

------------ By air 1 – 2 days _______ By sea 20 – 22 days

5. Conclusions

• China is a huge potential market where high quality fruit is imported from all the countries of the world and the consumers can certainly afford to buy Pakistani mangoes.

Karachi

Islamabad

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• Chinese quarantine laws are very strict and it is important that quarantine requirements must be met. (A pre shipment inspection is necessary for export to China).

• All three hot water treatment plants, certified by AQSIQ, are based in Karachi which is a barrier for export of mango from Punjab. The mango will need to be brought to Karachi first for treatment prior to export to China.

• It is highly advisable that PHDEB endeavours promotion of citrus & mangoes in the coming seasons using the platform & expertise of ASLP mango supply chain project. Delegation of exporters can be arranged for promotion of mango & citrus in China.

• Late harvest of Pakistani mango i.e. any time after 10th September nearing Chinese moon festival that is celebrated around 20th of September every year can fetch big gains.

• Each box should clearly mention the origin of produce & other relevant information in Chinese language. Each box should contain even number of fruit that is 6 to 12 mangoes per box. Each mango should have a sticker which is important & symbolic of good imported quality.

• Chinese prefer blush and golden mangoes having average weight of around 500grams • Retail price and cost of mangoes on arrival should be calculated by doing some trail

shipments as cost is certainly an issue for Chinese importers. Also in road transportation the enhanced shelf life will be an important issue and needs to be addressed.

• Competition for fresh Pakistani mangoes is quite significant as China has lots of local mango varieties and so the key to market our mangoes would be to ensure that we deliver good quality

6. Follow up Actions

1. A shipment of 8 to 10 ton White Chaunsa mangoes will be sent to China in the coming mango season in collaboration with either of the following companies in China;

a. Guangzhou Jiangnan Fruit and Vegetable Co. Ltd.

b. Shenzhen Agriculture Products Logistics Co. Ltd.

c. Golden Wing Mau Agricultural Produce Co. Ltd

d. Yuqi Biological Science and Technology and Development Ltd.

The PHDEB with support from ASLP will undertake this activity with the leading exporters (approved HWT plants) of Pakistan. The ASLP Mango Supply Chain Participants (Pakistan Side) will take the responsibility for ensuring the fruit quality.

2. These companies will be invited to visit Pakistan’s horticulture industry (as desired by the companies) in order to have a mutual interaction and sustainable partnerships for horticulture business between the two countries.

3. For the promotion of Kinnow from Pakistan, the New Cooperation Jiajiale Chain Supermarket Co., Ltd. (NCS, China) has already agreed to provide the free space to Pakistani Kinnow suppliers. Therefore a delegation comprising the leading Pakistani

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Kinnow exporters has to be organized under the umbrella of PHDEB to undertake the market promotion in China (2007-08 Kinnow crop year)

4. PHDEB will follow up with the planning of activities in collaboration of support from Dr. Timothy Sun, University of Queensland, Australia.

7. Acknowledgements

The research team is thankful to the ASLP, ACIAR project leaders from Australia (Dr. Ray Collins, University of Queensland, Australia) and Pakistan (Muhammad Iqbal, PHDEB) for planning, support and sponsor of this activity. The role of Dr. Timothy Sun was tremendous to organize the scheduled events and to link Pakistan to the best horticulture business industry in China.

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Annex 1: Fact Sheet about China (PRC - People’s Republic of China)

The world’s most populous country, China is a society in transition. It is an emerging global superpower, and maintains a permanent seat on the UN Security Council. Though nominally communist, the ruling Communist Party began liberalizing the economy in the 80’s and China is now one of the major players in global trade. Though almost half of citizens depend on agriculture for their livelihood, recent economic growth has been largely urban-based, drawing waves of poor rural farmers to migrate to the country’s many massive cities.

Size China and the United States are almost equal in size, and both claim to be the world’s third largest nation.

Land 9,596,960 sq km

Population

Over 1.3 billion, though current population growth is relatively low (0.59%) partly due to the government’s enforcement of a “one-child policy”.

Languages Spoken

Mandarin Chinese is the official language, but local languages like Cantonese, Mongolian and Tibetan dominate large portions of the country. One fifth of the population is currently learning English, and it is estimated that within 20 years the Chinese English speaking population will outnumber native speakers in the rest of the world.

Type of Government

The People’s Republic of China is most often referred to as a “communist state.” Though the economy has become increasingly capitalist in recent years, the Communist Party of China (CPC) still exercises authoritarian control over the country. There is little meaningful opposition to the CPC in most elections, though it is increasing at local levels. The government is harsh in its treatment of political dissidents and organized

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resistance, but also has maintained public support by delivering economic improvement for some portions of the population. China ranks in the middle of the corruption index, sharing its score of 3.3 (10 being the least corrupt) with India, Egypt, Mexico and Saudi Arabia.

Religion

China is the only officially atheist country in the world and 59% of the population identify themselves as non-religious. Still, traditional beliefs of Confucianism and Taoism play a sizeable role in Chinese culture. Small percentages of Buddhists, Muslims, Protestants and Catholics, number in the tens of millions. As many as 100 million followers of the Falun Gong, self described as a “spiritual practice” rather than a religion, experience regular persecution by the government.

Gender and Health

Issues

Because of the “one-child policy” and the cultural value placed on male children, by 2020 China is expected to have 30 million more men than women due to sex selective abortion, adoption or abandonment of female children, and even infanticide. Abortion is legal on request (there have been allegations of forced abortion and sterilization campagins) and contraceptive use amongst reproductive age women is extremely high at 83.3%. There is a large gap in literacy between men (95.1%) and women (86.5%). Health care in China is not universal, though life expectancy has more than doubled since 1950.

Environment and

Resources

China faces a number of serious environmental issues caused by overpopulation and rapid industrial growth. Water pollution and a resulting shortage of drinking water is one such issue, as is air pollution caused by an over-reliance on coal as fuel. It has been estimated that 410,000 Chinese die as a result of pollution each year. Deforestation and desertification are also issues. The country’s rivers constitute the largest potential source of hydropower in the world.

Economy

China is the world’s fourth largest economy. Per capita GDP is $6,800/year, though the poorest 10% of families earn only 2.4% of total income, while the richest 10% earn 30.4%.

Currency Ex. 1 Yuan (RMB) = 8 PKR = 0.13US$ (approx.)

International Aid

Received: $1.4 billion, or about $1 per person in 2001

Receives US

Counterterrorism

Assistance:

China has worked with the US on a number of international counter-terrorism measures.

Death Penalty: In use for violent as well as non-violent crimes like tax evasion and corruption.

Top Five Industries: Mining and ore processing, machine building, weapons, textiles

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and apparel, petroleum

Poverty Rate: 10% reported to live below the official poverty line, though 46.7% of the country lives on less than $2/day

McDonald’s

Restaurants: Since 1990

Military Spending: 4.3% of GDP – 22nd highest rate worldwide

Human Trafficking

Situation:

Though China is a source, transit and destination country for international trafficking, the most significant trafficking problem is domestic, with as many as 25,000 vicitims each year. The problem is exacerbated by government imposed restrictions on movement within the country, which allows for exploitation of illegal migrants in cities, as well as by the imbalance of male-female population, which motivates trafficking of women as brides.

Media

China ranks 159th out of 167 on the Reporters without Borders press freedom index. Almost 10% of the population are internet users, though the government censorship of websites recently prompted Google to develop a special pre-censored version of its search engine for the country.

Regions 23 provinces, 5 autonomies and 4 state Cities

Weather Tropical in south to subarctic in north Inner Mongolia

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Annex 2: Protocol of Phytosanitary Requirements for Exporting Mangoes from

Pakistan to China

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30

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Annex 3: Program Details

Day Activities

2 Sept (Sun) Arrival of Pakistani research team in China (Urumqi)

3rd Sept (Mon) Interview importers Interview custom officers Interview quarantine officers

4th Sept (Tuesday) Visiting fruit wholesale and retail markets Interview superstore management Interview transport companies and freighters

5th Sept (Wed) Interview wholesalers and retailers Running a focus group

6th Sept (Thursday) Travel to Shenzhen Meeting with fruit importers and distributors

7th Sept (Friday) Visit of superstores chain (Wal-Mart)

8th Sept (Sat) Free day

9th Sept (Sun) Running a focus group Meeting with GM, Shenzhen Agriculture Products Logistics Co. Ltd

10th Sept (Mon) Visit Shenzhen Buji Agricultural product center and interview wholesalers and distributors Travel to Guangzhou Visiting Guangzhou Jiangnan fruit and veg wholesale market & Meeting with GM, market administration

11th Sept(Tues) Sosheel, Sohail and Babar fly back to Urumqi Tim fly out from Guangzhou to Singapore

12th Sept (Wed) Sosheel, Sohail and Babar fly out from Urumqi to Islamabad

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Annex 4: Contact List

4.1. Ms Lee Chang See, General Manager, Urumqi Yuqi Biological Science and Technology and Development Ltd. Email: Lijg4299@263.net , Website: www.naturetop.com. 4.2. Mr. Yimit Rosol, Plant Quarantine Officer, AQSIQ,Urumqi, China. Ph: 0991-4639396, Email: yimitjan@sina.com 4.3. Mr Chia Ze Yan. Xinjing New Cooperation, Jiajiale Supermarket Co., Ltd. Email: zjb@ncsjjl.com, Web: www.ncsjjl.com. 4.4. Mr. Giang Lai, Fruit wholesaler, Urumqi. Ph: 13039466583, 13999403052 4.5. Mr. Mau Wah. General Manager, Golden Wing Mau Agricultural Produce Co Ltd., Shenzhen China. Email: exp@wingmau-fruit.com, Web: www.wingmau-fruit.com,

4.6. Mr. Fan Li Zun. General Manager, Shenzhen Agriculture Products Logistics Co. Ltd., Shenzhen, China. Email: lvtian@vip.163.com, Web: www.ps-cz.com

4.7. Mr. Zhiqiang Guan General Manager Assistant, Guangzhou Jiangnan Fruit and Vegetable Wholesale Market Development Co Ltd. Email: jnpfsc@vip.163.net

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Annex 5: Letter of AQSIQ

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Annex 6: Freight Costs

A: Export to China by Road

Export to China by road freight is undertaken through Sost border. The Pakistani transport can go till Kashgir or Taxurgan, where from the produce changes hands and is transported in different vehicle. The transit time for travel from Karachi to Taxurgan is seven to eight days and it takes another three to four days from Taxurgan to Biejing. Similarly, it takes about eight days from Karachi to Kashgir, where from Urumqi is three days travel and Shenzhen/Guangzhou is about six days travel. The produce can be transported from Karachi to Rawalpindi in some private vehicle and NATCO provides transportation from Rawalpindi to China (Taxurgan/Kashgir). Within China, railway and other transport (reefer/non reefer) is available. Freight Cost

Karachi to Taxurgan Rs. 170,000/- Reefer & GenSet Rent Rs. 60,000/-

B: Air Freight

Air Company No. of Flights/Week Freight Cost

Air China 1- Karachi to Beijing Rs.90/Kg PIA 2- Karachi to Urumqi Rs. 85/Kg Southern China Islamabad to Urumqi Dose not carry Fresh Fruit.

C: Sea Freight

The available information for subject shipments by sea in 40’ Ref Container: - S/No. Shipping Co. Freight US$ Transit Time

1. Maersk Line 1800-2000 14-18 Days

2. APL 2500 22-24 Days

3. Wan Hai 1700 12 Days

4. Shangai 1700 16-18 Days

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The cost structures and possibility price in the markets of 5 kg mangoes are as follows;

Farm gate price of Mango = 250

Transportation (Multan to Karachi) = 20

Processing (Desapping, HWT, Grading and Packing) = 85

Road transportation

Air Freight Sea Freight

Freight Charges of Refrigerated Container (Karachi to Khunjrab) = 34

Freight Charges (Karachi to Urumqi) = 980

Freight Charges 40’ container (Karachi to Beijing) = 25

Internal distribution cost in China;

Khunjrab to Urumqi = 36 Khunjrab to Shenzhen = 68

Internal distribution cost in China;

Urumqi to Shenzhen = 64

Internal distribution cost in China;

Beijing to Urumqi = 10 Beijing to Shenzhen = 10

Total Cost = 425 - 460 Total Cost = 1399

Total Cost = 390

Possible wholesale price in China = 85 - 92

Possible wholesale price in China = 280

Possible wholesale price in China = 78