Investigation of market opportunities for Australian avocados in Hong Kong
Professor Tony Dunne University of Queensland
Project Number: AV02016 AV02016
This report is published by Horticulture Australia Ltd to pass on information concerning horticultural research and development undertaken for the avocado industry.
The research contained in this report was funded by Horticulture Australia Ltd with the financial support of the avocado industry and the University of Queensland.
All expressions of opinion are not to be regarded as expressing the opinion of Horticulture Australia Ltd or any authority of the Australian Government.
The Company and the Australian Government accept no responsibility for any of the opinions or the accuracy of the information contained in this report and readers should rely upon their own enquiries in making decisions concerning their own interests.
ISBN 0 7341 0635 1
Published and distributed by: Horticultural Australia Ltd Level 1 50 Carrington Street Sydney NSW 2000 Telephone: (02) 8295 2300 Fax: (02) 8295 2399 E-Mail: [email protected]
© Copyright 2003
Australian Avocado Market Development Opportunities in Hong Kong
Merryn Bristow Kalyn Dessert Alanna Edwards Andrew Molenaar Andrew Penberthy Australian Avocado Market Development Opportunities in Hong Kong
Executive Summary
This report was commissioned by Horticulture Australia to provide Australian avocado growers and exporters with information regarding the potential of Hong Kong as an export market for Australian avocados. In addition the report contains our recommendations on the most appropriate strategies that could be implemented to raise the demand for Australian avocados in Hong Kong. The research was conducted by five final year, Bachelor of Agribusiness students from the University of Queensland, Gatton Campus.
The research initially involved interviewing representatives of the domestic supply chain. This was done to gain an understanding of the industry, identify issues that would influence exports domestically and also to gain contacts for further in market research to be conducted in Hong Kong.
Several issues were raised during this stage of the research that need to be followed up in the Hong Kong market. These were Australia’s reputation as a supplier of avocados in Hong Kong, the nature of existing business relationships, post-harvest handling facilities and expertise, consumer demographics and awareness of avocado and the associated costs and prices of avocados in Hong Kong.
In-market research was undertaken in Hong Kong over a period of seven days in late September. A series of interviews were conducted with representatives of every stage of the Hong Kong avocado supply chain. The information that was collected during this stage provides the foundation for this report.
The major findings of our research were:
• Imports of avocados into Hong Kong have grown very steadily over the last 3 years, from 310 tonnes in 1999 to 366 tonnes in 2001. There is evidence of growth of Australian exports in the market, from 78 tonnes in 1999, to 179 tonnes in 2001. This is not sufficient to absorb the oversupply problem expected in Australia but is still a regular niche market that will absorb some of our predicted surplus supply.
1 Australian Avocado Market Development Opportunities in Hong Kong
• Australia possesses an advantage due to proximity due to the fact that it has cheaper freight rates than its competitors. However, this advantage is mostly eroded by Australia’s greater costs of production.
• Australia has a very prominent supply window that correlates with Australia’s period of peak supply that, depending on the year, ranges from around May to September. Both importers and statistics indicate that Australia is the dominant supplier to Hong Kong during this period.
It can be concluded that the Hong Kong market is a relatively small, steadily growing destination for avocados in general. This market has proved to be a reliable niche for Australian avocado exports. However, the fact that it is a mature market with fairly limited growth potential indicates that it is not going to be a market that can absorb Australia’s predicted massive increase in avocado production.
However, three major strategies can be recommended to help increase demand for Australian avocado exports in Hong Kong:
1. It is recommended that market development efforts be targeted at the retail sector in Hong Kong rather than the food service sector. The rapid growth and increase in market power of the supermarket chains is giving access to a growing market segment of mid-high income Chinese who have had little previous exposure to avocados. In contrast the food service sector is a mature market segment centred around the major hotels
2. It is recommended that in order to increase demand it would be essential to adapt avocados to Chinese cuisine. By doing so, this will help establish a market with traditional Chinese consumers. We suggest that expatriate Chinese housewives or chefs be commissioned to experiment with avocados and develop recipes that incorporate it into their traditional Chinese cooking. These recipes would then become the basis for in-store promotional material.
2 Australian Avocado Market Development Opportunities in Hong Kong
3. It is recommended that a well researched and targeted promotional program that coincides with the peak supply season for Australian avocados should be undertaken to support this ‘new use’ product development. This program should include bilingual in–store promotions and product use demonstrations, featuring the recipes developed in the second recommendation.
This market development strategy of forming an alliance with a supermarket chain in Hong Kong to increase the consumption of avocados among the Chinese population has the potential to provide a market entry vehicle into Mainland China as the supermarkets expand their presence there.
3 Australian Avocado Market Development Opportunities in Hong Kong
1 INTRODUCTION 8
2 METHODOLOGY 9
3 STAGE ONE: INITIAL RESEARCH IN AUSTRALIA 10
3.1 An Overview of the Industry 10
3.2 Domestic Supply Chain for exported fruit 14 3.2.1 Growers attitudes to export 15 3.2.2 Packing 16 3.2.3 Exporters 17 3.2.4 Freight Forwarders 18
3.3 Summary 20
4 STAGE 2: IN-MARKET RESEARCH 22
4.1 Import Statistics and Overview of Hong Kong Imports 22
4.2 Importers 27 4.2.1 Quality and Reputation 30 4.2.2 Nature of the Exporter/Importer Relationship 31
4.3 Wholesalers 33
4.4 Retail 38
4.5 Food Service 46
4.6 Complete Hong Kong import supply chain 48
5 DISCUSSION 50
5.1 Avocado export supply chain 50
5.2 Retail, wholesale and foodservice sectors. 51 5.2.1 Demand patterns 51 5.2.2 Existing and potential uses of avocados 52 5.2.3 Australia’s proximity advantage 52
5.3 Potential supply windows 53
5.4 Strategies to raise demand 54
5.5 Limitations 56
6 RECOMMENDATIONS 57
4 Australian Avocado Market Development Opportunities in Hong Kong
7 REFERENCE LIST 59
8 APPENDICES 60
8.1 Appendix 1: Contact list- Hong Kong market 60
8.2 Appendix 2: Contact list- Domestic 63
8.3 Appendix 3: Contact List- people who were not interviewed 65
8.4 Appendix 4: Question List- Hong Kong Market 67
8.5 Appendix 5: Question List- Domestic Market 72
8.6 Appendix 6: Interview Summaries- Hong Kong 80
8.7 Appendix 7: Interview Summaries- Domestic 88
8.8 Appendix 8: Hong Kong fresh and dried avocado import statistics 93
5 Australian Avocado Market Development Opportunities in Hong Kong
List of Tables and Figures
page
Table 1: Avocado seasonality in Australia by region 10 Table 2: Predicted Expansion of the Australian Avocado Industry 11 Table 3: Comparison of methods of freight to Hong Kong 20 Table 4: Value of imports by country of origin 23 Table 5: Sources by country 27 Table 6: Importers in Hong Kong and their activities 29 Table 7: Characteristics of Hong Kong supermarkets 41 Table 8: Avocados observations from supermarkets 42 Table 9: Specifications and uses for avocado in hotels in Hong Kong 45
Figure 1: Total Australian exports by destination 13 Figure 2: Total monthly Australian avocado exports 14 Figure 3: Domestic Supply Chain for Export Fruit 14 Figure 4: The Australian export value stream 15 Figure 5: Hong Kong avocado supply chain 22 Figure 6: Hong Kong fresh and dried avocado imports 23 Figure 7: Monthly fresh and dried avocado imports to Hong Kong 24 Figure 8: Hong Kong avocado imports 25 Figure 9: Hong Kong monthly imports from each country 25 Figure 10: Distribution of fruit and vegetables 28 Figure 11: The Hong Kong import value stream 47 Figure 12: Complete value stream 49
6 Australian Avocado Market Development Opportunities in Hong Kong
Acknowledgements
The research team consisting of Merryn Bristow, Kalyn Dessert, Alanna Edwards, Andrew Molenaar and Andrew Penberthy would like to acknowledge both the financial support and initial direction received from the Australian Avocado Industry through Mr. Wayne Prowse of Horticulture Australia Limited.
We wish to thank Associate Professor Anthony Dunne for his invaluable support and guidance throughout this assignment, the Queensland Department of State Development for their help in gaining industry contacts and Bryan and Judy Prosser for their information on the avocado industry both domestically and in the Hong Kong market.
We would also like to thank the many contributors to the report including domestic growers, exporters, export facilitators and those in the Hong Kong supply chain for their time, information and advice. All contacts are shown in the appendices section of the report and we apologise if we have overlooked any contributor.
7 Australian Avocado Market Development Opportunities in Hong Kong
1 Introduction
In July 2002, Horticulture Australia Limited, on behalf of Australian Avocado Growers Federation, commissioned the School of Natural Rural Systems Management, at the University of Queensland to conduct a study assessing the potential of the Hong Kong market as a destination for Australian avocados.
As part of a strategic review of the industry, Australian Business Limited (ABL) completed a report titled ‘Avocado Export Market Intelligence Study’. In this study ABL forecast that future avocado production was expected to exceed domestic demand, such that export opportunities will need to be established for some 4000 tonnes of fruit in 2005. Furthermore the study identified Spain, Sweden and the UK as the best prospects with other potential markets recognised as being Hong Kong and New Zealand.
The focus of this study is confined to assessing the growth potential of the Hong Kong market. The project brief as specified by Horticulture Australia was to: • Assess the retail, wholesale and food service sectors in regards to: Demand patterns Existing and potential uses of avocados Competitors in the market
• Investigate any potential advantage Australian avocado exports may have in the Hong Kong market due to Australia’s close proximity.
• Investigate any potential supply windows that may exist for Australian avocados.
• Provide a recommendation to the Australian Avocado industry as to the most appropriate strategy to raise demand for Australian avocados in Hong Kong.
The research was undertaken by a group of four senior Agribusiness students over the period July – October 2002.
8 Australian Avocado Market Development Opportunities in Hong Kong
2 Methodology
The research was completed in two stages.
Stage 1 was conducted in August / September and involved a review of the Australian avocado industry. The objectives of this stage were to:
• Familiarise ourselves with the Australian avocado industry. • Review and verify the study conducted by Australian Business Limited. • Identify issues for further investigation in Hong Kong. • Acquire data that would allow us to identify the costs involved in the domestic section of the export supply chain. • Identify contacts and gain introductions in the Hong Kong market.
This investigative process involved both telephone and direct interviews with industry members along the supply chain including growers, marketing cooperatives, wholesalers, export agents and freight forwarders. A list of the people contacted and interview summaries can be found in Appendix 1 and 7 respectively.
Stage 2 of this study involved market research in Hong Kong from September 27 to October 4. This part of the research entailed both direct and telephone interviews with multiple members at each stage of the supply chain, from importer through to the retail and food service sectors. This process allowed us to gain relevant information, whilst also enabling us to cross check information provided at each stage.
Questionnaires were devised for each meeting based on the project brief as well as any arising issues from Stage 1 of the investigation. These questionnaires are presented in Appendix 4. The people interviewed in Hong Kong were initially identified during Stage 1 of the study. We were also greatly assisted by the Queensland Government Trade and Investment Office, Hong Kong in gaining additional businesses contacts. The complete contact list for the Hong Kong market is provided in Appendix 1, along with summaries of the interviews (Appendix 6.)
9 Australian Avocado Market Development Opportunities in Hong Kong
3 Stage One: Initial Research in Australia
3.1 An Overview of the Industry
Avocados are grown across Australia in a diverse range of geographical areas, permitting almost year round production. The Hass variety is grown for ten months of the year, with the Shepard variety from the Atherton Tablelands and Hass from New Zealand filling the gap in supply during February and March. At present the ability to sustain supply to both the domestic and export market for the entire year does not exist. Sufficient volumes to export are only available during the peak supply period from May to September.
Table 1: Avocado seasonality in Australia by region
Avocado seasonality in Australia by region Avocado type District Month J F M A M J J A S O N D Hass Atherton Tablelands Bundaberg Childers Sunshine Coast Coastal SEQ+ Northern NSW Riverland/Sunraysia NSW Mid North Coast Perth Metro Blackall Range/Mt. Tamborine Toowoomba Range Pemberton/SW WA Shepard Atherton Tablelands Bundaberg Childers Source: Australian Avocado Strategic Plan 2000-2005
Table 1 shows supply periods for the various growing regions in Australia. The major growing regions in terms of volume are located in the Bundaberg/Childers and Sunshine Coast districts of South East Queensland. Their large production volumes enable the industry to supply both the domestic and export markets during their key production periods.
10 Australian Avocado Market Development Opportunities in Hong Kong
At present, Australian avocado production is in a growth phase due to the rapid increase of plantings in recent years. Table 2 outlines the predicted expansion of the Australian avocado industry and illustrates the need to identify substantial export markets for the anticipated surplus supply of Australian avocados.
Table 2: Predicted expansion of the Australian avocado industry
Year Production Domestic Domestic Imports (t) Nominal Excess Consumption Consumption Exports (t) supply (t)
(production + (t) Total (t) Per-Capita imports – Consumption consumption)
(kg) 2001 32,667 29,400 1.63 4,667 1,600 7,934 2002 36,500 32,850 1.83 5,500 2,200 9,150 2003 40,333 36,300 2.02 6,333 2,800 10,366 2004 44,167 39,750 2.21 7,167 3,400 11,584 2005 48,000 43,200 2.4 8,000 4,000 12,800 Adapted from the Australian Avocado Strategic Plan 2000-2005
From the information observed in Table 2, a discrepancy was identified with excess supply in exceeding nominal projected exports by 7200 tonnes in 2005. Where the remainder of the fruit is going is difficult for us to determine but a substantial proportion of this may be contributed to spoilage.
The data shown in Table 2, predicts that avocado production in Australia will increase dramatically from 32 850 tonnes in 2002 to 43 200 tonnes in 2005 and this can be attributed to the fact that the new orchards planted in the late 1990’s are now coming into production, with the most substantial growth in the Pemberton districts of Western Australia. The growth from these plantings will mainly be experienced later in the Hass season from November to January (Australian Avocado Strategic Plan, 2002.) This forecast in growth was supported by two of the four growers interviewed, who indicated they had increased the number of trees in their operation and were planning to further expand their orchards.
Interviewees in the domestic market believed that the industry has had some reprieve from expected production increases, due to unfavourable climatic conditions over the
11 Australian Avocado Market Development Opportunities in Hong Kong
last two seasons. Two of the four growers who were interviewed reported reduced production levels in their operations and one Sydney exporter told us that he could not fill his orders due of the lack of quality product available during the year. In spite of these comments, there was general concern about what will happen during the next favourable production season.
The current per capita domestic consumption level of avocados is approximately 1.8- 2.0 kg per person annually, and according to the Australian Avocado Strategic Plan this consumption is expected to increase to 2.4kg per person by 2005. Other data in the Strategic Plan forecast a growth in production of 32% and consumption growth of 20%. Even if the projected growth in per capita consumption is achieved, supply will still significantly outstrip demand.
In order to gain an appreciation of the economics of growing and marketing avocados, we have attempted to construct a model of the avocado value chain. As part of this exercise we obtained cost of production data from three growers. These estimates ranged from $8 per tray (including packing) to $12.50 per tray. The reasons for this variation were mainly associated with farm size and location.
The most significant variable that impacted on the cost of avocado production was the size of the operation. Larger growers are capable of achieving better economies of scale with regard to fixed and variable costs compared with smaller producers. They can also justify larger investments with regard to technology and technical support, which enables them to increase their production. An example of this was the substantial yield increases achieved by one grower, from investment in soil moisture monitoring technology.
The location of growers can also have significant implications on their costs of production. For example, the freight costs from the Atherton Tablelands to the Brisbane markets is significantly higher than that from the Sunshine Coast. Another grower spoke of difficulties in securing sufficient water due to falling water tables, resulting in reduced yields and therefore increased average costs of production. In addition to the above-mentioned variations, avocado growers are also subjected to many different climatic afflictions including frost, drought or hail depending on their
12 Australian Avocado Market Development Opportunities in Hong Kong
location. The costs of these failed crops must be amortized over subsequent crops, which increases underlying production costs.
Figure 1 shows that Australia currently exports significant amounts of avocados to Bahrain, New Zealand, Hong Kong, Singapore, Malaysia and the UAE. Export volumes to these countries need to be increased or new markets found if the anticipated oversupply is to be mitigated.
Figure 1: Total Australian exports by destination
Total exports by destination
250000
200000
150000 2000 kg 100000 2001
50000
0
i a Z e d in e ng ia al. ia r n ra n ad o tius s N o AE h ru n ri y p ila U a B a w C a a B g K au ala e g h C n M di Arab in T o M N u H a S S
Source: Australian Harmonised Export Commission
Australian avocado exports occur predominately during the period from May to September when production is at its peak and there is surplus in the market. Figure 2 is used to demonstrate the traditional seasonal export patterns in Australia and reinforces the information received about supply patterns.
In Figure 2 the large peak in exports at the beginning of 2001 can be almost entirely attributed to the sizeable volume shipped to the United Arab Emirates. It is unknown why this large export volume occurred. Data from the year 2000 is indicative of a more typical year with imports increasing during the middle months of the year that coincide with our peak growing season.
13 Australian Avocado Market Development Opportunities in Hong Kong
Figure 2: Total monthly Australian avocado exports
Total monthly exports
90000 80000 70000 60000 50000 2000
kg 40000 2001 30000 20000 10000 0 JFMAMJJASOND months
Source: Australian Harmonised Export Commission
3.2 Domestic Supply Chain for exported fruit
The supply chain of Australian avocados destined for the export market consists of a number of steps that are outlined in Figure 3.
Figure 3: Domestic supply chain for export fruit
Production
Packing and Freight Freight Forwarders Wholesaler Exporter Freight Companies
Importer
These costs associated with each stage of the chain and other issues identified at each stage by supply chain members are detailed below and shown in Figure 4.
14 Australian Avocado Market Development Opportunities in Hong Kong
As reported previously, the farm gate cost of production for growers ranges between AUD$4.00 and $7.00 per tray and because it is mainly the bigger, more efficient growers supplying product for export a nominal figure of $4.50 was chosen. Added to these costs are the packing and freight cost for a nominal total packed cost of $9.00. Growers are receiving prices of between AUD$11.00 and $15.00 and because Australia is supplying during its maximum production times, a conservative figure of AUD$12.50 was used, offering a margin of AUD$3.50 per tray.
Exporters are receiving prices between AUD$22.00 and $26.50 in Hong Kong, from which freight costs of between $1.60 if sea freighted and $6.50 air freight must be subtracted. Currently most product goes airfreight, so a nominal freight figure of $6 was used. This leaves gross profits of around AUD$7.00 per tray, from which exporters costs must be subtracted.
Figure 4: The Australian export value stream
Returns per tray per tray (AUD)
Growers: Cost range: $4.00-$7.00 $8.00 Nominal: $4.50 Nominal margin: $3.50
Packing and freight: Cost range: $4.00-$5.50 $12.50 Nominal: $4.50
Exporters: $19.50
3.2.1 Growers attitudes to export
During our interviews a number of issues regarding growers attitudes were raised. The development of export markets for Australian avocados has, in the past, been problematic due to the fragmented nature of the industry and the attitudes of the avocado growers.
15 Australian Avocado Market Development Opportunities in Hong Kong
Two interviewees believed that the attitudes of growers were hindering export market development. Growers generally expected returns to be superior to those available in the domestic market. They went on to suggest that growers should view the Hong Kong market as an extension of the domestic market. Prices in the Hong Kong market generally reflect prices in the Sydney market with the addition of freight costs. The main benefits that are gained from exporting is that when the produce is removed from the domestic market, the domestic price increases due to the supply and demand relationship. However, there are other benefits of exporting to Hong Kong. Because the Hong Kong market utilises the smaller fruit that is less accepted domestically, and this provides a financially viable outlet for this produce.
One industry representative stated that Hong Kong has in the past been viewed simply as a market to direct product during times of low domestic prices. The ABL study identified fluctuating volumes that lend support to this opinion. Although this opportunistic approach may have successfully alleviated short-term problems in the domestic market, it is not conducive to developing long-term relationships and therefore greater export volumes. An exporter articulated the opinion that taking a small price penalty in foreign markets should be viewed as an investment in long-term market development as the development of these markets will be crucial in the coming years.
3.2.2 Packing
This phase of the supply chain can be undertaken in a number of different ways: growers can both pack and market their own product, pack their own fruit and market it through a cooperative or send bulk bins to a cooperative to be packed and marketed.
In general, a good level of cohesion, communication and openness between growers and their respective cooperatives was observed. This level of cohesion allows better production forecasts, which potentially could be advantageous for securing reliability of supply in Hong Kong. The situation where exporters are incapable of filling their supply obligations due to lack of supply of avocados is less likely to occur if growers have a good idea of anticipated export volumes.
16 Australian Avocado Market Development Opportunities in Hong Kong
An exporter identified Australian avocado packing standards as an obstruction for international trade due to the fact that in some geographical locations, the first grade standards differed from those applied in other areas. This could potentially compromise Australia’s reputation with international buyers if inconsistent, or sub-standard, product was exported. A suggestion was made that tougher price penalties were necessary to reduce the incidence of sub-standard fruit being sold as first grade product. Complaints were largely directed at southern pack-houses who harvest later in the season; effectively out of Australia’s main export window and this may explain why there has been no criticism from importers as yet.
3.2.3 Exporters
During stage 1 of the research process, we interviewed four exporters who indicated that they were supplying avocados to the Hong Kong market.
The majority of the avocados are packaged in 6kg net trays with a small quantity of 10kg cartons being sent. Sizes are mainly 25, 28 or 30 counts with a small quantity of larger fruit (size 16.) The preference for smaller fruit was believed to be due to the cheaper per unit price and greater per tray return when the fruit was sold at a piece rate. Due to the small quantities of avocados that are being exported into Hong Kong, three of the four exporters were using airfreight and one exporter was sending avocados by sea freight in 20ft refrigerated containers.
The exporters that were interviewed indicated that they preferred to source fruit from a few, large growers. This reduces the transaction costs and offers more consistent fruit quality and in some circumstances, produce is also sourced from wholesalers to supplement any orders that their usual suppliers cannot fill. Generally exporters try to avoid sourcing fruit from the wholesale market due to the extra costs involved and the increased variation in product quality.
All of the exporters interviewed thought that the knowledge and infrastructure for ripening and post-harvest handling of the avocados in Hong Kong was fairly poor. They claimed that there were no dedicated ripening rooms and inadequate cold chain
17 Australian Avocado Market Development Opportunities in Hong Kong
facilities and this caused problems with fruit quality and consistency before it arrived at the consumer.
One of the exporters interviewed claimed that the Hong Kong market was very opportunistic and price driven whereby importers showed no interest in long-term relationships and would change suppliers fundamentally on pricing issues. It is believed that the Hong Kong market is so opportunistic due to the fact that there are no phyto-sanitary restrictions, and this has allowed it to become a target market for much of the world. The result of this is that it effectively becomes a commodity market, and therefore a price driven market in which relationships are not valued as much as the bottom line.
3.2.4 Freight Forwarders
There are a large number of freight forwarders in Australia that deal with sending perishables into the Hong Kong market. Freight forwarders are export facilitators and have expertise in the areas of export documentation, shipment consolidation and transport coordination. They offer these services to exporters who don’t possess the necessary skills in-house or find it more efficient to out-source these services.
The freight forwarders that we spoke to in our investigations confirmed that the majority of Australian avocados were exported during the months of June-July. Avocados are currently exported by both sea and air methods and interviews were conducted with a number of freight forwarding firms to ensure that any issues about exporting avocados to Hong Kong that needed to be further investigated were identified.
Airfreight is presently the most utilised method of exporting avocados into Hong Kong. It is used for a number of reasons. Time taken to get to the market (around 24 hours to reach its destination in Hong Kong) offers expediency, and less opportunity for the produce to spoil. Airfreight is also used because the quantities of avocados that are currently been exported are not enough to warrant the use of a sea container.
18 Australian Avocado Market Development Opportunities in Hong Kong
In the cargo holds of the aircraft, the controlled temperature is set for the highest minimum temperature required across all products being freight. This means that if the hold contains a consignment of bananas the minimum temperature would be set at 12 degrees whilst avocados are ideally stored in temperatures of approximately 5-8 degrees. This method may not be optimum for the perishable produce but unfortunately this is an issue that the exporters have no control over.
Peter Langdon of the Airfreight Council of Queensland indicated that airfreight space is a fairly limited resource throughout the year but would not be a problem if it was booked in advance. Demands on the system are already very high due to reductions in the frequency of flights and greater passenger loads therefore reducing the available space for fresh produce. It was suggested that if volumes of avocados were to increase significantly, there might not be sufficient space to airfreight. The ideal situation both in respect to space and costs would be to increase the quantities of avocados sent at one time to allow the use of sea freight.
Another option suggested by Peter Langdon was to transport the produce down to Sydney and to airfreight the perishables from there. This method is believed to be as cost effective as exporting the produce from Brisbane by air because the frequency of flights to Hong Kong out of Sydney means that there is an increased availability of space and reduced airfreight costs.
ANL Shipping Company indicated that sea freight takes between 9-11 days from Brisbane to Hong Kong and therefore it is more critical to ensure that favourable transit conditions are maintained. Refrigerated sea containers can be either 20ft or 40ft long and can be kept at temperatures between –20 and 20 degrees. The reefers also have the option of either modified atmosphere, which is the initial filling of the container with desired gasses, or controlled atmosphere, which is the constant monitoring and adjustment of gas composition within the container.
At present all avocados that are being sea freighted to Hong Kong are shipped in 20ft modified atmosphere, refrigerated containers. These containers are used primarily to ensure that the produce arrives at the market in the best possible condition and to make certain that the level of shrinkage during transit is kept to a minimum.
19 Australian Avocado Market Development Opportunities in Hong Kong
One of the exporters raised the issue of the accuracy of export statistics due to consignment consolidation. This involves avocados being sent in mixed loads. These loads are then recorded as the dominant produce in the load, so it is assumed that many of the avocados that are exported are not being recorded. These inaccuracies may be rectified to some extent this financial year, with tough financial sanctions against companies and individuals found to be recording exports inaccurately and therefore statistical information in the following years should become more reliable and valuable.
Table 3: Comparison of methods of freight to Hong Kong
Freight type Cost $/tray Volume Transit Time 20ft refrigerated $2330 -$2800 $1.60-$1.96/tray 10 pallets 9-11 days sea container approx. 1 tonne AV $1500 - $1800 $8.90-$10.90/tray 1180kg 24 hours Air Pallet $3500 - $3700 $6.10-$6.50/tray 4000kg 24 hours
Sea freight costs approximately AUD$1.80 per tray and takes between 9 – 11 days, compared to with air freight that cost AUD$6-11.00 per tray depending on the type of container used and only 24 hours transit time. In the past Australia has not been able to take advantage of cheaper sea freight rates due to the lack of volume. However, this year an Australian exporter has been able to secure and fill orders for 20ft containers of avocados into the Hong Kong market for the importer, Wing Kee.
3.3 Summary
From our investigation of the domestic supply chain, links in the Hong Kong import supply chain were identified. Contacts were established from interviews with Australian exporters, Government departments such as the Queensland State Development Office, freight forwarders, avocado producers and cold calling on identified companies in Hong Kong.
20 Australian Avocado Market Development Opportunities in Hong Kong
From interviews and other background information collected in Australia it was concluded there were a number of areas that required further investigation whilst in Hong Kong. These areas were: • Australia’s reputation as a supplier of avocados in Hong Kong. • The nature of existing business relationships. • Post-harvest handling facilities and expertise. • Consumer demographics and awareness of avocado. • The associated costs and prices of avocados in Hong Kong.
To investigate these issues, the supply chain was followed into Hong Kong with interviews conducted with importers, wholesalers, retailers and food service outlets. This stage provided a solid foundation for the in-market stage of the project that was conducted on the 27th September 2002 to the 4th October 2002.
21 Australian Avocado Market Development Opportunities in Hong Kong
4 Stage 2: In-Market Research
Stage two of this research project deals with in market research. We spoke to importers, wholesalers, retailers, and foodservice outlets to ensure all aspects of the Hong Kong avocado market were accurately covered.
The avocado supply chain in the Hong Kong market is shown in Figure 5. Exporters send product into importers such as Ming Kee Chan and Wing Kee, and also directly to retailers such as ParknShop. The importers then send fruit to wholesalers, retailers, (Jusco, Wellcome) and larger foodservice outlets. Smaller foodservice outlets purchase from wholesalers. Each section of this supply chain will be discussed and the costs associated will be developed.
Figure 5. Hong Kong avocado supply chain
Exporter
Importer
Wholesaler
Food Retail Service
4.1 Import Statistics and Overview of Hong Kong Imports
The importation of fresh and dried avocados into Hong Kong has increased significantly in the past three years from 450 tonnes in 1999 to 1308 tonnes in 2001. Australian exports to Hong Kong have also increased during this three-year period from 78 tonnes in 1999 to 179 tonnes in 2001 (Hong Kong Census and Trade.)
22 Australian Avocado Market Development Opportunities in Hong Kong
Figure 6: Hong Kong avocado imports from 1999 – July 2002
Hong Kong Avocado Imports (excluding China and Taiwan)
380 370 360 350 340 330
Tonnes 320 310 300 290 280 1999 2000 2001 2002 Jan-July Year
Source: Hong Kong Census and Trade
Data regarding China and Taiwan has been excluded from the above graph as the import statistics indicate that both China and Taiwan are supplying mostly low value product to Hong Kong. Table 4 indicates that Taiwan is supplying produce on average at $0.89/ kg. and China on average at $0.69/kg. These values are significantly below the average of $1.89/kg. As our investigations did not reveal any imported product from either Taiwan or China in the fresh markets and there was no mention of avocado processing in Hong Kong. It can then be speculated that these figures describe pulped product or product being re-exported from Hong Kong.
Table 4: Value of imports by country of origin
Trading 1999-2001 1999-2001
Country Average Value/kg Average Value/kg HK$ AUD$ America 20.97 5.24 Australia 16.01 4.01 South Africa 13.72 3.43 Mexico 11.87 2.97 Taiwan 3.55 0.89 China 2.76 0.69 Average 7.59 1.89
Source: Hong Kong Census and Trade
23 Australian Avocado Market Development Opportunities in Hong Kong
The import statistics that were gathered whist conducting in-market research, indicate that the values of the imports from each country varied up to 35% across the year, excluding China and Taiwan figures. The largest variation was experienced between the USA and Mexican imports. Mexican and South African product displayed greater similarity, with the average values varying from AUD$2.97 to $3.43. However, Australian avocados were more expensive than both Mexico and South Africa and importers in Hong Kong confirmed this.
Figure 7: Monthly fresh and dried avocado imports to Hong Kong
Total Avocado Imports into Hong Kong- Monthly
300
250
200 1999 2000 150 2001 Tonnes 100 2002
50
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month
Source: Department of Census and Trade, Hong Kong
Hong Kong avocado import figures indicate that the amount of product being received is increasing and that Australian exports have also increased. Imports in the first half of 2002 spiked, contrary to the trends of previous years. This is a suspect figure and is assumed to be low value product from China and Taiwan.
The data presented in Figure 8 again excludes the imports from China and Taiwan. This diagram provides a clearer illustration of the fresh produce imported into Hong Kong for the previous four years. This graph shows that there has been relatively little growth in the market apart from the beginning of 2002, which has been assumed to be a large quantity of low value Mexican product.
24 Australian Avocado Market Development Opportunities in Hong Kong
Figure 8: Hong Kong Avocado Imports
Hong Kong Avocado Imports (excluding China and Taiwan)
140 120 100 1999 80 2000 60 2001 Tonnes 40 2002 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month
Source: Hong Kong Census and Trade
Figure 9 illustrates the monthly Hong Kong import statistics collected from Hong Kong Census and Trade. The graphs indicate that Australian exports occur during the peak growing season of May to September. The Australian Avocado Growers Strategic Plan and importers in Hong Kong stated that Australia competes directly with the USA and South Africa as these countries have similar peak supply seasons from May to September. Mexico, New Zealand, Chile and Spain have opposing peak seasons, spanning from October through to February/March.
Figure 9: Hong Kong monthly imports from each country
Hong Kong Avocado Im ports 1999
40000 35000 30000 America 25000 Mexico 20000 A us tralia 15000 Kilograms 10000 South Africa 5000 0
t r r r ry ry ril y e e e a a rch a b b u a Ap M June July o m n M ct e emb Ja ebru Augus O v c F o e September N D Months
25 Australian Avocado Market Development Opportunities in Hong Kong
Hong Kong Imports 2000
40000 35000 30000 America 25000 Mexico 20000 Australia 15000
Kilograms South Africa 10000 5000 0
r r y h y e ary rc ust er u Ma July g be April June u mb tob mber Ma A te c e JanuarFebr O ovem Sep N Dec Month
Hong Kong Avocado Imports 2001 45000 40000 35000 30000 25000 20000 15000 10000 Am erica Kilograms 5000 Mexico 0 Australia y h y c ul May J uary April June ugust South Africa anuar Mar ember J ebr A October F eptember ecember S Nov D Month
However, according to these statistics, the majority of America’s supply is being exported to Hong Kong in the period October to January, which is after the supply season for Australia. October to January is not in the USA’s peak supply season and so it may be assumed that the USA is sourcing its fruit from Mexico during this period. This may also indicate that though the USA has the same peak season as us they are not exporting much to Hong Kong during these months.
Australia has a very prominent supply window. There is a clear trade off between the USA and Australia because when Australian imports are high the USA tapers off and
26 Australian Avocado Market Development Opportunities in Hong Kong
vice versa. These graphs and statistics indicate that South Africa and Mexico are not major players in the market, however, this contradicts the view of several importers in Hong Kong that stated that they import from South Africa and Mexico for several months of the year. The graphs also illustrate that Australia is supplying small volumes for the majority of the year and this could be imports by Ming Kee Chan, an importer, who had a strong preference for Australian avocados.
Table 5 outlines the different countries from which firms in Hong Kong import avocados from around the world. All of the importers interviewed sourced Australian avocados for some period of the year.
Table 5: Sources by country Importer Australia USA Mexico New Zealand South Africa Chile Wing Kee Ming Kee Chan ParknShop Jusco Chef's Garden Jardines
It was noted that two importers in Hong Kong predicted that China would be one of the greatest exporters of avocados to Hong Kong in the future. It is believed that China is not currently exporting any fresh avocados to Hong Kong because of their inconsistent quality, volumes and poor food safety standards. However, it was stated that the standard is greatly improving. One of the importers said that they have started importing other vegetables such as lettuce from China and believe they will soon be importing other products as the quality improves. China would have an advantage due to proximity and also a lower cost of production. As Chinese production standards are developing rapidly, they pose a massive competitive threat in the future.
4.2 Importers
During our in-market research we interviewed two of the three major importers of avocados into Hong Kong. We also interviewed retailers that import directly and smaller importers that generally import avocados in mixed loads. By interviewing importers of different sizes and undertaking diverse activities an accurate
27 Australian Avocado Market Development Opportunities in Hong Kong
understanding of the entire supply chain could be developed and a broader range of issues addressed. The following section will use the information received whilst in- market to address the nature of business relationships in Hong Kong and Australia’s reputation as a supplier relative to other countries.
The Figure 10 provides an insight into the distribution network for fresh fruit and vegetables in Hong Kong. This diagram gives some idea as to the percentages of product being distributed to end users, with 34% going to institutional consumers and 66% to the household consumers. Whilst these proportions are not entirely accurate for avocado distribution, they do provide an idea of the different distribution channels within this market.
Figure 10. Distribution of Fruit and Vegetables
Importer
3% Wholesale - 81% 16%
Logistic Supplier
Retail - 66%
Institutional Household Consumers – Consumers – 66%
Source: Western Wholesale Fruit Markets
A few key importers dominate the Hong Kong avocado market. Their current import activities are illustrated in Table 6. The major trend that can be identified from this data is the strong preference for size 28 and 30 count Hass avocados.
28 Australian Avocado Market Development Opportunities in Hong Kong
Table 6: Importers in Hong Kong and their activities
Importer Freight Volumes Size Variety Supply Wing Kee Seafreight 1000 trays/ 28’s and Hass only Retail 50% every 7-10 week 30’s Food service days and Wholesaler 50% Ming Kee Air freight 500-600 trays/ 28’s Hass only Mostly direct week preferred wholesale some Chan Some 30’s food services ParknShop Air and Sea 450-500 trays/ 25’s Hass only ParknShop freight direct week generally stores only and 16’s for Great Food Hall Jardines Use importer 720-900 trays / 28’s Hass mainly Retail 70% (Wing Kee) for week generally Food service sea freight 23’s for Some fuerte 30% Top up with air some food from South freight services Africa themselves Chef’s Garden Air freight 45 trays/ week 28’s or 30’s Hass only Food service mixed loads only only
Wing Kee is the largest importer in Hong Kong. They receive a 20 ft container of avocados every 7-10 days. They are the only importers in Hong Kong regularly sourcing avocados in sea freight containers. This could be for two reasons. Firstly, it has been stated that the Hong Kong market cannot absorb larger volumes. Secondly, Wing Kee is one of the only importers that has the infrastructure to be able to store, ripen and distribute large volumes of avocados.
The majority of importers utilise the peak supply seasons of different countries to achieve a consistent supply and price for avocados. Wing Kee imports avocados from South Africa, Australia and the USA during the middle months of the year and then from Mexico, New Zealand, Chile and Spain at the beginning and end of the year as they basically only import during each country’s peak season. Mark Lee of Wing Kee stated that by sourcing from Australia, Mexico and South Africa they can achieve year round supply with prices fluctuating only 2% across the year. One third of the container loads that Wing Kee imports from Australia is utilised by ParknShop. The remaining two thirds of the container is distributed to food service industry and retail stores such as Wellcome.
29 Australian Avocado Market Development Opportunities in Hong Kong
ParknShop also imports via airfreight two to three times a week to top up supplies between container loads. In the future they are looking to utilise mixed sea freight container loads. Tops of containers of other produce such as citrus will be lined with trays of avocados making the transaction cheaper and eliminating the problem of slow absorption of whole containers in the Hong Kong market.
Ming Kee Chan imports from Australia, New Zealand and Mexico. Roger Lee mentioned that they would prefer to source Australian fruit for 12 months of the year if volumes were available and if the price was competitive. Ming Kee Chan mostly supplies the wholesale market and some firms in the food service industry such as Delifrance, which is a French deli café franchise.
Chef’s Garden is only a small importer and sources avocados in mixed, airfreight loads. This company uses export agents in different countries and mentioned that all countries produce was equal based on quality.
The Jardine Group is the parent company of the supermarket, Wellcome and other food service outlets such as Oliver’s Sandwich Bar. This company mentioned that they are looking into sea freighting avocados themselves but currently they receive sea-freighted avocados from Wing Kee. They also import avocados by airfreight themselves. Of this produce imported, 70% is utilised in the retail sector and their food service outlets consume the remaining 30%.
4.2.1 Quality and Reputation
One importer explained that a country’s reputation as a supplier included several aspects; quality, size, oil content and consistency of supply. All importers stated that Australia had a good reputation for quality with the reports of poor produce being sent from Australia not verified by any importers. Roger Lee of Ming Kee Chan stated that the consistency of quality and sizing of Australian avocados is generally better than Mexico and South Africa and this factor has helped contribute to Australia’s good reputation and in some cases a preference for Australian avocados. Stephen Chen of
30 Australian Avocado Market Development Opportunities in Hong Kong
Wellcome also stated that though Mexico had good quality fruit they had very inconsistent sizing and this was a problem.
Australian avocados are viewed to have similar oil content to New Zealand and Mexico with Spanish and South African avocados generally having lower oil content. This has resulted in Australian product gaining a reputation of a slightly higher quality product due to the higher oil content giving the product more flavour.
Mark Lee of Wing Kee mentioned that the quality of produce deteriorated from all countries as they reached the end of their peak supply season. This is due to the increased oil content in the causing rapid ripening. This presented as a problem for supermarkets because it shortens the fruit’s shelf life. Wing Kee also avoided end of season product from all countries. This is because suppliers start to struggle to fill volume requirements and poor quality produce is included. Domestic exporters didn’t state that the quality drops towards the end of the season but indicated that volume requirements were difficult to fill.
4.2.2 Nature of the Exporter/Importer Relationship
The relationships between Australian exporters and Hong Kong importers differed depending on the importer and the nature of their business. All importers mentioned having long-term and fairly transparent relationships with suppliers from several countries. The larger importers such as Wing Kee explained that they would prefer to deal with only one supplier from each country because they believed that it improved the loyalty in the relationship and also reduced the number of transactions and paperwork that was involved in organising shipments. However, not all importers dealt with only one supplier from each country. ParknShop deals with two exporters throughout the year in Australia.
Mark Lee of Wing Kee indicated that they preferred to deal with growers rather than exporters. His reasoning was that exporters tend to source the cheapest product on the day. Conversely, growers tended to take more pride in their product, and take a longer
31 Australian Avocado Market Development Opportunities in Hong Kong
term view of the market resulting in them supplying more consistent, higher quality produce. We have discounted this statement because Wing Kee sources from an exporter and had no comments of poor performance. Exporters should be equally, if not more aware of their reputation as a supplier.
Noel Shield of ParknShop was of the opinion that Australia’s supply chain is too long especially when compared with countries such as South Africa. He saw potential for increased vertical integration as this would result, not only in decreased costs, but also the destruction of barriers to communication between growers and the end users. The key links in the avocado supply chain are the exporter, (there are only two or three in Australia,) and the suppliers (exporters deal with fewer larger suppliers). This structure offers little resistance to information flow and an efficient export supply chain.
Pricing arrangements between importers and exporters differed depending on the nature of their relationship with suppliers. Some importers such as Ming Kee Chan and Chef’s Garden base their prices on the Sydney market price for avocados plus freight. Wing Kee has an individual pricing system for each supplier in each different country. These prices are not based on domestic prices but on a price decided prior to the transaction. They are then compared with domestic market prices and with other countries. Basically they receive a quote from their supplier and Wing Kee assesses the quote for competitiveness. A price and volume of supply is then agreed upon for a period of time.
Quality, service and price were three attributes that importers mentioned as essential in the relationship. They stated that they would not compromise quality for price. Quality includes aspects of sizes, ripeness, oil content and appearance. Quality must be assured to guarantee the entire product sent is fit for sale and has sufficient shelf life.
Size is particularly important for internal accounting systems of buyers because avocados are sold on a piece basis and not weight. Stephen Chen offered the example that if 28’s are ordered and 30’s are sent individual outlets are charged for two extra pieces of fruit, affecting their balance sheet, and their Just In Time (JIT) inventory
32 Australian Avocado Market Development Opportunities in Hong Kong
systems. This problem can be countered balanced by making adjustments to the system. However, this can only be done if advanced notice is received, or by withholding the product for a day that creates a backlog in the system as successive orders arrive.
Service involves reliability and value adding. The latter is a relatively new area of supplier service and can be thought of as extending the suppliers responsibility beyond the point of delivery. Noel Shield of ParknShop explained how some supply companies, (Delmonte and Chiquita,) were now employing grower representatives to facilitate better consumer information flow. Suppliers are now also becoming involved in aspects such as shared promotional initiatives with retailers, to the point where suppliers may perform all the marketing and promotion for their product.
4.3 Wholesalers
Two wholesale fruit markets currently operate in Hong Kong: • The Western Wholesale market on Hong Kong Island. • The Yau Ma Tei wholesale fruit market in Kowloon.
Both markets deal solely with imported produce, as there are no fruit production areas in Hong Kong. Sales through the Yau Ma Tei markets account for approximately 80%, by volume of wholesale fruit, whilst the Western Market is somewhat smaller accounting for 20% of fruit sales.
The wholesalers at these markets occupy small trading units approximately 55m2 that contain a small cold room. There are 478 wholesalers at the Western Wholesale markets and of these only 133 are fruit traders (Agriculture, Fisheries and Conservation Department, 2001.) Large importers such as Wing Kee and Ming Kee Chan sell directly to wholesalers on a daily basis. Most wholesalers purchase produce daily due to the lack of infrastructure and ability to store large volumes of produce.
The wholesalers break down the produce into individual orders that they supply to the food service industry. The page of photos displayed at the end of this section contains
33 Australian Avocado Market Development Opportunities in Hong Kong
a photograph of a cart that is a typical order to be distributed from the wholesaler to a food service outlet.
At the Yau Ma Tei market there were no avocados sighted at the time of our visits. Mr Lo of Jet All Trading Company, a fruit importer that supplies this market, said that there was no throughput of avocados at any time of the year in these markets.
Our visit to the Western Wholesale Markets was arranged through the Queensland Government Department of State Development and the Hong Kong Government Vegetable Marketing Organisation. Mr Wu, a Hong Kong Government Official, escorted us through the market.
There were a small quantity of avocados in the Western Wholesale Market at the time of our visit and we were told that the fruit was mainly destined for the food service sector. Size 30, Calavo avocados were seen and the particular fruit was of average quality and size with most of the fruit being hard with small blemishes. We also saw small quantities of class 1, size 28 fruit from an Australian producer, which was overripe with damaged packaging.
A representative of Marvic Trading Company (HK) stated that they generally receive 300 trays/month of size 28 avocados from Wing Kee. Their customers were food service providers such as the Marriott, Maxims and Starbucks Café. Marvic Trading Company was receiving Calavo product from Wing Kee during our visit but indicated that they generally buy Australian fruit when available. They told us that they were unhappy with the last consignment of Australian fruit as it was overripe and had internal rot. Generally, they were of the opinion that the quality of Australian fruit was on par with the rest of the world.
34 Australian Avocado Market Development Opportunities in Hong Kong
Yau Mei Tei Wholesale Markets
Marvic Trading Company (HK) at the Western Wholesale Markets
Fruit and Vegetable shop
35 Australian Avocado Market Development Opportunities in Hong Kong
Australian avocados at the Western Wholesale Markets
Calavo product at the Western Wholesale Markets
Mixed load of produce which was destined for the food service sector
36 Australian Avocado Market Development Opportunities in Hong Kong
4.4 Retail
Within the retail sector, interviews were conducted with the management staff from the three major supermarket chains in Hong Kong - ParknShop, Wellcome and Jusco. The list of individuals interviewed can be found in Appendix 1. In addition several supermarkets were visited to enable the collection of in-store information such as pricing, size and brands. The information in this section of the report is based on information gained from those interviews and visits.
Two major players, ParknShop and Wellcome, currently dominate the supermarket sector. Both are owned by major global companies. ParknShop is a subsidiary of Hutchison Whampoa and Wellcome, the biggest retail chain in Asia with over 2000 stores, is owned by U.K. giant, Jardines.
Traditionally, wet markets have been the primary supplier of fresh food products including meat, fruit and vegetables to household consumers. However, in more recent years the retail sector in Hong Kong has changed dramatically with the emergence of an increasing number of supermarkets. ParknShop alone have opened a total of 50 new superstores in Hong Kong over the past four years each covering a total area of 20 000 to 30 000 square feet. Consumers have altered their grocery shopping habits, becoming more reliant on supermarkets for their fresh food instead of the traditional wet markets.
The proliferation of large, multinational supermarket chains throughout Asia has radically changed the landscape for suppliers. Supermarket chains have massive buying power, which allows them to place new stringent demands on suppliers. They work on 60 day payment and have detailed and rigid quality assurance protocols. Increasingly, supermarket chains are moving towards the simplicity and cost effectiveness of working with fewer, larger suppliers. They now have more power to exert influence on whole industries and are demanding value added supply. This included such things as assistance with marketing and promotion.
37 Australian Avocado Market Development Opportunities in Hong Kong
Noel Shield of ParknShop holds great concern for all Australian horticultural exporters. The retail environment throughout Asia is changing dramatically. Large retailers want to deal only with one supplier from each country that has the ability to supply an entire range of produce. In the current situation, with a few exceptions, Australian exports are highly fragmented, with a number of different suppliers not only across industries, but also within. Noel Shield believes that if Australia fails to acknowledge these changes and develop strategic alliances or similar they will be jeopardising a massive, lucrative, and ideally situated market.
This interpretation of the changing retail market was also identified by Stephen Chen of Wellcome, who believed that Australia must establish a more globalised system of supply through complimentary partners in different geographical regions. Australia may have to, for example, look at forming an alliance with New Zealand to fill the gaps in supply. This means both countries can develop a strong reputation for consistent supply under the one united brand and neither would be competing directly against each other. The result may be that each county’s market share could be maintained and increased.
John Piper, Managing Director of Food Asia Marketing, was previously employed by Wellcome from 1987 to develop their fresh fruit and vegetable section and increase overall market share in the fresh fruit and vegetable market. From his experience in the development of Wellcome’s produce section he was able to confirm that the supermarkets had developed their position from virtually nothing to strong and still increasing market share. This was evident from the on-going expansion of all the supermarket chains through the development of new stores.
Noel Shield of ParknShop stated that their initial increase in market share was won through a price war where supermarkets cut their margins from 25% to as low as 10- 15% to attract consumers. This enabled them to secure a foothold in the produce market, allowing them to attract more customers based on aspects of quality, service and price.
Supermarkets entered the market with a concept designed to attract the traditional wet market consumers. This involved the adaptation of certain qualities of wet markets,
38 Australian Avocado Market Development Opportunities in Hong Kong
such as live fish, meat, fruit and vegetables to the supermarkets to create a similar purchasing environment and an added convenience to the consumer. The supermarket stores that have incorporated the concept of the wet market were mainly located in wealthier districts such as Admiralty and Kowloon Tong. The dominance of the supermarkets is also expanding out to more traditional Chinese residential areas such as Po Lam. A large ParknShop megastore has recently been built in this suburb in conjunction with the newly established housing estate.
There has also been a recent emergence of superior class supermarkets, targeting customers looking for a premium product. These include Japanese chains Jusco and Sogo, which are large department stores with the supermarket section located on the basement level. A Sogo department store located in Causeway Bay stocked size 25 avocados for $1.73 AU per piece as well as triple packs for $1.60 AU per pack, containing very small sizes that would be rejected in Australia. At present the market share in fresh food for Sogo and Jusco is small but is increasing. Table 8 includes the observation from all the supermarket visits.
Premium products including size 16 and organic avocados were stocked at ParknShop’s superior class supermarket ‘The Great Food Hall’ in the Pacific Place shopping centre at Admiralty. The store manager in the ParknShop superstore in Causway Bay said they turned over 1-2 trays of organic avocado per week, compared to 6-7 trays of conventional product. The organic product was of much lower quality than the standard line, which may have been both the cause and a result of reduced turnover.
Chris Rees, Senior Trade Commissioner of Austrade also believed that the growth of superior class supermarkets was due to the economic downturn experienced in recent times in Hong Kong. Consumers no longer have the disposable income to eat out as regularly, but still have the desire to eat well. Premium supermarkets resulted.
Wellcome has stocked avocados for six years, and ParknShop for four to five years. Both supermarket chains indicated that they had experienced an increase in the volume of throughput of avocados in recent years. Wellcome supermarket’s Stephen
39 Australian Avocado Market Development Opportunities in Hong Kong
Chen believed that 65-70% of the Jardines Group produce goes to the supermarkets and 30-35% to their food service outlets such as Oliver’s Sandwich Bars. Four years ago this figure was the reverse, with only 30-35% going to the supermarkets. Noel Shield of ParknShop indicated that volumes had increased over the past four years from 300 trays/week to 450-500 trays/week, primarily due to the introduction of superstores.
All three supermarket chains believed that their main consumers of avocados were either expatriates or affluent Chinese who have had dealings with western cultures. Some Growth has occurred through the introduction of supermarkets because they target more affluent, traditional Chinese. However, significant growth would require penetration of the broader Chinese market, which has yet to include avocado in their diets.
This point is reinforced by the absence of avocados in the wet markets visited. Supermarkets generally service the middle to upper income Chinese and the expatriate population, while the wet markets cater for lower income Chinese consumers. The fact that there were no avocados in wet markets shows that lower income Chinese people are not consuming avocados.
The key management figures interviewed from all three major supermarket chains did indicate that within the retail sector, demand remains fairly static throughout the year. The only major fluctuations occur during the Autumn Festival and Chinese New Year. During these times though, sales of all grocery items increase.
The three supermarket chains all receive different quantities and sizes of avocados from different supplying nations. The Hass variety was observed across the market. Table 7 illustrates the quantities, size, variety and source for each supermarket chain.
40 Australian Avocado Market Development Opportunities in Hong Kong
Table 7: Characteristics of Hong Kong supermarkets Supermarket Quantities Sizing Variety Sources Wellcome 576-720 trays 28 into supermarkets 99% Hass Main source USA and per week. 23 into Oliver’s 1% Fuerte Mexico with Australia Sandwich Bars supplying 2-3 months of the year or 25% ParknShop 450-500 trays Between 26-28 100% Hass Australia 7-8 months of the per week. supermarkets (want 25) year, New Zealand, Mexico 16 at speciality food and USA hall Jusco 14-21 trays per 23-25 and also small 100% Hass Receiving product of USA, week quantities of bulk bins South Africa and small quantities from New Zealand
Initially ParknShop stocked size 28’s to reduce the unit costs but since then they have changed to 25 count avocados to provide better value to customers by increasing the amount of flesh per unit of fruit. These sizes were sighted in the stores at Kowloon Tong and Fortress Hill. Jusco targets higher income consumers and uses size 23 – 25’s, which has reduced their competition through market segmentation.
Most of the fruit seen in supermarkets during our research was stored in refrigerated shelving. This meant that the product was unripe and still green. It is believed that this was used to ensure that the maximum shelf life for the product. Interestingly most of the fruit that was stocked in the supermarkets at the time of our research project was Australian fruit although this was not the situation at the wholesale markets. This could be because we were in Hong Kong at the very end of Australia’s supply window.
The data shown in Table 8 outlines the price per piece, size, brand, quality, ripeness and storage position of the avocados sighted on visits to various supermarkets in different areas. The varieties were all Hass.
41 Australian Avocado Market Development Opportunities in Hong Kong
Table 8 Avocado observations from supermarkets Location Size Price Brand Quality Storage Ripeness (AUD) Position
ParknShop Po Lam -Metro 28 $1.92 Koola, Australian Internal rot. Refrig Unripe City Avo Beside stonefruit Causeway Bay 25 $1.92 Nutra Gold, Variable, rub Refrig+= Unripe Ravens Avo, mark, lenticel Unrefrig Koola, Ambullaba damage, cut Orchads (Qld) mark Kowloon Tong- 28 - 30 $1.92 Koola Grove, Iraak Variable but Unrefig + Variable Festival Walk Vic reasonable Refrig Admiralty – 16 – 18 $3.72 Good Refrig Over ripe Pacific Place Wellcome Causeway Bay 28 $1.72 Calavo Rub mark, Refrig Unripe scratches Fortress Hill 28 $1.72 Good Refrig Unripe Sogo Causeway Bay 25 $1.72 Calavo Good Refrig Unripe 3 pac $1.60 Good Refrig Unripe Jusco Hang Hau 28 $1.92 Port Stevens Avo Old, soft Refrig Over ripe Organic (ParknShop) Causeway Bay 18 – 20 $4.22 Googa farm Good Refrig Over ripe Blackbutt Qld Admiralty – 18 – 20 $9.22 Good Unrefrig Ripe Pacific Place (2 pac)
42 Australian Avocado Market Development Opportunities in Hong Kong
ParknShop Megastore at Po Lam
Refrigerated avocados at ParknShop
Refrigerated Australian avocados sold at HKD$7.90 per piece.
43 Australian Avocado Market Development Opportunities in Hong Kong
Avocados purchased from SOGO for HKD$6.80
Ordinary and Organic avocados at the ParknShop store in The Great Food Hall, Admiralty
44 Australian Avocado Market Development Opportunities in Hong Kong
4.5 Food Service
The interviewees from the food service sector in Hong Kong that we spoke to during our research included Shane Rider, the Executive Sous Chef from The Park Lane, Alex Ho, the Fruit Purchasing Agent from The Marriott, Tsui Kit Po, the Executive Sous Chef from the Intercontinental Hong Kong and Michael McCalman, the Executive Sous Chef from the Kowloon Shangri-la.
Tsui Kit Po, the Executive Sous Chef of the Intercontinental Hotel, believes that currently, the food service industry in Hong Kong is experiencing a downturn. This is because the tighter economic situation has reduced disposable incomes, and people are eating out less. This situation is predicted to abate when the economy turns around. While people are not eating out as often when they do they are still looking for high quality meals. These restaurants indicated that they were generally selling to expatriates and wealthier Chinese. The only discrepancy to this was from Shane Rider who believed that over 80% of the hotel restaurants clientele was local.
The chefs that were interviewed were all using avocados in a similar way to western culture with the most popular inclusion of the fruit being in salads. Another very popular dish was avocado with crabmeat and mango. It was speculated that the mango was incorporated in an effort to sweeten the product and therefore pandering to the sweet Chinese tooth. Further examples of avocado uses in hotels in Hong Kong, are shown in Table 9.
Table 9: Specifications and uses for avocado in hotels in Hong Kong Food Service Specifications Uses
Hotel Size Volume Importer/ Wholesaler
(trays/
week) Salad Sushi +Mango Dressing Crabmeat Crabmeat Guacamole
Park Lane 28 7 Wing Kee The Marriott 28-30 14 Wing Kee, Goodwill, Lung Shin Kee Intercontinental 32 21-28 Wing Kee, Silco International, Fresh Channel Kowloon Shangri-La 28-32 14 Wing Kee
45 Australian Avocado Market Development Opportunities in Hong Kong
The produce received at the hotels were either of size 28 or in bulk cartons. The smaller avocados were preferred in dishes at The Marriott Hotel, as they looked superior as garnishes and produced less wastage when only small quantities were used. Michael McCalman of the Kowloon Shangri-La also indicated that smaller size fruit was favoured as it was “convenient for side dishes and small sizes look better sliced.”
The majority of chefs interviewed believed that the quality of avocados did not differ across the different supplying countries. Tsui Kit Po indicated that the quality of Australian produce was good, however it was often very unripe when he received it, and on one occasion he had to resort to oven ripening the produce to ensure that it was usable.
Michael McCalman of the Kowloon Shangri-La, reported seasonal fluctuation in avocado consumption with the majority consumed during the summer months in salads. Other hotels such as The Park Lane and The Marriott Hotel indicated that consumption was stable throughout the year. Finally, the Sous Chef at the Hotel Intercontinental believed that turnover increased during the cooler months from September to April due to enhanced tourist activity.
This information is considered to be inconclusive due to the conflicting nature of the opinions received, however statistical results that were gathered from the Hong Kong Census and Trade, indicates that increased consumption occurs during June to October.
At present these major hotel chains are only using small volumes of avocado in their restaurants. These figures include: • The Hotel Intercontinental uses between 21-28 trays per week. • The Marriott Hotel uses 14 trays per week. • The Park Lane uses 7 trays per week. • The Kowloon Shangri-la uses 14 trays per week.
46 Australian Avocado Market Development Opportunities in Hong Kong
There were no set procurement systems across the foodservice sector with a number of different systems described. The Hotel Intercontinental obtains monthly tenders for the supply of all their fresh produce and whoever has the most price competitive tender will receive the business for the given month. For the majority of the time, Wing Kee supplies the business directly but during periods where extra quantities are required, a wholesaler such as Silco International or Fresh Channel will be used.
The three other hotels that were interviewed sourced their product from the wholesale markets either daily or on a twice-weekly basis. They used a number of small suppliers and paid a relatively consistent price for their produce.
4.6 Complete Hong Kong import supply chain
All links in the supply chain, their relationship and their impact on each other have now been identified. Figure 11 is a diagram of the average range of prices that are received, per tray, by each individual at the different price points of the supply chain.
Figure 11: The Hong Kong import value stream. Cost per tray, (AUD).
Exporter
Importer: $22.00-$26.50
Wholesaler: Retail:
$23.00-$27.00 $23.00-$28.00
Food Service: Consumer: $23.00-$30.00 $48.00
Importers stated prices ranged between $22.00 and $26.50. Wing Kee was the only company taking sea-freighted product from Australia, but was unwilling to give figures. It is assumed they would be getting product in for at least $4.00 cheaper than their airfreight counterparts.
47 Australian Avocado Market Development Opportunities in Hong Kong
Wholesalers source product from mainly the two major importers Wing Kee and Ming Kee Chan. Ming Kee Chan said $22.00-$25.00, for 28’s, on top of which they charged 7-9% commission to their customers. Wholesalers spoken to quoted prices paid were between $23.00-$27.00. These wholesalers then break down the products and re package them into individual orders for food service firms.
Food service outlets reported paying prices of between $23.00-$30.00 per tray. They can source product directly from importers or wholesalers.
Retailers can import directly or source product from importers. One retailer reported paying an average of $26.50 per tray for 25 count fruit, which was then sold for $1.92 per piece, ($48.00 per tray). Retail prices were $1.70 for 28 count, ($47.60 per tray,) equating to a mark-up of between 70% and 100%.
Information gathered from these links in the supply chain and Australia’s potential to expand avocado exports to Hong Kong will be discussed in the following section.
48 Australian Avocado Market Development Opportunities in Hong Kong
5 Discussion
During our domestic investigation we were able to identify issues that needed to be addressed to accurately examine and answer the issues raised in the brief. Through the interviews conducted in Hong Kong these issues could be researched and resolved. To assist in this process the export supply chain and all the costs associated with it had to be established and investigated. These major issues are outlined below. • Assess the retail, wholesale and food service sectors with regard to: Demand patterns Existing and potential uses of avocados Competitors in the market Strengths and weaknesses of competitors • Investigate any potential advantage Australian avocado exports may have in the Hong Kong market due to Australia’s close proximity. • Investigate any potential supply windows that may exist for Australian avocados • Provide a recommendation to the Australian Avocado industry as to the most appropriate strategy to raise demand for Australian avocados in Hong Kong.
5.1 Avocado export supply chain
Figure 12: Complete value stream
Production: $8.00
Packing and Freight: $12.50
Exporter: $19.50
Importer: $22.00-$26.50
Wholesaler: Retailer: $23.00-$27.00 $22.00-$28.00
Foodservice: Consumer: $24.00-$30.00 $48.00
49 Australian Avocado Market Development Opportunities in Hong Kong
The supply chain from the grower to the end user in Hong Kong is used to help illustrate the skills and costs involved in making the avocado available to the consumer. Each stage of the chain has a certain cost associated with it and also the firms margins attached.
A nominal margin of $3.50 is returned to the grower. A gross margin of $7 is available for the exporter, from which their costs before freight must be subtracted. Once the fruit reaches the end user it is valued at $48.00. Although on initial appraisal this appears an exorbitant mark-up, from the model it can be seen there are a number of margins to be absorbed. The greatest mark-up, (70-100%,) occurs at the retailer.
The largest saving for the Australian end of the chain is available from the use of sea freight. This indicates that it is important to try to increase demand so that sea freight can be utilised and reduce total exporting costs.
5.2 Retail, wholesale and foodservice sectors.
5.2.1 Demand patterns
Imports of avocados into Hong Kong have grown very steadily over the last 3 years, from 310 tonnes in 1999 to 366 tonnes in 2001. This is primarily due to the mature nature of the market, in which expatriates, Chinese with western connections and more affluent Chinese are the main consumers. There is evidence of growth of Australian exports in the market, from 78 tonnes in 1999, to 179 tonnes in 2001. This is not sufficient to absorb the oversupply problem expected in Australia but is still a regular niche market that will absorb some of our predicted surplus supply.
Demand is fairly static across the year. This can be seen in the import statistics and was confirmed by retailers stating that demand was fairly constant. However Australian imports to Hong Kong have grown 130% in the last three years compared only 18% consumption growth.
The majority of Australian exports to Hong Kong usually occupy a supply window from May to September, depending on the climatic conditions of the Australian
50 Australian Avocado Market Development Opportunities in Hong Kong
season. This is outside of Mexico and Spain’s main supply periods being from October to March, but clashes with the USA’s and South Africa’s key production periods. However, import statistics indicate that the USA is supplying the majority of their produce during Mexico’s peak supply season. We can then assume that the USA is sourcing from Mexico. Australia holds an advantage over both its major competitors, USA on price and South Africa on quality. The cost advantage over the US is due to our lower costs of production, as well a proximity advantage. The lesser quality of the South African produce is due to lower oil content, and as a consequence less flavour. If these advantages are maintained, Australia’s supply window will be sustained and further growth should occur.
5.2.2 Existing and potential uses of avocados
Current uses of avocados in the retail and food service sectors were comparable. The supermarket personnel we spoke to believed that most consumers were using avocados in typical western dishes such as salads and sandwiches. In the food service sector, main uses were sandwiches, salads and with seafood.
By adapting the use of avocados to the traditional Chinese cuisine it is believed that a larger market can be targeted increasing the prospects for potential growth. This will be explained further in the recommendations section.
5.2.3 Australia’s proximity advantage
In the brief it was outlined that Australia’s advantage due to its distance from Hong Kong should be further explored.
Although Australia did have a freight cost advantage, it was largely eroded by our increased cost of production. Mexican, Spanish and South African product was quoted as the same price or cheaper, landed in Hong Kong, than Australian product. Some extra price advantage may be derived from securing adequate volumes to be
51 Australian Avocado Market Development Opportunities in Hong Kong
able to send sea freight more consistently. This would reduce freight costs from approximately $6.00/tray for airfreight to $1.80 /tray, sea freight.
A competitive advantage is also created through the fact that our airfreight costs are relatively cheap compared with other countries. This allows product to be sourced quickly when importers don’t have sufficient supply remaining to last until the next container arrives. Australian product can be landed in the country in 24 hours.
Our proximity advantage could be lost in the medium term if China can offer good enough quality product, and we may have to look to other markets. Noel Shield identified rapidly improving production methods, and food safety protocols in China as an impending threat to all imports into Hong Kong. China has the geographical diversity to offer year round supply, low labour and production costs and an obvious proximity advantage. They are already starting to send in other fresh produce into Hong Kong, and as food safety and quality assurance improves this will pose a major threat to Australia in the medium term.
5.3 Potential supply windows
The brief required an assessment of Australia’s current supply window, and the potential to extend it.
Australia currently possesses a very prominent supply window. Figure 8. showed a clear trade off between the USA and Australia because when Australian imports are high the USA tapers off and vice versa. The graphs also indicate that Australia is the major supplier during the peak supply season.
There has been some effort made by Australian avocado exporters such as Sunfresh to source fruit from various regions throughout Australia to try and achieve a longer supply period. Suppliers from the various producing regions in Australia need to establish a large supply syndicate. This will create the capacity to supply the required volumes throughout the supply season and allow for the development of economies of scale under the one united brand, providing greater market power.
52 Australian Avocado Market Development Opportunities in Hong Kong
There were conflicting views on whether this supply window Australia sends into could be expanded. One importer preferred Australian produce for its superior, consistent quality and wanted to source it for twelve months. Conversely, Wing Kee, the major handler of avocados in Hong Kong, wouldn’t source fruit from any country towards the end of the season due to high oil content and the resulting accelerated ripening of the fruit. They believed Australia would struggle to extend its supply period and maintain quality.
Australia can’t supply its domestic market year-round, relying on imported product from New Zealand from October through to February. If we can’t supply our own market it is highly unlikely that we can secure sufficient volumes to expand export activities to Hong Kong.
Extension of the supply period would also result in the encroachment on the supply windows of some formidable competitors. Australia may find it difficult to match prices offered by the likes of Mexico. Although Australia has a proximity advantage, and therefore freight advantage, Mexico has much lower costs of production, and can land fruit in Hong Kong cheaper than Australia, unless we can secure volumes to enable us to use sea freight.
5.4 Strategies to raise demand
The final requirement of the brief was to arrive at the best strategies to increase Demand for Australian avocados in Hong Kong.
The management personnel interviewed at the three major supermarkets chains stated that promotions do have a pronounced effect on the volume of throughput for the period of the promotion.
David Kwong of ParknShop indicated that during a promotional period using in-store promotional material such as posters, recipes and demonstrations, volume throughput increased up to 600 trays/week. However, three to five weeks after the conclusion of
53 Australian Avocado Market Development Opportunities in Hong Kong
the promotion, this merely resulted in a decrease back to the normal 450-500 trays/week. Anthony Kwoon of Jusco also reported that the Californian avocado company, Calavo achieved an increase of 200% in sales as a result of promotional activity using pamphlets, recipes and education in-store.
Retailers and suppliers generally, jointly fund promotional activities. David Kwong identified a straight cost distribution for example at a ratio of 60:40. Stephen Chen said in the past Wellcome’s suppliers had funded the development of promotional strategies, and they had covered the cost of point of sale material.
Greater efforts need to be focused on other segments of the markets that are not traditional consumers of avocados. The greatest opportunities for growth exist in the undeveloped Chinese market segment. The expansion of supermarkets in Hong Kong and throughout Asia has created an opportunity to easily target and access these traditional Chinese consumers. The supermarkets also offer a medium of communication that has better potential for promotion and education to reach this new target market.
Stephen Chen suggested that potential promotional activities should be targeted at middle-income Chinese people, emphasising the health benefits and showing them ways to incorporate it into their diets and cuisine. The opportunity to incorporate avocados into Chinese peoples’ diets may be limited because they have a ‘sweet tooth’. They prefer crispy, sweet and juicy fruit and avocados do not display any of these traits.
In addition David Kwong of ParknShop indicated the importance of educating consumers as part of promotional activities because people are not familiar with the ripening process, appropriate storage and handling or how to select the best quality avocado.
Noel Shield of ParknShop believed that branding is an effective way to identify Australian produce and it is perceived that there are some advantages when consumers can identify produce as Australian. An Australian industry figure expressed a different opinion. He thought that in the future, markets will be inundated
54 Australian Avocado Market Development Opportunities in Hong Kong
with brands and therefore branding will become a useless marketing tool. Branding Australian avocados would not be an effective promotional tool because we have limited brand strength due to our inability to provide year round supply. Consumers will simply forget the brand when there is no presence in the market. Importers and supermarket chains consider inability to supply for 12 months a great disadvantage.
5.5 Limitations
During the course of the entire investigation a number of limitations were encountered. Firstly, language barriers inhibited the obtainment of information in some interviews. For example, in some interviews when a specific question was asked, a more general answer was given, making it hard to obtain detailed information.
Existing relationships between Australian exporters and importers in Hong Kong provided a limitation to our research, in both stages. These relationships limited the amount of information that interviewees were willing to disclose in our investigations.
Hong Kong import and Australian export statistics could be inaccurate because documentation is inaccurate. As product is exported in mixed loads only the prominent product in the containers are documented both on the domestic and international side. These inaccuracies may be rectified to some extent this financial year, with tough financial sanctions against companies found to be recording export inaccuracies.
55 Australian Avocado Market Development Opportunities in Hong Kong
6 Recommendations
The Hong Kong market is a relatively small, steadily growing destination for avocados (Figure 7). Australia currently occupies a supply window in this market, which has grown steadily for the past few years (Figure 9). The continuation of this supply combined with the steady growth trend should result in a slow increase in Australian exports to Hong Kong. This market has proved to be a reliable niche for Australian avocado exports. However, the fact that it is a mature market with a fairly limited growth potential indicates that it is not going to be a market that can absorb Australia’s predicted massive increase in avocado production.
As a result of our research we have arrived at three recommendations that will enhance the position of Australian avocados in this valuable niche market.
Recommendation 1 We recommended that efforts should be aimed at the retail sector in Hong Kong. Supermarkets are expanding rapidly, giving access to a growing market segment of mid to high income Chinese who have had little previous exposure to the use of avocados. The food service sector is static and tightly controlled by existing supply relationships as a result it is a good segment but offers only incremental growth.
Existing relationships with retail chains in Hong Kong offer opportunities to follow their expansion into more traditional Chinese areas. This is starting to occur as supermarkets are expanding into traditional Chinese areas and are targeting the conventional customers of wet markets.
Recommendation 2 To increase demand it would be essential to adapt avocados to Chinese cuisine. One method suggested by Stephen Chen involved the American Asparagus Industry. Expatriate Chinese women in the USA were given asparagus and asked to experiment with it in their traditional cooking. It yielded good results, allowing promotion and education around how asparagus can be used. Asparagus has now become a part of many Chinese people’s diet and as a result a significant market for asparagus has now been established. Avocados are somewhat different to asparagus, but the same
56 Australian Avocado Market Development Opportunities in Hong Kong
concept of providing Chinese women or possibly chefs with the fruit may offer ideas in adapting avocados to Chinese cuisine, thereby increasing the potential market in Hong Kong.
This type of new use development for avocados would be unique and although other suppliers might benefit from this development, it will show the supermarkets that we are willing to invest in their market and therefore they will have a reason to source from Australia. We are not in a position to recommend a specific supermarket chain that could be enlisted as a partner but it is strongly suggested that the industry needs to investigate this aspect of this strategic decision more closely.
Recommendation 3 A very well researched and targeted promotional program that coincides with the peak supply season for Australian avocados should support this ‘new use’ development. This program should include in–store promotion and product use demonstrations, featuring the recipes developed from Recommendation 2. The recipe cards and in- store displays should be printed in Chinese and English because we are trying to target the more traditional Chinese population.
The payoff if these are successful is that the market will grow at a faster rate and supply window could be extended as our supply capacity improves. The greatest benefit may arise in the future if we have developed a formula we can use to penetrate other areas of China, such as Shanghai and Guangzhou within the expanding retail infrastructure.
57 Australian Avocado Market Development Opportunities in Hong Kong
7 Reference List
• Australian Export Harmonised Commission 2001, Exports of Avocados 1999/2000 Code 8044000 Avocados, fresh or dried’ ABS, Canberra.
• Dunne, A. 1999, Marketing Agricultural Products: An Australian Perspective, Oxford University Press, Melbourne.
• Ferguson, G., Payne, G., Van Der Westhuizen, P., Rekhy, R., Qui, V. & Baker, J. 2002, ‘Australian Business Limited, Report Number AV 01003’, Avocado Export Market Intelligence Study for Horticulture Australia Ltd, ABL, Sydney.
• Hong Kong Agriculture, Fisheries and Conservation Department 2001, ‘Western Wholesale Food Market Fact Sheet 2001’, AFCD, Hong Kong.
58 Australian Avocado Market Development Opportunities in Hong Kong
8 Appendices
8.1 Appendix 1: Contact list- Hong Kong market
• Wing Kee Produce Limited • Queensland Government Trade and G/F Hong Leong Industrial Investment Office Complex 2208 Harbour Centre 4 Wang Kwong Road 25 Harbour Road Cowling Bay, Hong Kong Wanchai, Hong Kong Mark M.K Lee (General Manager) Ellen Kwok (Marketing Officer) Telephone: (852) 2953 2188 Telephone: (852) 2827 1839 Email: [email protected] Fax: (852) 2827 0321 Email: [email protected] • Vegetable Marketing Organisation of the Hong Kong Government • Food Asia Marketing Ltd. 757 Laichikok Road Rooms 904-906 Tung Ming Building Kowloon, Hong Kong 40-42 Des Voeux Road Steven Kwok Central, Hong Kong Mobile: (852) 9309 3105 John Piper (Managing Director) Fax: (852) 2725 1860 Telephone: (852) 2537 3460 Fax: (852) 2537 3175 • The Park Lane Hotel • Email: [email protected] 310 Gloucester Road Causeway Bay, Hong Kong • Hong Kong Census and Trade Shane Rider (Sous Chef) 19/F Wanchai Tower Telephone: (852) 2293 8888 12 Harbour Road Wan Chai, Hong Kong. • The Shangri-la Hotel Telephone: (852) 2582 4915 64 Mody Road www.info.gov.hk/censtatd Kowloon, Hong Kong Michael McCalman (Sous Chef) Telephone: (852) 9743 1715
59 Australian Avocado Market Development Opportunities in Hong Kong
• Wellcome Supermarket • ParknShop 9 Chung Kwong St 3/F,. Area A & B, Room 312-313 Tseung Kwan O Industrial Estate HK International Distribution New Territories, Hong Kong Centre Stephen Chen (Fresh fruit and Terminal 4 Vegetable Manager) 18 Kwai Chung Container Port Telephone: (852) 2995 1333 Kwai Chung, Hong Kong David Chung Wai Kwong (Buyer • ParknShop Trading- Fruit and Vegetables) 3/F,. Area A & B, Room 312-313 Telephone: (852) 5145 1402 HK International Distribution Email: [email protected] Centre Terminal 4 • Jusco Department Store and 18 Kwai Chung Container Port Supermarket Kwai Chung, Hong Kong 3/F Stanhope House Noel Shield (Commercial 738 Kings Road Manager) Quarry Bay, Hong Kong Telephone: (852) 31451061 Anthony Kwoon (Assistant Fax: (852) 3145 1401 Manager Food and Catering Email: [email protected] Buying Office)
Telephone: (852) 2884 6888
• Western Wholesale Fruit Market 8 Fung Mat Road • Chef’s Garden Sai Ying Pun, Hong Kong Western Wholesale Market Mr. Wu 8 Fung Mat Road Telephone: (852) 2387 8648 Sai Ying Pun, Hong Kong Fax: (852) 2725 8624 Paul Daley (Director) Telephone: (852) 2501 5811
60 Australian Avocado Market Development Opportunities in Hong Kong
• Ming Kee Chan Rm. 1915 Hong Kong Plaza • The Excelsior Hotel 186-191 Connaught Rd West 281 Gloucester Road Hong Kong Causeway Bay, Hong Kong Roger Lee (Director) Mr. Franz Dajcman (Sous Chef) Telephone: (852) 2517 2686 Telephone: (852) 2837 6878
• Austrade • Jet All Trading Company Rm. 2404 24/F Harbour Center Room 1708 Winfield Tower 25 Harbour Road 15 Museum Row Wanchai, Hong Kong Hong Kong Christopher Rees (Senior Trade Mandy Lo (Wholesale Importer) Commissioner) Telephone: (852) 2771 8304 Telephone: (852)2588 5301 Fax: (852) 2827 4145 • The Marriott Hotel 46 Stubbs Road • InterContinental Hotel Admiralty, Hong Kong 18 Salisbury Road Alex Ho (Fruit Purchasing Agent) Kowloon, Hong Kong Telephone: (852) 2918 1708 Tsui Kit Po (Executive Sous Chef) Fax: (852) 2721 1211
Telephone: (852) 2313 2240
61 Australian Avocado Market Development Opportunities in Hong Kong
8.2 Appendix 2: Contact list- Domestic
• Murray Brothers • Goodwood Plantation Avocados PO Box 34 Brisbane Markets MS 379 Goodwood Road Gary Poole Childers QLD 4660 Telephone: (07) 3875 8107 John Simpson Fax: (07) 3875 8141 Telephone: (07) 4126 8200 Fax: (07) 4126 8321 • Avocado Marketing Co-Op Mobile: 0428 268 200 Limited PO Box 300 • Carter and Spencer International Yandina QLD 4561 Ltd. Judy Prosser (Marketing 38 Walker Street Coordinator) Tennyson, Brisbane Telephone: (07) 5446 7069 Trent Paola (Export Clerk) Fax: (07) 5472 7271 (07) 3848 1299
• WDM International 35 QANTAS Drive • Natures Fruit Company Brisbane Airport QLD 4007 23 Windsor Road John Warren (Director) Nambour QLD Telephone: (07) 3860 5988 Brian Raphael (Director) Mobile: 0419 645 327 Telephone: (07) 5441 3699 Email: [email protected] Mobile: 0438 713 580
• CT Freight • Airfreight Council of Queensland Unit 3/B 17 Sugarmill Road Brisbane International Airport Eagle Farm, Brisbane Passenger Terminal Adam Pascoe (Export Clerk) Peter Langdon (CEO) Mobile: 0412 182 273 Telephone: (07) 3860 5244 Telephone: (07) 3260 1388 Mobile: 0416 262 747
62 Australian Avocado Market Development Opportunities in Hong Kong
• Tilbrook Marketing Pty Ltd • Cosco Shipping Company Building C Level 2 Cosco House Flemington Markets 101 Sussex Street Flemington NSW 2140 Sydney NSW 2000 Lindsay Tilbrook (Director) Telephone: (02) 9373 9478 Telephone: (02) 9746 8508
• SP Exports • Horticulture Australia Ltd 9 North South Road Level 1, 50 Carrington Street Isis, Central Mill Sydney NSW 2000 Norm Phillips (Director) Wayne Prowse (Marketing Telephone: (07) 4126 6333 Manager)
Telephone: (02) 8295 2300 • Antico International Pty Ltd Fax: (02) 8295 2399 Warehouse G
Flemington Markets • Rod Dalton Flemington NSW 2140 Sandy Creek Road Chris Antico (Director) Grantham QLD 4347 Telephone: (02) 9764 3833 Telephone: (07) 5466 1316
• OBM • Favco Queensland Pty Ltd 98 Commercial Road Sherwood Road Newstead, Brisbane Rocklea, Brisbane Doug Bishop (Director) Jacky Kunze Telephone: (07) 3854 1227 Telephone: (07) 3379 8133 Fax: (07) 3854 1898
• QLD Dept. of State Development • Department of Primary Industries Level 19, 111 George Street PO Box 1054 Brisbane QLD 4000 Mareeba QLD 4880 Emma Lester Chris Horsbrough (Export Trade Export Supply Development (Food Development Officer) and Agribusiness) Telephone: (07) 4048 4683 Telephone: (07) 3234 0969
63 Australian Avocado Market Development Opportunities in Hong Kong
8.3 Appendix 3: Contact List- people who were not interviewed
• Swift Freight Hong Kong Ltd. • Alliance Produce Agencies Ltd. Ground Floor Room 1904, East Asia Aena Tower No. 161 Hai Tan Street 308 Des Voeux Road Central Sham Shui Po, Hong Kong Hong Kong Telephone: (852) 2243 3368 Wilson Wu (Director) Joesph Li (Managing director) Telephone: (852) 2581 1101
• SILCO International Limited • The Renaissance Hotel 3 Mok Cheong Street 1 Harbour Road Unit B 4th Floor Freder Center Wanchai, Hong Kong Kowloon, Hong Kong Paul Chandler (Food and Beverage Bernard Hofstein (Managing Manager) Director) Telephone: (852) 2584 6868 Telephone: (852) 2764 3632 Fax: (852) 2827 8721
• Joyful Fairy (Fruits) Limited • Etak International Ltd. Rm. 7-8 1st Floor Kam Fai 111 Hutchinson House Building Hong Kong 20 Waterloo Road Bill Evans (Director) Kowloon, Hong Kong Telephone: (852) 2526 2371 Henry So (Director) Telephone: (852) 2385 4199 • Gastro Primo Limited 13B Sum Lung Industrial Building • Woon Kee Hong 11 Sun Yip Street Stall No. C10 Vegetable Market Chai Wan, Hong Kong Western Wholesale Market Walter Kern (Managing Director) 8 Fung Mat Road Telephone: (852) 2889 0287 Sai Ying Pun, Hong Kong Anita Leung (Director) Telephone: (852) 2549 3258
64 Australian Avocado Market Development Opportunities in Hong Kong
• Australia Trading Co • Buah Buahan Ltd 4/F Blk A, Chun Yee Mansion Golden Sun Centre, 731 Nathan Road Sheung Wan, Hong Kong Mongkok, Hong Kong Kenneth Leung (Director) Regina Mak (Director) Fax: (852) 2858 1556 Fax: (852) 2398 - 1838
65 Australian Avocado Market Development Opportunities in Hong Kong
8.4 Appendix 4: Question List- Hong Kong Market
General Importer Questions • Could you please tell us a about your company and its activities? • Could you give us an indication of the volumes of avocados imported throughout the year? Of these volumes how many trays are from Australia? • Are there specific supply periods from certain countries? Could you indicate Australia’s period of supply in relation to other countries? • What dictates this supply fluctuation from each country? • Do you mostly sea or airfreight avocados? Does this dependent on the country that it is exported from? • What percentage of your imports are Hass? Other varieties? From each country? Do you have a preference for any certain varieties? What drives this preference? • Do you have a particular preference for certain sizes? Is this consumer driven or supply driven? • Could you indicate where you distribute your product (food service, retail, wholesale) • What distribution channels do you use to distribute this product? • What sort of cold chain infrastructure and ripening facilitates do you have? Does this influence the amount of imports that you can handle? • What reputation do you perceive Australian avocado have in Hong Kong? How does this compare with other countries? • Do you generally source your suppliers or do they approach you? • Do you believe that your company would be interested in sourcing more supply Australia?
Wing Kee Produce • Could you please tell us a bit about Wing Kee and its activities as a company? • Could you give us an indication of volumes of avocados imported throughout the year? Of these volumes how many trays are from Australia? • Are there specific supply periods from certain countries? Could you indicate Australia’s period of supply in relation to other countries?
66 Australian Avocado Market Development Opportunities in Hong Kong
• What dictates this supply fluctuation from each country? • Do you mostly sea or airfreight avocados? Does this vary depending on the country? • What proportions of your imports are Hass? Other varieties? from each country? Do you have a preference for any certain varieties? What drives this preference? • Do you have a particular preference for certain sizes? Is this consumer driven or supply driven? • From an Austrade publication we found in Australia it stated that you supply 80% of your imports to the food service industry and then the rest through wholesale markets. Is this correct? • What distribution channels do you use to distribute this product? • What sort of cold chain infrastructure and ripening facilitates do you have? Does this influence the amount of imports that you can handle? • What reputation do you perceive Australian avocado have in Hong Kong? How does this compare with other countries? • Do you generally source your own produce or do they approach you? • Do you believe that Wing Kee would be interested in sourcing more supply from areas other than Northern Queensland in Australia?
The Vegetable Marketing Organisation • Could you please tell us about the Vegetable Marketing Organisation. What are the primary activities of this business? • Could you explain to us how the markets work? • From your experience, could you indicate how common avocado imports are and their relative demand compared with other fruits? • Do you have an idea of volumes of avocados going through the markets? Does this figure fluctuate much? • Have volumes increased over the past few years? If not do you know why not? • Do you know what varieties and sizes are most commonly dealt with? • Could you explain to us where most of the avocados are used i.e. food services, retail, re-exported?
67 Australian Avocado Market Development Opportunities in Hong Kong
• Do you know of any importers and wholesalers that deal with avocados that we might be able to talk to? Wholesalers • Could you please tell us about your activities and involvement with avocados? • What varieties of avocados do you mostly sell? Is this consumer or supply driven? • What sizes of avocados do you mostly deal with? Is this consumer driven or supply driven? • How do volumes fluctuate through out the year? • Where are the avocados distributed? i.e., retail, food services etc. • Could you explain the distribution channel to us? For example how do you get the fruit to you are where it is going? • Where do you source your fruit? For example from an importer. Do you have a long-standing relationship with certain suppliers? • Do you have an opinion on Australia’s reputation of avocados in Hong Kong? How does this compare with the reputation of other countries? • Do you know of any other importers that might be willing to talk to us that are involved with avocados?
Retail • How long have fresh avocados been a product in your fruit and vegetable department? Is it considered a new product? • Do you import avocados directly or do you use import agent? Why? • Could you give us an indication of volumes of avocados imported through out the year? Of these volumes how many trays are from Australia? • Are there specific supply periods from certain countries? Could you indicate Australia’s period of supply verses other countries? • What dictates this supply fluctuation from each country? • Do you mostly sea or air freight in avocados? Does this vary from different countries? • What proportions of your imports are Hass? Other varieties? Is this proportion stagnant for each country? • Do you have a preference for any certain varieties? What drives this preference?
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• Do you have a particular preference for certain sizes? Is this consumer driven or supply driven? • Could you give us an indication of the cost of importing avocados? In our domestic investigation we were told that prices are based on an extension of the Sydney market, is this what you base your prices on? • Do you have strong, long-term relationships with your suppliers based on pre- arranged supply contracts or do the suppliers supply based on price drive opportunity? • How do you ensure the quality of supply from your suppliers? • What reputation do you perceive Australian avocados have in Hong Kong? How does this compare with other countries? • What strategies would you suggest Australia adopt to increase avocado exports to Hong Kong? • Is there potential for Australia to differentiate Australian avocados relative to its larger competitors? • Has there been a positive response to the promotional activities carried out previously?
Food Service • What quantities of avocados would you use on a weekly basis? Does this fluctuate much? • Has your use of avocados increased over the past few years and can you see it increasing in the future? If not, what reasons are there that this would not happen? • What recipes do use avocados in? Is this influenced by seasonal changes? • What varieties of avocados do you use? Why do you choose to use this variety? (Availability or Preference?) • What sizes of avocados do you use? Why do you choose this size? (Availability or Preference?) • Could you give an indication of the prices that you pay for your avocados? • Who do you find as the most prevalent consumers of dishes, which include avocado? (People of Chinese origin, travellers or ex pats.) • Where do you source your avocados? • Do you have an established relationship with your supplier?
69 Australian Avocado Market Development Opportunities in Hong Kong
• Do you have a preference of the origin of your produce? If so, Why?
Austrade • Has Austrade had any involvement in the past of in developing a market for Australian Avocados in Hong Kong? What success did they have? • Who did they target? Retail, wholesale, food services? • Of this market research already completed, could you indicate any further avenues to pursue to build on this development? • Do you know of any issues that we will have to overcome to achieve our objective of increasing Australian avocado exports to Hong Kong? • From our investigation in Australia we have been informed that the Hong Kong market very price driven and therefore hard to establish relationships. Do you believe this is true and that it will be a problem that we will have to overcome? • From our investigations in Australia we were informed that only 1/3 of imports are consumed on the island with the other 2/3 being re-exported, possibly into China. Could you confirm this? • We have already established several contacts but do you know of any other importers, wholesalers and food service contacts that might be willing to speak with us? • Do you have any statistics on the volumes of Avocado imports or any statistics on avocado distribution?
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8.5 Appendix 5: Question List- Domestic Market
Natures Fruit Company • Have you been involved with exporting in the past? Did you export to Hong Kong? • If yes, why are you not presently exporting? • What problems did you incur when exporting your product into a foreign market? • How do you think that the industry is going to fare in the next few years with the anticipated oversupply of the domestic market? • How much export potential do you think that Australia has in regards to avocados? • Do you think that there will have to be any changes in the industry to secure export markets? • Do you think Australia has the capacity to sustain an export market? • Do you think Natures Fruit Company would be willing to supply a constant export market if it offered long term guaranteed prices even if these were slightly lower than the fluctuating domestic market and be interested in developing business relationships? • What are the average costs of packaging? Per tray and per kilo cost? • What are the average marketing costs per tray or kilo? • What future strategies do you intend to implement to deal with the anticipated domestic oversupply?
Simpson Farms • What is the area of your farm? • How many trees are planted? • What varieties do you grow? • Do you only have avocados? • How do you think that the industry is going to deal with the anticipated oversupply of the domestic market in the near future? • How much export potential do you think that Australia has?
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• Do you think that there will have to be any changes in the industry to secure export markets? • Who do you export through? Do you have an export agent in Brisbane? • What is the exporting process? • Who initiates the transaction (you, your exporting agent in Australia or your importer in Hong Kong?) • Would it be at all possible to get a figure on the costs of exporting? • Is it mainly only a market based on opportunity or do you have an ongoing agreement with an importer in Hong Kong? • What sort of quality fruit do you send to Hong Kong? • What size fruit do you send to Hong Kong? Is this because you have identified that this is what the market wants, does the importer request this size fruit or is this entirely your decision? • When do you export? Is it only certain times of the year or year round? • What countries do you export your produce to? • How long have you been exporting to Hong Kong?
Murray Brothers and Carter and Spencer International • Do you export avocados to Hong Kong? Elsewhere? • Where do you source your avocados? • How many trays of avocados do you export a year? (in past years) • What types of varieties, sizes and quality do you usually export? • When do you export most of your avocados? (Certain months?) • Is this just to off load excess supply or do you have an on going market (order) that you fill? • How do you export these? Air or sea? • Could you give us an indication of the cost of these different types of freight? • Do you use control atmosphere or modified atmosphere when freighting by sea? • Do you have a quality insurance program in place? • What ports do you go to in Hong Kong? (Including air or sea) • Do you have contact with importers in Hong Kong? • Would it be possible to see any of your produce whilst we are in Hong Kong?
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• From this contact do you receive any market information? • Who initiates the transaction (your clients in Hong Kong, clients in Australia or yourself?) • What are the market conditions like in Hong Kong? (Prices received?) • Do you know where the produce goes when in Hong Kong? Wet markets, service markets or supermarkets? • Do you know what the level of cold chain management is like in Hong Kong? • Have you had any issues or problems that may be of interest to us that you have had to overcome?
Favco Queensland Pty Ltd • You mentioned on the phone that you are currently exporting avocados, what quantities to you export? • Do you export only Hass variety? • What sizes of fruit do you export? • Do you only export by air? • Do you use a freight forwarder? • Could you give us an indication of the cost to freight avocados to Hong Kong. • When do you generally export? Are there certain periods with higher demand? • Where do you source your avocados? • How do you package the produce? • Would it be possible to get an indication of the prices received in Hong Kong? • Does this fluctuate throughout the year? Are there any reasons for these fluctuations? • We have received conflicting information regarding the ability to sustain long- term relationships with people in Hong Kong because it is such a price driven market. What is your opinion and experience with this? • Do you send ripe fruit or backward fruit and ripen it over there? • Would it be possible to see some of your produce while we are in Hong Kong? • Do you supply supermarkets, food service, import agents? • Do you have import contacts that you could introduce us to in Hong Kong?
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CT Freight • What quantity of avocados are you currently exporting? • Is this a similar volume to past years or has it been increasing? • The highest production periods are between June and July is this when you freight most of the avocados? Or are there any other particular periods of high volumes eg around Christmas? • Do you freight most of the avocados by air or sea freight? • How regularly available is shipping space and departure times? • How long does it (sailing time and flight time) take? • What are the charges? • Documentation fees, Port service fees, terminal-handling charges, lift-on lift- off, bunker adjustment factors? • Do you usually use 20ft or 40 ft refrigerated containers? • Have you ever had to use modified atmosphere containers? • Do you commonly send avocados by airfreight? • Is space and availability of flights to Hong Kong proved to be a problem? • Could you give us a general indication of the cost to air freight avocados to Hong Kong? Does this include documentation fees etc? • Are there specific quarantine requirements that need to be met before freighting to Hong Kong? • Are your shipments to Hong Kong CNF? • Do you know other freight forwarders or fruit importers in Hong Kong that you could introduce us to?
SP Exports • How do you send you produce over to Hong Kong (air or sea) • Who you do you usually deal with when exporting? • Can you tell us about your experiences with the Hong Kong Market? • Experiences with different importers? • Do you export directly to supermarkets or import agents? • Do you know of any importers that we could talk to whilst in Hong Kong? • Where do most of your tomatoes go when over there (wet markets, the service industry, supermarkets?)
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• What difficulties do you anticipate us having in dealing with exports to Hong Kong? • Do you know what the level of cold chain management is like in Hong Kong? (Ripening facilities) • Do you use any in-store marketing? • Do you have any consumer preference criteria that you follow eg sizes, packaging.
Watt Exports and Antico International • Could you please tell us a little about your business and its activities. • Are you involved with exporting avocados into Hong Kong? • In a report conducted for Horticulture Australia it was stated that only 69 tonnes per year is exported into Hong Kong but we believe that this may not be accurate. Would you be able to provide us with some idea of the amount of avocados you export annually to Hong Kong? • What amount of fluctuation has occurred in the amount over the past five years? What were contributing factors to this fluctuation? • What fluctuation occurs in the amount of avocado exports to Hong Kong throughout the year? Why does this fluctuate? • What time period do you export for? • How many trays per week or pallets per week do you send during your export period? • Would it be possible to see some of your avocados whilst we are in Hong Kong? • Do you source your avocados from agents, grower groups or individual growers? • What price do you pay for them? • In Hong Kong do you sell to an importer, an agent or directly into the food service or retail chains? Which do you prefer? • What price do you receive from your client in Hong Kong per tray? • Does this price fluctuate throughout the year (at what specific points during the year are the peaks and lows)? • Does this fluctuating price largely depend upon the amount of imports of
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South African, NZ and American avocados? • We have received conflicting information regarding the ability to sustain long- term relationships with people in Hong Kong because it is such a price driven market. What is your opinion and experience with this? • How were you able to firstly obtain and maintain your business in Hong Kong? • How is the export transaction initiated? By your input suppliers chasing an export market, by yourselves or clients in Hong Kong? • What size and variety is exported? Why so? Is it consumer driven or surplus in domestic market? • Do you utilise a freight forwarder? • What type of freight do you use? Air or sea? • Does this purely depend on volume available for the order? • What ripening process do you use?
OBM and Warren Done International • What produce are you actually exporting to Hong Kong or have you exported in the past. Does this include avocados? • The highest production periods are between June and July is this when you freight most of the avocados? Or are there any other particular periods of high volumes eg around Christmas? • Where do you freight most avocados to in Asia? What proportions to each country? Hong Kong in particular? • We have been informed that no avocados are freight by sea, is this true? If so do you freight other perishables by sea? • What are the charges? • Documentation fees, Port service fees, terminal-handling charges, lift on lift off, bunker adjustment factors? • How long does it (sailing time) take? • How regularly available is shipping space and departure times? • From when the produce is ready to go, how long does it take to get to the market overseas (Hong Kong.) How long does it take to pass customs, unloading time etc? Air compared with sea?
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• How many flights go to Hong Kong and how much space is available on these flights? • If the exports to Hong Kong increased would availability of space and flight times be a problem? • Do you use different freight services? Could you tell use some of these companies, both air and sea. • Could you give us a general indication of the cost to air freight avocados to Hong Kong? Does this include documentation fees etc? • Do you organise any freight forwarding once in the other country? • Do you know other freight forwarders or fruit importers in Hong Kong that may be of interest to our project? • Do you know of other companies in Australia that export to Hong Kong? • Have you had any issues whilst exporting to Hong Kong or are there any issues that we should be aware of if we attempted to increase avocado exports to Hong Kong?
The Airfreight Council of Queensland • What are the frequency of flights to Hong Kong and the availability of freight space? • Of this freight space how much is being utilised? • If avocado exports to Hong Kong were to increase would freight space be a problem? • Is it possible to obtain a record of monthly space available as we are hoping to match a period of opportunity to supply particular market with a period that has available airfreight? • Is there a record of the volume of avocados that have been air freighted to Hong Kong? • Could you give us an indication of the cost to air freight an AV container of avocados to Hong Kong if we decided to export our product direct?
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COSCO Seafreight • How often do ships depart the Brisbane port for Hong Kong? • How often do ships depart the Sydney port for Hong Kong? • Do you offer both 20ft and 40ft refrigerated containers? • What is the cost to ship a 20ft refrigerated container from Brisbane? • What is the cost to ship a 20ft refrigerated container from Sydney? • What is the cost to ship a 40ft refrigerated container from Brisbane? • What is the cost to ship a 40ft refrigerated container from Sydney? • Could please indicate other costs and charges not included in the shipping price: • Documentation fees • Port Services fees • Ex Sydney and Ex Brisbane • Terminal Handling charges • Lift on / Lift off fee • Bunker Adjustment factors • What is the sailing time to Hong Kong from both Sydney and Brisbane ports? • If ships were due to sail on Wednesday, when would the produce be required at the port? When is it then loaded? • Can you supply modified atmosphere containers? If so could you please indicate the cost involved?
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8.6 Appendix 6: Interview Summaries- Hong Kong
Jusco- Anthony Kwoon Jusco is a Japanese company who opened stores in Hong Kong about 15 years ago. They have recently moved into China (4 stores). In 10 years time they aim to have about 100 stores in China. They aim to have one stop shopping and complete a lot of in store promotion and taste testing. The main produce is coming from South Africa, USA and Chile. Australia is not a very big exporter. When the Australian season starts then so does New Zealand and the New Zealand fruit is preferred over Australia by Jusco because they are cheaper.
He believes that middle-income Chinese people are the major consumers of avocados from his store. Mr Kwoon believes that it is important to emphasise the nutritional benefits of avocados and also to entice people by providing Chinese recipes including the product. He also thinks that we need to focus our efforts on people who do not know about avocados. Mr Kwoon believes that Japanese people eat avocados with soy sauce and wasabi (Japanese mustard).
Sometimes Australian avocados come over by air and they are unripe and Jusco finds it difficult to ripen. The US produce are much better as they are almost ripe when they reach Hong Kong by sea. They are receiving avocados in size 23-25 as he believes that 28-30 is too small. The company is charging around HKD$9-$10.90 per piece.
Wellcome- Stephen Chen Stephen Chen stated that Wellcome are considering importing using sea freight and then springing the fruit themselves. They are currently experimenting with ripening in banana ripening rooms. He reported the Calavo brand is very strong in Hong Kong but considers Australia’s quality on par with the rest of the world. The advantage for US in this particular market is that it is cheaper to land in Hong Kong then Australian fruit. He doesn’t think that the market is big enough to handle container loads from both US and Australia.
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Stephen believes that we need to drive demand for our product more. He thinks that we can do this by developing Chinese recipes using avocados, and emphasising the health benefits of the fruit. This shows people how they can make the fruit a regular part of their diet and also creates a need for it in the consumers mind. Stephen thinks that about 65-70% of his produce goes to retail and 30-35% to foodservice. About 4 years ago the proportions were opposite, however the downturn in the economy reversed this figure and has also made the retail market more price sensitive. He thinks that Australia needs to set up a more global syndicate with complementary partners and one brand. He believes that we should target middle income Chinese people and to show them ways of using it in Chinese dishes. He thinks that avocados are well-positioned price wise. They are affordable but seen as a slightly premium product. He believes that his relationships with his suppliers are good. They are loyal and don’t really ‘chop and change’. Attributes that they look for in a supplier are quality, service and price. Service can be broken up into service/reliability, and service/value adding. The latter is becoming more prolific.
ParknShop- Noel Shield Noel explained the changing face of retail in Hong Kong. In the early 90’s they were involved in a price war with the wet markets to win the fresh custom from them. Previously supermarkets were solely for dry goods. They currently import AV’s 2-3 times a week for a total of 400-500 trays of avocados. Noel believes that it is mainly expatiates buying avocados through their stores. Their avocado comes from Mexico, South Africa, and New Zealand.
Noel was very negative about Australia’s performance as a horticultural exporter generally, claiming we were liable to lose our most obvious market, (Asia,) unless the situation was rectified. The supermarket revolution is sweeping Asia and massive multi-national companies are dominating the market as they have the size to command massive market power, and therefore the ability to basically dictate terms to their suppliers. They are demanding much more value added supply, whereby the supplier takes on responsibility for such issues as quality control and marketing. He saw the way of the future as massive international supply conglomerates that could secure market power and year round volumes. Extra to this they could achieve cost savings, and offer a broad enough base to allow them to afford value-adding
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initiatives. Noel believed that the fragmented nature of the Australian industry was leaving us in the wake of more progressive suppliers, such as South Africa. He also considered us to have too many links in the supply chain, making us much less efficient than many of our rivals. The result is that we are compromising a market in which we have a fundamental proximity advantage.
He saw avocado as a product intrinsically unsuited to the Asian palette. They are looking for sweet, crisp, juicy fruit, which the avocado is not. He also thought there was much education work needed to encourage the Chinese population to accept the product. He explained that the Hong Kong market was very susceptible to promotion, attributing 50% of ParknShop’s sales to promotional activities. This activity only offered short-term returns however, with sales returning to normal as soon as promotion ceased.
Food Asia Marketing- John Piper Mr. Piper is a representative of exporters from around the world to Asia so to save these exporters the expense of having to have a person in Hong Kong. He handles day-to-day disputes and generally acts as a relationship manager with the Asian importers.
Mr. believes that demand must be stimulated so that more than one importer is needed. Growth in Hong Kong needs to come from increase demand in the Chinese population not ex patriot population. Hong Kong /Chinese women in particular are very focused on health and this could an opportunity for promotion as the flavour doesn’t really appeal to the Chinese pallet and diet.
Australia has a good reputation. Therefore labelling ‘Australian Produce’ may be of benefit. Particular benefit has come from Meat and Livestock’s efforts with Australian meat recognition. (We saw this in the grocery stores.)
Chef’s Garden- Paul Daley Chef’s Garden is an importer and wholesaler who sales only to food services, hotels, restaurants and chain stores such as Oliver’s sandwich bar.
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They source produce from several countries such as South Africa and Mexico and use different agents in each country to organise the imports. Paul Daley that price and quality are basically consistent across all the countries. Airfreight produce from all countries in mixed loads with other produce such as berries and lettuce.
Imports smaller fruit such as 28’s – 30’s because this reduces the per unit value of the fruit and that this is also what the hotels want. Chef’s Garden pays $3.30 - $3.50/ piece of fruit and import approx. 160-170 fruit per day. Over the last month he has sold 5000 pieces of fruit.
Mr. Daley didn’t think there was much potential to expand imports into Hong Kong in the future because China is improving their quality and thinks in a few years that quality will be regulated and it is ¼ the price of other imports. Thinks that China will be exporting to the rest of the world soon. He is already starting to import some stuff from China but doesn’t think there is much room to increase exports to Hong Kong through food services, as it doesn’t target enough people. A 20% expansion in foodservices is only maybe 20 extra trays a week.
Kowloon Shangri–La Hotel- Michael McCalman They have 6 different restaurants at the hotel and only use avocados in the Californian restaurant. The hotel use around 1-2 trays /day of Hass avocados with a higher quantity consumed in summer with salads. Michael indicated that he was happy with small sized fruit as it is convenient for side dishes as they use half and avocado per side dish and the small sizes look better sliced. He indicated that all avocados received from different countries have been of good quality.
Western Wholesale Markets- Mr. Wu The western wholesale markets and the Yau Ma Tei fruit markets are the two markets in Hong Kong that have fruit. Yau Ma Tei sell about 80% of the fruit in Hong Kong and the Western Wholesale market selling the remaining 20%. Fruit Seen at Markets
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CALAVO is the main fruit that is currently on the Hong Kong market with a small quantity of Australian produce. The fruit from Mexico was of a size 30 count and the fruit from Australia was size 28. Marvic Trading (H.K) Company They are presenting receiving avocados from CALAVO. This company had some refrigerated activities. They get 300 trays/month. The hotels are the major users of the avocados. They identified the Marriott, Maxim and Starbucks café. They sell the trays for about HKD$90-$120. Buy for $95-$110
Ming Kee Chan- Roger Lee Roger Lee believes that the quality of Australian avocados are better then Mexico, with a high oil content. Customers are asking for Australian product as they are of better quality but the problem with this is the supply gap (he thinks that there is trouble between December and May supplying the export market.) Ming Kee Chan completed a trial of exporting Australian avocados by sea but it not find it advantageous as we could not supply the quantities that were required and the Hong Kong market was not capable of consume this amount in frequent intervals. Mr Lee believed that the market was consuming around 5000 trays per month (not including supermarkets,) and the fruit was eaten 50/50 by both Chinese and Westerners. Hass was the preferred variety of avocados as they can distinguish when the product is ripe and ready to eat due to the colour change. Small fruit is not acceptable to the Chinese market and large fruit is not very economical therefore he believes that the best size fruit is around 28. The company has a margin of between 7-9% on avocados but Mr Lee was not prepared to tell us the price that he pays for his produce. Branding of avocados by Australia is not considered to be important at the moment due to the small quantities that are being sent to Hong Kong and that fact that there is not consistent supply.
The Park Lane- Shane Rider
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The hotel uses avocados mainly in sushi rolls, brochette, sauces, as a garnish and with seafood. The restaurant uses about a tray per day of Hass avocados of size 28-30 which are sources directly off Wing Kee. Fluctuation does not really occur throughout the year and the majority of the avocados consumed are by Chinese people (around 80%.)
The Marriott Hotel- Alex Ho The Marriott Hotel uses avocados in sushi and salad. They consume around 400 pieces per week and this does not fluctuate much throughout the year. They only uses Hass avocados as they believe that the fruit deteriorates less quickly then other varieties and they have a better shape then other cultivars. The size of the avocados they source is not considered to be important as they are cut up and used in recipes although the smaller the avocado then the less wastage there is. The hotel sources their fruit off Wing Kee, Goodwill and Lung Shing Lee and they generally pay around HKD$4 per piece.
The Hotel Intercontinental- Tsui Kit Po The Hotel Intercontinental uses approximately 3-4 trays per day of size 28 avocados throughout the year with more produce requested from September to April. Tsui Kit Po believes that the volumes of avocados required have decreased since the economic downturn but demand is expected to rise in the future as the economy recovers.
The hotel tenders for the supply of their produce monthly and whoever has the most price competitive tender gets the business. The supply is mostly from Wing Kee but other suppliers that the Intercontinental uses are Silco International and Fresh Channel. The hotel uses avocados for guacamole, salads, with seafood and as a dressing.
Wing Kee Produce- Mark Lee Wing Kee source size 28 Hass avocados only from Australia (May-August,) New Zealand, South Africa (July-September,) Spain and Mexico (September-April.) Mark believes that the quality of Australian fruit is similar to Mexico and New Zealand but the oil content of Spain and South Africa is less and therefore they have
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less flavour. It is thought that the food service can tell this lack of flavour and therefore they are not as popular. Calavo have the ability to supply the Hong Kong market for 11 months of the year but the higher costs of production prevents this.
The prices of avocados vary only about 2% across the year and this price is fairly consistent because they source produce from many countries, which protects them from the seasonal domestic price fluctuations of individual countries.
Of the avocado imports it is believed that approximately 50% is distributed to food service and 50% to supermarkets. Wing Kee considers itself to be a service company rather then a trader. They check every carton and repack according to the ripening stage and quality of the fruit. They deliver at least once or twice a day to its larger clients and whilst they are not the cheapest supplier they attract customers based on service.
Wing Kee employs it own promotional team to work in supermarkets. They have carried out promotions with Calavo at Wellcome and also at restaurants. Wing Kee has not got an avocado group that is willing to put in the effort to help develop the avocado market.
Austrade- Chris Rees Chris Rees believes that when producers and grower groups try to expand into export markets they need to consider not just the commerce or business side of the operation. They need to listen to the retail and consumer base and work on the products more then the business. In the future, he believes that a group of countries (e.g. New Zealand and Australia) may have to combine to be able to deliver a continuous supply under one united brand to deliver avocado to the market as separate marketing attempts from within the one country cannot be sustained. He also indicated that whilst the Hong Kong market may not deliver greater returns but it will offer growers a consistent; secure market for their produce. A method of promotion of Australian avocados would be to send growers or industry
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representatives to the Hong Kong market and this promotion should focus on the importers and wholesalers rather then consumers.
There has been a recent emergence of superior class supermarkets with superior produce. Mr Rees believes that this is due to an economic downturn thus people who in the past ate out, are now buying larger quantities are greater quality produce from these stores instead. Chris indicated that the market has become price driven and suggested that one way to possibly overcome this problem would be to endorse the health benefits of the avocado as the Chinese population prefer to consume foods that are healthy.
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8.7 Appendix 7: Interview Summaries- Domestic
Sunfresh- Bryan and Judy Prosser Sunfresh is a rapidly expanding cooperative, for growers who still pack their own fruit, but also want the marketing advantages of a cooperative. They export around 600 tons of 32, 30, 28 and 25 count per year to Singapore and Hong Kong. They said that product was generally sent in to Hong Kong at Sydney market parity prices. From their own market research they knew that post-harvest handling facilities and knowledge were very poor in Hong Kong and that their demographic was largely rich expatriates. Growers get paid from a common pool, regardless of if their fruit is sold locally or overseas. Sunfresh have had trouble filling orders recently due to the poor season, this damages their reputation as a supplier. They are looking to secure southern members to extend their supply season. They saw the fragmented nature of the Australian industry as a big problem in the future.
Simpson Farms- John Walsh Simpson farms consists of 40 000 producing avocado trees with plans to plant another 10,000 next year. Varieties grown include Hass Shepard and Wurtz, with production of 400,000 trays per year from March to August. They produce 18 - 20 tonnes per hectare on average or 12 - 15 trays per tree. Cost of production before pack-house is approximately $4 tray and $8 - $9 tray to land in the Sydney markets.
Simpson Farm have not concentrated on exports due to their good relationship with Woolworths and therefore export markets only account for approximately 10% of their crop. Markets include New Zealand, Hong Kong and Singapore and approximately 2.5 - 5% of their total crop is exported to Hong Kong, resulting in 10,000 to 20,000 trays or 60-120 tonnes from March to August (Hass). These are mainly size 28's by airfreight, through Watt Exports in Sydney. They try to minimise the production of smaller fruit through the use of intensive soil moisture monitoring and picking fruit for size.
Tilbrook Marketing Pty Ltd- Lindsay Tilbrook This company exports to Hong Kong and Singapore, with orders of 60,000 trays or 360 tonnes this year that couldn't be filled. He believes that this damaged Australia's
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reputation and allowed South Africa a greater market share. Tilbrook is currently air freighting approx. 300 size 28's of Hass every twelve days and this produce is going to importers than being used in supermarkets and upper class hotels. Lindsay sees long-term relationships imperative, however growers who view Hong Kong more as a dumping ground rather than a valuable export market hinders this.
Tilbrook Marketing uses as few suppliers as possible to help ensure consistency. He believes that once the domestic price reaches $15 growers abandon the export market, as they only want to export if they can get a higher price. Importers want a stable price at the lower end of the market. Believed that it would be advantageous to get a strategic alliance with other growers to ensure more consistency of supply.
OBM/Warren Done International- Doug Bishop and John Warren Most avocados are sent during June-July. Airfreight is used for most perishable products being exported out of Australia because it is faster, there is less product deterioration and the quantities that are being sent are not enough to warrant using sea freight. There are daily flights from Australia to Hong Kong so the availability of space and the timing should not be an issue. The general costs of airfreight are about $1500 per AV container, which equates to about $1.00/kg for avocados. These freight forwarders both believe that the produce that was being exported out of China was traditionally poor quality but now the quality has been improved. This may potentially affect the Australian export market.
ANL Shipping Company Sea freight can occur in either a 20 foot or 40 foot refrigerated container. The current prices for these containers are approximately: • 20 foot- USD$1600 • 40 foot- USD$2600 Ships are leaving weekly from the Brisbane port to Hong Kong and it takes approximately 10 days sailing time to reach its destination.
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Airfreight Council of Queensland- Peter Langdon The peak period for airspace during the year is between October and February. Space is generally not a problem during our identified window of opportunity (June-July.)
Antico International Pty Ltd- Chris Antico Antico international are relatively new comers to avocado exports, only commencing activities this year. Mr Antico termed the Hong Kong market as “opportunistic”. They are sending 20’ containers out of Brisbane approximately every fortnight. This would be greater if it was a better season. They prefer to source from larger suppliers, for simplicity, consistency and volume. Main competitors include Mexico, California and New Zealand. New Zealand has always been sending via airfreight, hence the opportunistic, price driven nature of the market.
Department of Primary Industries- Chris Horsbrough Wing Kee is the major importer of perishables in the Hong Kong market and it is estimated that this company imports over 80% of the avocados. The DPI indicated that Wing Kee is their client and that they had recent completed 2 trial consignments of ‘backward’ fruit of 1000 trays from North Queensland. The fruit reportedly sold well in the market but no further business has been conducted since. Wing Kee request smaller fruit (size 28-30) and this is because the fruit is more attractive in the retail market and shows better returns per piece for the importer. Chris believes that Australia is attractive as a supplier for a number of reasons including freight costs to the market and also availability of fruit. Most of the fruit is believed to be going into the food service sector and only approximately 1/3 of the fruit imported into Hong Kong is being consumed in market and the other 2/3 is being re-exported. The major threat in the future is that the market will become inundated with brands and therefore using Australia as a marketing tool will become useless.
Favco Queensland- Jacky Kunze Currently exporting organic avocados 6-50 trays /week and Currently exporting approx. 700 trays /week of normal avocados to ParknShop. Only use Airfreight but
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hope to use sea freight in future because it so much cheaper. Export 25-28’s and 16’s for Great Food Hall. Prices range from $24 to $29 per tray depending on the sizes.
Believes that the Hong Kong market is very price driven and need to educate Hong Kong consumers and importer about avocados if going to increase the demand.
SP Exports- Norm Phillips Norm Phillips, owner of SP Exports was of the opinion that the Hong Kong market was too price driven to be able to make an attempt at developing loyal relationships. He termed the Hong Kong market as simply being a commodity type market and being very supply/demand trading situation. He did agree that there are many new plantations of avocado trees but these were replacing the trees whose production life was ending and therefore the surplus in supply will not necessarily emerge.
Murray Brothers- Garry Poole Murray Bros source and supply avocados to exporters who sometimes export to Hong Kong. The exporters demand 28-30 count s of the freshest stock to allow for the long transit duration. Murray Bros sells a tray of 28 count for $14 - $16 and trays of 30 count for $12 - $14.
Garry Poole is of the opinion that the Australian avocado industry has no cohesion with respect to supply and sharing of information and they are therefore undermining themselves as an industry. This will be highly detrimental when it comes to the times of predicted oversupply as growers will try and undermine each other for the sake of a dollar per tray and this could be the determining factor between survival and death for growers especially the smaller growers.
Carter and Spencer International- Trent Paola Carter and Spencer International were not involved in exporting of avocados to Hong Kong but they are exporting citrus to Hong Kong. Trent Paola acknowledged that there was a gap within the cold chain within Hong Kong from when the shipping containers or the AV was landed until it was reconnected to electricity a few hours later.
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The reason why retailers in Hong Kong demand the smaller fruit is that the cost per unit can be significantly reduced. Consumers in Asia and Hong Kong included, place appearance as the main priority in selecting fruit and taste is secondary.
Watt Exports- Bob Watt Bob Watt stated that his company had been exporting avocados to Hong Kong for a total of 18 years. In the past five years his market share within Hong Kong has been reduced because of the emergence of competitors with emphasis placed on the South African fruit. Bob Watt believed that South Africa was importing sea freight container loads and could therefore place avocados on the market at a lower price than he could.
Bob Watt sources avocados from individual growers, grower groups and markets and was therefore able to supply between the months of February to November with the greatest amount of exports performed in February, March and April. Bob Watt had been able to develop loyal relationships through regular business with buyers in Hong Kong and therefore does not endure the full extent of the price driven market but he must still remain competitive. Although Watt Exports deal with a combination of supermarket chains, importers and agents he did prefer to work with importers because they could take a range of products in a single order as opposed to just avocados.
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8.8 Appendix 8: Hong Kong fresh and dried avocado import statistics Hong Kong Import Statistics - 1999 Trading Country Total Total January January February February March March Import kg Import Value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ America 194735 2892 18594 267 18594 277 Mexico 37650 439 Taiwan China 63830 188 Australia 78193 1475 2824 63 3034 71 4538 72 South Africa 50466 813
TOTAL 449930 6308
April April May May June June July July August Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg 37188 599 2483 38 1480 20 3737
19930 50 9500 2123 44 13286 250 706 12 14228 249 21421
August September September October October November November December December Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ 85 20715 369 36162 538 37188 477 18594 224 37632 439
4 29400 104 5000 3 388 8596 168 2537 52 3440 68 1460 39
(Source: Hong Kong Census and Trade)
92 Australian Avocado Market Development Opportunities in Hong Kong
Hong Kong Import Statistics – 2000
Trading Country Total Total January January February February March March Import kg Import Value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ America 175177 6165 3393 70 19051 239 37188 474 Mexico 53933 648 18432 215 18432 215 Taiwan 214500 761 China 533533 1495 6000 27 7000 30 Australia 71933 1157 1240 32 2258 62 394 9 South Africa 61731 746
TOTAL 1153115 7632
April April May May June June July July August Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg 18739 237 18000 244 18594 17069 218 4400 16 33000 117 23100 82 61600 218 37400 2000 4 15000 49 25500 64 49100 1632 35 2328 40 16293 242 13703 212 4326 20165 231
August September September October October November November December December Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ 204 20384 220 19914 231 19914 246
133 19800 70 13200 47 8800 31 13200 47 164 122000 408 134963 445 128500 172 43470 132 64 5239 85 8238 136 6114 94 10168 146 19702 231 9851 115
(Source: Hong Kong Census and Trade)
93 Australian Avocado Market Development Opportunities in Hong Kong
Hong Kong Import Statistics – 2001
Trading Country Total Total January January February February March March Import kg Import Value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ America 177029 2414 19914 247 39828 527 19924 277 Mexico Taiwan 517000 1833 8800 31 17600 62 13200 47 China 425398 1154 11873 33 6000 18 38500 156 Australia 179385 2645 7421 99 8588 159 157 4 South Africa 9993 117
TOTAL 13100014 8184
April April May May June June July July August Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg 19914 277 19914 294 11000 39 19800 70 70400 250 103400 367 88000 22000 85 12335 46 4410 22 3000 7 50890 8369 74 17194 246 24340 336 34224 460 19829 9993 117
August September September October October November November December December Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ 19200 283 19200 250 19200 261 312 79200 281 35200 125 44000 156 26400 94 130 62020 241 112000 114 27460 80 74410 248 295 31916 470 13879 251 7860 148 5609 102
(Source: Hong Kong Census and Trade)
94 Australian Avocado Market Development Opportunities in Hong Kong
Hong Kong Import Statistics - 2002 Trading Country Total Total January January Febrauary February March March Import kg Import Value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ America 1478 27 5925 144 165 3 Mexico 17260 228 47040 621 113045 472 Taiwan 1500 19 38500 137 104500 371 China 72500 153 61100 130 22000 54 Australia 14690 358 3060 68 4955 112 South Africa
TOTAL 864838 6256
April April May May June June July July Import kg Import value $ Import kg Import value $ Import kg Import value $ Import kg Import value $ 23028 338 2039 34 726 24 726 31 19200 255 99000 351 22000 78 13200 47 15400 55 4500 8 3625 10 7500 17 4670 67 11326 190 37834 591 22935 366 33312 219 20230 243
(Source: Hong Kong Census and Trade)
95