1547D916A32 Danh Gia Thi Truong Qua Nhiet Doi EU

An Assessment of Market Potential of Selected Tropical Fruits in The Netherlands

Prepared For:

Federal Agricultural Marketing Authority (FAMA) Bangunan FAMA Point, Lot 17304, Jalan Persiaran 1,

Bandar Baru Selayang, 68100 Batu Caves,Selangor

Tel: 03-61389622 Fax: 03-61383650

Prepared by:

Research Team from Universiti Kebangsaan Malaysia

Prof. Dr. Mohd. Fauzi bin Mohd. JaniProf. Dr. Aliah Hanim bt Mohd. SallehDr. Tih Sio Hong Dr. Azhar Hj Ahmad Dr. Norjaya bt Mohd. Yasin En. Mhd. Suhaimi Ahmad En. Ahmad Khairy bin Mohd. Domil

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FAMAHighlight

Market Potential of Selected Malaysian Tropical Fruits in The Netherlands

Abstract Agricultural sector has been identified as the third largest contributor to the growth of the Malaysian economy. Although Malaysia had penetrated the EU market for the past few years, the total export is still very minimal and only concentrated on selected fruits particularly star fruits. As such, this research attempts to explore the market potential of various tropical fruits in the European market particularly The Netherlands, which serves a gateway to Europe. The purpose of this research is to identify the types of tropical fruit distributed and to provide recommendations to increase the tropical fruits export to The Netherlands. Ten types of fruits are identified as the focal fruits in the study namely star fruit, papaya, pineapple, pomelo, dragon fruit, rambutan, mangosteen, durian, mango and jackfruit. One hundred industry players including importers, wholesalers, distributors, and retailers are chosen for the study sampling. Data is gathered through personal interviews and market observations. Consequently, a strategic action plan is recommended to increase the market potential of Malaysian tropical fruits. It is also important to comply with several international regulations such as EUREPGAP and HACCP in order to penetrate the supermarket chains in The Netherlands. Keywords: Marketing strategy, supply chain management and distribution

Introduction

European Union (EU) is the worlds largest importer of agricultural products and the major imported products are fruits, vegetables, cereals and coffee. Fruit consumption is increasing due to health conscious eating habits and there is great potential towards the consumption of exotic/tropical fruits. The import of agricultural products to EU markets is via the Netherlands since it is a gateway of fruits and vegetables to the EU markets. Accordingly, this research project aims at assessing the market potential of selected tropical fruits in the Netherlands. The findings of this research would certainly help in formulating a strategic action plan to enhance Malaysian export of tropical fruits. The high standard of living and purchasing power of the Netherlands consumers indicates there is a great potential for demand on tropical fruits and fruit products. This study also focuses on the market potential of ten tropical fruits which are 1) star fruit, 2) pomelo, 3) dragon fruit (pittaya), 4) papaya, 5) pineapple, 6) mango, 7) rambutan, 8) mangosteen, 9) durian and 10) jackfruit. Therefore, this research focuses on achieving the following objectives; to identify importers, distributors and retailers in the Netherlands that market tropical fruits, to identify the types of tropical fruits distributed and the preferred characteristics of these

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fruits, and to suggest a strategic action plan to increase the tropical fruits export to the Netherlands.

Overview of Tropical Fruits in the EU Markets It is predicted that the demand for fresh tropical fruits is growing at nearly 8% over the projection periods for major tropical fruits. World import of tropical fruits is expected to reach 4.3 million tones by 2010 and 87% (or 3.8 million tones) of this demand would be from developed country markets. Among the biggest markets for tropical import are the EC markets, followed by the United States of which both markets total up to 70% of the import demand. For the EC markets, the Netherlands remains as the major European transshipment point or gateway for imported tropical fruits. Thus, it is important to understand the marketing channel of the Netherlands and establish network contact in order to penetrate the EU markets. Export of fruits and vegetables to EU markets also encountered competition from the local produces. Since EU markets are governed by The European Commission, there is a Common Agricultural Policy (CAP) that controls the prices and subsidies. The objectives of CAP include development of local agricultural system, taking care of the local agricultural community and the control of agricultural products pricing as well as the movement of products (The European Commission, 2000). Efforts of CAP have no doubt has led to the increase of the number of farmers and hence, increase in local supply. However, there is a demand gap for tropical fruits where tariffs for non-competing commodities (i.e., not produced in EU) like tropical products are low. In addition, there is a preferential scheme given to imports from developing and less developing countries, thus favoring of some countries (www.researchandmakrets.com). Malaysian Exports of Selected Tropical Fruits to EU Malaysia is one of the exporters of tropical fruits to the EU markets. Figures 1 to 5 show the total quantity of exports of selected tropical fruits from Malaysia to the EU markets between 2001 and 2005. In Figure 1, there was a slight increase in quantity and in year 2005 the export was recorded at 90kg. Durian is a unique tropical fruit and only appreciated by a small group of the EU consumers. This group of consumers might only be Asian originated consumers, and are willing to pay slightly premium price to enjoy fresh durians. Frozen durian is also exported to EU markets and the main suppliers are Thailand. Malaysia might want to explore the export of fresh and frozen durian to the EU markets.

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Figure 1: Malaysian Exports of Fresh Durian

0

200

400

600

800

1000

2005 2004 2003

EU25

Netherlands

Source: Adapted from table 2.2.1, http://mkaccdb.eu.int/mkaccdb2/statistical_form.htm, Accessed date 22/7/2006

Malaysian exports of fresh or dried guava, mango and mangosteen have not been consistent. As shown in Figure 2, though from year to year there was slightly increase in exports of these fruits, in 2005 the quantity export was not very high with a total of 12,900 kg. As mentioned before, these fruits are exported by India and Thailand.

Figure 2: Malaysian Export of Guava, Mango, and Mangosteen

05000

100001500020000250003000035000

2005 2004 2003 2002 2001

EU25

Germany

Netherlands

UK

France

Italy


Though in smaller quantity, Malaysian export of fresh tamarind, cashew apple, jackfruit, lychee and sapodillo plum category are on a constant increase (Figure 3).The export is more reflected on jackfruit export since the jackfruit market acceptance is more favorable. Generally, to western consumers, it is a delicious fruit especially prepackaged jackfruit. Jackfruits that are exported in whole units are used for decorative purposes.

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Figure 3: Malaysian Export of Tamarind, Cashew Apple, Jackfruit, and Lychee

0

20000

40000

60000

80000

100000

2005 2004 2003 2002 2001

EU25GermanyNetherlandsUKFranceItaly


Malaysian export of fresh papaya has shown a slight decrease for five consecutive years. The direct export of papaya to United Kingdom is of minimum quantity (Figure 4). According to the Malaysian exporters, the best quality papaya is usually supplied to Hong Kong market at premium prices. In addition, there might also be a shortage of supply due to some farming problems that affect papaya fruits. In 2005, Malaysian export of papaya to EU is 68,200kg.

Figure 4: Malaysian Export of Fresh Papaya Pawpaw

05000

100001500020000250003000035000

2005 2004 2003 2002 2001

EU25

Germany

Netherlands

UK

France

Italy


Star fruit is the main export of Malaysia. The quantity export of fresh star fruit and dragon fruit are stable at more than 3 million kg (Figure 5). In particular, Malaysian export of star fruit is significant. Most of the EUs importers and or wholesalers get their star fruit supplies from Malaysia. This is one of the potential export areas. However, the volume of star fruit consumption is not growing due to the low consumer awareness of star fruits consumption and its nutritional value. Star fruit is used as decorative purposes and only a small quantity is used for consumption. More introductory promotion is needed to increase the world demand on star fruit. Dragon fruit is quite new to the EU consumers and the white dragon fruit is highly demanded compared to red dragon fruit.

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Figure 5: Malaysian Export of Fresh Star Fruit and Dragon Fruit

0500

1000150020002500300035004000

2005 2004 2003 2002 2001

EU25

Germany

Netherlands

UK

France

Italy


From the statistics, it is indicated that Malaysian tropical fruit exports to EU remain at lower and inconsistent quantity. There are some opportunities yet to be fully explored and exploited. Among the trade partners for Malaysia are the Netherlands, Germany, United Kingdom, France and Italy with the Netherlands as a major gateway for Malaysian exports to get access to the EU markets. In terms of the type of tropical fruit export, it is identified that higher potential fruits include star fruit; fresh or dried guava, mango and mangosteen, papaya and durian.

Methodology Before the actual data gathering in the Netherlands, an exploratory study was conducted among a group of Malaysian fruit suppliers and exporters. Then, industry interviews were carried out among the Netherlands importers/exporters, distributors, wholesalers and retailers to examine the characteristics of tropical fruits distribution activities and to determine the potential demand of the selected tropical fruits. A drop off method was also included in the survey to generate more industry responses especially to capture the potential respondents who were unable to attend formal interviews. In addition, market observation was done to understand the daily function of tropical fruit distribution and market spread of tropical fruits within the local community. This holistic research approach would generate more information that is useful to draw a complete framework of foreign channel distribution and fruit distribution network in the Netherlands market. To determine a valid and meaningful findings a sample size of 100 industry players was targeted. The study took approximately six months of study which encompassed secondary and primary data collection, data analysis and reporting as well as strategizing on strategic action plan. The research was completed in April 2007.

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Research Findings Sample Characteristics A total of 100 field interviews or observations were carried out. Refer to Table 1 for the breakdown of the respondents. Large scale importers are channel players that directly import fruits and vegetables from overseas. Eleven large scale importers that operate in the Netherlands as well as Europe were interviewed. Examples of large scale importers are FTK, Natures Pride, Hispa Fruit, Aartsenfruit, Agro Fair, Bud Holland, De Groot International B.V. and Valstar. These players usually contact foreign farmers or exporters and import substantial quantities of fruits including tropical fruits. They supply to the local Netherlands wholesalers and other European wholesalers that distribute the fruits through out European markets.

Table 1: Sample Category and Size (N = 100)

Sample Category Sample Size Large Scale Importer 11 Importer/Wholesaler 35 Large Scale Retailer 12 Retailer/ Small Retailer 38 Open Market 4

Overall, the channel of distribution in the Netherlands is well developed and connected. From figure 6, the channel members include large scale importers, wholesalers, and exporters. These channel members are the big players in fruits and vegetables distribution in the Netherlands as well as European markets. They usually hold multi-roles from importing fruits and vegetables from various parts o the world, sourcing from South America, Asia and also local supplier to re-exporting to European countries and redistribute them through out the Netherlands. In their distribution network, they supply to other importers, wholesalers, exporters and sometimes retailers.

Figure 6: Overview of the Channel of Distribution

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Fruits Supply and Distributing Size Tropical fruits in the Netherlands are usually imported from South America, Africa and Asia. Other exporting countries include Brazil, Colombia, Surinam, Mexico, Costa Rica, Thailand, Indonesia, Vietnam, Philippine, India and Malaysia. From Table 2, Malaysian tropical fruits such as star fruits, pomelos and rambutans are common but, mangosteens, dragon fruits, durians and jackfruits are not very common. In terms of the size of the fruit distribution, there are different sizes for different type of fruits. Table 3 shows the common distributing size of the selected tropical fruits.

Table 2: Tropical Fruits Distributed and Sources of Supply

Type of Fruits Frequency count of distributor that distribute the fruits

Source of Supply (Country Base)

Star fruit

33

Malaysia, Taiwan, Israel (very small quantity)

Dragon fruit

24 Vietnam, Thailand, Malaysia (very small quantity)

Papaya

50 Colombia (cheaper price), Brazil, Thailand, Ecuador, Surinam, Malaysia

Pineapple

41 South America Costa Rica (Dulce Gold Pineapple) Brazil, Ecuador, Mexico, Ghana, Spain, Malaysia

Mango

44 South America Philippines (the best) Thailand, Pakistan, India, Mexico, Mali, Carribean, Peru, Malaysia

Pomelo

31 China, Thailand, Israel Malaysia (price too high)

Rambutan

31 Thailand, Indonesia, Malaysia

Mangosteen

28 Thailand, Indonesia, Africa, Malaysia (Hardly see in the market)

Durian

18 Thailand, Malaysia, Africa

Jackfruit

17 Malaysia, Thailand (in pre-packed form) Depend on demand, hardly see in the market

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Table 3: Tropical Fruits Consumption and Distributing Size for European Market

Type of Fruits Frequency Count Distributing Size

Star fruit Decorative Consumption Decorative & Consumption

15 4 4

150gm per piece 20 pieces/ box 1 box 3kg 500gm/piece 6 pieces/box 1 box 4kg 500gm/piece 8 pieces/box 1 box 4kg

Pomelo/Citrus grandis Decorative Consumption Decorative & Consumption

-

12 -

1-1.25 kg /piece 9 pieces/ box 1 box 10 kg

Rambutan Decorative Consumption Decorative & Consumption

-

15 -

>30gm/piece 12 pieces/small package 4 packages/box 1 box 2kg

9

Mangosteen Decorative Consumption Decorative & Consumption

-

13 -

1.5kg each

Jackfruit Decorative Consumption Decorative & Consumption

- 9 1

>15kg/piece 1 piece / box 1 box 15-18kg

Competitiveness of Malaysian Fruits A positioning mapping looks at the competitiveness of the tropical fruits. The mapping is based on two elements; market competitiveness and market demand based from the survey and market observation during the team visits to the Netherlands and Germany. As shown in Figure 7, there are three clusters of different positioning for the fruits.

Figure 7: Positioning Map for Selected Tropical Fruits in European Market

High Market Demand

Starfruit

Rambutan, Durian,

Jackfruit, Mangosteen

Pomelo, Dragon Fruit

Mango, Papaya, Pineapple

Low High Market Competition

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The first cluster is mango, papaya and pineapple. Though the demand or quantity imported into the Netherlands and European market is high, the competitiveness is also high. In order to compete, Malaysian suppliers must improve the quality of the fruits and reduce the cost of farming. Next cluster is pomelo and dragon fruit. These tropical fruits though accepted in the market, the quantity of demand and numbers of suppliers are not significant. Dragon fruit has a great potential to be exported to the European market due to the low market competitiveness. The third cluster is star fruit, rambutan, durian, jackfurit and mangosteen. This cluster is more on novelty purchase. These fruits are not commonly available in the market. The demand is seasonal, thus the market competitiveness is relatively low compared to other tropical fruits. Star fruit is highlighted because Malaysia is the leading supplier of star fruits. The majority of importers, wholesaler, traders and retailers mainly recognize Malaysian star fruits and import them from Malaysia.

Conclusions and Suggestions

There are a number of strategic actions needed to enhance Malaysias competitiveness of tropical fruits export for the Netherlands and European markets. This study on the Netherlands market serves as a good platform to understand the overall channel of distribution. In terms of supply, value chain and market access there are six components that require special attention. These six strategic actions are proposed due to its significant impact on the Malaysian tropical fruits sales in the Netherlands and European markets. Figure 8 shows the components of the strategic action plan.

Figure 8: Components of Strategic Action Plan

Suggestions for Strategic Action Plan

Strategic Alliances

Foreign Importers

WholesalersDistributors

ConsumerAwareness

ForeignConsumers

Market Maker

* MalaysianGovernment

Agencies

* Local DistributorsExporters

Associations(National

DistributionNetwork/Center)

Supply Chain Management

* Local MalaysianFarmers, distributors

Exporters (Integration Of Supply Chain

Activities)* Commercial-based

farming

Information Flow

i. Supply chain management system in the local Malaysia market The suggested strategic action plan includes a setting up of farmers, distributors and exporters alliances with the leading exporters serving as key management center. In summary, the solutions are:

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Enhanced vertical cooperation: Farmers, Distributors and Exporters Alliances Enhanced horizontal cooperation between industry players Further development of EUREPGAP compliance working team, farmer groups Encourage more Commercial-based farming and infrastructure Transportation cost subsidization; double tax deduction for carriers

ii. Enhancement of strategic alliances with key foreign channel members In general, the research findings indicated that there is a lack of market access among the local players. The solutions should include:

Enhancement of Strategic alliances with foreign importers and wholesalers Strategic partnership with importers because importers are the first-tier market

player that control the distribution network and market creator that pushes the demand down the channels to end users via retailers

iii. Large scale consumer awareness marketing campaign Generally, consumer awareness on tropical fruits is at a minimum. Tropical fruits are sometimes used in food decoration rather than consumption. The summarized solutions would include:

Conduct large scale consumer marketing campaign Collaboration with foreign universities to promote Malaysian tropical fruits Young generation: develop positive perception towards tropical fruits

consumption Periodical in-store promotion

iv. Brand management It is found that there is lack of brand recognition in the market. In addition, European channel members and consumers are unaware of tropical fruits nutritional value. In summary, the solutions are as follows.

Development of strong products in terms of fruit quality, packaging, cold-chain facilities

Development of strong brand (e.g. Chiquita Banana, Dole Pineapple, Washington Apple, Del Monte Tomato) in terms of brand awareness, perceived quality, brand loyalty and brand association

Conduct brand survey Consumer education campaign in supermarket chains to make European shoppers

to acquire the taste for sweet tropical fruits and to eat them fresh in addition to use them for decorative purposes

Promotion of brand to create brand equity (added value of the brand name)

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v. Coordinated research, development and market access Research and development must be fully utilized to gain market access. Some new research findings or information might not be well disseminated due to government regulations on information dissemination. The solutions are:

Review the existing rule and regulations on information dissemination Enhance the efficiency of information dissemination via centralized information

intelligence unit (IIU)

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Analyzing the Marketing Channels of Tropical Fruits in the European Market

Abstract The Netherlands is considered the second largest trading partner for Malaysia in the European Union (EU) market and the tenth largest export destination for Malaysian fruits. Successful penetration and expansion of tropical fruits is very much dependant on the overall integrated marketing system and supply chain management. Hence, this study explored the marketing channel of tropical fruits in the Netherlands. Specifically, the study identified 1) the industry players in the fruits industry in the Netherlands particularly importers, distributors, wholesalers and retailers and 2) the facilities for fruit distribution. One hundred industry players are chosen for the study sampling. The data is gathered through personal interviews and market observations. The channel of distribution in the Netherlands is well developed and connected. Therefore, there is a need to create strong partnership between Malaysian fruit exporters and the Netherlands importers and wholesalers. In addition, Malaysian exporters should focus on the supermarket chain since it provides great economical and growth opportunities for tropical fruits. The distribution of fresh produce in the Netherlands is mainly through the supermarket chain and on the increasing trend. Keywords: Supply chain management, marketing management and marketing strategy

Introduction

Market penetration and expansion of tropical fruits, either in fresh form or processed, is very much dependent on the overall integrated marketing system and supply chain management. For the whole system to function accordingly, several mechanisms have to be established which include market channeling system, grading system for fresh and processed products, transshipment and storage, bar coding and identification system, quality control and labeling. Understanding the characters of the existing markets and its development with respect to fruit industry in the targeted country and the character of customers preference are important knowledge in order to strategically place Malaysian fruit exports to the European community. One of the immediate issues that require more attention is the understanding of foreign market channel and industry characteristics in the Netherlands, especially in a country that serves as a market gateway to Europe. Thus, an in-depth understanding of the characteristics of the channel members and its operation of fruits distribution would definitely gain us better access to the European markets. This research focuses on achieving the following objectives:

i. To identify importers, distributors and retailers in the Netherlands that market tropical fruits

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ii. To identify facilities in fruits distribution used by the channel members in distributing tropical fruits

Tropical Fruits Export in the EU and the Netherland Markets According to DG Trade European Commission, it is predicted that the demand for fresh tropical fruits would grow at nearly 8% over the projection periods for tropical fruits. In terms of market demand, United Kingdom is the largest market followed by France and Germany. Even though EU acts as a single market, EU consumers preferences are different and they emphasize on different elements. (www.researchandmarkets.com). World import of tropical fruits is expected to reach 4.3 million tones by 2010 and 87% (or 3.8 million tones) of this demand would be from developed country markets. Among the biggest markets for tropical import are the EC markets, followed by the United States of which both markets total up to 70% of the import demand. For the EC markets, the Netherlands remains as the major European transshipment point or gateway for imported tropical fruits. Therefore, it is important to understand the marketing channel of the Netherlands and establish network contact in order to penetrate the EU markets. Market Channels of Fruits Distribution in the Netherlands From experts opinions and in reference to the GfK Consumentenpanel Netherland, Frugi Venta Annual Report of 2005 (report on consumer panel for fruit and vegetables purchases), it is clear that supermarket chains are the main distribution channels of fruit and vegetables. The total volume traded in 2005 is 3.7 billion (refer to Table 1). Out of this, 2 billion is through supermarket chain (54%), followed by the daily or flea or open market (32.5%) and green grocer or fruit and vegetables shops (13.5%). Table 2 shows the share of volume in the purchase of fresh vegetables and fruit. The distribution of fresh fruits is mainly through the supermarket chain and followed by the open market. Green grocer and home delivery enjoy relatively smaller shares. Therefore, to penetrate the Netherlands market it is crucial to access the supermarket chains.

Table 1: The Value of Selected Market Segments in Year 2005

Market Segment Euro (in Billion) Percentage* Percentage Supermarkets (5000 Outlets) 2 54% 65% Daily/ Flea Market 1.2 32.5% 20% GreenGrocer/Shops/Fruit/ Stalls 0.5 13.5% 15% TOTAL 3.7 100% 100% *2005 percentage is calculated based on the three selected market segment volume Source: Adapted from GfK Consumentenpanel Nederland. Frugi Venta Annual Report 2005

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Table 2: Share of Volume in Purchases of Fresh Fruit and Vegetables for Individual Sales Channels in the Netherlands

Vegetables Fruit 1999 2002 2005 1999 2002 2005 Supermarket 73% 77% 84% 63% 68% 75% Greengrocer 11% 8% 5% 12% 9% 7% Home delivery 1% 1% 1% 3% 2% 2% Open-air market

11% 10% 6% 18% 16% 12%

Other 4% 4% 4% 4% 5% 4% TOTAL 100% 100% 100% 100% 100% 100% Source: GfK Consumentenpanel Nederland. Frugi Venta Annual Report 2005 page 10. EU Requirements of Tropical Fruits Importation The European Union is a custom union that has a common tariff for third countries importation into EU markets. In fruit and vegetable sector EU has a common market organization (CMO) that is involved in policy mechanisms and trade agreements to stabilize markets (http://www.ers.usda.gov). EUs requirements for foodstuffs export are high especially in terms of food quality and safety. Several mandatory legislative requirements include general good law, certificate of conformity, maximum residue limits and phytosanitary regulations and plant protection. General Food Law European Food Safety Authority was established in 2002. It underlines procedures in food safety, other general principles and requirements and provisions on the traceability of food. General Food Law was enforced since January 2005. Certificate of Conformity is required for all import consignments of fresh fruit and vegetables from countries outside of the EU. Maximum Residue Limits (MRLs) for pesticide residues is the EC Marketing Standards requirements. A Pesticide Residue Analysis report should accompany each consignment and the labs providing the report must be accredited or ISO approved. The International Plant Protection Committee (IPPC) sets the International Standard for Phytosanitary Measures (ISPM) in order to ensure that the imported agricultural goods are free from plant diseases or insects. It also prevents the EU crops from contact with phytosanitary harmful organisms that might be transferred from the imported consignments. Other measures of fruits import include firmness of the fruit, freshness, color/appearance, packaging presentation, uniformity in size, free of damaged and abnormal external moisture. EUREPGAP Recently the EUREPGAP certification is required especially for supply to supermarket chains. It is believed that in 2008, EUREPGAP certification might be a must in order to

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supply to EU markets. EUREPGAP provides a widely accepted standards and procedures for the global certificate of Good Agriculture Practice (GAP). It consists of standard processes of product even before it is planted until it leaves the farm. This is to ensure that the best practice is applied in systematic and consistent approaches throughout the entire agriculture chains from seed selection, farm, chain of processing, packaging and distributing channels until the products are delivered to the end consumers. It is accomplished through standardization of procedures and compliance criteria. Currently, even though EUREPGAP certification is not a must for certain segment, it has become a basic requirement to enter into the high end retail chains in European markets.

Methodology Industry interviews were carried out among the Netherlands importers/exporters, distributors, wholesalers and retailers to examine the characteristics of tropical fruits distribution activities and to determine the potential demand of the selected tropical fruits. A drop off method was included in the survey to generate more responses especially to capture the potential respondents who were unable to attend formal interviews. In addition, market observations were done to understand the daily function of tropical fruit distribution and the market spread of tropical fruits within the local community. This holistic research approach would generate more information that is useful to draw a complete framework of foreign channel distribution and fruit distribution network in the Netherlands market. To determine a valid and meaningful findings a sample size of 100 industry players was targeted.

Findings Sample Characteristics This study focuses on industrial survey that interviewed importers, wholesalers and retailers of tropical fruits. A total of 100 field interviews or observations were carried out. Refer to Table 3 for the breakdown of the respondents.

Table 3: Sample Category and Size (N = 100)

Sample Category Sample Size Large Scale Importer 11 Importer/Wholesaler 35 Large Scale Retailer 12 Retailer/ Small Retailer 38 Open Market 4

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Channel of Distribution in the Netherlands With reference to Figure 1, the channel members include large scale importers and wholesaler, large and small scale retailer, and open market.

Figure 1: Overview of the Channel of Distribution

i. Importers and Wholesale Distribution In the group of importers and wholesale distribution, two significant segments can be identified: large scale importers and importers/wholesalers group. The first group is the large scale importers. The list of large scale importers is as follows:

Aartsenfruit Hispa Fruit Agro Fair Natures Pride Bud Holland OTC Holland De Groot International B.V. Stacy Food Group FTK Holland Valstar Group

This group of channel members plays a key role for fruits distribution through out the Netherlands and European market. As shown in Figure 2, large importers import fruits from foreign exporters and some even directly contact the foreign farm operator and foreign wholesale center to assure that they enjoy the certain targeted margin. Their main customers are big buyers such as other importers/wholesalers in the Netherlands, importers/ wholesalers in Europe and large scale retailers. In general this group of players may enjoy about 30% to 35% gross profit margin. To supply to this group of importers, fruits products must posses EUREPGAP certificate, especially in 2008, where the EUREPGAP requirement becomes a must.

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Figure 2: Suppliers and Customers of Large Scale Importers

Importer/ Wholesalers in the

Netherlands

Foreign farm

operator

Large Scale

Based on the interviews conducted with the large scale importers, the first criterion that their clients looked for when purchasing fruits is EUREPGAP (refer to Table 4). Large importers are usually not involved in re-packaging since all imported products are sold in containers and pallets. Mix pallet may be supplied upon request by the customers.

Table 4: Feedbacks from Large Scale Importers (n = 11)

Statements Summary Remarks Import/export activities Actively involve in importing and exporting activities of fruits and

vegetables. Source from the world and distribute through out Europe General turnover is more than 100 million

Decision making criteria of tropical fruits

Quality, Price and Consistency of supply

Facilities Have their own cold rooms and cold-storage vehicles Mode of payment Letter of credit via IBAN (International Bank Account Number)

Direct bank transfer and Bank guarantee for suppliers Credit term Usually within month to 1 month

Longer credit term is given to supermarket as payment is secured. The same credit term is received from suppliers

Company policy on defective goods

The common practice is to take the photo of the defective goods and send credit note to the suppliers or Accept the fruits and sell at lower price

Service Deliver the ordered fruits to their customers. Rent out the storage space (warehouse space) for their customers.

Import requirement EUREPGAP Certification Compliance to all EU rules and regulations Brand name is not an issue except for well established brand name

Importers/ Exporter

(Margin ~30-35%)

Importers/ Wholesalers in

Europe Foreign

Exporters

Foreign wholesaler

center

Large Scale Retailers

(Supermarkets)

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such as Chiquita Banana and Dole pineapple. Packaging requirement Standard container and pallet size.

Does not involve itself in re-packaging and pallets are ready to be transported to the customers. Mix pallet is provided with regard to customers requirements

Promotion Use push strategies that usually highlight the fruits that they carry and service provided. Do not promote specific country products. Promotion of the specific country products depend on the exporting country. For example, Thailand government and exporters support with poster and various promotional materials.

Malaysian products Receive minimum materials about Malaysian products. The only exception is starfruits The companies import starfruits mainly from Malaysia

Collaboration potential Interested to collaborate with Malaysian exporters and farm operators, however, it depends on the quality, price and supply consistency No general collaboration terms, all depends on specific negotiation

ii. Importers/ Wholesalers The second group of tropical fruit network is importer/wholesaler. This group of channel members distributes fruits and vegetables within the Netherlands markets as well as neighborhood European countries such as Germany, Belgium and France. They import fruits from foreign exporters. Their main customers are retailers in the Netherlands and European countries. As depicted in Figure 3, this group of players might enjoy about 25% to 35% gross profit margin. To supply to this group of importers, fruit products must possess minimum EU requirements. EUREPGAP certificate is an added advantage but not compulsory, however, it may be the basic requirements in the near future.

Figure 3: Suppliers and Customers of Importers/Wholesalers

Wholesaler/ Retailers in Europe

Importers/ Wholesaler

(Margin ~25-35%)

Small Retailer/ Open Markets in the Netherlands

Foreign Exporters

Large Scale Retailers

(Supermarkets)

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According to these companies, their clients criteria in fruits purchasing decision are price and quality. As shown in Table 5, wholesalers try to avoid any re-packaging work as labor cost is extremely expensive in Europe. However, minor re-packaging is sometimes performed to meet their clients packaging requirements. Some customers require the packaging in the form of ready-to-sell. Small mixed-packaged fruits are also provided for specific customers such as hospital fruit store.

Table 5: Feedbacks from Importers and Wholesalers (n = 35)

Statements Summary Remarks Distribution activities Involve in distributing fruits products to the local retailers as well

as to the other European countries especially Germany, Belgium and France. Mainly source the products from foreign exporters Generally, the turnover is below 100 million

Decision making criteria of tropical fruits

Quality, Price and Consistency of supply

Facilities Majority own cold rooms and cold-storage vehicles Mode of payment Letter of credit via IBAN (International Bank Account Number)

Direct bank transfer, via cheque or cash Bank guarantee is provided for direct source of foreign exporters

Credit term Usually within month to 1 month Longer credit term is given to supermarket as payment is secured. The same credit term is received from suppliers

Company policy on defective goods

The common practices include: taking photo of defective goods and send credit note to suppliers; returning to the suppliers; writing off; and selling at lower price

Service Deliver the ordered fruits to their customers The delivery is organized as direct as possible, sometimes directly from port to the customers venue

Import requirement EUREPGAP Certification is a plus but sometimes not compulsory In 2008, the EUREPGAP Certification may become a must Must comply to EU rules and regulations Brand name is not an issue except for well established brand name such as Chiquita Banana and Dole pineapple. Supply to supermarket has more strict requirements

Packaging requirement Do simple re-packaging and bulk breaking to supply to small retailers. Excess fruits may be supplied to open markets with minimum price or at cost. Some retailers require the fruits packaged in ready-to-sell form

Promotion Do not invest in promotion of specific country products. Traditionally it depends on the established network of distribution. The original source of fruits must invest in promotion

Malaysian products Receive minimum materials about Malaysian products. The only exception is starfruits.

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Starfruit imports are mainly from Malaysia Some importers/wholesalers that have established relationship with Malaysian exporters may carry more Malaysian fruits.

Collaboration potential Few companies are interested to collaborate with Malaysian exporters, however, it depends on the quality, price and supply consistency There is no general collaboration terms, all depends on specific negotiation

iii. Large Scale Retailers: Supermarket Chains One of the most important outlets that sell fruit and fresh produce to the customers is the supermarket. In the Netherlands, supermarket chains are very popular since they are found everywhere and offer better products at a competitive price. Besides Mediterranean fruits, tropical or exotic fruits are also popular items found on the shelves of the supermarkets. Through observation, all the premises are complete with cold rooms to store the fresh produce. Albert Heijn

Considered to have the largest market share in the country, Albert Heijn operates the stores in several formats; everyday supermarket, the larger Albert Heijn XL, convenience store, and the Internet delivery service Albert.nl. Albert Heijn stores are full service-supermarkets and are known for their focus on quality. From observations, starfruits supply came from Malaysia, whereas bananas and pineapples are from South America, mainly from the branded Dole and Chiquita. The tropical fruits on sale here include Doles pineapples (Costa Rica) which are priced at 5.85 each and papayas from Brazil. Interestingly, Albert Heijn makes an effort to promote these products as exotic fruits through brochures and advertisements. C1000 Schuitema C1000 is part of Schuitema, a retail and wholesale company. C1000 is now part of Ahold Supermarket Group which includes Albert Heijn since it holds 73% interest in Schuitema. Tropical fruits such as bananas and ananas are also available in these supermarkets. Besides coming up with its own brand C1000, branded fruits such as Dole and Chiquita are also available. C1000 also does its own packaging. Through technology innovation, C1000 supermarket chain is rolling out a new generation of self-scan checkouts. Customers simply place their items on the conveyor belt, which are transported through a scanner portal, where a device will read the barcodes, regardless of their position. By eliminating individual scanning, it accelerates the checkout experience.

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ALDI Aldi is considered as the worlds leading discount retailer. With a modified concept, Aldi has developed a hybrid that until now has been regarded as opposites: discount and convenience. With over 5000 stores all over the world, Aldi focuses on food-to-go and convenience products, including chilled drinks, sandwiches and fresh fruit - and all this without breaking the rules of efficient discounting.

All products whether baked beans or fresh cut flowers, biscuits or daily delivered fresh fruit and vegetables, are sourced from the best suppliers. Tropical fruits such as bananas and pineapples are available in this outlet. Among the tropical fruits available include papaya (Brazil) which is priced at 5.95 per piece, pineapple (Costa Rica) at 5.50 per piece, mango (South Africa) at 0.95 per piece and pomelo (China) at 2.50 per piece. The fruits are sold as they are, in the original packaging. Promotion on tropical fruits is done in the store; point-of-purchase (POP). Sligro Sligro is a wholesale outlet (entrance by registered pass only). Most of the customers are organisational consumers such as restaurants and cafeteria (39%), medium business (22%) and small retailers (6%). Currently, Sligro has 38 self-service stores and food contributes 90% of sales. Its main competitor is Makro. In Netherlands, Sligro has more sales than Makro and the average Sligro store resembles a hypermarket, whereas Makro looks more like a warehouse. Branded fruits like Dole and Chiquita are sold here. Other tropical fruits include Malaysian starfruits, Brazils melons, Chinas pomelos and Thailands rambutans. iv. Small Retailers and Open Markets Small Retailers A total of 38 small retailers were included in the study. Retailers in the form of mini market and grocery stores are scattered through out the Netherlands. It serves the local communities at convenience location and appropriate smaller quantities for household consumption. A typical mini market usually carries various ranges of household items such as canned foods, vegetables, fruits and dried items. Relatively, tropical fruits are considered as luxury fruit items as it is imported. Therefore, consumers purchases of tropical fruits are relatively in smaller amount. The retailers require fruit products that are packaged in a ready-to-sell form. As labor cost is expensive, retailers also avoid doing re-packaging activities.

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Open Markets Open markets are traditional areas for selling dried and wet products. This type of open market usually operates in the morning or evening on a regular basis. For example, Afrikaaderbuurt Open Market operates twice per week. The products sold in open markets are of lower quality and price. Excess supply is usually distributed in the open markets with minimum pricing. Only few typical tropical fruits such as banana, pineapple, mango and papaya are commonly displayed and sold. Few stores sell dragon fruits. Starfruit, pomelo, rambutan, mangosteen, durian and jackfruit are not available in the open markets. Store owners usually get the suppliers from local wholesalers and sell on cash basis. No specific packaging is required. Pineapple is one of the tropical fruits sold that requires specific cutting machine. The machine is supplied by the suppliers to the store owners. When consumers purchase the pineapple, the cutting service is provided so that the pineapple is in the ready-to-eat form.

Conclusion

Information from various industry players is pertinent in understanding the market characteristics and structure of EU. Tropical fruits are brought in by importers and wholesalers which are later distributed in retail outlets such as supermarkets and open markets. Penetrating the supermarket chains in the Netherlands would be the next step in order to gain market acceptance to the European consumers. The Netherlands provides good access opportunities to the European countries since the fruits are transported to the Netherlands and re-exported to Germany, France, the UK and other European countries. To address the above issues, a strategic action is recommended which consists of several components. They are 1) supply chain management system in the local Malaysian market, 2) enhancement of strategic alliances with key foreign channel members, and 3) coordinated research and development in market access. For Malaysian suppliers to compete in the international market particularly in Europe, they must supply enhance its product quality and price competitiveness. In addition, more promotion and marketing activities are needed especially promotions in the supermarket chain stores to attract end users which serve as a pulling effect. Finally, Malaysian suppliers need to be able to supply tropical fruits consistently in order to attract the big foreign buyers.

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References

Exotic Tropical Fruits Market in the EU, www.researchandmarkets.com/reportinfo.asp?report_id=304437, Accessed date 25/1/2007. Market Access Database, DG Trade European Commission, http://mkaccdb.eu.int/mkaccdb2/statistical_form.htm, Accessed date 29/8/2006 Tropical Fruits, www.fao.org, Accessed 27/1/2007. International Tropical Fruits Network, www.itfnet.org/whatsnew_content.fm?ID=362&Channel=Business, Accessed 1/7/2006. http://www.ers.usda.gov, Accessed date 1/7 2006 http://www.ers.usda.gov/publications/wrs0406/wrs0406e.pdf, Accessed date 1/7 2006 http://www.fruitsafety.org/UK/Products/Pineapple/Framesetpineapple.htm, Accessed date July 1, 2006

25

The Enterprise and the Importance of Quality for Market Access in EU.

By

Palasuberniam K. Agriculture Counsellor Embassy of Malaysia

The Netherlands

Abstract Quality is a fundamental factor for negotiating price on our products. Engaging both the enterprise and public sector at all level for determining the compliance in the quality infrastructure is of paramount importance. Having done that, compliance to the quality standards set by both regulatory and consumer organization of importing countries is the responsibility of the enterprise. Food safety issues in the whole of EU are governed by regulations and directives established at EU level. In addition, retailer organizations such as GlobalGAP, BRC, IFS, and Q&S have their own food safety control systems with their suppliers which are often more stricter than the state rules. Recent trends on food markets favour the development of new food products with more added value and higher degrees of differentiation. These changes have created new opportunities for new products such as convenience and functional products such as hot cuisine, food with low sugar level, natural products and products that can be conveniently picked up at the stores. Enterprises in Malaysia should exploit these opportunities and compete in the new value chain. Also be prepared to innovate and to organize speedily not only to comply with food safety standards but also to be sensitive to the changing food habits in Europe.

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FAMAHighlight

1. Introduction Trading is the basis for the existence of commercial activities and the success of each enterprise is subject to its ability to get organized in order to produce and promote its products. Since Europeanization or globalization of the trade and the rules it entails, the most realistic approach for an enterprise is futures selling, i.e, selling before producing. But, we cannot sell before having produced, unless we are capable of respecting the buyers demand, product features, i.e, adhering strictly to the quality requirement. Therefore, it is imperative for enterprises especially in Malaysia to produce products of quality and at the same time to strengthen the national quality control body which would enable a label to be given to the origin of the products. Analysis of retail sales data reveals there is a further trend in food consumption pattern in Europe. Packed food products account for large shares of total food expenditures among consumers especially among the high income countries and the demand for convenience is still growing. Market trends also indicate strong growth in sales of packaged food products among the newly independent countries in Eastern Europe. The demand for processed attributes has increased consumption of quality assured products including organic products. In Western Europe, this has resulted in increased sales of private brands because retailers can set and enforce their own product quality standards. In developing countries especially in Eastern Europe, expansion of supermarket chains has also introduced private retailer brands, mainly cheaper substitutes for major manufacturer brands. This is the reason why the quality control approach remains one of the fundamentals, even the first and foremost requirement among the rules to be adhered to in all types of transactions. 2. Market Access Rules in EU At the moment, there are 35 quality regulations that cover 40 major fruits and vegetables. The regulations covers minimum requirements for quality (loyal and commercial quality), criteria for classification and calibration (fair trade); requirements for presentation and labeling; consumers information and country of origin. In addition to that, Common Agricultural Policy reform for EU countries was introduced on 24th January 2007 to improve the competitiveness and market orientation of the fruits and vegetable sector, reduce income fluctuations resulting from crisis, increase consumption, enhance environmental protection and, where possible, simplify the rules and reduce the administrative burden. The reform would encourage more growers to join Producer Organizations within EU. For Malaysia, to get market access, let us move on to the practical phase of the matter in order to understand the links existing between our activities and Quality.

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Moving to the market implies respecting the market access rules, namely;

Offering Quality Providing Quantity Ensuring Regularity Offering a Good Price

So for an enterprise in Malaysia to get market access and compete in the EU market, it needs to focus on the above market access rules. 2.1. Offering Quality Technological advancement of food production and internationalization of food distribution have induced more concern on food safety standards. Regulators have issued codes of conduct for food production, distribution, processing and preparation. The different stages of the production process are subject to different European laws regarding food safety and quality control or related issues. The enterprise has to comply with the regulatory standards and consumer demands on the quality. 2.1.1 Compliance to the regulatory standards What is the situation in Malaysia? Government enforces technical requirements such as in CODEX, HACCP, ISO standards for products inter alia, to protect the health and safety of their citizens. Consequently, an exporter has to meet these requirements for the relevant product to be allowed entry into the importing country. That is not enough. The requirements of the buyer have also to be satisfied if the product is to be sold in that market. In Malaysia, regulatory bodies involved in the exports of fruits are: Department of Agriculture and Federal Agricultural Marketing Authority (FAMA). But both these bodies do not have the capacity or manpower to provide analytical services that has international standing or accredited laboratories for residues and pests risk analysis. Other agencies and establishments are also providing analytical services in some other areas. It will greatly benefit the exporter if there is only one central agency providing all the necessary analytical services. For example within the European Member States there is an extensive network of laboratories engaged in detecting undesired substances in food. Within this network, there are so-called reference laboratories, whose task is to maintain the quality of the research in detecting residues. But at the national level, in particular in the Netherlands, two laboratories are represented as National Reference Laboratory (NRL) for residues in food products. One of the example is RIKILT. RIKILT- Institute of Food safety is an independent research organisation in the field of food and feed safety and health. The institute carries out high-quality research in the detection, identification, functioning and effects of substances in animal feed and vegetable, animal and compound foodstuffs. It is an autonomous body, self funded that

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carry out all the necessary analytical services for both enforcement agencies and consumer bodies. So there is uniformity in the results that everyone accepts the authoritativeness of the agency. It is also serve as an expert centre for analysis of residue substances in animal products. The Fruit Trade Association of Netherlands as (Frugi Venta) has also established Food Compass in 2003. By means of Food Compass, companies in the fruit and vegetable trade sector can have residue analyses conducted by agents. As a result, they can prevent products with excessive residue content from coming into the retail channel. Members of the association need only have to pay an annual subscription. Growers apply to Food Compass via the trading firm or the sales organization, and the products of the grower are sampled at the trading firm in accordance with the normal planning of Food Compass. Samples are taken from members premises to monitor residues every three months. This service is free for members. Since the end of October 2006, Food Compass has been certified as a residue monitoring system for GlobalGAP. In Malaysia, there are many agencies providing such services. Very often these laboratories are not accredited by the international accreditation bodies and the results are questionable. In view of this Malaysia should positively support the formation of a single body to implement this entity. Malaysia Agri Food Corporation or MARDI TEC or FAMACO jointly can form a corporate entity to set up the laboratory with initial grant from government. This kind of laboratory that is privately run can be more efficient with result orientated for the benefit of private sector. This laboratory can encompass not only fruits and vegetables, but also seafood, meat products and other processed and semi-processed products. But for development of methodology, this organization can utilize the universities infrastructure and other government departments for technical services that are available. These organisation can also become a certified residue monitoring system for SALM, SALT, SPLAM and also for GlobalGAP as needed. 2.1.2. Compliance to the Consumer Driven Standards Exporters having to meet the relevant sanitary and phytosanitary measures applicable to their products for entry into the importing country also need to fulfill the consumer driven standards. In Europe, satisfying buyer specifications such as Euro Retailer Product Working Group Good Agricultural Practice (EUREPGAP) synonym (GlobalGAP), International Food Standard (IFS) and the Global Standard- Food of the British Retail Consortium (BRC Food) are the pre-requisite for products to be sold in well established supermarket chains. Conformity has to be demonstrated to mandatory and voluntary requirements. Very often the consumer standards imposed by the consumer organization in Europe are much stricter than regulatory standards that are generally complied with CODEX. The GLOBALGAP or any other consumer quality standards are primarily designed to reassure consumers about how food is produced on the farm by minimizing detrimental

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environmental impacts of farming operations, reducing the use of chemical inputs and ensuring a responsible approach to workers health and safety as well as animal welfare. Generally they are a private sector body that sets voluntary standards for the certification of agricultural products around the globe. In Malaysia, similar voluntary quality programs have been established with the help of government agencies. They are abbreviated such as SALM, SPLAM, SALT, SOM and so on. Such abbreviations do not have the direct connotation on quality for easy interpretation by the enterprise in the market place. For uniformity and easy understanding, the agencies that are implementing the consumer quality programs should be thinking of changing the abbreviation by depicting the international market perception and general understanding ( for example, MYGAP). 2.1.3. Traceability This is a method of developing system and procedures to enable traceability of raw materials and intermediate and final products. From January 2005, traceability is required at all levels of the food supply chain in the EU (General Food Law Regulation). Major importers of fruits into EU have been implementing this procedure. Growers Traceability Reference Number- In Malaysia, often an export consignment consists of fruits collected from many growers. The major importers in Europe insists on traceability meaning that each grower must have an identity or reference number which can be traceable in case the consignment is intercepted with residues or pests. Therefore, traceability will help to screen the grower who has supplied fruits which have high pesticide residue on them, and action can be taken for individual non-compliance while the remaining inventory can be released. Further, this procedure will help to alleviate the problem of rejecting the whole consignment otherwise. 2.1.4. Notification of Non-Compliance of SPS Quick mitigation of the non-compliance is most essential to ascertain the credibility of the existing exporters. Generally, the notification of non-compliance is conveyed through the Consumer protection directorate-general of EU to the Ministry of International Trades (MITI) representative office in Brussels, Belgium. Sometimes the notifications of non-compliance do not reach the exporter quickly or effectively and this leads to misunderstanding and over-reacting in certain situations. So the responsible agency at the SPS inquiry point should coordinate with the relevant department and the parties affected immediately after receiving a non-compliance report from (MITI) Brussels. Any follow up decision made at the ministry or departmental level to rectify the non-compliance issues need to be conveyed immediately to the EU enforcement authorities and clients. The quick remedial action will create confidence amongst the regulators and will help to exporter to proceed with the continuity of the export.

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General Administrative Infrastructure of SPS

EUDirector General

SANCO

Malaysian International Trade & Industry (MITI)In Brussels

National SPS Committee

??

Ministry of HealthMinistry of Agriculture

MAQISNational Inquiry Point

Food Safety and Quality Control

Department

Department of Fishery

Department of Agriculture

Department of Veterinary Services

EnterpriseNotification

The figure above shows the general administrative infrastructure of implementation of Sanitary and Phytosanitary (SPS) in Malaysia. Although administrative structures for handling notifications of SPS measures, both incoming from EU and other members and notifications of new measures do exist but they need to be streamlined and improved for effectively solving of emerging SPS problems. 2.2. Providing Quantity At the moment, horticulture industry in Malaysia is facing a major crisis. With the palm oil price exceeding RM 3000 per metric ton, prevalent dieback disease on papaya, ever increasing cost of production (material and labour), perennial problem of short of air cargo space with anticipation of further flight route cut, seasonal variation of production, uncertainty of supply, unavailability of new clones that is accepted by market, competition form other emerging markets, impact of AFTA, all these will pose great threat to the industry. The government through the implementation of Third National Agriculture Policy, recommended 15 types of fruits (1998). In 2003, based on the Action Plan for The Balance of Trade (BOT) for agriculture, set a target of 12 fruits.(www.agrolink.moa.my). Since the implementation of the slogan Agriculture is Business, there is a need to review on the policy decision on the number of fruit types to be given priority that are economically viable and have the capacity to produce for export market. The government should focus on the crops that are strategic to Malaysia.

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Again with the record breaking experiences of palm oil price in 2007, it will pose a threat to the horticultural crop expansion in the shorter term. So the BOT plans might not be materialize due to this golden crop. 2.3. Ensuring Regularity Certain fruits have been established well in the foreign market. But fluctuating supply has affected the continuity of demand of the specific product. Some examples are mangosteen, rambutan and even mango. Some importers in Netherlands have indicated unfavourable reaction towards Malaysian exporters as far as regularity is concerned. 2.4. Offering a good price Price is always a major factor in Market Economy. It is well known fact that, in the horticulture industry, China is the price maker. At the moment, almost every country has to compete with Chinas products. Malaysian products are generally assumed to be more expensive as compared to products from China, Vietnam and Thailand. 3.0 The Role of enterprise within a Market Economy Within the Market Economy system, an enterprise is bound to innovate, create and make forecasts. Since consumer food choice is changing rapidly with development, the various quality attributes indicated by Brunso, Fjord Grunert (2002) such as sensory attributes, health attributes, health attributes, process attributes and convenience attributes have already created considerable complexity of consumer choices. In addition to that, cultural differences further complicate the consumer choice. Towards this end, an enterprise not only needs information, but it also requires the ability to analyze them so as to be innovative. Consequently, the quality of the information received plays a major role in its capacity to make forecasts and continue to compete and progress. 3.1 Structure of the Retail Market in Netherlands At the point of preparing this paper, I am unable to get the EU figures on the number of supermarkets and retail shops dealing with vegetables and fruits. In 2004, there are 5593 supermarket outlets of which 1446 are green grocers in the Netherlands alone (Source: Facts and Figures of the Dutch Agri-Sector 2006/2007). Green grocers generally deals with vegetables, fruits, grains and other food items. In term of values, the total value of fruits and vegetables traded in and on these markets was approximately 3.7 Billion (Fig 1). Fifty-four percent (54%) of the value traded was from supermarkets, thirty-two percent (32%) was done in flea markets and fourteen percent (14%) was from green grocers (Source: Frugi Venta Annual Report 2005).

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Fig 1: The structure of the Netherlands Retail market (2005)

Supermarket outlets Euro 2 Billion

Daily/ Flea Market 1.2 Billion

65% GreenGrocer/Shops/ Fruit/Veg Stalls 0.5 Billion

15%

20%

Source: GfK Consumentenpanel Nederland. Frugi Venta Annual report 2005 According to GfK Consumentenpanel (report on consumer panel for fruit and vegetables purchases, 2005), based on the initial six months of trading in 2005, the volume for supermarket dominated almost eighty-four percent (84%) for vegetables and seventy-five percent (75%) for fruits, respectively. The dominant position of the supermarket is also reflected in the table below (Table 1), which indicates the distribution of total fruit and vegetable sales for individual channels. Additionally, their report indicates a significant increase in volume per household in 2005 than in 2002. The volume of semi-processed vegetables (eg. assortment of mixed vegetables such as salad, carrot, cabbage and leak) continued to grow strongly. There was a seventeen percent (17%) increase in 1999 and a nine percent (9%) increase in 2002, respectively. Within the extensive processed vegetable assortment, sales of washed spinach and sliced endive reached the highest level.

T me in purchases of fresh fruit and vegetables for i nels in the Netherlands

Vegetables Fruit1st h 200 2005 1999 200Supe 77Greengrocer 11% 8Home delivery 1% 1Open-market 11% 10Other 4% 4

source: GfK Consumentenpane Frugi Venta Annual report 2005

2

% 84% 63% 68able 1: Share of volundividual sales chan

alf of 1999rmarket 73%% 5% 12% 9% 1% 3% 2% 6% 18% 16% 4% 4% 5

l Nederland. page 10 2 2005% 75%% 7%% 2%% 12%

% 4%

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Furthermore, the report indicates that the vast majority (94%) of prepared products are sold in supermarkets. However, the sales of prepared fruit have not met the expectations of buyers and shareholders of the supermarkets and the greengrocers, which was a mere 4%. Nevertheless, despite the sale of the prepared fruit not meeting the expectations of their investors, the share of pre-packaged fruit (assortment of different fruits) and vegetables in total sales continued to rise: Sixty percent (60%) of the vegetables was pre-packaged compared to fifty percent (50%) in 2002; with fruit, forty-six percent (46%) was pre-packaged compared to forty-three percent (43%) previously. Retail packaging is popular from these two marketing strategies: (1) hygiene (appearance, colour and smell) and (2) labeling to distinguish a product). The report also indicates that there is a sharp decline in the share of the open-air market. The enterprises have to decide in which segment of market they would like to pursue and strategize accordingly. 3.2 Trends in Food Retailing The changes in retail structure as seen above has influenced the power balance in the food chain and the competition among retailers. Retailers are already beginning to adopt proactive marketing strategies by having private labels to indicate their products. This will influence the buyers that the products having private labels are of high quality and consequently develop loyalty. European retailers also giving special importance to traceability of food products within the distribution network and willingness of suppliers to engage for long-term relationship with enterprises. 4.0. The Key factors within the Market Economy The key actors within the market economy are: The state, whose responsibility is to regulate, and The enterprise, whose duty is to sell trading products of reliable quality

4.1. Government policy Government and private sctor should not do the same. Government agencies should not compete with private enterprises. Government should be the facilitator rather than a competitor. If the government does compete with enterprises, then there will be a tendency to have double standards in term of enforcement and implementation of regulatory rules. This will lead to the lack of confidence on the part of regulators. The enterprise should strive to improve and innovate so that government can continue to support based on the credibility of the enterprise rather than the contacts.

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5.0. Concluding Remarks Agriculture exports diversified significantly during the last two decades particularly into high value fresh and processed products fuelled by changing consumer tastes and advances in production, transport and other supply chain technologies. Quality attributes are becoming a negotiating instrument. Trends on food markets favour the development of new products both in the fruits and vegetable sector with more added value and higher degrees of differentiation. Both developments in consumer demand and changes in retail industry have created new opportunities. However, to sustain in the industry, the enterprises should always comply with the quality requirements.

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Pengantarabangsaan dan Pengkomersialan Buah-buahan Malaysia: Penilaian Kesedaran Pengguna, Penerimaan, Sikap dan Citarasa di Pasaran Jepun

oleh Profesor Dr. Faridah Hj. Hassan (Ketua Penyelidik)

Prof. Madya Dr. Rosidah Musa Jamaliah Mohd. Yusof

Jamaluddin Yahaya

Fakulti Pengurusan Perniagaant Universiti Teknologi MARA 40450 Shah Alam, Selangor,

Malaysia

dengan kerjasama

Lembaga Pemasaran Pertanian Persekutuan (FAMA) Kementerian Pertanian dan Industri Asas Tani Malaysia

Abstrak Objektif utama kajian ialah untuk mendapatkan maklumat mengenai cabaran dan potensi yang akan dihadapi oleh pengeksport buah-buahan tropikal Malaysia ke pasaran Jepun. Secara spesifik kajian ini mendalami dan meneliti garispanduan impot dan prosidur sistem pengagihan pengeluaran segar di Jepun. Penemuan penyelidikan ini memberi implikasi bahawa prosidur import yang ketat dan undang-undang perlindungan tumbuhan akan merumitkan pengeksport buah-buahan tropikal untuk memasuki pasaran di Jepun. Oleh yang demikian, sekiranya Malaysia ingin berjaya dalam persekitaran pasaran yang lukratif dan berdayasaing, maka satu penekanan kepada pengusaha, pengeksport buah-buahan dan agensi kerajaan yang berkaitan mestilah terlebih dahulu perlu memahami secara implisit perundangan/peraturan dan juga memahami corak pemakanan buah-buahan oleh pasaran Jepun. Kaedah penyelidikan ini adalah melalui focus group dan temuduga in-depth dan laporan rasmi dari beberapa pentadbir kerajaan, peniaga buah-buahan, pengimport, peruncit dan konsumer. Kata kunci: Pengantarabangsaan dan Pengkomersilan, buah-buahan Malaysia, Kesedaran Pengguna, Penerimaan, Sikap dan Citarasa, Pasaran Jepun.

FAMAHighlight

Towards Internationalisation and Commercialisation of Malaysian

Fruits: Assessment of International Consumers Awareness, Acceptance, Attitude and Preferences (Japanese Market)

by Professor Dr. Faridah Hj. Hassan (Research Leader)

Associate Prof. Dr. Rosidah Musa Jamaliah Mohd. Yusof

Jamaluddin Yahaya

Faculty of Business Management Universiti Teknologi MARA 40450 Shah Alam, Selangor,

Malaysia

In collaboration with

Federal Agricultural Marketing Authority (FAMA) Ministry of Agriculture and Agro-based Industry Malaysia

Abstract The main purpose of this paper is to illuminate the challenges and potentials that might be faced by the exporter of Malaysians tropical fruits into the Japanese market. Specifically the study aims to impart importing guidelines and procedures and distribution system for fresh produce in Japan. The key findings of the research imply that the stringent importing procedures and plant protection regulations may discourage the exporters of tropical fruits to penetrate the market. Hence, if Malaysia is to succeed in this competitive yet lucrative market environment, it is imperative that farmers, fruit exporters and relevant government agencies understand implicitly the aforementioned regulations and understand the pattern of fruit consumption among the Japanese. The research methods utilized in the study were via focus group and in depth interview and official reports from several government authorities, fruit traders, importers retailers and consumers.

Key Words: Internationalization and Commercialization, Malaysian

fruits, Consumers Awareness, Acceptance, Attitude and Preferences, Japanese Market

Introduction

The agriculture sector has contributed significantly to the growth and development of the Malaysian economy hence, it is appropriate for the agriculture and food sector to be boosted as the third engine of Malaysias economic growth. In fact, Malaysia quest to be a net exporter of food by 2010, and seriously reinventing its agriculture sector. To ensure that this sectors contribution to the national economy and its global competitiveness remain strong in future, the Third National Agricultural Policy (NAP3) has been formulated. The NAP3 covers the period 1998 to 2010, which was set out as a framework for the agricultural sector future growth and continue to sustain as an important sector in the economic development of the country. The Policy was largely guided by the objectives and strategies of the National Development Policy and incorporates several strategies and action plans to deal with expected challenges and changes to the international economy.

It was reported that the markets for agricultural produce such as local fruits are

experiencing stiff competitive environment domestically, particularly during the fruit season. As such, it is envisaged that developing new markets such as penetrating challenging market such as Japan for fruits could promise significant contribution of the agricultural sector to export earnings. This effort could facilitate and assist to realize this countrys aim to increase its agricultural products export value to RM17.2 billion by 2010 (Federal Agricultural Marketing Authority, 2005). Malaysia is a producer of a wide range of tropical fruits such as pineapple, banana, mango, rambutan, durian, mangosteen, jack fruit, star fruit just to name a few.

Although the world market for tropical fruits is growing, Malaysias share in the overall international fruit trade is relatively insignificant. Nonetheless some interesting prospects for future development of tropical fruits in Japan have been revealed (Miyauchi & Perry, 1999). Hence, it is timely for Malaysia to examine the export market potential for its fresh tropical fruits into the Japanese market.

Japan is considered as one of the largest market in the world. Being the worlds

biggest importer for primary produce such as rice, wheat, soy bean, beef, fish, prawn, and animal feed (Miyauchi & Perry, 1999), its market for fresh fruit is relatively undeveloped. Furthermore, it was reported that the Japanese fruit growers satisfied only 60 percent of the market demand (Japan Trade Directory, 2005). Thus it offers a promising opportunity for foreign importers.

Japan itself produces fresh fruits such as pears and persimmon for their own consumptions. In fact, Japan is the third major producer for persimmon after China and Brazil (Japan Trade Directory, 2005). A wide variety of fresh fruits are imported to Japan, and most common one are bananas, pineapples, oranges, grapefruits and mangoes. With a strong economic background of Japanese households, the demand for other fresh fruits keeps on increasing (Japan Trade Directory, 2005). It was noted by Miyauchi & Perry (1999), the volume of the imported fruits is declining, but the variety of imported fruits and consumption of new and foreign tropical fruit is increasing.

This reflects that the Japanese consumers desire for variety in the fresh fruits category. With regards to fresh fruits imports, among the principle exporters are the USA for oranges, grapefruits, lemons and limes and papayas. While New Zealand is the key exporter for kiwifruits, Philippines is the major exporter for bananas, pineapples and mangoes (Japan Trade Directory 2005). The domestic production has run at 3.0 3.2 million tons a year whilst imports share of total fresh fruit supply is approximately 35 percent, about 1.6 million tons (c.f. Japan Trade Directory, 2005). Problem Statement

Even though it is an attractive avenue to embark on export marketing (internationalization) specifically lucrative market such as Japan, however, tremendous amount of effort, time and money have to be invested to implicitly understand the market and ultimately gaining market accessibility. Therefore, a thorough knowledge of the importing procedures and the Japanese distribution system and business practices as well as Japanese fruit consumption behavior is imperative in order to gain market accessibility successfully. Importers might face a tremendous challenge as Japanese market is very different in terms of plant protections laws, distribution system and the Japanese fruit consumption as compared to other cultures. Despite the aforementioned issues, very little research has been carried out to enrich our insights of the knowledge gap. In respond to this rationale, this paper attempts also to explore what are the critical challenges and potentials of importing fresh tropical fruits into the Japanese market. Research Objective

Generally this study is to explore and identify the challenges and market potentials in

exporting fresh fruits and commercializing it in Japanese market. Specifically, the research aims to gain insights of the legal regulations and administrative procedures in importing fresh fruits and understand the Japanese distribution system of fresh fruits and business practices and Japanese fruit consumption behavior. Ultimately, the fresh fruit business potentials offers by the market will be identified.

In brief the research objectives are: Assess the awareness level, acceptance, attitude and preferences of the

Japanese consumers on Malaysian fruits. Gain insights of the importing procedures and imported plant protection

procedures for fresh fruits in the focused country. Examine implicitly the distribution system for exporting fresh fruits to Japan.

Propose Action Plans for Market Accessibility of Malaysian fruits into Japanese market.

Research Design

Two stages approach were used in this study. Firstly, focus group discussion was conducted in Malaysia with relevant exporters, agents, representatives Ministry of Agriculture and Agro-based Industry, Federal Agriculture Marketing Authority (FAMA) and Japanese Embassy. The main objective of the focus group session was to understand the current rules and regulations in importing fresh fruits to Japan and to gain some insights from panels that have vast experience in exporting fresh fruits to Japan.

Secondly, several in depth interviews were conducted in Japan with relevant key

officers of various fruit-related organizations such as the Import Promotion Department of the Japanese External Trade Organization (JETRO), the import agents and wholesaler of fresh fruits and also Fresh Produce Import Facilitation Association in Japan. Beside this, relevant information was also obtained from official reports published in Japan and Malaysia and observations from field visits.

The in-depth interviews with the Japanese authorities were conducted during 7 19 October 2006 in various cities in Japan which include Osaka, Nagoya, and Tokyo. In addition, the research members visited several hypermarkets and supermarkets in these cities to observe the fresh fruits available with regards to its varieties, prices, quality, packaging, and their country of origin. Meetings with the relevant companies top management and top official of Tottori University and Wakayama University in Osaka were arranged by our research assistance in Japan. Company representatives from Nagoya came to Tokyo to be interviewed. Three consumer surveys were conducted in Tottori and Wakayama University and Japanese Club, in Kuala Lumpur.

The interviews were conducted between 10th October 2006 until 19th October 2006 in three major cities in Osaka, Nagoya, and Tokyo. On 10th October, an interview was held in Wakayama University in Osaka with the President, Vice President and also other top management of the University. On 11th to 12th October, 2006, the researchers attended seminar on agriculture organized by Tottori University. Most of the papers presented were mainly about the demand and supply of fresh fruits in Japan market. During the seminar, our research team distributed structured questionnaires to the students and lecturers who attend this seminar. The main purpose of this survey was to explore their preferences and awareness of Japanese of Malaysians tropical fruits.

While in Tottori we were also invited to attend a meeting organized by Japanese Agriculture Association (JAA). We took this opportunity to interview the officers about the potential of exporting Malaysians fruits in the Japanese market. We were also furnished with important reports pertaining to the value of export and imported fruits in

Japan. Subsequently, after the meeting we were invited to visit the pear (nashi) plantation. Tottori is well known as the biggest producer of quality nashi in Japan. We were also given the opportunity to visit JAA biggest fruit collection centre, where the key workers are the nashi farmers themselves. We were amazed by the high technology instruments that the factory employed in order to grade and pack the fruits. On 14th October, the researchers traveled southbound to Toyokawa, Nagoya where a meeting was conducted with the packaging manufacturer. During the visit we were given the opportunity to witness the latest packaging material and technology used by the factory. In Tokyo, we met with distributors, trading companies, importers, executives of Jusco, Japan Fresh Produce Import and Safety Association, Ministry of Agriculture, Forestry and Fisheries, Japan External Trade Organization, the OTA Fruit Auction Market and also the fruits parlour. Research Findings

According to the import agents, most of the fruits import source is from U.S which constitutes about 30% of the total imports. In 2004, Malaysia falls on 21st place in terms of ranking for importing the fresh fruits into Japan. It was also stated that the opportunities for exporters to import the fresh fruits into Japan are great if they could produce good quality fruits. It was revealed that most of the foreign fruits are imported by traders. Starting from May 2006, the Japanese government has imposed stringent regulations to the suppliers of imported fresh fruits into Japan. The chemical content of the fruits has to be reported in order to check against the Japanese positive chemical listing. Due to this stringent traceability protocol recently Japan managed to detect traces of prohibited pesticides in the fresh fruits, particularly mangos from India.

According to the importers, it is particularly very difficult to import fresh fruits to Japan. There are only a few suppliers or traders who are able to import the fresh fruits. The critical issue of importing fresh fruits has been quality and also the present of fruit fly. The importing agents experience with Thailand with these two issues on the imports of mangosteen has made them changed their importing strategy. They import another fruit instead, which is mango originated from India. As such, this will create stiff competition among fresh mango which already available in the Japanese market. It was observed that only those traders who follow strictly the rules and regulation of importing foreign fruits would be able to supply the fresh fruits to Japan. Nevertheless, mangosteen is identified as a fruit with potentials. The external and internal appearance, size and sweetness of mangosteen are among the criteria of the fruit choice of the Japanese. However, the importers must ensure that the shell of the fruit must be in good condition as any scratch on the skin is regarded as damaged.

It is also stated that it is not a Japanese culture to eat freeze-dry fruits, but fruits are generally used as toppings. For the traders, price is a factor that determines if the traders are willing to import the frozen fruits. For the processed fruits like juice, the challenge lies in the life span of the juice itself which generally is only about two weeks in the convenient stores. As to date, Japan is working with traders in Thailand and Philippines for juices. Other processed fruits-based food which is gaining its popularity among the Japanese is mango pudding which mainly imported from Singapore. Apart from the life span, the lead time is also another issue that must be addressed if traders plan to export the processed fruits into Japan.

From the interview with two leading supermarkets (AEON and HANAMASA), it was unveiled that they imported quite a number of frozen fruits. For example, rambutan, mangosteen, dragon fruit and durian in frozen form were imported from Thailand. Other frozen fruits like pineapple were imported from Taiwan and grapes were from Chile. There is a high demand for frozen mango and pineapple fruits but there is a low acceptance for dragon fruits. The main reason for its unpopularity is because the fruit is considered new and most consumers do not know how to eat it. Again, the issue of quality and lead time can impede the opportunities for imports by the traders.

With another interview with the supermarket, it is found that customers generally enjoy eating fresh fruits, but they are lazy to peel off the skin. These customers prefer processed fruits such as pudding and juices. This has resulted in a reduced demand for fresh fruits that the supermarket has reduced in its imports for fresh fruits. Furthermore, the supermarkets were facing problems on their imported fruits as black spots were found on most of the fruits. Apart from that, they also had delivery period issue where most traders could not comply with the earlier agreement on delivery date. It is important that the fruits must be delivered timely in order to maintain its sweetness. Other processed fruits which have gained popularity are the mango jelly and also the mango pudding. Besides the normal consumption by the consumers, they are used by

1547D916A32 Danh Gia Thi Truong Qua Nhiet Doi EU

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