How to prosper when life gives you lemons

When is a lemon not just a lemon? Well, in Tongnan, a district of Southwest China's Chongqing, it can become anything from fruit tea to a facial mask to essential oils once it hits the production line.

China is not traditionally grower of lemons, but Tongnan dominates the domestic market with nearly 100 processed lemon products that it exports to about 30 countries.

More than 40,000 families are involved in planting 13,000 hectares of lemons in the district at present, with plans to have 30,000 hectares of lemon groves generating 30 billion yuan ($4.3 billion) of revenue by 2020.

Tongnan's success is an example of agricultural supply-side structural reform in action. The local government has placed much hope in the Huida Group, leader of the country's nascent lemon processing business.

Dai Xiaoping, founder of Huida, believes the company's success lies in what he calls "deep processing", which means making use of all parts of the fruit.

"The flesh of a lemon can be made into dried lemon slices and drinks, its skin and seeds into fruit tea, and the oil in the skin can be used in cosmetics," he said.

Dai did not come up with his zesty business model until suffering a major setback from the traditional "grow-buy-sell" pattern six years ago.

Farmers in Chongqing first began to grow lemons about 50 years ago and sold the fruit to dealers from other parts of the country.

In 2007, Dai returned to Tongnan, his hometown, to plant a lemon grove. A bumper harvest came in 2011, but a glut in supply led to a fall in price and many farmers were frustrated at selling their produce for a paltry 0.6 yuan per kilogram. That was when Dai learned that fresh fruit is vulnerable to price volatility. What's more, any unsightly fruit, which can account for nearly one-third of the yield, is harder to sell.

"The lesson was that growing good lemons is only half the battle; selling them is the other half," he said.

So Dai came up with the idea of processing his crop: "The new business enables us to bypass the risks of the fresh fruit market and it's also a way to deal with the ugly ones."

In 2012, Dai set up Huida, spending heavily on a research and development center. A year later, he launched a production line, at a cost of more than 300 million yuan, to produce food, beverages, cosmetics and healthcare products.

One metric ton of fresh lemons can sell for about 8,000 yuan, while dried lemon slices made from them sell for 120,000 yuan, he said.

The production line can handle more than 20,000 tons of fresh lemons per year and that capacity is set to rise when a new production line opens at the end of this year. Tongnan now has 10 lemon processors, providing hundreds of jobs both in the factories and in the fields.

As the largest of them, Huida has contracts with 84 cooperatives to supply fresh lemons.

"Since our products have higher added value, we can offer a higher price to growers. So the misery we all experienced in 2011 may never happen again," Dai said.

(China Daily 03/24/2017 page7)