Top: A Chinese worker picks fruit at one of Chic Group's eight orchards in China. Above: Zhu Yanming, CEO of Chic, says the company plans to introduce fruits that are popular in the West to the Chinese market. Photos Provided to China Daily

Versatile company looks to an uncommon fruit in China to target the nation's growing consumer trend for healthier foods

Chic Group, China's largest canned fruit exporter, is on a similar path of many Chinese companies - it is putting a greater focus on the domestic market. But in transforming its business once again after a reshuffle in 2001, it is banking on one unlikely fruit to target the world's second largest economy: blueberries.

In May, the Shanghai-based company announced it will invest $2 million (1.6 million euros) to develop a 133-hectare blueberry orchard in Chongqing.

Zhu Yanming, CEO of Chic, says the farm will have an annual capacity of 90-100 tons of blueberries for the overseas and Chinese markets.

Chic supplies one of the United States' largest processed food producers, Del Monte Food Co. Last year, it exported 10,500 twenty-foot equivalent units (TEU) of fruit products to Del Monte, while also supplying processed fruits to other major food companies such as Coca-Cola Co, Heinz Co, Dole Food Co Inc and fast-food restaurant operator Yum! Brands.

Last year, the company exported 50,000 tons of canned oranges and peaches, accounting for about 20 percent of China's total exports of the two fruits that amounted to 253,000 tons.

But in retooling its business to focus on fruit juices, especially blueberry, it is hoping that with growth in China's consumer wealth and demand for healthier foods, more and more Chinese will be turning to a more Western taste in fruits.

"If you look at the entire domestic market the middle class is expanding rapidly, (and) that puts more disposable money in the hands of people and they are willing to taste those fruits that Chinese people are not familiar with but popular in the West," Zhu says. "Aiming at the new growth point is the key factor for Chic."

Zhu says the company is also looking to fruits such as avocados, blackberries, raspberries and black amber plums but adds that it will take awhile before Chinese consumers grow more accustomed to them.

The CEO says demand for fresh fruits in China is on the rise. For Chic to increase revenue, he says, it is important to be keenly aware of consumer trends, like the preference for a wider range of fruits.

According to a survey done between 2010-11 by DWS Invest Global Agribusiness Fund, a mutual fund managed under Deutsche Bank, US consumers drank an annual average of 45 liters of fruit juices, slightly less than the average of 46 liters in Germany. In Japan, the average was 16 liters. During this period, Chinese drinkers consumed an annual average of 1 liter.

"We know many Chinese don't have the habit of drinking fruit juice now and the consumption per person will not rise drastically in the short run, but Chinese consumers are paying more attention to their health now," Zhu says.

Expanding business is nothing new for Chic. It transformed from a logistics and supply chain management solution firm to a fruit processing and canning company in 2001. It now employs about 12,000 and has branch offices in 19 cities across 17 countries with eight orchards of mainly oranges and peaches. Its orchards are located in Hunan, Anhui, Jiangsu and Shandong provinces as well as Chongqing and the Inner Mongolia autonomous region, a total of 1,319 hectares.

Over the last seven years, Chic has been conducting tests at its orchard in Junan, Shandong province, to ensure that its blueberries are equal in taste to the fruits grown in the West.

And it has already experimented with juices, with a juice brand and "bistro" named Brix 12 in Shanghai. Chic currently has three stores in the southern coastal city but is looking to add four more this year and a total of 50 across eastern China.

Zhu says Chic is also working with a Fortune 500 company, though he declined to disclose the name, to run an as of yet unnamed juice brand.

The CEO says one snag to Chic's business is the competitive nature of fruit farming. Due to low labor costs, it had previously been an advantage in China to compete with major international juice brands. He says the take-home pay for a Chinese fruit picker is much lower than in the US and Europe. A Chinese fruit picker's salary is between 1,500 yuan and 2,000 yuan per month during the harvest, while in the US, fruit pickers can earn $1,700 (1,370 euros) to $1,900 per month, according to research by Hebei University published last year.

But he admits the advantage in labor is declining because more Chinese people in the rural parts are moving into urban areas of China where there are more jobs, education opportunities and higher standards of living.

In 2011, China's urban population surpassed the number of people living in the countryside for the first time in China's more than 5,000 years of history. According to figures released by the National Bureau of Statistics, the number of people living in towns and cities increased by 21 percent to around 691 million by the end of 2011. China's rural population fell by 14.6 million to 657 million.

"From a long-term perspective, the agricultural output may drop after a few years because of people moving into the cities. It is imperative to improve farmers' income level and grant them more affordable business opportunities," says Gao Juncai, a director at the National Development and Reform Commission.

Zhu says China must "keep its farmers at home and thus reduce the stress on the urban areas. The key is land reform in rural areas, coupled with access to the funds, education and technology needed for them to become modern farmers".

In April, Chic partnered with the United Nations Educational, Scientific and Cultural Organization (UNESCO) to launch a program to test various green approaches to rural urbanization.

With UNESCO, Chic, which donated $2 million to the program, will help build a community in Banan district of Chongqing with an investment 200 million yuan. The company hopes to bring this model into other provinces such as Anhui and Shandong.

Zhu says the disparity between rural and urban standards in China is vast and that it is time to reduce the wealth gap between Chinese cities and rural areas.

To assist this project, Chic is establishing two agri-business projects in Chongqing and Anhui and is planning to grow oranges in Chongqing and peaches in Anhui's Xiaoxian county. Fruit processing factories and logistics centers will also be built to create jobs. Chic has invested 500 million yuan for these projects.

"Chongqing has a big chance to realize the goal because the central government has chosen Chongqing as an experimental zone to implement the policy of urban-rural integration. In Xiaoxian county, Anhui province, 18 ministries and administrations signed together to select this place for another attempt at urban-rural integration," Gao says.

Chic's other plan is to develop 10,000 hectares of farmland in Xiaoxian county to achieve an annual peach processing capacity of 400,000 tons with the goal of becoming the world's largest peach processor and producer.

zhongnan@chinadaily.com.cn

(China Daily 06/08/2012 page15)