Required Report - public distribution

**Date:** 2007/3/15

**GAIN Report Number:** TW7011

TW0000

**Taiwan**

**Stone Fruit**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Alan Hallman

American Institute in Taiwan

**Prepared by:**

Jeff Miller, Reports and Marketing Officer

**Report Highlights:**

High export prices for stone fruit during the 2006 season cut into what
promised to be another positive year for U.S. suppliers to Taiwan. While
volume dropped 11 percent overall, enough consumers remained willing to
pay higher prices (15\~25 pct. higher than 2005 prices at retail
outlets), to sustain a 7% rise in sales by value in 2006 over last year.
Given improved pricing, stone fruit demand is expected to grow
moderately over the next three years in value and volume. Exporters and
industry associations are encouraged to target key consumer priorities
in market promotions. This will help maximize market interest and
support stone fruit's still privileged position in Taiwan's fruit
market.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Taipei ATO \[TW2\]

\[TW\]

Executive Summary

Stone fruit has held a privileged position in Taiwan's fruit universe
for at least the past decade. The favored position of the peach in
Chinese history and the strong promotion effort given sweet cherries
have won stone fruit the position of third most popular fruit category
(by volume, after citrus and deciduous fruit). While Taiwan produces
significant quantities of Japanese apricots, plums and peaches, they
are, with the exception of the latter, channeled primarily into
processed food applications. Therefore, an estimated one half of total
fresh stone fruit consumption is supplied by imports.

Tight supply and robust domestic U.S. demand combined to force prices
for stone fruit significantly higher during 2006, reducing imports in
what could have turned into another record sales year for US peaches and
cherries in Taiwan. As it was, Taiwan consumers shied away from
premium-priced fruit sending overall stone fruit export volumes to
Taiwan down 11 percent. Higher per-unit prices, however, increased the
dollar value of sales positive by 7 percent over 2005 levels. Even given
a return to more attractive pricing levels, any reduction in economic
growth can be expected to impact stone fruit consumption.

The United States, with an 80 percent share of Taiwan's stone fruit
imports and one quarter of total domestic fresh stone fruit consumption,
will remain the largest supplier of stone fruit to the Taiwan market
into the foreseeable future. As China remains excluded from the market
for plums, peaches and nectarines due to lack of phytosanitary
protocols, the US will continue to account for most (better than 95%) of
northern hemisphere supply. With supplies increasing most significantly
from the southern hemisphere, the US share of total imports in the
category should over the coming half-decade settle in at around 70
percent of an expanded "pie".

To ensure a healthy market for US stone fruit in Taiwan, exporters and
industry associations are encouraged to provide additional attention to
importer and consumer needs and to consider supporting marketing
programs that help draw consumer attention back to stone fruit.

Production

Taiwan produces roughly 2/3 of its total, and roughly 1/2 of its fresh,
consumption of stone fruits (Japanese apricots, plums, peaches,
nectarines, jujubes (Chinese dates) and cherries). Of the total 151,800
mt harvested in 2006, Japanese apricots accounted for about 36% (54,000
mt), plums for 21% (31,700 mt), jujubes for 22% (33,600 mt) and peaches
and nectarines for almost 21% (32,500 mt). Taiwan does not produce
cherries. Production is expected to remain relatively consistent through
the coming several year period.

Stone fruit varieties cultivated in Taiwan to date are largely "local"
or "Asian" in origin and, as such, differ (with the exception of
peaches) significantly from imported varieties in terms of appearance,
taste and application. An estimated 80% of the annual harvest of plums
and Japanese apricots (some 65\~75k mt) is channeled into the
manufacture of value-added fruit products, including candied, preserved,
dried fruit as well as fruit wine and distilled spirits.

Taiwan's large middle class and consumption-oriented propensities have
joined in recent years with renewed market interest in / nostalgia for
distinctively Taiwanese foods. Preserved and otherwise processed plums
and Japanese apricots, as a widely accepted mainstay of the Taiwanese
snack lineup, have enjoyed a resurgent popularity that promises to hold
through the coming years. Consequent demand for local varieties of fresh
plums and Japanese apricots for use in processing these snacks has
helped stone fruit orchards resist, and slightly reverse, the overall
pressures felt in the overall domestic fruit sector to reduce crop
acreage and shift resources away from fruit production. While, for
example, the area in which apples are harvested has fallen by some 10%
since 2002. The area under stone fruit cultivation has held roughly the
same over the last 5 years and may indeed increase slightly given steady
or increasing demand.

Taiwan grown peaches are sold and consumed fresh and, unlike plums and
Japanese apricots, compete in the same market as imports.

Taiwan peaches are available in the marketplace between late February
and early June. The season for plums and Japanese apricots is slightly
later, from March through late June.

Consumption

Market demand for stone fruit is well established in Taiwan, with the
core market dealing in commodity varieties and a healthy periphery
handling specialty stone fruit varieties (donut peaches, pluots, and
super-sized Japanese gift peaches) that attract market curiosity and
command premiums. In terms of fresh (non-processed) stone fruit, high
quality fruit imported from the United States and other countries has
been a staple of grocery stores and fruit markets for more than a
decade.

The 213,577 mt of stone fruit consumed in Taiwan during 2006 represents
a slight (3%) drop from 2005 levels. In terms of consumption, Taiwan
should remain on a moderate upward track in stone fruit consumption
averaging 3\~5 percent per year over the next several years.

Increases / decreases in fresh consumption remain derived almost
exclusively from imports. Such was very apparent during the 2003/2004
year with numerous poor cherry crops and the 2004/2005 year with
generally poor plum crops around the world, growth (or decline) in local
market consumption during any given year is influenced greatly by the
availability of stone fruit crops of reasonable (in historical terms)
price and quality from foreign suppliers.

As shown in the table below, imported stone fruit accounts for 30% of
Taiwan's total demand for imported fresh fruit (most tree fruit, with
the exception of citrus, is primarily imported). This ratio is expected
to remain relatively stable through the coming several years.

With the position of most stone fruit at or near the "pinnacle" of the
premium fruit pyramid, it is important to keep in mind that fruit in
this category is more vulnerable to variances in the general state of
the economy than are staple and commodity fruits. Although not playing a
perceptible factor in the current dip in consumption (largely attributed
by industry to high supplier prices and sourcing issues), growing
uncertainties regarding economic growth prospects, tighter government
and private sector budgets for social activities / gift giving, and a
general tightening of fiscal belts cannot but negatively affect growth
prospects over the next three years. Negative or mixed economic
performance can be expected to cancel or reverse growth for the affected
year or years. Conversely, positive economic growth and political /
economic stability can be expected to reflect in particularly strong
demand growth for stone fruit.

![](media/image2.wmf)

Taiwanese rank among the highest consumers per capita of fruit in the
world. Fruit is regularly eaten as a snack and as dessert and is the
most popular "visiting gift" to share with friends and relatives.
Supporting this highly fruit-oriented diet is a wide selection of
locally grown fruit (from tropical fruits like bananas, mangoes, and
custard apples to temperate fruits such as apples, jujubes and peaches)
*and* an active and sophisticated trade in imported fruit.

Enjoying such a diverse and competitive fresh fruit market, Taiwanese
are both knowledgeable and careful in their purchases. The core
commodity markets for fruit, including stone fruit, demand good quality
at competitive prices. There is virtually no market in Taiwan for
second-quality -- with even slightly bruised or otherwise imperfect
fruit sold at a sacrifice or simply dumped. Consumers examine fruit
purchased carefully for appearance and quality. The broad diversity of
fresh fruits available during most of the year also means that switching
among "similar" fruit categories is common when consumers cannot
purchase a particular fruit item at an acceptable price point or quality
level.

***Good \"Face Value\"***

As with deciduous fruit (apples, Asian pears), attractive appearance
(size, color, shape) and quality image are given significant weight by
the Taiwan consumer. This reflects the broad-based use of fruit as an
expression of social courtesy and thoughtfulness. Unless bought solely
for personal consumption (rarely), the color, size, and general
appearance of fruit is typically quite important to the retail customer.
Serving good-looking fruit to family, friends, or clients intimates good
manners, generosity, and warmth. The \"best-looking\" fruit, often
specially presented on store shelves or sold in gift packaging, fetches
the highest prices. Fruit categories (such as sweet cherries) and
varieties (such as white flesh peaches) that are perceived /
successfully marketed as premium items enjoy strong demand and earn for
importers the highest profit margins.

**Trade**

Roughly 1/3 of Taiwan's total stone fruit demand and 1/2 of total fresh
stone fruit consumption, respectively, are imported. In terms of volume,
nectarines represent the largest segment (38%), followed by plums (24%),
cherries (20%), and peaches (18%). Taiwan imports a negligible volume of
fresh apricots. Lackluster trade performance in 2006, particularly in
comparison of the strong gains made in 2005, is in significant part
attributable to higher world prices. White flesh peach price quotes in
2006 were 15\~35% higher than 2005. Sweet cherry quotes also went as
high as 20% above 2005 levels.

Northern hemisphere suppliers, with the highest initial volumes and
highest prices, lost the most ground. US peach sales fell 12%, while
Japan's small but premium export sales was sliced nearly in half (45%).
Cherries were the one bright spot, benefiting from regular local
promotion and flexible packaging on retail shelves, were the single
category to maintain positive growth this year. Northern hemisphere
suppliers (the United States and Canada) grew their collective imports
by just under 2 percent.

![](media/image3.wmf)

Southern hemisphere supplier Chile, earning some advantage from
increasing supply and lower costs of production, managed to hold peach
volumes steady as the market's second largest supplier (after the US)
and make significant inroads in cherries -- effectively doubling its
sales volume to 2,612 mt.

![](media/image4.wmf)Over the coming three years, the United States is
almost assured to remain the dominant supplier of stone fruit to the
Taiwan market. Imports of fresh cherries from China, permitted from
2005, have not yet made an impact on the market due to quality issues,
and importer concerns regarding consumer acceptance of Chinese cherries.

Sales success by southern hemisphere suppliers, particularly Chile, is
helping grow year-round demand for stone fruit while not cutting into
northern hemisphere supplier markets. As the market continues to grow,
the U.S. can be expected to own a gradually smaller share of a "bigger
pie". Trade analysts anticipate that, over the longer term (five years
or more), the U.S. can expect to account for a minimum of around 70
percent of total imports by volume. However, should Taiwan permit
phytosanitary access to Mainland Chinese stone fruit -- peaches in
particular -- U.S. exporters can expect to face significant challenges
to hold onto their overall dominance.

**Trade and the WTO**: Taiwan's entry into the WTO in 2002 (January)
opened the island's stone fruit market to countries previously banned
(Korea and Japan) or restricted. As shown in the table below, US market
share in all categories has fallen off pre-WTO highs. While US market
share has been "watered down" somewhat by rising import volumes from
competitors, US stone fruit is facing a truly new competitive landscape
in Taiwan's post-WTO market. Taiwan's summertime fruit markets today
display a much broader array of fresh fruit choices both from abroad
(Japan, Korea, SE Asia) and from domestic producers (improved varieties
of mangoes, citrus, berries, etc.).

***Product substitution*** has proven to date to be a significantly
larger threat to stone fruit's former dominance of summertime store
shelves than by stone fruit from competing northern hemisphere
suppliers. In order to retain and improve the market for US stone fruit,
US industry and exporters are encouraged to maintain targeted and
effective marketing programs that underscore stone fruit as the summer
fruit of choice for Taiwan consumers. Promotion programs may do best to
address key consumer objectives (health, face value, reliable quality)
and take advantage of Taiwan's interest in new varieties of familiar
fruits by introducing and promoting such.

**[General Phytosanitary Requirements]{.underline}**

Taiwan subjects stone fruit imports to inspection based on three
foundation laws: the Food Safety Management Act, Food Safety Management
Regulations, and Maximum Residue Level Standards.

Taiwan currently bans or subjects to pest-free certification
requirements imports of stone fruit from countries with the following
pests: (1) Mediterranean fruit fly, (2) Peach fruit fly, (3) Codling
moth, (4) Apple maggot, (5) Mexican fruit fly, (6) Plum curculio, (7)
Queensland fruit fly, (8) South American fruit fly and (9) Western
Flower Thrips.

![](media/image5.wmf)Taiwan defines maximum residue levels (MRLs) for
around 60 chemicals. Shipments are checked on a random basis. Taiwan's
Department of Health (DOH) is currently reviewing current permitted
chemicals and MRLs for each. The Agricultural Affairs Section at the
American Institute in Taiwan and U.S. industry have worked to ensure
that all pesticide and other chemicals of concern to U.S. industry are
permitted under temporary arrangement during the review period as well
as to see that chemicals and residue levels will be defined in such a
way as to not become a trade barrier to U.S. suppliers. The DOH review
process is expected to run several years during which formal
announcement of new MRLs will be made.

A list of MRLs in English is available on the Department of Health's
website at URL: http://www.doh.gov.tw/english/food/1.5.htm

**[The China Factor in Competition in the Taiwan Stone Fruit
Market]{.underline}**

Taiwan has opened the two stone fruit categories of apricots and
cherries to import from China. To date, Taiwan has recorded no imports
of either.

While importers have indicated certain interest in assessing China
suppliers' capabilities in supplying fresh cherries, logistical
difficulties and continuing quality control difficulties have, to date
prevented any successful sales. Cherries, with their unique position as
a high volume, high value, short sales window item, represent both high
risk and high profit for Taiwanese importers. As such, established
suppliers in the United States and other major fruit producing countries
are still preferred due to their reliability and responsiveness.

At the present time, the import of stone fruit from China, while
remaining a long-run threat to US market share, is not considered a
factor in current market competition.

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height="3.6846456692913385in"}**Statistics**

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