Required Report - Public distribution

**Date:** 3/6/2009

**GAIN Report Number:** CH8616

CH8616

**China, Peoples Republic of**

**Market Development Reports**

**\"A\" is for Apple and \"C\" is for China**

**2009**

**Approved by:**

![](media/image1.wmf)Joani Dong, Director

U.S. Agricultural Trade Office Guangzhou

**Prepared by:**

May Liu

**Report Highlights:**

Why is South China so important for U.S. apples? First, it's home to the
biggest imported fruit wholesaler in China where trucks leave, laden
with fruit to the rest of China. Second, its ports draw in most of the
imported apples that hail from overseas. Third, Cantonese are crazy
about fruits. U.S. Red Delicious is available year 'round in retail
stores, in family-owned fruit stalls and from peddlers on tricycles.
Imported American Galas and Granny Smiths are popular, but the U.S. is
constrained to officially export only Red and Golden Delicious from
Pacific Northwest states although other varieties enter via grey
channels. Increased market access for American apples is linked to
China's market access for fresh pears and maintenance of market
promotion. The Chinese Fuji is a fierce competitor.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Guangzhou ATO \[CH3\]

\[CH\]

**Table of Contents**

> [A look at the world apple market
> 3](#a-look-at-the-world-apple-market)
>
> [Why South China plays a pivotal role in China's apple trade
> 3](#why-south-china-plays-a-pivotal-role-in-chinas-apple-trade)
>
> [What South Chinese like about imported apples
> 5](#what-south-chinese-like-about-imported-apples)
>
> [Who the competitors are 7](#who-the-competitors-are)
>
> [Where apples are sold 10](#where-apples-are-sold)
>
> [How U.S. apples are marketed and promoted
> 11](#how-u.s.-apples-are-marketed-and-promoted)
>
> [Conclusion 13](#conclusion)
>
> [Other related GAIN reports 14](#other-related-gain-reports)
>
> [Appendix 15](#appendix)

# 

# A look at the world apple market

*China is a big producer, but also imports high value, fresh apples*

Apples account for just about half the world\'s deciduous fruit tree
production. China is a leading apple producer and exported US\$698.7
million fresh apples to the world (mostly to Russia and many Asian
countries such as Indonesia, Thailand, Philippines and Vietnam);
However, according to China *Customs*, in 2008, it imported US\$ 44.6
million worth of fresh apples from all sources, up 30.3 percent from the
previous calendar year.

![](media/image2.jpeg){width="2.5625in" height="3.051388888888889in"}

These apples hail mainly from Chile and the United States. U.S. apples
occupied 38.9 percent, while Chile took the lead with 45.6 percent
market share. New Zealand is the third biggest fresh apple exporter to
China, followed by Japan.

The data may not reflect the whole market situation. According to
industry insiders, direct shipments of Washington apples to China only
account for 40 percent of total imports of Washington apples into China.
The rest (Washington Gala, Granny Smith and early season Red Delicious),
due to a 45-day cold treatment requirement, are transshipped from Hong
Kong. Taking this into account, U.S. apples should have more market
share than Chilean apples in China's imported fruit market.

China consumes U.S. apples in the South (Guangzhou, Shenzhen, Guangdong,
Foshan, Zhongshan, Changsha, Xiamen and Fuzhou), the North (Beijing,
Qingdao, Dalian, Shenyang, Changchun, Harbin,) and the East (Shanghai
and major cities in Jiangsu and Zhejiang Provinces coastal areas) This
report focuses on the view from the Pearl River Delta because of its
strategic importance.

# Why South China plays a pivotal role in China's apple trade 

For the past two decades, South China has been the hub for fruit
imports. In recent years, direct shipment to mainland ports has
increased, but insiders still believe significant amounts enter via grey
channels through Hong Kong where they are marketed locally or barged in
containers to South China ports and loaded onto trucks headed to the
*Jiangnan Fruit and Vegetable Wholesale Market* in Guangzhou, South
China. From there, apples are trucked to the rest of China.

Apple imports through South China ports reached US\$ 32.2 million in
2008 which accounted for 72 percent of total imports to China. Improved
infrastructure and growing numbers of retail outlets have extended
distribution networks for apples in South China.

**Table 1.** Total imports to China via South China ports

  -------------------------- ----------- ----------- ---------- ----------
                             **2005**    **2006**    **2007**   **2008**

  **Value (US\$ millions)**  19.35       16.60       24.14      32.22

  **Quantity (metric tons)** 25,053      20,511      26,271     31,190
  -------------------------- ----------- ----------- ---------- ----------

*(Source: China Customs)*

In 2008, according to *China Customs*, South China imported US\$17.7
million worth of fresh apples from Chile, US\$ 9.8 million from the
States and US\$ 4.5 million from New Zealand.

In 2008, 96.6 percent of China\'s total fresh apple imports from New
Zealand landed in ports in the South: about half came in through
Shantou, 45 percent from Guangzhou and rest from Shenzhen. Shanghai and
Beijing only represent a fraction of total imports.

In addition, 86 percent of China\'s total fresh apple import from Chile
entered the South, 8.5 percent in the north and 4.5 percent in Shanghai.
![](media/image3.jpeg){width="2.28125in" height="3.066666666666667in"}

Some 56.6 percent of China\'s total fresh apple imports from United
States came through South China, 30 percent from the north and 12.4
percent from the east.

Apple consumption continues to rise with increased incomes, especially
in urban areas. Guangzhou and Shenzhen are key markets in South China.

There are a number of emerging South China markets including Dongguan,
Foshan, Xiamen, Fuzhou and Nanning. They have promising potential for
imported apples, although further market development is needed and
likely to be extended there.

Domestic supply floods the market. Chinese apples, mostly from the north
(Shandong and Shaanxi) dominate mass market, and the Fuji is the
favorite for many southern consumers. Chinese apples, mostly Fuji, are
available throughout the year and sold at less than half U.S. apple
prices. Overall fruit quality is expected to improve as farmers plunk
down more farming inputs to coax high yields.

Demand for imported apples grows. Apples, mostly from Chile and the
United States, hold high end niches in wealthy areas. There is also
increasing demand for apples from New Zealand and Japan.

Development of the fruit distribution system in China, especially the
cold transport system, has not yet kept pace with ever growing fruit
imports. Most cold storage facilities in cities other than Guangzhou and
Shenzhen are small and in poor condition.

The sight of perishable high-priced fruit placed outside
temperature-controlled areas point to lack of awareness or lack of cold
storage all along the supply chain - from importers to wholesalers and
retailers. This is why traders sometimes complain about losing money.

Limits in the cold chain system have led to significant losses for both
domestic and imported apples. It can affect the quality of imported U.S.
apples before delivery to consumers. As a result, shortage of cold
storage facilities and management expertise restricts expansion of U.S.
fruits from principle city markets to smaller cities. However, in recent
years South China has progressed.

Another challenge is tightening inspection in recent years, which also
limits apple imports. Consumers do not care much about where fruits come
from and those that do often aren't informed enough to tell the
difference. This prohibits further success of U.S. fruit, especially in
emerging city markets where consumers have limited experience with
imported products. Improving the quality of local fruit and availability
of a wider variety of imported fruit limits sales of U.S. fruit.
Washington *Red Delicious* apples are usually labeled in retail chains
so consumers are well informed. As the U.S. cannot officially export
*Washington Gala* and *Granny Smith* apples to China directly, retail
chains tend to be cautious and do not label Washington Gala and Granny
Smith apples. Thus, consumers may not be able to differentiate
Washington Gala and Granny Smith apples from Southern hemisphere Gala
and Granny Smith
apples.![](media/image4.jpeg){width="3.1458333333333335in"
height="2.3534722222222224in"}

In addition, the Chinese *Huaniu* apple that closely resembles U.S. Red
Delicious makes it easy for Chinese-grown fruits to assume an American
identity through counterfeit labeling.

# What South Chinese like about imported apples

South China is at the forefront of the nation's rush towards a developed
market economy where residents enjoy above average incomes. Its rising
middle-class can afford imported fruits, known for high quality with
health and food safety reasons attributes.
![](media/image5.jpeg){width="2.142361111111111in"
height="2.859027777777778in"}

Guangzhou and Shenzhen consume the most imported apples in South China.
Since one child families are the norm, parents will do anything to
provide the best for their prized child. As a result, target consumers
for apples are:

1.  Health-conscious young parents

> 2\. Organizations

3.  Individuals with mid- to high- level incomes

4.  Individuals concerned with lifestyle

Consumers expect retailers to carry different kinds of apples from
various overseas sources.

South China consumers tend to follow consumption patterns from Hong
Kong, Macau and other Southeast Asian countries. Japan and Taiwan, for
example, have a big influence on South China, particularly Hong Kong and
Macau.

Hong Kong has a well-developed apple distribution network. Increasingly
organic varieties are found in shops that specialize in organic and
natural products such as *City Super* and *ThreeSixty*. Imported organic
apples from the United States, Italy, New Zealand and Australia packed
in small transparent packages attract small families and individuals.

**1. Color, aroma, taste, firmness, crunch, price**

In general, South China consumers prefer apples that are juicy, crunchy,
firm and mildly sweet, at a Brix valued 11 to 14 degrees. Shiny color
and medium-sized apples are favorites, like the Fuji variety. Retailers
prefer to use waterfall displays to grab attention.

Consumers also like the larger red delicious from Washington State, with
its elongated shape, dark red hue and pronounced dimples. This variety
is ideal for gift-giving, but isn't purchased as an everyday item for
most people. A prime Washington Red Delicious can cost twice as much as
a Chinese Fuji for the general public. However, when comparing top
quality Chinese Fuji apples from Northern China and adding shipping
costs, they are not that much cheaper than Washington apples.

South Chinese urban consumers scrutinize fruit characteristics and
presentation such as look, flavor, safety and nutrition; however, price
is still important to most.

Chinese use all senses when selecting fruit. For example, with apples,
they will check for firmness, color, appearance and fragrance. They
listen to the crunch when their teeth sink in. They will judge if the
price is reasonable or too high. For domestic apples, taking Fuji Grade
A for example, retail prices should not be higher than US\$1.00 per 500
grams (one lb.) and not higher than US\$0.58 per 500 grams for lower
grades. In contrast, Southern consumers accept imported apples at higher
prices ranging from US\$1.40 to US\$2.20 per 500 grams.

**2. Family enjoyment and convenience**

South China families not only enjoy eating but in eating fresh. It's
usually the female head of household who shops daily for fresh fruits
and foods. Sometimes, after dinner, the family strolls to nearby fresh
stalls. ![](media/image6.jpeg){width="3.0625in"
height="2.296527777777778in"}

High-end retailers such as *Olé* and *Sam's Club* like to use popular,
small prepackaged bags of apples.

**3. Gift giving**

Traditionally, the best apples are given during holidays and special
occasions. In Cantonese, the word for apple *(ping guo)* is similar to
the word for peace *(ping an).* The older generation encourages
relatives to eat apples and tell friends to bring apples when traveling.
Friends and family present apples to wish patients well.

During special occasions such as *Spring Festival* (also known as the
*lunar new year*) and *mid-Autumn Festival* in September *(*also known
as the *Moon Festival),* for example, people give apples when visiting
friends, nicely packaged in a decorative gift boxes made of paper or
wood or gift basket with Chinese symbols for "good luck." Retailers may
sell privately labeled gift boxes. To the Chinese, "eight" and "six" are
lucky numbers so retailers make sure prices cleverly include either of
these two. Red Delicious apples, prized for its lucky red color, used to
be the most popular variety for gift-giving. However, consumers have
shifted to Gala and Granny Smith's which are gaining ground in South
China.

**4. Health and lifestyle attitudes**

Traditional Chinese believe eating apples promotes health. Apples are
rich in nutrition, easily digested and absorbed and an excellent source
of fiber. Fiber helps sustain blood sugar levels; promote digestion;
helps lower blood cholesterol levels and reduce risk of heart disease
and certain types of cancer. A large sized apple contains only 130
calories. Natural sugars in apples are slowly released into the
bloodstream. That's why they are a good source of healthy carbohydrates
and may be consumed by diabetics.

Consumer demand for high quality fruit has increased in major
consumption areas such as Guangzhou and Shenzhen. There is a growing
trend of health conscious consumers who pay premium prices out of
concern for food safety. They go for different varieties and colors.

Chinese people prefer to peel the skin when eating apples for fear of
excessive pesticide residues used in China. However, it is a good idea
to eat apples with skin. Almost half of the vitamin C is underneath the
skin. Eating the skin also increases insoluble fiber content. Most of an
apple\'s fragrance cells are also concentrated in the skin. As they
ripen, skin cells develop more aroma and flavor.

Since retailers and media promote U.S. apples along the themes of food
safety and wholesomeness, eating and enjoying them with skin on is a
good selling point. Thus, Washington state joined forces with the U.S.
Department of Agriculture's (USDA) Agricultural Marketing Service, as
well as other states, to adopt and offer the USDA's Good
Agricultural/Good Handling Practices audit program to Washington state
growers, producers and shippers, a voluntary, audit-based program that
verifies conformance to generally recognized good agricultural practices
and good handling practices as outlined in the Food and Drug
Administration's Guide to Minimize Microbial Food Safety Hazards for
Fresh Fruits and
Vegetables.![](media/image7.jpeg){width="3.5618055555555554in"
height="2.4319444444444445in"}

Many Chinese consumers are already aware of "green food,'" that is, food
grown under controlled conditions that limit use of pesticides and
fertilizers. Affluent consumers are willing to try organic apples.

# Who the competitors are

**1. U.S. origin - Washington apple varieties in South China**

Officially only *Red Delicious* and *Golden Delicious* from the Pacific
Northwest States (Washington, Oregon and Idaho) are allowed access into
China. There is limited demand Golden Delicious, and its Chinese
equivalent known as *Huang Jiao* which looks similar is also not
popular. The *Washington Apple Commission* looks favorably for Chinese
access of all imported apple varieties.

There are growing imports of *Granny Smith's* and *Gala's* from
Washington State that enter South China via Hong Kong through grey
channels.

U.S. apples in China are mostly from Washington State, known worldwide
for their beauty and crunchiness. Central Washington's hot summer days
and cold nights create an intense dark red. With the distinctive red,
white and blue labels, Washington apples show up in family owned fruit
stalls dotting the city and in giant hypermarkets. In China, all U.S.
apples are eaten fresh and generally not used as an ingredient for
cooking. However, Post has noticed that some retailers provide recipes
to encourage use of apples as an ingredient. South China fans prefer
medium size 100's (per 42-lb. box) while the rest of China prefers
bigger 72's or 80's. Apples are usually purchased out of preference for
a certain variety.

***Red delicious*** has a unique shape with a long-chin in attractive
shiny red wax and a favorite snacking apple for many western consumers
because it is crunchy with a mildly sweet flavor. They are harvested in
September and October. Available year-round in Guangzhou and Shenzhen,
it is regarded as a perfect gift to friends and relatives for its deep
red color and shiny surface due to waxing. *Red's* are used for
religious or ancestral offerings on the first and fifteen of every month
according to the lunar calendar at home or at temples. In South China,
this variety can be found in almost every retail format including
hypermarket, supermarket and fruit stalls. Some insiders believe current
demand for red delicious has reached maturity in this region, but
continued promotion is
critical.![](media/image8.jpeg){width="2.441666666666667in"
height="2.948611111111111in"}

***Golden Delicious*** has firm, white flesh and sweet crisp flavor. In
the States, it is the preferred \"all purpose\" cooking apple since it
retains its shape and rich, mellow flavor when baked or cooked. *Golden
Delicious* is very good in fresh salads and freezes well. However, there
is not much demand for this variety in South China.

***Granny Smiths*** have crisp, mouth-watering tartness. Bright green,
extremely tart, crisp, juicy and versatile, Granny Smith is available in
South China from September through April, although this variety is not
officially allowed access to the Chinese market through legal
procedures. Sales volume is small, compared with Red Delicious. However,
it is regarded as a good variety to enrich shelf display by many South
China retailers as the color is solid green.

***Galas*** have pinkish-orange stripes over a yellow background, the
signature of this crisp, aromatically-sweet apple. Gala is a good size
for snacking and one of the favorites for South China consumers. In the
States, they are also used for salads, baking and for making apple
sauce. In China, they are eaten fresh. This variety's harvest is from
mid-August through early-September. Galas are available in South China
from late August through next year April. The variety has enjoyed a
growing positive reputation in South China. Many people prefer the taste
of U.S. *Gala* to those from Chile and New Zealand. However, competition
from Chile and New Zealand cannot be ignored. China also produces this
variety, however, the taste and appearance is not as good as imported
products.

**2. Apples from the Southern Hemisphere \-- Chile and New Zealand.**

Apples from Chile are available from March to September in South China.
Traders increasingly import Chilean *Galas* and Chilean Granny *Smiths*
then. This affects imported volumes of U.S. Gala's and Granny Smith's
where there's an overlap. It normally takes about a month for Chilean
apples to be shipped from the ports of Valparaiso or San Antonio to
China.

Meanwhile, New Zealand Gala is also available from March in South China.
Apples from the Southern Hemisphere are usually cheaper than U.S.
apples. However, as the U.S. season is the opposite of South Hemisphere
countries, in general, there is no direct competition in autumn and
winter. New varieties like Queen, Pacific Rose, Beauty from New Zealand
are also gaining popularity. Most container shipments from New Zealand,
mostly from the port of Napier, normally take two weeks to China.

Normally, Chinese traders purchase fruit from all overseas suppliers
(U.S., Chilean and New Zealand) using letters of credit or plunk down a
deposit with final payment upon arrival or pay in advance if it wants to
secure scarce quality supplies. However, since Chile has proportionally
big and growing supplies and needs to sell quickly as it does not have
controlled atmosphere (CA) storage that allows them to sell year 'round
like the Americans, Chilean exporters will sell to Chinese traders on
consignment. This means shippers will quote a lowest price. The importer
bears the loss if apples are sold below this price; if above, the
importer shares the profit with the shipper. The more flexible payment
terms encourage Chinese traders to import more Chilean product.

**3. China's apple supply.**

In addition to imported apples from Chile and Australia, Chinese apples
are available almost year round. Since South China has a hot climate, it
has almost no production of apples. However, with improved
infrastructure development, domestic supply from Shandong and Shaanxi
provinces are transported to the South, mostly Fuji's. There are also
other choices: *Red Star*, *Qinguan, Huaniu* (which resembles *Red
Delicious*), *Huang Jiao* (also known as *Yellow Banana* and resembles
*Golden Delicious*), Qingpingguo (also known as *Green Apple* and
resembles *Granny Smiths but paler green*), *Jinguan and Gala*. All
these varieties are priced much lower than imported ones
![](media/image9.jpeg){width="2.4166666666666665in" height="1.8in"}

*Fuji\'s* spicy, crisp sweetness and firm flesh make it an excellent
fresh eating apple which is how Chinese consume them. In the States,
they're used for baking or making applesauce and stores as well. In
China, *Fuji's* key production areas include Shangdong, Shaanxi and
Gansu. *Fuji* flavor improves in storage. *Fuji* skin color varies from
yellow-green with red highlights to very red. It is a cross between *Red
Delicious* and *Ralls Janet* varieties in Japan. Domestic Fuji's for the
regular public can sell for half that of imported apples. This also
limits sales of U.S. apples for the price conscious.

**4. Other competitors.** In South China, there are also apples from
Japan, home of the *Fuji*. One of Japanese varieties called
"*Shijiediyi,*" or "No. 1 in the world" in Chinese, is as large as a
giant grapefruit. During past special holidays, they have reached a high
of US\$21 per piece at stores. Since this variety targets a niche
market, sales volume is small.

Other competitors include other imported fruit such as table grapes,
cherries and oranges as well as local tropical fruits available in the
summer such as durian, mangosteen, lichee and mangos, not to mention
domestic cherries, peaches, watermelon and pears.

# Where apples are sold

South China is the most developed region for apple distribution
channels. Chinese consumers prefer to buy fruits from a range of formats
including modern retail outlets and traditional formats such as fruit
shops and open air stalls as well as moving street vendors on tricycles.

**1. Hypermarkets and supermarkets.** The best venues for imported
apples in South China are *Sam's Club*, *Olé* lifestyle store, *AEON
Jusco, CR-Vanguard, Park 'n shop* as well as *Metro.* All have a
sizeable fresh produce section, featuring a large variety of fresh
fruits. These large retailers look for supplies available year 'round.

Over 80 percent of supermarket customers visit the produce department,
and 75 percent end up buying something. Produce quality is the main
reason a customer chooses one supermarket over
another.![](media/image10.jpeg){width="2.5625in" height="3.1875in"}

Apples are the heart of the produce category, and Washington apples are
the leading worldwide apple brand. Washington apples consistently
provide top category sales, setting the tone for an entire department.

Most supermarkets and hypermarkets offer both bulk and pre-pack fruit
and combination bags. Bins are often used to position seasonal/
promotional items at the front of the store and the front of the produce
department. These supermarkets and hypermarkets have learned to create
an "apple destination": they keep the apple category out in front and
show customers an image of quality by keeping the category clean and
organized the entire day. In fact, more and more hypermarkets have
refrigerated counters to display fruits. They also apply color breaks to
attract traffic. Surveys have shown that over half of all purchases are
made on impulse. How to stimulate this impulse for apples is a hot issue
for these retailers.

Retailers have begun to carry organic produce items in recent years, and
shelf space doubled this year. Over 95 per cent of organic products sold
in South China are locally produced fresh produce. There are some
imported organic products at high-end stores sourced from Taiwan, Japan
and Europe, but rarely from the United States.

In addition, hypermarket and supermarkets are ideal venues for launching
in-store American Food Festivals. In South China, Guangzhou and Shenzhen
are the most developed areas.

**2.** **Fruit stands.** They fill gaps left by convenience stores,
which rarely carry more than one or two types of fruit. Fruit stands and
open-air stalls have always been prosperous in South China despite rapid
expansion of modern retailers. China's high urban population densities
are likely to support their continued existence.

Many consumers still believe apples sold here are fresh, directly from a
wholesale market on a daily basis. Small size and independent ownership
allows these shops to adapt to individual locations such as apartment
complexes and adapt product selection to match individual consumers.

Imported varieties are available. Since sales are boosted by the
tradition of giving gifts when visiting friends, most fruit stands will
even wrap fruit baskets to order. However, they are generally regarded
as poor venues for imported products, as they are generally price
driven, poorly regulated and lack the means to store fruit properly.

**3.**  **Moving street vendors** mostly sell domestic apples and other
fruits. Sometimes, they sell imported apples and cherries, but in
limited quantities.

**4.** Emerging produce **chain stores in communities** offer gift
packs, bulk and pre-pack fruit. Displays can be smaller but produce
quality is critical.

**5.** **Internet online** ordering and delivery is an emerging trend.
Selected specialized fruit trade websites also offer online shopping of
gift-packaged apples. China has already overtaken the States in 2007
with 189.4 million internet users, a 221 percent jump in five years
time, but the practice of on-line purchase is much lower. This trend may
take years to become popular as South China consumers still prefer to
personally buy fresh.

# How U.S. apples are marketed and promoted

Post talked *with U.S. Washington Apple Commission* representatives,
local retailers and traders who stated that in order to market U.S.
apples successfully, shippers, importers, distributors and retailers
need to follow handling and marketing instructions carefully to minimize
loss and damage.

**Storing.** Apples keep longest in cool conditions (3C / 36F), which
are well-ventilated, dark and slightly humid.  Apples ripen six to ten
times faster at room temperature than when refrigerated. If
refrigeration is not available, a good option is to store product in a
shed or garage, in plastic bags to retain moisture - leave a 2cm (1in)
hole in each bag to allow some ventilation.
![](media/image11.jpeg){width="3.6222222222222222in"
height="1.7826388888888889in"}

**Display.** Large, eye-catching displays draw customers using the
Christmas, Mid-Autumn Festival, Spring Festival and American food
festival themes. Attractive displays may be created using large ceramic
pots, baskets, wooden crates or pallets for a wholesome, "natural" look
that reinforces the healthy image of produce. The amount displayed
should match what's expected to be sold in the same day.

**Sampling.** Sampling is especially effective in introducing new
products, or reintroducing old favorites. It also provides opportunities
for personalized contact, enhances cross-merchandising efforts and, most
importantly, stimulates immediate as well as longer term sales.

**Handling.** Consumers expect the best when they pay more so good
rotation practices are key -- they shouldn't have to sort through
product. Customers will always take the freshest available product they
have access to.

Old stock needs to be placed on top and never at the bottom so that the
first in is the first out. Stock needs to be rotated side-to-side and
back to front. Apples must be cushioned at the bottom with a pulp tray
and other soft materials.

Apples must always be carefully handled, as they are fragile and
susceptible to bruising. Damaged and decaying produce must be removed
and sold separately or throw out. Water should not be sprinkled on
apples as it causes them to lose crunchiness and taste.

**Promotions.** Competing in the apple market requires careful planning
and a clear market strategy. Long term cooperation is the goal. Large
retailers require consistent supply and quality. Instore promotions
which include samples are one of the most effective ways to promote
apples from United States. USDA Agricultural Trade Offices (ATOs) in
China are good resources. *(Refer to list of Agricultural Trade Offices,
page 14)*![](media/image12.jpeg){width="2.6444444444444444in"
height="3.1868055555555554in"}

For example, in early December 2008, representatives of the *Washington
Apple Commission,* (WAC) in China arranged a national training seminar
and promotion program involving six retailers around the country. Among
them, three were in South China: *Wal-Mart*, *Jusco* and *Park 'n Shop*.
In South China, there are 42 *Wal-Mart*, 35 *Park n' Shop* and 13
*Jusco* stores. Similar sessions were conducted in Shanghai and Beijing,
but with different retailers. *(Note - WAC is governed and funded by
growers who pay a mandatory assessment against all fresh apple
shipments. The Director of Agriculture approves the budget and sits on
the Board of Directors. WAC's purpose is to advertise, promote, educate
and develop the market for the Washington fresh apple crop.)*

**Logistics management**. U.S. apples are collected during the harvest
season, then packed and stored in cooling conditions. Before loading to
a ship container, apples are required to be kept under cold treatment
for 45 days. Then it takes two to three weeks to ship the containers to
China ports.

**Duties.** Officially, the duties for direct apples shipment from U.S.
to China include 10 percent tariff plus 13 percent VAT (value added
tax). Generally, containers are shipped to Hong Kong, then transshipped
to mainland China. On average Southern Chinese traders pay US\$7,142 as
handling package fee per container. The handling fee varies in different
seasons.

Chinese importers or wholesalers sell apples to distributors. Then,
chain stores purchase produce items through their Chinese distributors.
(*Refer to* *Appendix -- Logistics Path for Fresh Apples*, *page 15*)

Specialized wholesale markets have seen increasing trading volumes of
fresh apple varieties.

*Jiangnan Fruit and Vegetable Wholesale Market* is known as one of the
largest wholesale markets in China for fruit and vegetable trading. Each
year on average, it handles 5.0 million tons of fruit and vegetables
valued US\$ 2.0 billion. Over 30 fruit importers set up branch offices
here. Many key apple importers or traders are not familiar with customs
clearance formalities so they usually hire agents to execute import
clearance.

Distributors and traders from all over China visit *Jiangnan Wholesale
Market* and arrange shipment of apple products by trucks bound for
retailers, restaurants and hotels as well as fruit stands. Secondary
fruit wholesale markets are always incorporated in local agricultural
product wholesale markets. For example, in Shenzhen, there are two
wholesale markets: *Shenzhen Buji Agricultural Produce Wholesale Market*
and *Futian Agricultural Produce Wholesale Market.* Traders in these
markets visit *Jiangnan Market* regularly buy imports.

Emerging new wholesale markets aggressively pursue a greater share of
the produce business from Jiangnan. But they would find it hard to
replace *Jiangnan* in the next three to five years, given the latter's
well-established operations, logistics network that crisscrosses the
country, and availability of a full range of varieties imported through
both official and grey channels. Diversified distribution such as
specialized distribution centers, outlets and chain stores spur sales.
Trading companies and industry groups accelerate marketing efforts.

**Cold chain***[.]{.underline}* It is the distributors' responsibility
to keep fruits fresh until retailers receive product in good condition.
And it is retailers' responsibility to provide fresh fruits to their
customers. Therefore, cold chain management becomes more important
during the whole process. However, so far, cold chain management is
lacking. Not all trucks for transshipping fresh fruits have cold chain
facilities. ![](media/image13.jpeg){width="3.0833333333333335in"
height="2.296527777777778in"}

**IPR protection***[.]{.underline}* Few Chinese consumers pay attention
to origin issues. Few can tell the difference between genuine labels of
U.S. origin apples from false ones. In some emerging markets, the
Chinese Huaniu that looks like a *Red Delicious* had a Washington apple
label. Counterfeits are widespread in these markets, and where a brand
name adds value, it is certain to be copied. As a result, there is less
room for marketing and promotion of imported products. As for trade,
Chinese clients need to be visited regularly to maintain good
relationships and show appreciation. These contacts will help exporters
understand regional and city markets.

# Conclusion 

Although Washington apples have long enjoyed a good reputation in South
China, it is critical to keep promoting its image and work closely with
retailers. Innovative packaging, new varietal development and reasonable
price positioning are key to maintain market share, given fierce
competition by Chinese apples. Solid promotion has helped to capture a
middle and upper income consumer base, pretty much immune to the global
economic slowdown when it comes to apples. Traders are open to new
varieties such as Washington's *Honey Crisp*. Opening the Chinese market
to all varieties is critical to the future of U.S. apples.

**Post Contact Information**

For further information about the China market, as well as updates on
upcoming events and activities, visit our website at
[www.usdachina.org](http://www.usdachina.org/) or contact the following:

**FAS/Office of Agricultural Affairs (OAA), Beijing**

No.55 An Jia Lou Rd,

Beijing, China 100600

Tel: 68-10-85313600

Fax: 86-10-85313636

E-Mail: <AgBeijing@fas.usda.gov>

Website: [www.usdachina.org](http://www.usdachina.org/)

**Agricultural Trade Office (ATO), Beijing**

No.55 An Jia Lou Rd,

Beijing, China 100600

Tel: 68-10-85313950

Fax: 86-10-85313050

E-Mail: <ATOBeijing@fas.usda.gov>

Website: [www.usdachina.org](http://www.usdachina.org/)

**Agricultural Trade Office (ATO), Guangzhou**

14/F, Office Tower

China Hotel, Guangzhou 510015

Tel: (86 20) 8667-7553

Fax: (86 20) 8666-0703

E-mail: <atoguangzhou@fas.usda.gov>

**Agricultural Trade Office (ATO), Shangha**i

Shanghai Center, Suite 331

1376 Nanjing West Road

Shanghai 200040

Tel: (86 21) 6279-8622

Fax: (86 21) 6279-8336

E-mail: <atoshanghai@fas.usda.gov>

**Agricultural Trade Office (ATO), Chengdu**

U.S. Consulate General

Chengdu Agricultural Trade Office, Suite 1222

194th Section Renminnan Road

Chengdu, Sichuan, PRC 610041

Tel: +86 13808212410

Fax: +86 28 8513 8698

Email: atochengdu@fas.usda.gov

**Agricultural Trade Office (ATO), Shenyang (office to open 2009)**

E-mail: atoshenyang@fas.usda.gov

# Other related GAIN reports

1\. Fresh Deciduous Fruits Annual\-- CH8108, dated November 26, 2008

2\. South China, Vibrant Gateway for China\'s Imported Fruit \-- CH7610,
dated June 10, 2007

# Appendix

**Table 1. 2008 China imports of fresh apples by country and region
(US\$ million)**![](media/image14.wmf){width="2.186111111111111in"
height="2.172222222222222in"}![](media/image15.wmf){width="2.207638888888889in"
height="2.120138888888889in"}![](media/image16.wmf){width="2.167361111111111in"
height="2.098611111111111in"}

**Table 2. Total apple imports to China, Chile and U.S. took the lead**

**(US\$ million)**

![](media/image17.wmf){width="5.2375in" height="2.796527777777778in"}

**Table 3. Logistics path, from American orchards to Chinese consumer**

*(Source: ATO Guangzhou)*

**Table 4. Major Apple Varieties Available in South China** (by origin)

<table>
<colgroup>
<col style="width: 11%" />
<col style="width: 12%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 5%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Origin</strong></td>
<td><strong>Variety</strong></td>
<td><em>Aug</em></td>
<td><em>Sep</em></td>
<td><em>Oct</em></td>
<td><em>Nov</em></td>
<td><em>Dec</em></td>
<td><em>Jan</em></td>
<td><em>Feb</em></td>
<td><em>Mar</em></td>
<td><em>Apr</em></td>
<td><em>May</em></td>
<td><em>Jun</em></td>
<td><em>Jul</em></td>
</tr>
<tr class="even">
<td rowspan="3"><p>U.S. Washing<em>-</em></p>
<p>ton State</p></td>
<td><p><em>*Red</em></p>
<p><em>Delicious</em></p></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="odd">
<td><p><em>*Granny</em></p>
<p><em>Smith</em></p></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Gala</em></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="odd">
<td rowspan="2">Chilean</td>
<td><p><em>*Granny</em></p>
<p><em>Smith</em></p></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Gala</em></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="odd">
<td rowspan="4">New Zealand</td>
<td><p><em>*Granny</em></p>
<p><em>Smith</em></p></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Gala</em></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="odd">
<td><em>*Rose</em></td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Queen</em></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr class="odd">
<td rowspan="7">Chinese Apples</td>
<td><em>*Gala</em></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Fuji</em></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td> </td>
</tr>
<tr class="odd">
<td><em>*Red Star</em></td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Qinguan</em></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="odd">
<td><em>*Huaniu (1)</em></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><em>*Ji Guan</em></td>
<td></td>
<td></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="odd">
<td><p><em>*Qing</em></p>
<p><em>Pingguo or</em></p>
<p><em>Green</em></p>
<p><em>Apple (2)</em></p></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
</tbody>
</table>

*(Source: ATO Guangzhou) (1) Similar to Red Delicious; (2) similar to
Granny Smith*