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"OPPORTUNITIES TO INCREASE TROPICAL FRUITS EXPORTS IN EUROPE"

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1 "OPPORTUNITIES TO INCREASE TROPICAL FRUITS EXPORTS IN EUROPE"
SEMINAR ON "OPPORTUNITIES TO INCREASE TROPICAL FRUITS EXPORTS IN EUROPE" 13 AUGUST 2008 For Malaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, MAEPS Serdang Exploring the Market Potential of Fruits in Europe: Key Lessons for Malaysian Tropical Fruits Exporters. Excerpt from A FAMA-UKM research consultancy project entitled “An Assessment of Market Potential of Selected Tropical Fruits in the Netherlands” By Research Team from UKM Prof. Dr. Mohd. Fauzi bin Mohd. Jani, Prof. Dr. Aliah Hanim bt Mohd. Salleh, Dr. Tih Sio Hong, Dr. Azhar Hj Ahmad, Dr. Norjaya bt Mohd. Yasin, En. Mhd. Suhaimi Ahmad, En. Ahmad Khairy bin Mohd. Domil (Marketing & Service Management Research Group UKM)

2 OBJECTIVE OF STUDY 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 fruits among the channel members. To identify facilities in fruits distribution used by the channel members in distributing tropical fruits. To suggest a strategic action plan in order to increase the tropical fruits export to the Netherlands.

3 SCOPE OF STUDY Geographical scope:
The Netherlands as the gateway to the European fruit market. This study focuses on the market potential of ten tropical fruits as listed below: Starfruit Dragon fruit Pineapple Rambutan Durian Pomelo Papaya Mango Mangosteen Jack Fruit

4 RESEARCH ACTIVITIES CONDUCTED
1. Focus Group Discussion 2. Interviews (n = 100) with industry players: Local exporters and producers Foreign importers, wholesalers, and retailers 3. Observation of open markets in the Netherlands. 4. Participation of 26th Fresh Produce Forum, 7th Feb 2007, Berlin. 5. Interviews with Fruit Logistica tradefair participants, 8-10 Feb 2007. 6. Warehouse site visits in the Netherlands, Nov/Dec 2006, Feb 2007. 7. Feedback from local industrial experts

5 Discussion during FAMA-UKM workshop
Hilton Hotel, Petaling Jaya, November 27, 2006 Interview sessions with the representatives of Solfruit (Fruit Logistica tradefair participant) Berlin, February 7, 2007

6 Warehouse site visits - Hispa Fruit’s Cold Room
Feb. 13, 2007

7 Various Tropical Fruit Uses In Europe
Eating Gifts Garnishing Table Deco

8 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
1. Demand for fruits in Europe is “pushed down” through the marketing channels by large-scale importers as the primary tier, with wholesalers, large-scale and small-scale retailers and open markets as secondary and subsequent tiers in the channel system. Implication: Vital for exporters to identify which importer to target, and establish and sustain a mutually-beneficial long-term relationship with this (these) large buyer(s). Equally vital for exporters to be able to supply conforming to the large quantity and export quality of fruits expected by these large-scale buyers who value order consistency, regularity of supply and appropriate timing to meet shortfalls of supply in Europe.

9 An Overview of the Marketing Distribution Channels for Tropical Fruits in the Netherlands
Large Scale Importer/ Wholesaler/ Exporter Exporters (Retailer) Retailer Supermarket Retailer/ Wholesaler End Consumers Distribution Center / Warehouse Open market Re-export Cross-Supply Indicator:

10 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
2. Consumer demand for fresh tropical fruits in Europe is also “pulled” up through the channels by large-scale and small retailers such as the supermarket chains. Implication: If targeting for the potentially large consumer market in Europe, the fruit (e.g. Carambola, pineapple, mango, pomelo, watermelon, jackfruit) can be ‘positioned’ to be eaten fresh, and must be matched with the needs and tastes of the supermarket shopper ( value-for-money positioning). This will generate thin margins to be spread over large turnover.

11 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
2. If targeting for specific niche market segments, as decoration (for buffet tables/decorate drinks, as garnishing), or for fresh juicing, a premium strategy will give the marketeer the advantage of premium pricing with higher margins over small quantities of selected fruits (e.g. starfruit, pittaya, pineapple’ mangoes) To be studied: Potential of fruits to be positioned as “gifts” (such as in Japan) Producing fruit species with attractive colour and longer shelf life Exporting sweeter varieties for fresh juicing and targeting special buyers (airlines, hotel and restaurant chains)

12 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
3. There is a growing trend among European consumers to prefer “health and beauty” attributes in their preferences of what fruit to choose to eat and for what occasion. Implication: If exporters want to capitalize on the “exotic” fruit image, its quality is of the essence in order to enjoy the benefits of premium pricing. But if “a critical mass” is needed to harness orders from supermarkets, consumer awareness of the nutritional benefits through extensive consumer promotional campaigns (at supermarkets, fruit fairs, specialty stores, educational media, etc.). FAMA can play a leading role in promotion. Effective grading and labeling with nutritional information for consumers are vital, to signal quality and the health benefits they promise.

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16 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
4. The ten tropical fruits from Malaysia are still generally perceived by consumers in Europe as “exotic” fruits and not (commercial) fruit “commodities” such as bananas (predominantly from Central America), apples, oranges, pears, grapes and pineapples (predominantly from Costa Rica) to be eaten daily as a quick snack/refreshment. Implication: To compete with the Euro spent on fruits with other freshly eaten fruits such as apples, oranges, pears, bananas, our fruits have to be ‘eating-friendly’, ‘snack-friendly’ – pre-packaged (e.g. in individual portions) and pre-cut, with assortments in ‘fruit boxes’.

17 Brochure Promoting Tropical Fruits

18 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
5. Malaysia carambola (starfruit) has the largest export potential to Europe; relative to the 3 other tropical fruit clusters under study. Cluster 2 (Mango, Papaya, Pineapple) has very high market demand, but the European market is very competitive with so many suppliers already dominating the market. Cluster 3 (Pummelo, Dragon fruit) has medium market demand with moderate level of competition. Cluster 4 (Rambutan, Durian, Jackfruit, Mangosteen) has few suppliers and presently low market demand.

19 Rambutan, Durian, Jackfruit, Mangoesteen
Positioning Map for Selected Tropical Fruits in European Market Market Demand Market Competition Low High Mango, Papaya, Pineapple Pummelo, Dragon Fruit Rambutan, Durian, Jackfruit, Mangoesteen Star fruit Potential Market Competition refers to number of competitors in market/intensity of competition Market Demand is the estimated level of demand by importers Positioning map is based on researchers observation of the market, interviews with industry players

20 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
5. Implication: Each cluster open possibilities for different marketing strategies. Star fruit Invest in market positioning & generate higher demand from importers Concentrate effort on maintaining its current strength especially the positive association of star fruit and source from Malaysia Leverage the familiarity of the fruit to create market niche among high-end market Promote more usage of fruit. Not just for garnishing but promote it for daily consumption Expand supply to meet the EU critical demand (timing & quantity)

21 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Mango Concentrate investments in positioning our mangoes for profitable segments (probably specialty stores, airlines, hotels, banquets e.g. by promoting Malaysian mangoes as tastier and tender). Promote Malaysian mangoes for high-end market. (Avoid competing head-on in supermarket shelves based on price, e.g. with Indian mangoes)

22 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Pineapple and Papaya Challenge for market leadership by emphasizing the fruit quality Build selectively on strengths. For example, Josephine for the sweeter taste Reinforce vulnerable areas especially for papaya. Invest on R&D to improve the quality of fruit

23 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Pummelo and Dragon fruit Invest heavily in most attractive segments Build-up ability to counter competition. Fruit size for pomelo need to be reduced as preferred by Europeans Educate the target market to try dragon fruit

24 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Durian and Rambutan Can invest in pre-packed frozen durian for carefully targeted segments (e.g. via Oriental Market stores) Promote rambutans in fresh fruit assortment ready to eat. Possible consideration in processed e.g. canned with syrup.

25 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Jackfruit and Mangosteen Increase awareness since they are presently seen as ‘exotic’ fruits Invest in educating the consumers (converting non-users to users) Jackfruit: pre-packed in ready-to-eat form Mangosteen: fresh & potential processed food due to high perish ability Good packaging to enhance their shelf life Position the fruits for eating (emphasize the unique taste)

26 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
6. Fruit importers’ main concern in selecting suppliers (Malaysian exporters) are conformance to: EUREPGAP, HACCP, ISO certification Guaranteed uninterrupted supply Ability to fulfill order quantities Ability to meet timing of demand. Implication: (a)Ensure effective supply chain management system in local Malaysian market by: Enhancing vertical cooperation: Farmers, Distributors and Exporters Alliances. Enhancing horizontal cooperation between industry players.

27 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Further development of EUREPGAP compliance working team, farmer groups Encourage more Commercial-based farming and infrastructure Transportation cost subsidization-Double tax deduction for carriers (e.g. airline service providers) (b) Ensure the effectiveness of market makers in the Malaysian market. Enhancement/increase effectiveness & efficiency of market makers institution. Setting up an independent (non-profit) research unit at IPTA to develop market intelligence and coordinate the European

28 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS
Enhancement of integrated tropical fruit facilities and processing Integrated Fruits-based Central-Kitchen (IFCK): this Central Kitchen acts as a planning and processing centre of fresh fruits To reduce fruit wastage Produce high value-added processed fruits Overcome the short shelf-life of fresh fruits (c) Enhancement of strategic alliances with key foreign channel members. 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.

29 Conduct large scale consumer marketing campaign
KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS (d) Large scale consumer awareness marketing campaign. 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

30 SUGGESTION FOR FUTURE RESEARCH
Consumer awareness of tropical fruits value and consumption Study on close competitors’ marketing practices (e.g. packaging, branding, quality assurance, pricing) Specific study on value-added tropical fruit products, for example processed fruits, pre-packed ready-to-eat fruits.

31 Other Potential of Processed Tropical Fruits

32 THANK YOU Any enquiries please contact:
Professor Dr. Aliah Hanim M. Salleh Graduate School of Business Universiti Kebangsaan Malaysia (UKM) Tel : Website :


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