Pacific Rim

Many Markets, Many Opportunities

By Dan Block

As many agricultural producers have already learned, to be successful in farming today you must be successful in marketing. What and how we grow must be driven by what our customers want. The basis of a sound farming operation is knowing what our customers like and responding to those varied preferences. Nowhere is this marketing principal more important than in the international marketplace. And nowhere is the international market more full of potential for California growers than in the Pacific Rim. For growers and shippers looking to expand sales outside the U.S., it is critical to remember that the Pacific Rim is not a market. Rather, it is a region of the world in which dozens of district markets, or niches, are located. Success in any one of these diverse markets depends on the ability to identify the unique needs of consumers there. This sensitivity to the different needs and tastes of the end users is the essence of niche marketing. Niche marketing is a departure from the old way of thinking about exporting produce. Old approaches viewed export as simply selling off excess production to be sold to buyers in relatively undefined offshore markets.

Today we grow specifically for export markets with an eye towards the diverse cultures and needs of those markets. Without this strategy of targeting niches with higher value produce, we would be lost in a rising, global sea of commodities. What is so special about the so-called Pacific Rim for growers in California and the Western U.S.? The answer is (1) rising consumer incomes in many countries of that region, and (2) proximity of California to those countries. The Pacific Rim region contains countries with rapidly developing economies and rising per capita incomes. With the increases in per capita incomes of these consumers comes increases in their preferences for higher quality food items. More protein as well as a greater selection of fruits and vegetables is desired. Tastes are becoming more westernized especially among the younger adults. This is evidenced by the expanding fast-food and foodservice sectors in many of these Pacific Rim countries. The region is flanked on the West by the economic powerhouses of Japan, South Korea and Taiwan as well as the emerging giant of China. Its eastern border is formed by Latin America and the United States (more specifically California); and in the South by the Southeast Asian countries, Australia and New Zealand. The Asia/Pacific region has been enjoying an increase in trade and investment of immense proportions. This massive economic growth has tremendous economic implications for progressive producers in the Western U.S. California growers in particular have differential advantages, so important in marketing today, that position them for exciting opportunities in this part of the world.

California’s Advantage
Obviously Alaska, Oregon, Washington, and California are closer to the Pacific Rim markets than other states. But, California has the advantage of a longer growing season for specialty crops which the Northwest can’t grow and for which the more affluent consumers in East and Southeast Asia have a growing preference.

Moreover, California exudes a highly-desired image for many consumers in these markets. Premiums are paid for products from California and Asian distributors go to extremes to capture the "California" image. It is not unheard of for sellers of Asia-produced vegetables to claim the produce is from California in order to garner a higher price.

Every country in the Asia/Pacific region has its own unique market situation and consumers. They have different cultural backgrounds which determine buying behaviors. The great mistake many inexperienced exporters make is to view these countries as essentially the same where in fact they are all quite different. There are dozens of unique niche markets in the Pacific Rim region, and no doubt many that have yet to be discovered. Nevertheless, there are some countries that have more immediate potential for California growers and will be discussed briefly.

Japan
Japan is a well known target market in what is termed the East Asian region. It continues to offer numerous export niches that aren’t always obvious. In many cases, these opportunities are more suited for the smaller exporter and shipper who is able to get a profitable return on a smaller volume of selected products. Much has been written on Japan and many experts will tell you the Japanese consumer is very particular about quality.

In Japan cosmetic appearance and taste are critical. Retail price is not so important. Health concerns are beginning to emerge as equally important to appearance and taste, and may play a much more significant role in the buying behaviour of the Japanese. Some California producers, rather than viewing these health concerns as purely a threat, have considered modifying their cultural practices in ways that would satisfy that particular niche in the Japanese market.

Japan itself grows beautiful produce. As pressure on Japan mounts to open up its market more to U.S. agricultural exports, Japan has considered taking a more aggressive stand in terms of developing export markets for its high quality fruits and vegetables. The growing potential throughout the developed world for high value fruits and vegetables has not gone unnoticed by the normally competitive Japanese.

In April, the Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) reported that it is proceeding with plans to develop a "Japanese trademark" for the purposes of promoting agricultural exports. They are doing base line research in New York and other major U.S. cities and are investigating direct marketing of high quality produce. Although Japan has already been exporting specialty crops such as shiitake mushrooms, nashi pears and Unshu mandarin oranges, this outward looking approach of their produce industry signals a growing awareness of the export opportunities in high-value, specialty produce.

Singapore
The island nation of Singapore is located at the tip of the Malay Peninsula and is part of Southeast Asia. But, it is quite different from Malaysia on which it borders. A former British colony, Singapore is predominantly Chinese and the culture and business climate reflect the Chinese influence. Singapore is a unique market in that it is geographically small and yet very open to imports. Like Hong Kong, there are few if any import restrictions. It is a growing market because consumers there have rising disposable incomes and are used to a diverse selection of international food imports.

Generally fruits and vegetables are purchased in "wet markets." These are street vendors who display their products in bulk and customers pick over the produce and make their selection. Yet, there is a trend toward the more western kind of supermarket where some pre-packaging exists. Singapore has been described as the "perfect market for up-value kinds of products."

Tourism is increasing in Singapore and this means growth in the hotel industry. Throughout Asia the hotel and foodservice sectors have been excellent niches to target high quality speciality produce. One of the advantages of promoting produce in Singapore is that one can easily reach the Malaysian and Indonesian markets from there.

Singapore acts as a transhipment point to other Southeast Asian nations and many businesspeople pass through Singapore and use it as a center for commerce and trade. Singapore is a very long way from California, and freight rates are high. On the other hand, it has appeal as a starting place for an Asian/Pacific marketing strategy since it is an open market, has a robust economy, familiarity with western foods, and is influential to other important Southeast Asian markets.

Malaysia
Malaysia’s population is well over half Malay and other indigenous peoples. It has a population of over 30 percent Chinese and 9 percent Indian. The Malaysian economy has also been growing significantly. Malaysia imports a good deal of the food and agricultural products it consumes and per capita fruit consumption has been rising.

Although most homemakers in Malaysia shop everyday for fresh meats and vegetables, there has been a trend toward western-style shopping in supermarkets. They are very familiar with imported food items and often perceive imported products as superior to local products. Apples, oranges, and grapes from the United States have been successful in Malaysia, and products from the U.S. have a high degree of positive perception and recognition.

Hong Kong
In Hong Kong, as in the other countries of Southeast Asia, the "wet market" is still very important, but there is a gradual shift to supermarket selling. This past year a newer kind of produce marketing store has popped up. Called the "California Fruit Store," it has been described as "the 7-11 of fruit!" Younger people are attracted to this store because it has a bright, clean appearance and is loaded with a variety of fresh fruit and fresh-squeezed juices. As evidenced by its name, "California" remains a differential advantage, and is a valuable image on which California growers can capitalize.

When considering consumers in Hong Kong, it is important to realize that over half of the meals are eaten outside the home in restaurants. Businesspeople don’t take their lunches to work but eat lunch out. The Hong Kong Chinese rarely entertain in their homes and hosting dinners and banquets in restaurants is quite common. Therefore, the foodservice industry, and especially hotels, are important in a Hong Kong export plan. Hotel grills and buffets are a good place for the more expensive "gourmet fruits." A product with unique characteristics applicable to desserts or traditional dishes may have a special opportunity here.

Hong Kong provides marketing leverage into another country, China. With the integration of enterprises from the People’s Republic of China into Hong Kong, products introduced into Hong Kong markets often find their way into the hotel business in China, especially in the southern economic zone of Canton/Guangzhou. Although significant political issues regarding China are still in question, Hong Kong remains an important commercial door to China and should be viewed as such.

Thailand
Thailand is over 75 percent Thai and almost everyone is Buddhist. With the huge investments that Japan is making in Thailand, as well as other countries in the Southeast Asian region, there are thousands of expatriate Japanese living there. Thailand’s economy is rapidly growing. Due to this growth it is predicted to be the next country to enter the category of Newly Industrialized Countries (NIC’s, also referred to as NIE’s – Newly Industrialize Economies). Thailand has been a major exporter of agricultural products, such as pineapple. Nevertheless, imports of fresh fruits are on the rise.

Thai’s are very quality conscious, but price is of paramount importance. They have a culturally based desire for fruit (the durian, for example, is believed to be an aphrodisiac). The U.S. Department of Agriculture’s Foreign Agricultural Service reports that as per capita incomes grow in Thailand, more Thais are attracted to supermarkets and restaurants and fast-food outlets serving western-style food. This trend could transfer to expanding consumption of specialty fruits.

Korea
The Republic of Korea, known as South Korea, is a rapidly growing economy with rising consumer incomes that has significance for U.S. agricultural exporters. It is a very homogeneous population with a small Chinese minority. Most are Buddhists with strong Confucian traditions, but there is a growing Christian minority of almost 30 percent. Like Japan, Korea is very protective of its agricultural products, and getting certain U.S. produce exports into the country has been difficult. Some of the barriers are slowly coming down and over the long term Korea has interesting export potential.

As incomes have increased, Korean preferences for higher quality luxury foods have also increased. Per capita consumption of fruits in Korea grew 71 percent during the ten year period of 1977-1986. With the projected increase in income and total population, consumption of fresh fruits is anticipated to grow. Hotels have been good users of specialty produce due to the increase in tourism and the presence of over 50,000 U.S. military and non-military personnel.

Taiwan
The Taiwan economy has expanded dramatically and Taiwan has been a rapidly growing market for California produce exports. The wholesale buyers in Taiwan are aggressive and promote the produce they import. With a tremendously growing per capita income, Taiwan, like Singapore, demands more imported produce. But unlike Singapore, Taiwan is much closer to California, and produce prices are more reasonable. California exporters of fruit to Taiwan report phenomenal growth there and view it as an exciting market.

Market Research
To take advantage of these opportunities in the Pacific Rim, start learning about the foreign customers your target. Understand the needs of the consumers as well as the distributors and retailers. Fortunately, this task is becoming easier all of the time. The Foreign Agricultural Service (FAS) of U.S.D.A. has agricultural trade officers (ATO’s) in each country. Located in the embassies, they are available to assist you by telephone or FAX machine. Generally the ATO’s in Asia are knowledgeable about the buying behaviors and consumption trends of the people in their respective countries. They will even assist you in establishing contacts with agents, distributors and buyers. These overseas offices are listed in a very useful publication available from the FAS entitled, Food and Agricultural Export Directory, Publication No. 1459.

For some readers, marketing in the Pacific Rim region may already be done indirectly through brokers, cooperatives or international packer/shippers. But growers should be aware of who their end users are and what foreign consumers wants from their farming operations in California.

The more you learn about your international customers, the more you can structure your operation for long term success in this global marketplace. There are opportunities not yet discovered by California growers and exporters. Learning more about these diverse peoples will expand your marketing vision and eventually your profits.

Beyond the lure of increased profits derived from well-targeted export strategies, is the broader objective of building a more prosperous and peaceful world by sharing the harvest of food and ideas. The inevitable economic integration that is presently taking place means expanded opportunities for all peoples of the world. California growers are in a unique position to be influential as leaders in this global integration through the production and marketing of high quality food to satisfy the needs of the peoples in the Pacific Rim and beyond.