Chilean avocado exporters outline Chinese sales strategy
May 29 , 2017
As the Chilean avocado season gradually draws to a close and the country starts gearing up for next season, several industry members have signaled a need for clearer differentiation from their biggest competitor Mexico. And like their competitors, they are betting on China for future growth but still desire a better market understanding.
“China, mainly the avocado industry, changes very fast. The demand for avocados grows every month,” says Chilean Hass Avocado Committee managing director Juan Enrique Lazo.
“Working in China is not easy for us, especially from Chile, since there are a few cultural habits that are different for us.”
The country gained access to the Chinese market in 2014, and according to Lazo from 2015-16 to 2016-17 alone shipments almost tripled to 13,194 metric tons (MT).
Javier Fuchslocher, commercial manager at major Chilean avocado export company Santa Cruz SA, attributes much of the industry’s success to promotional efforts from the committee.
“The campaign was targeted at the distribution centers, markets, supermarkets, some retailers, restaurants, and online media, and I think the results were very positive because we went from nowhere to placing avocados in the territory of China,” he says.
“Chinese consumers are getting more familiar with avocados, not only with the fruit itself but also with the way they should be consuming it.”
The committee embarked on a promotional campaign across the Chinese cities of Shanghai, Guangzhou and Shenzhen, and included online promotions such as working with a local social media agency to increase awareness of the fruit on WeChat and Weibo, social media apps widely used by the Chinese.
The campaign also included offline promotions that consisted of fairs such as the Asia Fruit Logistica held in Hong Kong during September last year and FHC China held in Shanghai, and activities in wholesale markets as well as cooking shows involving chefs, bloggers and hospitality professionals.
But according to Lazo, one of most important contributors to the campaign was the team’s trips to restaurants.
“We walked into restaurants in Shanghai, Guangzhou and Shenzhen visiting different types of restaurants, which sold mainly western cuisines or Chinese restaurants with a Western focus,” he says.
“And we had a very good experience with them, teaching them what Chilean avocados are, telling them about the differences and even giving them some samples to try,” said Lazo.
“We had a wide variety of people – some had previously already tried them, while others didn’t know they had been using Chilean avocados all along. Some restaurants also told us avocados are too expensive for them.”
The executive also highlights the work of promoters in putting the word out in China about Chilean avocados.
“If there is no promoter working, you only see the pile of avocados in the supermarket and consumers walking past it, but when there are promoters with their microphones, they attract the attention of the consumers,” he says.
“Mexican avocados are very well-positioned in the Chinese market, so if we had managed to overtake them to be the main supplier of avocados to China just after the first year, it means that the campaign had run really well,” adds ProChile Guangzhou commercial director Hernan Jaramillo Soto.
Price fall response – improving availability
According to Lazo, the price of the avocado in the Chinese market has dropped from an average of CNY10-25 (US$1.45-3.64) per avocado in the first season, to CNY5-12 (US$0.73-1.75) in the last season, thus increasing accessibility for many consumers.
This price fall was partly driven by a much larger volume on the market, which in Chile’s case was going up to 700MT – or 30-35 full container loads – per week.
“The prices during the 2016 campaign were lower than probably what it was expected at the very beginning,” says Fuchslocher, who adds this is part of market development and markets can’t grow if they’re only based on extremely high prices.
“Our approach in the Chinese market is in the long term – we are expected to develop the market and that will require some investment on our side in terms of increasing the value of the fruit, but understanding that the development and potential of the Chinese market is still there.
“We are not running away from the Chinese market.”
Nicolas Holmgren, a representative of Corpora Fruit, echoed Fuchslocher’s thoughts.
“In general, the company was affected by the fall in prices, but the thing is you are opening a market. We believe in China because we have been doing business with them for more than 10 years, and when they know you have a good product it is only a matter of time before the market opens up,” says Holmgren.
“We believe that avocados are a very good item, and we believe and have seen that Chinese consumers are willing to start eating avocados.”
“We believe the consumption will increase and prices will go up again.”
However, he warns it is imperative for the Chilean avocado industry to be “conscious of the volume we will send each week” for the upcoming season in order to avoid oversaturation.
Suppliers who worked with these exporters did not seem too affected by the fall in prices, according to Fuchslocher.
“The growers that work with our company have been with us for a long time. Most of our growers have been selecting to work with us for many years – they know that part of our strategy is to develop the Chinese market, and that it will require effort to be made on one specific season to develop the market,” he says.
“And they have been showing their support for us, because for the growers, to have a market like China consuming their avocados means stability, and a very important asset for them in the long term.”
Looking ahead to next season
With its third season coming up in October this year, the Chilean avocado industry has been gearing up its preparations, taking lessons from areas that didn’t go so well in the recent campaign.
“We need to learn how to achieve more accuracy in targeting the Chinese consumers who are buying the avocados,” Jaramillo says.
“We are not sure whether they come to the supermarkets to buy Chilean or Mexican avocados, and maybe that’s our next challenge – how we can position the Chilean avocados in the minds of the Chinese consumers?
“We need to improve the image on the avocado labels, and find out how to make Chilean avocados closer to the Chinese consumers.”
Lazo has a similar perspective.
“1.5 months before the campaign, we realized that the predominant avocados in the Chinese market were going to be from Chile which was why we had to change the focus of our campaign to highlight not just avocados, but Chilean avocados,” he says.
“We changed the slogan of the campaign and complemented with an artwork that highlights that these avocados come from Chile, which worked well.
Besides the need to have a clearer differentiation between Chilean avocados and their largest competitor Mexico, industry members also realize they have to better understand Chinese avocado consumption habits.
“I have been to China eight times and can tell the diet is different from the one we eat on this side of the world,” Holmgren says.
“Fitting avocados into the diet that they can eat can be quite difficult, but it seems that it is an item that especially young people like a lot,” said Holmgren.
“The challenge is for the Chilean avocado industry to understand that China is not only made up of one culture, but is a country of different cultures, tastes and cuisines. It is a heterogeneous country,” adds Jaramillo.
“Usually when I talk to some of my friends, they are learning through social media how to cook avocados. The fruit is new, most of them do not know how to eat it, many of them put it in the water and boil it, but I cannot tell you whether this is right or wrong. It really depends on culture,” he says, adding he has tried avocado soup and avocado ice cream.
While exporters are still finalizing their strategies for the next season in China, for Holmgren it looks likely volumes will increase depending on eventual market prices.
But volume expansion aside, both Lazo and Jaramillo share that the industry is looking to branch out into more cities in China, particularly the inner cities which may include Dalian, Hangzhou and Qingdao.
“We have not done a proper market research yet, but we know that avocados are getting to more and more cities in China, because I have visited those cities and I have seen it for myself,” says Lazo.
“E-commerce sales give us information about where people are buying avocados from, and we also already had importers advising us to go into other cities since last year.”
Lazo also highlights interest in boosting avocado sales in the Chinese capital Beijing.
“We have done a pilot campaign in one store in Beijing this year, just to try it out, because there was a demand. We didn’t go into Beijing last year because we wanted to focus on the biggest avocado-consuming cities, and Beijing was not in this list,” he says.
“But this year we are definitely coming.”
For Jaramillo, going into more Chinese cities goes hand-in-hand with creating a good impression of Chile in the minds of Chinese consumers.
“At ProChile, we are now trying to move beyond the first-tier cities, beyond the coastal areas into the inner cities such as Chengdu and Wuhan, where consumers there may also be willing to try something different. And to do that, we need to promote our country image,” he says.