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PRODUCT MARKET STUDY: UK FRESH FRUITS (INCLUDING EXOTIC FRUIT) AND VEGETABLES MARKET Date: May 2005 1.0 Product Definition Fruits HS CODE 08030019 08043000 08045000 080711 081060 08109030 08109040 description Bananas Pineapples Guavas, mangoes and mangosteens Melons and papayas Durian Tamarinds, cashews apples, lychees, jackfruit passion fruit, carambola and pitahaya Vegetables HS CODE 070960 070310 07035990 07070005 07049010 07092000 07093000 07099060 07097000 description Capsicum Onions and shallots Mushroom Cucumbers Cabbages (white and red) Asparagus Aubergines (Eggplants) Sweet maize Spinach 2.0  Overview The United Kingdom per capita consumption of fresh fruits and vegetables amounted to 79.6 kilogram in 2004, with an estimated value of £8.5 billion. The trend of eating fruits have been on the increased with more British snacking on fruits rather than on chips, chocolate and other snack products, in an attempt to lead a healthier lifestyles. The UK market for organic fruit and vegetables was valued about £170 million at retail value in 2004. 1   The UK market segments of fresh and vegetable market is: - Domestically produced fruit and vegetables - Exotics (tropical/subtropical products) - Off-season products  The market for fresh and vegetables can also be segmented according to: - Consumer market (retail shops, supermarkets, grocery stores), and - Out-of-home market (restaurants, business canteens, gas stations, institutions, food fast chains)  Within the UK market, the range and availability of fruits and vegetables has widened considerably in the last few years and most supermarket chains sell a broad range of core line traditional products supplemented by an ever increasing range of more exotic products. 3.0  Market Trends The healthy lifestyles adopted by many in the UK have seen an increased in the consumption of healthy food. Traditionally, fruits and vegetables are generally associated with health foods and something that is good to consume. This is because fruit and vegetables contain vitamins and natural antioxidants, which supposed to have properties preventive to hearth disease and cancer. The recent furore about the school dinners in the UK has prompted the government to have a closer look at the unhealthy food that is being served in the school and in the future fruits have been a compulsory addition to the menu. Over the last few years, UK consumers have experienced several food scares; many people are concerned about the safety of food, as well as intensive farming on the countryside and on the environment in general. These factors, combined with the increasing awareness of the importance of diet and nutrition, have intensified interest in organic foods and anything that is healthy. To increase environmental-consciousness in the EU, a group of leading Europen food retailers launched the EurepGap Protociol in 1999. The objective of the Eurepgap (Euro-retailer Produce Working Group for Agricultural Practice) is to raise standards for the production of fresh fruit and vegetables by promoting food safety, the sustainable use of natural resources and more environment-friendly production. As 2   from 1 January 2004, the leading European supermarkets chains only trade fresh fruit and vegetables, which comply with EurepGap standards.  Working according to the EureGap standards will be a very positive move to export to the UK and EU. However, producers in developing countries experience difficulties in complying with the Eurep standards and are calling for relaxation of the standards. For more information on the Eurep Group and EurepGap Protocol, please refer to www.eurep.org  Survey has indicated that the UK people are currently working more hours and coupled with busy social lives they have little and less time for food preparation. On top of that, single households’ have increases over the years. There is, therefore demand for products requiring extensive preparation has declined, while the opportunities for easy to prepare, semi-prepared, catered and processed products are increasing. In the case of fresh fruit and vegetables sector, this has led to pre-packed products and consumer packs containing prepared vegetables and fruits. Prepared (washed and cut) fruits are very popular and are sold by all the major UK supermarkets. Exotic Fruit Fresh Rambutan and Mangosteens  A remarkable increase can be seen in the consumption of exotic fruits and off-season products like mangoes, papayas, passion fruits and avocado. The increase in ethnic minorities living in the UK is responsible for the initial increases in sales of all kinds of exotic and tropical fruits. Once the products were on the shelves, other groups became attracted to buy them. Major importers in the UK are now promoting lesser-known exotics like rambutan and mangosteen. The UK consumers of today are demanding for a more variety of fruits in their marketing basket. People now travel far and wide and are very much exposed to exotic fruits. The retailers are also willing to sell exotic fruit to diversify their products and lure customers. Rambutans can be found in big oriental supermarkets or local corner shops and greengrocers but the mainstream supermarket like Tesco and Asda are yet to sell them. However, Harrods is selling a large selection of exotic fruits from all over the world and rambutans from Thailand are sold in the exotic fresh fruit section. For convenience these products are in easily recognisable packages, containing small amounts and practical information. These make it easier for UK consumers to become familiar with new and unknown   3 products. UK supermarkets are increasingly interested in selling exotics in these standardised packages. 4.0  Distribution The most effective distribution channels for Malaysian exporters of fresh fruit and vegetables are importers. These specialised Importers, not only have the experience and knowledge of the market, they also have strong relationship with suppliers and buyers all over the UK. Malaysian exporters are advised to contact and network with specialised importers for the distribution of their products. This applies especially to cases where it concerns tropical fruit varieties and offseason products. The UK importers also do not only focus on the demand of the home market. Because of their favourable, geographical location, many UK importers have the possibility to export imported products to all other European countries. a) Wholesale Level  Importing wholesalers deal directly with exporters and they trade on a large scale. As such they demand uniform quality and volume on the side of the exporters. Buyers at this level are increasingly developing partnership with preferred suppliers, in order to ensure availability of produce, which meets their specification on a week-in, week-out basis. One of the main accesses to the whole sale trade in UK is to sell to wholesalers in big market such as the New Covent Garden Market. The Market is the country’s leading horticultural wholesale market. One of their main activities is fruit and vegetable wholesaling. Thousands of tonnes of fresh fruit and vegetables from all corners of the world are delivered to the market each day. Some 70 per cent of produce sold in the Market is imported. Prices are mainly made on a free market basis negotiated face-to-face and responding quickly to demand. The Bulk of the produce sold is to the catering trade which means that there is always a demand for high quality supplies   b) Retail Level  In UK the traditional trade channels, i.e. the markets and the greengrocers, continue to sell a significant share of the fresh products in most key markets. In UK the specialised fruit and vegetables shops, hyper /supermarkets are the forefront, selling directly to the public. Mainstream supermarkets in the UK have also increasingly penetrated the function of the specialised 4 wholesale trade for fruit and vegetables and increasingly seek to ensure their supplies through direct contact with growers, especially for bulk tropical fruit and vegetables, which have a considerable market in the UK. UK consumers increasingly prefer one-stop shopping and superstores and fruit and vegetables is increasingly channelled through large and sophisticated handling companies, skilled in all aspects of importation and distribution.  Many importers of fresh fruit and vegetables have in-house distribution networks and warehousing facilities. Many importers of fresh produce have controlled atmosphere warehousing facilities and even packaging houses, responding to the growing retail demand for pre-packed and sometimes trimmed fruits and vegetables. In the UK, 50 per cent of fresh produce is sold through retail outlets, the remainder through the wholesale trade and for processing. Around 75 per cent of total trade at retail level is sold in supermarkets. Supermarkets such as Tesco, Sainsbury and ASDA, dominate the distribution of fresh produce.They do not buy direct, but from preferred suppliers in the UK, who source and deliver the produce according to the supermarkets’ requirements. Small retailers such as greengrocers and independent stores, tend to buy from the wholesale markets as they are buying in smaller quantities   5.0 Regulation and Legislations a) EU Quality Standards  The UK and EU sets high demand for quality. Quality is the key to successful exports to the EU. The marketing standards for quality and labelling of fruit and vegetables are laid down in basic regulation EC 2200/96, in the framework of the Common Agricultural Policy (CAP). For detailed description of UK standards for products subject to regulation EC 2200/96, please refer to www.defra.gov.uk/hort/hmi/common/standard.htm Besides the EU regulations, UK importers of fresh and fruit vegetables have their own quality standards. The EU requirements must therefore be seen as indicative for the quality that is demanded by the European importers  5 b) Certificate of Origin  All imports consignments of fresh fruit and vegetables from outside the EU and subject to EC marketing Standards will require recognised Certificate of Conformity before they are allowed to enter the EU market. For more information about the Certificate of Conformity, please refer to www.defra.gov.uk/hort/hmi.htm c) Environmental and safety issues  Environment aspects of products have become a major issue in UK and EU in recent years. Exporters of fresh and vegetables to the EU must be aware of health and environmental considerations of UK customers by offering products which comply with both legislative and market requirements. Imports of fresh fruit and vegetables to the UK have to comply with regulations for Maximum Residue Levels (MRLs) of a large number of pesticides. The maximum levels for pesticides residues in and on certain products of plant origin, including fruit and vegetables, are laid down in Council Directive 90/642/EEC. To promote environmentally sound products the EU award tariff preference or the levying of so-called ‘environmental taxes’ on products. An example of preferential systems is the General System of Preference (GSP) encouragement regime. To discourage the entrance of polluting products to the market, ‘ecotax’ is levied. Products of environmentally sounds are normally labelled with Ecolabels. Ecolabels will guarantees the organic origin and quality of agricultural products. EU standards for organic food production and labelling are laid down in Council Regulation (EEC) 2092/91. The Ecolabelling procedures are purely aimed at the products and indicate that the product with a label has reduced impact on the environment.  d) Health and Safety Issues Phytosaniatary regulations and plant protection  The international standard for phytosaniatary measures was set up by the International Plant Protection Committee (FAO) in order to protect the import agricultural goods which might have carry with them plant diseases or insects. The plant Protection Service will inspect large number of fruit and vegetables upon arrival in the EU. The inspection consists of a physical examination of the consignment on phytosaniatary risk, identification and validity of the covering phytosaniatary certificate. The phytosanitary certificate is an official document which certifies that the products described have been inspected according to appropriate procedures, are considered to be free from quarantine pests and conform to the current regulations of the importing country. 6 HACCP and ISO 9000  The need for good quality management takes on increasing importance. Two systems to demonstrate reliability of quality control system are:  HACCP – The Hazard Analysis Critical Control Point (HACCP) system is applicable to companies that process, treat, pack, transport, distribute or trade in foodstuffs. Although exporters to UK are not obliged to have an HCCP system and their systems will not be a subject to control by the food inspection service in the UK, the fact that they have approved HACCP system, or work following a similar quality control, will be a very positive argument in export business.  ISO 9000 – Manufacturers which have obtained an ISO 9000 series certificate, possess an important asset. The certification may be a vital factor in the selection process applied by trade partners in UK and Europe. e) Packaging and labelling  There are no important statutory obligations at UK and EU level for the packaging of fresh fruit and vegetables. Nevertheless, it is recommended to comply with the wishes of the importer, who knows the demands of his buyers. This goes for the packaging material, as well as for the sizes of the packaging. Where the size of the packing are concerned, the general standards, which are common practice, should be taken into account. Malaysian exporters should adapt to the generally accepted sizes of the cartons: - 60 by 40 cm; and - 40 by 30 cm  Member states of the EU are required to process between 50 and 65 per cent of packaging waste. Malaysian exporters targeting UK and other EU countries have to be aware of these requirements. That means that packaging (transport packaging, surrounding packaging and sales packaging) material should be limited and be re-usable or recyclable. Otherwise the importer will be confronted with additional costs, thus reducing the competitiveness of the exports. Labels for fresh fruit and vegetables should at least contain the country of origin, date of packaging and the name of the producer, so as to ensure full traceability back to the grower.  7  For more detailed information concerning packaging, marking and labelling for various fruit and vegetables species, please refer to: www.defra.gov.uk/hort/hmi/common/standard.htm 6.0 Import  Competition facing Malaysia and other developing countries are very stiff as only 10 per cent of fresh fruit vegetables and around 30 per cent of fresh fruit imports into the UK was supplied by developing countries. According to trade statistics, developing countries have strong position in the trade of fresh fruits like tamarind, lychess, bananas, guavas, mangoes , dates, pineapple, and passion fruits, all of which more than half of imports is supplied by developing countries. In the trade of fresh vegetables, developing countries play an important role in the supply of peas and beans, sweet maize and baby corn, although asparagus is also increasingly supplied by developing countries. From the ASEAN countries, Thailand seems to be Malaysia’s major competitor. Thailand, for example, is the largest exporter to the UK for sweet corns, fresh or chill. In 2004 Thailand exported £10.4 million, representing around 45 per cent of the share of the market. Thailand is also the dominant exporters from the ASEAN region in other vegetables such as spinach, onions, mushrooms and Asparagus. Thailand is the third largest exporter of asparagus after Peru to the UK. In 2004, Thailand exported £1.7 million or 13 per cent of the market. Imports of fresh fruits to the UK are mainly from the neighbouring EU countries such as Spain, the Netherlands, France and Italy. Bananas are the leading fruit product imported into the UK, representing a share of 20 per cent of total fruit imports. Leading suppliers are Costa Rica, Cameroon, Dominican Republic, Colombia and Jamaica. Pineapples represent only a small share of UK total imports although imports of these products increased considerably in terms of value and volume in the past three years. In 2002, UK imports of these fruits were £18.9 million but increased to £37 million in 2004. Costa Rica is the main suppliers but Malaysia’s main competitor from the ASEAN region is Thailand, exporting £0.203 million in 2004. Malaysia’s export was negligible and did not register in the imports statistics. Mango and guava is another popular import from the developing countries. Pakistan was the top exporter in 2004 with £6.5 million. From the Asean region, Philippines and Thailand were the main suppliers exporting £0.487 and £0.077 million respectively in 2004. Malaysia’s export registered at £ 0.011 million in 2004. The Asian ethnic communities in the UK prefer very sweet Indian and Pakistani mango varieties. For example, Indian Alphopnse 8    mangoes are popular with the South Asian community, while Julie mangoes from St. Lucia appeal to people of the Caribbean descent.  Some ethnic fruits such as watermelons, papayas, durians, tamarinds, Cashew apples and passion fruits and carambola (star fruit) are becoming popular choice for both local and ethnic minority in the UK. Fresh watermelons are imported mainly from Spain and Brazil but Thailand , China and Malaysia have also managed to have a share albeit small, of the UK’s imports. Thailand, China and Malaysia exports to the UK in 2004 were recorded around £0.001 million each Papayas are mainly from Brazil, India and Pakistan but Thailand was the fifth largest exporter to the UK in 2004. Thailand’s export was £0.375 million representing around 4 per cent of the market. Malaysia’s exports were minimal with a total of £0.015 million in 2004 Thailand dominated the export market of durian to the UK. Thailand share of the market was 99 per cent in 2004.Thailand export to UK was valued at £0.080 million in 2004.     South Africa, Netherlands and Thailand were the top exporters to the UK in 2004 for fresh fruits of tamarinds, cashew apples, lychess and jackfruit. They exported £1.7 million, £1.22 million and £1.22 million respectively in 2004. Malaysia is the 7th largest exporter to the UK of passion fruits and carambola. Malaysia’s export increased by 115 per cent in 2004. Malaysia’s export in 2003 was £0.059 million compared to £0.128 million registered in 2004. Thailand was the 11th exporter with export of £0.016 million in 2004.  7.0  Opportunities Opportunities of exports to the UK for Malaysian exporters lie in the exports of tropical and subtropical fruits and vegetables, which are hardly grown in the UK. There are a number of products, which will find only limited opportunities in the UK fresh produce market. In general this is applicable to leafy vegetables, with the exception of the specific, so-called Asian vegetables. Other products varieties which have hardly any change on the European market are for instance tomatoes, cabbage verities, cauliflowers, cucumbers and the 9 like. The self-supplying degree of the UK and the EU for these products is very high. When there are problems in production and harvesting in certain regions in the EU, neighbouring EU countries will be the first suppliers to fill the gaps.  Opportunities for Malaysian exporters could lie in the trade of exotics and off-season fresh fruit and vegetables. The exotics products have become well known in the UK market during the past twenty years. UK consumers have become familiar with these products and now have common place in the shops, such as pineapples, bananas, avocados and mangoes. These products are mostly subject to zero or relatively low levels of import duty and do not face local competition. In addition, there is a group of ‘exotic’ products such as fine green beans, baby courgettes and corn, sweet potatoes, pomegranates and star fruit, some of which may be grown in the EC but are more suitable to warmer, sub-tropical and tropical climates. The supply of other exotic verities such as Durian, Rambutan, Guava, Carambola and Star Fruit is also increasing but usually sold in specialised greengrocers and oriental supermarkets such as Wing Yip, Hoo Hing and Loon Foong. Wholesale market such as the New Covent Garden Markets also sells these exotic fruits. Malaysian fruits such as Rambutan, Carambola and Star Fruits are sold daily at this wholesaler market. The presence of large ethnic minorities in the UK also contributes to the popularity and marketability of exotic fruits. Lesser-known exotic products such as Durian, Rambutan and Langsat are available in all the big oriental supermarkets, though most Durians are imported from Thailand.    Developing countries play a major role in the supply of papayas, tamarinds, lychess, bananas, guavas, mangoes, dates, pineapples and passion fruits to the EU. In 2003, more than half of the imports were supplied by developing countries and Malaysia could be one of the leading suppliers of some of these products. The quality of the product is the key to successful penetration of the UK market and the UK sets high demands on quality. The Malaysian government’s commitment to strengthen the industry by implementing the ‘Malaysia’s Best’, which aims to highlight the quality of Malaysianproduced fruits, should help Malaysian exporters to penetrate the UK market. The emphasis given by the Malaysian government in promoting the agro based industry will in the long run resolved the problem of supply of the products to the marketplace. It will also be addressing the institutional framework addressing requirement such as quality 10   and standard, which are the main criteria of market entry. Malaysian fruits and vegetable would have the demand, as evidence in a lot of fruits being imported from our neighbouring to the UK. The oriental outlets are the niche outlets that carry most of these products and these outlets are indeed expanding in terms of number and sizes.  Malaysia has been exporting Carambola to the UK and the amount is still insignificant. The fruit has to a large extent being used as a garnishing/decoration and not as a normal ‘eating fruits’. There is therefore the need to promote Carambola, not as a mere fruit used for garnishing but as a proper eating fruits. As in Malaysia, the fruit could also be promoted as a beverage and riding on the fad of health food, Carambola could be another addition of exotic juice in the UK. Hence, awareness programme should be organise to promote the fruits, to the buyers as well as consumers. Similar story line happens to kiwi fruits, where in yester year, the fruits were used for garnishing but today, kiwi fruits rival that of apple, pear and oranges in the fruit basket of any consumers. With a maximum usage of the fruits, it will in the long run result in the increase in demand of Carambola. 8.0 Exhibition International Food and Drink Exhibition (IFE) Frequency, date: Email: Internet: biennial, March 2007 ife@freshrm.co.uk www.ife.co.uk Fruit Logistica, Germany Frequency, date: annual/ February 2006 Email: central@messe-berlin.de Internet: www.fruitlogistica.com 9.0 Useful Addresses Department for Environment, Food & Rural Affairs (DEFRA) Nobel House 17 Smith Square London SW1P 3JP Tel: 020 7238 6000 The Helpline email address is: helpline@defra.gsi.gov.uk 11 - Covent Garden Market Authority Covent House New Covent Garden Market London SW8 5NX Tel: 0207 720 2211 Fax: 0207 622 5307 Website: www.cgma.gov.uk The wholesale Fruit and Produce Merchants’ Association of Ireland Tel: 353 0 1 289 7959 Fax: 353 0 1 288 6406 - - Fresh Produce Consortium Email: info@freshproduce.org.uk Internet: www.freshproduce.org.uk Organic Food Federation Official The Tithe House Peaseland Green Elsing, East Dereham Norfolk NR20 3Y - MATRADE LONDON 3 May 2005 12