INDEX. Introduction General Economic outlook of Hong Kong s fruits & vegetables market 3

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1 Research on Hong Kong Fresh Fruits & Vegetables market 1 Market Research: Fruit & Vegetable Sector INDEX Introduction 2 1. General Economic outlook of Hong Kong s fruits & vegetables market 3 2. Major supplying countries of fruits & vegetables in Hong Kong 7 3. Import Regulations and Taxations Distribution System Price Analysis Role of Italy in the Hong Kong s fruits & vegetables market Conclusion 16

2 Research on Hong Kong Fresh Fruits & Vegetables market 2 Market Research: Fruit & Vegetable Sector Introduction People of Hong Kong prefer very much fresh food produce to frozen or processed ones. With population stood at 6.8 million, Hong Kong needs enormous supply of food produce. As the local production is small due to limited land resources and rapid urbanization, Hong Kong has to rely heavily on imported supply of food produce. Local consumption of fruits & vegetables (2004 per day): Fruits: 1,498 tonnes Vegetables: 1, 740 tonnes Source: Agriculture, Fisheries & Conservation Department

3 Research on Hong Kong Fresh Fruits & Vegetables market 3 1. General economic outlook of Hong Kong s fruits & vegetables market Hong Kong s fruit and vegetable market is very open and diverse. With zero tariff rates and virtually no plant quarantine restrictions, basically everybody can import fruits & vegetables to Hong Kong. Imports In 2004, Hong Kong imported a total of US$1,330 million of vegetables and fruits (SITC 05)¹ from abroad, decreased 5% comparing to the figure of previous year. Imported products were mainly from China, Thailand, U.S.A. and Chile. (Table 1). Table 1: Hong Kong s imports of vegetables & fruits¹ (SITC 05) Value: USD million Ranking (Based on 2001) Country Value Value Value % Share % Chg Value % Share % Chg World 1,415 1,445 1, , USA P.R. China Thailand Chile Iran Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR ¹ Vegetables & Fruits here including: - SITC 054 Vegetables, roots, tubers, fresh, chilled, frozen or simply prese - SITC 056 Vegetables, roots and tubers, prepared or preserved, nes - SITC 057 Fruit and nuts (not including oil nuts), fresh or dried - SITC 058 Preserved fruit & fruit preparations (excl. fruit juices) - SITC 059 Fruit juices (including grape must) & vegetable juices, unferment

4 Research on Hong Kong Fresh Fruits & Vegetables market 4 Major imported fruit & vegetable items Fruit Table 2 below indicates the major imported fresh fruit items in Hong Kong. Oranges and Grapes are the two most common categories in the past 4 years, then followed by apples, melons, durians, plums, pears & quinces, peaches and kiwifruit. (Table 2, figure 1) Table 2: Hong Kong s import of selected fresh fruits items from World Value: USD 000 Fruit items Grapes, fresh (HS ) 125, , , ,909 Oranges, fresh or dried (KG) 140, , , ,175 (HS ) Apples, fresh (KG) (HS ) 66,908 68,227 65,952 62,795 Durians, fresh (KG) (HS ) 56,263 55,513 47,243 44,945 Plums, prune plums and sloes, fresh 37,346 38,740 41,487 24,256 (KG) (HS ) Melons (including watermelons) and 52,310 44,511 38,087 36,663 papaws (papayas), fresh (HS 0807) Pears and quinces, fresh (KG) 23,686 19,768 17,513 16,973 (HS ) Peaches, including nectarines, fresh (KG) 9,400 12,202 10,092 8,332 (HS ) Kiwifruit, fresh (HS ) 7,652 10,296 9,617 11,252 Remarks: fruits such as mangoes, bananas and lemons have not been taken into consideration in the above table Value (US$ '000) 160, , ,000 Figure 1: Hong Kong's imports of selected fruit items from world (in terms of value) 100,000 80,000 60,000 40,000 20,000 Fruit type 0 Grapes Oranges Apples Melons and papaws, fresh Durians, fresh Plums, Pears & prune quinces plums and sloes, fresh Peaches, Kiwifruit including nectarines, fresh Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR

5 Research on Hong Kong Fresh Fruits & Vegetables market 5 Vegetables For the imported vegetables, brassicas (including cabbages, cauliflowers, kohlrabi and kale) is the most popular type among the others. The other categories (according to the popularity) include lettuce and chicory, alliaceous vegetables (including onions, shallots, garlic, leeks), roots (including carrots, turnips, salad beetroot, salsify, celeriac, radishes), potatoes, tomatoes and cucumbers & gherkins. (Table 3, figure 2) Table 3: Hong Kong s import of selected fresh vegetables items from World Value: USD 000 Type of vegetables Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas, fresh or chilled 40,371 34,383 32,444 29,704 (HS 0704) Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or chilled 8,807 6,796 6,903 7,129 (HS 0703) Lettuce and Chicory, fresh or chilled 13,995 11,493 9,054 8,962 (HS 0705) Carrots, turnips, salad beetroot, salsify, celeriac, radishes and similar edible roots, 7,906 7,553 4,422 6,239 fresh or chilled (HS 0706) Potatoes, fresh or chilled (HS 0701) 6,305 4,348 4,073 4,861 Cucumbers and gherkins, fresh or chilled 2,101 2,113 2,839 3,042 (HS 0707) Tomatoes, fresh or chilled (HS 0702) 2,958 3,863 2,404 3,390 Leguminous vegetables, shelled or unshelled, fresh or chilled (HS 0708) 3,572 2,506 2,543 1,896 Figure 2: Hong Kong's imports of selected vegetable items from world (in terms of value) 45,000 40,000 Value (US$ '000) 35,000 30,000 25, ,000 15,000 10,000 5,000 0 Cabbages Onions Carrots Potatoes Leguminous vegetables Type of vegetables Tomatoes Cucumbers Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR

6 Research on Hong Kong Fresh Fruits & Vegetables market 6 Re-exports In Hong Kong, around 23% of the imported fruits and vegetables is being re-exported to other markets. Amongst, China is the major destination, and she absorbs about 77% of the imported fruits & vegetables from Hong Kong in 2004 (Table 4). Table 4: Hong Kong s re-exports of vegetables & fruits² (SITC 05) Value: USD million Ranking (Based on 2004) Country Value Value Value % Share % Chg Value % Share % Chg World 436, , , , China 322, , , , Macau 6,754 7,188 8, , Vietnam -- 5,291 3, , USA 8,894 10,776 10, , Canada ,303 6, , Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR ² Vegetables & Fruits here including: - SITC 054 Vegetables, roots, tubers, fresh, chilled, frozen or simply prese - SITC 056 Vegetables, roots and tubers, prepared or preserved, nes - SITC 057 Fruit and nuts (not including oil nuts), fresh or dried - SITC 058 Preserved fruit & fruit preparations (excl. fruit juices) - SITC 059 Fruit juices (including grape must) & vegetable juices, unferment

7 Research on Hong Kong Fresh Fruits & Vegetables market 7 2. Major supplying countries of fruits & vegetables in Hong Kong Fruit China, Chile, South Africa and USA are the two major suppliers of the imported fresh fruits in Hong Kong. For some tropical fruits such as durian and melons, Malaysia and Thailand are the key suppliers. In 2004, Italy is the second largest supplier of kiwifruit to the local market. (Table 5) Table 5 : Major suppliers of selected imported fresh fruits items Major Suppliers (ranking based on 2004) Fruit items 1 % Share 2 % Share 3 % Share Grapes, fresh (HS ) USA 46.0 Chile 22.2 Australia 15.4 Oranges, fresh or dried (KG) (HS ) USA 65.8 South Africa 17.8 Australia 9.3 Apples, fresh (KG) (HS ) USA 48.2 China 19.5 Chile 17.5 Melons (including watermelons) and papaws (papayas), fresh (HS 0807) Malaysia 40.2 China 32.1 Singapore 7.8 Durians, fresh (KG) (HS ) Thailand 99.8 China 0.2 Taiwan * Plums, prune plums and sloes, fresh (KG) Chile 42.4 USA 29.2 Australia 17.2 (HS ) Pears and quinces, fresh (KG) (HS ) China 68.3 South 9.3 USA 9.2 Peaches, including nectarines, fresh (KG) (HS ) Africa Australia 30.6 Taiwan 20.4 USA 19.8 Kiwifruit, fresh (HS ) * insignificant - nil New Zealand 50.9 Italy 19.4 Chile 16.7 Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR Although Italy is not one of the major fruits suppliers in Hong Kong, Italy exported a lot kiwifruit to Hong Kong relatively. Italy has been the second largest suppliers of kiwifruit in the local market and New Zealand has been the largest supplier since 1998.

8 Research on Hong Kong Fresh Fruits & Vegetables market 8 In 2004, New Zealand supplied more than 50% of kiwifruit to Hong Kong. People in Hong Kong consume more kiwifruit from New Zealand, not only because New Zealand enjoys comparative advantage over Italy in terms of geographic location, but also the imported price of New Zealand kiwifruit is relatively lower than the kiwifruit from Italy. Chile has become one of the major supplying countries of kiwifruit to the local market in the past couple of years. Quantity of kiwifruit imported from Chile was more than Australia and France in Table 6 indicates the major sources and varieties of imported fruits by country of origin. These countries are also the major fruit supplying countries of Hong Kong. The more common types of fruits are also illustrated in the table. Table 6 : Major sources and varieties of imported fruits Mainland China USA Thailand Pears & Quinces Oranges Longans Watermelons Apples Durians Apples Grapes Mangosteens Honeydew Melons Plums and Sloes Bananas Mandarines Lemons Grapefruit Philippines Australia South Africa Bananas Oranges Oranges Mangoes Grapes Lemons Pineapples Plums and Sloes Grapes Coconuts Honeydew Melons Pears & Quinces Pears & Quinces Apples Source: Agriculture, Fisheries and Conservation Department, HKSAR Vegetables China, USA and Australia are the major suppliers of the imported fresh vegetables in Hong Kong. These three supplying countries have contributed to over 75% of the import value of different items of vegetables. (Table 7)

9 Research on Hong Kong Fresh Fruits & Vegetables market 9 Table 7 : Major suppliers of selected imported fresh vegetables items Major Suppliers (ranking based on 2004) Vegetables items 1 % Share 2 % Share 3 % Share Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas, fresh or chilled (HS0704) Lettuce and Chicory, fresh or chilled (HS 0705) Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or chilled (HS 0703) Carrots, turnips, salad beetroot, salsify, celeriac, radishes and similar edible roots, fresh or chilled (HS 0706) Ranking of Italy % Share China 94.3 USA 3.8 Korea China 45.6 USA 33.0 Australia China 53.5 New Zealand 21.4 USA Australia 31.1 Taiwan 23.5 China Potatoes, fresh or chilled (HS 0701) Australia 43.5 USA 26.6 China Leguminous vegetables, shelled or unshelled, fresh or chilled (HS 0708) China 55.2 Australia 10.5 India Tomatoes, fresh or chilled (HS 0702) China 41.2 Australia 15.8 Canada Cucumbers and gherkins, fresh or chilled (HS 0707) - nil China 80.1 Japan 13.0 Australia Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR Table 8 indicates the major sources and varieties of imported vegetables by country of origin. These countries are also the major vegetable supplying countries of Hong Kong. The more common types of vegetables are also illustrated in the table. Table 8: Major sources and varieties of imported vegetables Mainland China USA Australia Chinese Flowering Cabbage Cabbage Lettuce Carrots Round Cabbage Potatoes Potatoes Chinese White Cabbage Celery Onions Tientsin Cabbage Onions Tientsin Cabbage Turnips Cauliflowers & Headed Cabbage Lettuce Broccoli New Zealand Taiwan Netherlands Onions Carrots Potatoes Carrots Mushrooms Onions Potatoes Celery Sweet Corns Peas Radishes and similar Tomatoes Leguminous Vegetables Edible Roots Beans Cucumbers Source: Agriculture, Fisheries and Conservation Department, HKSAR

10 Research on Hong Kong Fresh Fruits & Vegetables market Import Regulations and Taxations There are no tariff system nor plant quarantine restrictions for the importation of fruits and vegetables in Hong Kong. The Food & Environmental Hygiene Department of the Hong Kong Government only suggests the importers to obtain the sanitary certificate for the imported items issued by the supplying countries. There will be regular food surveillances conducted by the Food & Environmental Dept., HKSAR. The food surveillance data will be collected and analyzed to define and measure health risk. 4. Distribution System: Hong Kong fruit importers place orders with exporters abroad. Most wholesalers operate on a commission (consignment) basis with importers and distribute fruits to retailers, also on commission. To meet rising demand in Hong Kong, China and other Asian countries, some wholesalers have begun importing directly from foreign packing houses. Wholesale Food Markets In Hong Kong there are fresh food wholesale markets operated by Government or private entities to provide trading facilities to fresh food wholesalers and buyers, and to assist the marketing and distribution of fresh food produce to retail outlets. a. Vegetable Wholesale Market There are altogether 4 vegetable wholesale markets in Hong Kong, and the one with the longest history and the largest transaction volume (45% of the total vegetable wholesale transactions) is located in Cheung Sha Wan in Kowloon operated by Vegetable Marketing Organization (VMO). VMO is a self-financing, non-profit making concern established in 1946 under the authority vested in the Director of Marketing by the Agricultural Products (marketing) Ordinance, Cap. 277 of the HKSAR. The major category of vegetables handled by the Cheung Sha Wan Vegetable Wholesale market is leafy vegetables. While VMO provides trading facilities, accounting and residue testing services to vegetable wholesalers and buyers, she charges the wholesalers a commission of up to 10% of the total value of sales for these services. There is no charge for buyers.

11 Research on Hong Kong Fresh Fruits & Vegetables market 11 b. Fruit Wholesale Market There are 2 major fruit wholesale markets in Hong Kong. The major one is located in Yau Ma Tei in Kowloon, which handles around 70% of the total fruit wholesale transactions and is operated by individual fruit wholesalers and retailers. The other fruit wholesale market is located in the Western Wholesale Food Market Complex managed by the Agriculture, Fisheries and Conservation Department. This market handles the other 30% of the total fruit wholesale transactions in Hong Kong. Retail In Hong Kong and other Chinese cultures throughout Asia, consumers used to purchase vegetables, fruits and other fresh foods from wet markets traditional street markets. However, the purchasing habits of the consumers have been changing a lot in the recent years due to the evolution of the roles of supermarkets in selling more fresh products. The younger generations are more keen to do the one-stop-shopping in supermarkets than in street markets.

12 Research on Hong Kong Fresh Fruits & Vegetables market Price Analysis Table 9 and table 10 indicate the average importation price of selected fruit and vegetable items from the top three suppliers of respective items in 2003 and We can see that there is a negative correlation between the importation price and import quantity of fresh fruit and vegetables, that is, the lower the price is, the more quantity is being imported (and vice versa). This negative correlation is more obvious to the importation of fresh vegetables. Table 10 illustrates that the suppliers who offer the lowest importation price are being found among the top three suppliers of every vegetable item. This implies that price is one of the key considerations for the vegetable imports. China, being close to Hong Kong, benefits from a low transportation cost, which is translated into low product cost. However, there must be other important considerations when importing fresh produce apart from price. Quality and taste are those considerations. This explains why most of the fruits with the highest importation value are not with the lowest importation price, while China, who always provides the fresh produce with very low price, does not rank the first of many fruit items.

13 Research on Hong Kong Fresh Fruits & Vegetables market 13 Table 9: Average Importation Price of selected FRUIT items in 2004 (in USD) Fruit Items Major Suppliers (based on import Quantity Import Quantity Import % Change in quantity in 2004) Price Price Price Grapes, fresh (KG) 1. USA 33,620, ,149, % (HS ) 2. Chile 26,743, ,607, % 3. Australia 13,115, ,633, % Oranges, fresh or dried (KG) 1. USA 118,860, ,673, % (HS ) 2. South Africa 40,427, ,970, % 3. Australia 26,721, ,908, % Apples, fresh (KG) 1. USA 34,647, ,611, % (HS ) 2. China 36,925, ,263, /-0% 3. Chile 9,008, ,869, % Melons (including watermelons) and papaws 1.Malaysia 36,636, ,029, % (papayas), fresh (HS 0807) 2. China 26,665, ,800, % 3. Singapore 9,756, ,751, /-0% Durians, fresh (KG) 1. Thailand 98,427, ,473, % (HS ) 2. China 64, , /-0% 3. Taiwan , Plums, prune plums and sloes, fresh (KG) 1. Chile 8,896, ,309, % (HS ) 2. USA 15,574, ,983, % 3. Australia 6,468, ,260, % Pears and quinces, fresh (KG) 1. China 24,632, ,818, % (HS ) 2. South Africa 2,706, ,004, % 3. USA 1,394, ,807, % Peaches, including 1. Australia 3,670, ,317, % nectarines, fresh (KG) (HS ) 2. Taiwan 1,932, ,487, % 3. USA 1,453, ,335, % Kiwifruit, fresh (KG) 1. New Zealand 2,703, ,911, % (HS ) 2. Italy 1,663, ,508, % 3. Chile 946, ,408, % Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR

14 Research on Hong Kong Fresh Fruits & Vegetables market 14 Table 10 : Average Importation Price of selected VEGETABLE items in 2004 (in USD) Vegetable Items Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas, fresh or chilled Major Suppliers (based on import quantity in 2004) Quantity Import Quantity Import Price Price % Change in Price 1. China 131,077, ,313, % (HS0704) 2. USA 1,339, ,179, % 3. Korea Rep 15, , % Lettuce and chicory, fresh or 1. China 18,545, ,521, % chilled (HS 0705) 2. USA 2,560, ,767, % 3. Australia 339, , % 6. Italy 3, , % Onions, shallots, garlic, leeks and other alliaceous vegetables, 1. China 13,601, ,275, % fresh or chilled (HS 0703) 2. New Zealand 4,458, ,171, % 3. USA 3,394, ,055, % Carrots, turnips, salad beetroot, salsify, celeriac, radishes and 1. Australia 4,380, ,383, % similar edible roots, fresh or chilled (HS 0706) 2. Taiwan 5,342, ,378, % 3. China 4,678, ,039, % Potatoes, fresh or chilled 1. Australia 3,464, ,549, % (HS 0701) 2. USA 2,460, ,641, % 3. China 2,096, ,839, % Leguminous vegetables, shelled 1. China 3,880, ,305, % or unshelled, fresh or chilled (HS 0708) 2. Australia 28, , % 3. India 99, , % Tomatoes, fresh or chilled 1. China 1,553, ,113, % (HS 0702) 2. Australia 346, , % 3. Canada 29, , % 8. Italy 61, , % Cucumbers and gherkins, fresh 1.China 9,303, ,372, % or chilled (HS 0707) 2. Japan 111, , % 3. Australia 43, , % Source: Hong Kong Trade Statistics, Census & Statistics Dept., HKSAR

15 Research on Hong Kong Fresh Fruits & Vegetables market Role of Italy in the Hong Kong s fruits & Vegetables market Generally speaking, Italy is not a major supplier of fresh fruit and vegetable items to Hong Kong. She only plays a very insignificant role compared to other supplying countries renowned for supplying fresh produce such as USA, Australia, Mainland China, Taiwan, Thailand, New Zealand, Chile and South Africa. The comparatively significant exporting fruit & vegetable items from Italy include kiwifruit and fresh tomatoes only. Kiwifruit Figure 3 : Hong Kong's imports of Fresh Kiwifruit from Italy and other supplying countries (year 2004) France 8% Chile 17% Italy 19% Other countries 4% Italy New Zealand Australia Other countries France Chile Australia 1% New Zealand 51% Fresh Tomatoes Figure 4: Hong Kong's imports of fresh or chilled tomatoes from Italy and other countries (year 2004) Canada 14% Japan 3% Italy 11% Other countries 9% Australia 16% Australia Netherlands China Canada Japan Italy Other countries China 41% Netherlands 6%

16 Research on Hong Kong Fresh Fruits & Vegetables market Conclusion With the improvement of the living standard in Hong Kong, more and more countries would target Hong Kong as their destinations of exporting their fresh fruit and vegetables. More variety of fresh fruit and vegetable items can be found in Hong Kong throughout the year compared to a few years ago. The desire of exporting more fresh produce to Hong Kong will lead to competition among the suppliers. Therefore, price and quality will play an even more important role for the produce exporting to Hong Kong. Source: Agriculture, Fisheries & Conservation Department, HKSAR Hong Kong Census & Statistics Department, HKSAR Vegetable Marketing Organization Food & Environmental Hygiene Department, HKSAR

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