John Giles, a market research consultant and the divisional director at Promar International, a leading UK-based agri food supply chain consulting firm, gives Produce Business UK a sneak peek of what to expect from his educational seminar about emerging future sources of supply for UK buyers at this week’s London Produce Show and Conference 2015 (LPS15)
Your presentation at LPS15 will focus on a market analysis of three increasingly important potential sources of supply – Ethiopia, Vietnam and Uruguay. Why those three countries in particular?
John Giles (JG): The idea is to present something different. We all know probably quite a bit about the likes of Chile, Turkey, South Africa and Egypt as suppliers. I want to move away from the familiar suspects and look at lesser-known countries around the world as an educational guide.
Ethiopia, Vietnam and Uruguay are three deliberately-chosen countries of which people will have some sense, but probably won’t know a great deal, yet they are becoming more influential and important. They can all produce a wide range of produce – a combination of fruits and vegetables – they are known for some products and some participation in international markets.
My objective is to give some insight into these countries as potential exporters or as in-country suppliers.
Why do you feel UK buyers need to take notice of these three countries now?
JG: At any forward-thinking produce company part of the role as a buyer is to be well informed about current sources of supply but also about future sources. You should be looking at what is happening in new areas and asking what is their potential.
If you look back in history, developing a modern fresh produce industry doesn’t happen overnight. Some 20 years ago Chile was only just coming on the scene and now it’s a firmly established supplier. Morocco, Thailand and Turkey are other good examples.
Ethiopia, Vietnam and Uruguay are just three interesting sources. Their fruit and vegetable sectors have grown quite significantly in the last 10 years. They’ve all shown what they can do in various products and they are all improving rapidly. In all three countries, the best of the best are already very good.
Over the next five to 10 years I’d expect more businesses in these countries to master the skills that international buyers are looking for, whether that’s the technical know-how, the commercial prowess or the accreditations required. They are only going to continue to get better and be more successful. Buyers should be considering them now.
Tell us more about Ethiopia. Why should this East African nation in particular pique buyers’ interest?
JG: Ethiopia will be remembered for a lot of the wrong reasons and while the images don’t fade easily, we mustn’t get trapped into that way of thinking. It’s a very different country to what it was 30, 20 and even 10 years ago. The reality is that the horticulture industry is now booming and it’s becoming increasingly impressive. Ethiopia is the fourth-largest exporter of cut flowers after the Netherlands, Kenya and India, and a growing exporter of vegetables. Just 10 years ago, you wouldn’t have dreamt of that scenario.
What has happened to change things?
JG: Ethiopia has had a sustained period of economic growth – 5-10% per annum – and its economy is booming [it’s the largest economy by GDP in East Africa and Central Africa]. There’s a population of over 90 million people [it’s the most populous landlocked country in the world and the second-most populated nation on the African continent]. There are movements towards democracy, like we’ve seen in Nigeria, and the politics are modifying.
Ethiopia is essentially still a poor country, but it has a massive aspiration. It’s seeking to become a middle-income country in two decades’ time. Turkey used to be a poor country, but now it’s a modern, thriving nation that’s a geographical hub with a per capita income of US$10,000 per year (£6,650). But Ethiopia can only achieve that with economic growth and political stability. Already, there’s been ambitious investment in the horticulture sector. Money is flooding in from China, the Middle East and India too. And there have been significant developments in infrastructure, such as at the airport and across both the road and rail systems.
As a landlocked country, is water availability an issue in Ethiopia? What obstacles does this present for produce?
JG: Certain parts of the country are well provided with water. In the Upper Awash Valley and south of Addis Ababa there are reservoirs and irrigation schemes. In other parts of the country, yes, water availability is more problematic. But Ethiopians are acutely aware of the problem. Saudi Arabia is investing in Ethiopian water projects, however they are short of water themselves. So, there needs to be massive investment in water and that may be helped through external finances.
What are the opportunities for the British produce buyers and, also, UK suppliers perhaps looking to extend their availability?
JG: Ethiopia wants to accelerate growth, so it needs expertise and technology to achieve that. There are opportunities for training, technology and management skills to be transferred to Ethiopia from other countries, and obviously for produce supply itself. We might see international produce companies setting up joint ventures in Ethiopia as a way of creating year-round supplies. British companies are already supplying polytunnels to the flowers companies and Ethiopian growers/exporters are also using British accreditation schemes.
What’s on offer in Ethiopia for buyers from the UK in particular?
JG: The UK is already an importer from Ethiopia, but the country plans to send a lot more fresh produce to western Europe. The UK will be a clear target market within that objective, so we are bound to see more Ethiopian produce arriving on our shores.
Moving onto Vietnam, what’s the scenario there?
JG: In reality, no one knows much about Vietnam. But it’s right at the heart of South East Asia and it has a fast-growing economy (one of the fastest in Asia). Following on from the Next Eleven, Vietnam is one of the CIVETS group of countries. These are six favoured emerging markets – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa – in view of their diverse and dynamic economy and young, growing population. Vietnam’s population is currently over 90 million people and that’s expected to reach just under 100 million by 2020. So, it has a very fast-growing population base too, with a GDP per capita of US$2,200 at the moment.
What do you think are the produce prospects in Vietnam? Are we talking more imports or exports?
JG: Vietnam has the best of both worlds. It’s an import market with a growing population, so it will be interesting for the established produce suppliers like North America. But there’s also supply potential from Vietnam too and Vietnam aspires to be an exporter. The Vietnam Fruit and Vegetable Association indicates that the country grows a lot of tropicals and exotics like mangoes, pineapples, melons, bananas, papayas, rambutan, mangosteen, star apple, durian, custard apples and jackfruit, as well as a range of Asian vegetables.
What can the UK expect to see from Vietnam?
JG: Of course, it’s questionable whether in the next few years, Vietnam will become a main supplier to the UK. But Thailand, India and Pakistan have all become established exporters to the UK, so why not Vietnam too in the longer term? Currently, Vietnam exports quite a substantial volume of fruit to China (US$600 million) and almost the same to North America, with a little less to the Netherlands and neighbouring countries. Its vegetable exports, meanwhile, are more modest and mainly go to Asian nations like China, Korea and Japan.
The UK doesn’t appear to be a major target market for Vietnamese fruit at the moment but some of the fruit that it ships to the Netherlands will be re-exported to the UK. If you look at the growth of Vietnam’s economy and consider its sizeable exports to China and North America, then Europe and the UK are bound to come under Vietnam’s radar in the future. And, if they’re looking at Europe, they will be looking at obvious markets like the UK and Germany etc.
What about Uruguay? We know the country has a long-standing history in exporting citrus to Europe. In recent years it has made a name for itself in counter-seasonal blueberries too. What else is there to learn?
JG: We’re all familiar with Chile, Brazil, Argentina and increasingly Peru. But we don’t know as much about Uruguay – it’s the lesser-well-known supplier in South America at the moment. Uruguay is a small country, and, like you say, it’s a recognised exporter of mainly citrus (oranges, soft citrus, lemons, limes) and berries. It’s actually the third-largest citrus exporter in South America and Univeg has invested in the country.
Uruguay’s horticulture industry is growing and it will need to export the additional volume to more diverse countries given that it has a small local market of just 3.5 million people. The Netherlands and the UK are already target markets, with US$25 million-worth of Uruguayan fruit heading to the Netherlands each year and US$15 million-worth to the UK.
But what other products are there? Uruguay also produces apples, pears, table grapes, squash, onions, carrots and tomatoes – a wide range of fruits and vegetables. Uruguay has a lot of potential and the country will have an aspiration to sell more to Europe and the UK. We need to find out more.
Do you see any other countries like Ethiopia, Vietnam and Uruguay which hold promising supply potential?
JG: There are a whole range of East African nations that have threatened to make a breakthrough in horticulture or floriculture, such as Tanzania and Uganda. For whatever reason they’ve not done it, but they will. Zimbabwe and Zambia have historically exported to Europe but they’ve found it increasingly difficult in recent years. A lot is to do with the macro-economic and political situation there. Other countries that are completely off field might include Bolivia and Paraguay who are probably not even on the international scene at all yet.
How can any buyers interested in these countries get involved in sourcing opportunities?
JG: From my experience, and definitely for Ethiopia, if any country wants to accelerate the growth of an industry their relevant institutions will be promoting a range of inward investment schemes. For Ethiopia, we at Promar could help depending on what the buyer is looking to do. For Vietnam and Uruguay their attitude towards inward investment is typically very open. A combination of trade associations and government institutions will welcome you with open arms if you wish to do business.
In general, trade associations are very responsive because they’re looking for investment or trading relationships to help buyers build relationships with growers and exporters, which can often lead to joint venture agreements. In a lot of these countries the natural resources are there but sometimes what’s lacking is the knowledge of export markets or their requirements and how to meet those demands. The learning process can be quite long so it helps to do it in association with someone else.
Increasingly, exporters are coming to markets like the UK to do business. But buyers obviously need to go to a country of interest themselves to visit the market and learn about the structure of the industry. So, if you’re going to Kenya, why not visit Ethiopia as part of your trip? Or if you’re visiting Chile, Brazil or Argentina, remember you are right on the doorstep to Uruguay. The only way you’ll find out what’s going on in these countries is to do some homework and go and see for yourself.
Country fact file
Capital: Addis Ababa
Population: 92.9 million
Area: 1,104,300 km2
GDP: US$56 billion
Fresh produce organisation: The Ethiopian Horticulture Development Agency
Population: 91.5 million
Area: 332,698 km2
GDP: US$204 billion
Fresh produce organisation: The Vietnam Fruit and Vegetable Association
Population: 3.4 million
Area: 176,215 km2
GDP: US$57 billion
Fresh produce organisation: Upefruy (the Producers and Exporters’ Union of Uruguay).
John Giles spoke on the topic of Partnering with Emerging Markets at the London Produce Show 2015 on Thursday June 4.