John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc. He has carried out numerous assignments within the fresh produce sector in Chile, South Africa, New Zealand and South East Asia, as well as across the EU and in the UK. Here, he discusses the future outlook for Chile’s fruit trade with the ever-evolving UK market
For many international fresh produce organisations, the lure and appeal of emerging markets in South East Asia, the Middle East, and now, in some cases, Africa is understandably strong. Yet the opportunities that still exist in more mature markets such as the European Union (EU) and the US are still often fundamental to the future fortunes of exporters around the world. This is none so less the case than for Chile.
Chile has, of course, emerged over the last 25 years as a leading player in the international fresh produce sector; having developed markets all round the world for its fruit and vegetables. This has often been aided by the highly proactive negotiation of Free Trade Agreements with key potential markets, not least in Asia.
Yet the UK remains an important market for the Chilean export sector.
The key to the future development of the Chilean sector will be how it can balance the demand in its more mature markets with the obvious opportunity for its produce in Asia, the Middle East and Russia. This is a challenge faced by many other exporters around the world and in the case of Chile where the strategic guidance and expertise of the leading fruit exporters’ association, Asoex, will be especially important.
Looking at the UK as an example, Chilean fresh fruit exports have continued to increase over a sustained period of time. On a product-by-product basis, the performance of key products in Chile’s export portfolio has been as follows:
Between 2000 and 2014, imports from Chile in to the UK have increased significantly from 17,000 tonnes per annum to over 40,000t.
Arrivals in the UK have increased overall from 34,000t to 37,000t each year, but have peaked in the past at almost 65,000 tonnes annually.
Imports from Chile have increased steadily but slowly from 4,000t per annum to over 6,000t per annum, and in some years have peaked at 9,000t.
UK imports have grown from just a few hundred tonnes to over 2,500t during the same period.
Imports into the UK from Chile have been the real star performer and have grown from less than 100t per annum to over 7,000t per annum between 2000 and 2014.
View these charts to see the UK export evolution of Chile’s apples, blueberries, kiwifruit and grapes.
Changing UK dynamics
While the UK market was badly impacted by the economic downturn of the late 2000s, the UK economy has finally returned to positive growth over the last two to three years, with GDP increasing to reach the same levels seen back in 2008. During this period, however, the structure of the UK fruit supply chain has altered significantly, with increasing consolidation taking place.
The sale of fruit in the UK is still dominated by the major retailers, but widespread change is taking place due to the growth of the discount chains, online shopping and developments in the foodservice sector, which are all putting pressure on the position of the four leading supermarkets: Tesco, Asda (part of Wal Mart), Sainsbury’s and Morrisons.
At the same time, the UK is still heavily reliant on fruit imports. Arrivals are in the region of 3.7 million tonnes per annum and the UK has a long tradition of importing fruit from a wide range of sources, including the US, Central and Latin America, Africa and Asia as well as from within the EU itself.
What does this mean for Chile?
The UK market is still an important export destination for Chile’s suppliers and it needs to be treated as such. It will remain so in the future, but alongside the counter attractions of Asia and the Middle East. The nature of the market has changed considerably, however, in the last few years. How it was then, is not how it is now.
Chilean exporters need to recognise the changes taking place, in particular how the growth of the discounters, such as Aldi and Lidl, has altered the nature of UK consumer behaviour and how the market is now being driven. This change also provides the basis of future opportunities for well-informed and focused Chilean produce companies.
But taking its eye off the ball in the UK could see other ambitious exporters, such as Peru, grab market share that has been hard won over the last 20 years by a determined and coordinated export effort from Chile that has often been spearheaded by Asoex.
Taking all this into account is important if Chilean produce companies are to continue to be successful in the UK. The UK is still a big import market, but the battle to supply it will only intensify in the future. Only those who really understand the market and commit to meeting its technical and commercial requirements will survive, let alone prosper.
Chile has a great track record of supply and promotional support activity in the UK, and it is highly regarded by most of the leading supply chain players. There is no reason why this won’t be the case again in the next five years as the Chilean sector continues to move forward on all fronts.
John Giles can be contacted at: [email protected]