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1 Prof. Dr. Mohd. Fauzi bin Mohd. Jani, Prof. Dr. Aliah Hanim bt Mohd. Prof. Dr. Aliah Hanim bt Mohd. Salleh Salleh, Dr. Tih Sio Hong, Dr. Azhar Hj Ahmad, Dr. Norjaya bt Mohd. Yasin, En. Mhd. Suhaimi Ahmad, En. Ahmad Khairy bin Mohd. Domil A FAMA-UKM research consultancy project entitled An Assessment of Market Potential of Selected Tropical Fruits in the An Assessment of Market Potential of Selected Tropical Fruits in the Netherlands” Netherlands” Malaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, Malaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, MAEPS Serdang MAEPS Serdang Exploring the Market Potential of Fruits in Exploring the Market Potential of Fruits in Europe: Europe: Key Lessons for Malaysian Tropical Fruits Key Lessons for Malaysian Tropical Fruits Exporters. Exporters. For (Marketing & Service Management Research Group UKM) Excerpt from By Research Team from UKM

1 Prof. Dr. Aliah Hanim bt Mohd. Salleh Prof. Dr. Mohd. Fauzi bin Mohd. Jani, Prof. Dr. Aliah Hanim bt Mohd. Salleh, Dr. Tih Sio Hong, Dr. Azhar Hj Ahmad,

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1 Prof. Dr. Aliah Hanim bt Mohd. Salleh Prof. Dr. Mohd. Fauzi bin Mohd. Jani, Prof. Dr. Aliah Hanim bt Mohd. Salleh, Dr. Tih Sio Hong, Dr. Azhar Hj Ahmad, Dr. Norjaya bt Mohd. Yasin, En. Mhd. Suhaimi Ahmad, En. Ahmad Khairy bin Mohd. Domil A FAMA-UKM research consultancy project entitled An Assessment of Market Potential of Selected Tropical Fruits in the Netherlands Malaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, MAEPS Serdang Exploring the Market Potential of Fruits in Europe: Key Lessons for Malaysian Tropical Fruits Exporters. For (Marketing & Service Management Research Group UKM) Excerpt from By Research Team from UKM Slide 2 2 To identify importers, distributors and retailers in the Netherlands that market tropical fruits. To identify the types of tropical fruits distributed and the preferred characteristics of these fruits among the channel members. To identify facilities in fruits distribution used by the channel members in distributing tropical fruits. To suggest a strategic action plan in order to increase the tropical fruits export to the Netherlands. Slide 3 3 Geographical scope: The Netherlands The Netherlands as the gateway to the European fruit market. ten This study focuses on the market potential of ten tropical fruits as listed below: Starfruit Dragon fruit Pineapple Rambutan Durian Pomelo Papaya Mango Mangosteen Jack Fruit Slide 4 41.Focus Group Discussion2.Interviews (n = 100) with industry players: (a)Local exporters and producers (b)Foreign importers, wholesalers, and retailers 3.Observation of open markets in the Netherlands. 4.Participation of 26 th Fresh Produce Forum, 7 th Feb 2007, Berlin. 5.Interviews with Fruit Logistica tradefair participants, 8-10 Feb 2007. 6.Warehouse site visits in the Netherlands, Nov/Dec 2006, 13-16 Feb 2007. 7.Feedback from local industrial experts Slide 5 5 Discussion during FAMA- UKM workshop Interview sessions with the representatives of Solfruit (Fruit Logistica tradefair participant) Hilton Hotel, Petaling Jaya, November 27, 2006 Berlin, February 7, 2007 Slide 6 6 Warehouse site visits - Hispa Fruits Cold Room Feb. 13, 2007 Slide 7 7 Eating Garnishing Gifts Table Deco Various Tropical Fruit Uses In Europe Slide 8 8 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS1. pushed Demand for fruits in Europe is pushed down through the marketing channels by large-scale importers as the primary tier, with wholesalers, large-scale and small-scale retailers and open markets as secondary and subsequent tiers in the channel system. Implication Implication: Vital for exporters to identify which importer to target, and establish and sustain a mutually-beneficial long-term relationship with this (these) large buyer(s). Equally vital for exporters to be able to supply conforming to the large quantity and export quality of fruits expected by these large-scale buyers who value order consistency, regularity of supply and appropriate timing to meet shortfalls of supply in Europe. Slide 9 9 Large Scale Importer/ Wholesaler/ Exporter Importer/ Wholesaler/ Exporters (Retailer) Large Scale Retailer Supermarket Retailer/ Wholesaler End Consumers Distribution Center / Warehouse Open market Retailer Re-export Cross-Supply Indicator: An Overview of the Marketing Distribution Channels for Tropical Fruits in the Netherlands Slide 10 10 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS2. pulled Consumer demand for fresh tropical fruits in Europe is alsopulled up through the channels by large-scale and small retailers such as the supermarket chains. Implication Implication: (a)If targeting for the potentially large consumer market in Europe, the fruit (e.g. Carambola, pineapple, mango, pomelo, watermelon, jackfruit) can be positioned to be eaten fresh, and must be matched with the needs and tastes of the supermarket shopper ( value-for-money positioning). This will generate thin margins to be spread over large turnover. Slide 11 11 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS2.(b)If targeting for specific niche market segments, as decoration (for buffet tables/decorate drinks, as garnishing), or for fresh juicing, a premium strategy will give the marketeer the advantage of premium pricing with higher margins over small quantities of selected fruits (e.g. starfruit, pittaya, pineapple mangoes) To be studied: Potential of fruits to be positioned as gifts (such as in Japan) Producing fruit species with attractive colour and longer shelf life Exporting sweeter varieties for fresh juicing and targeting special buyers (airlines, hotel and restaurant chains) Slide 12 12 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS3. There is a growing trend among European consumers to prefer health and beauty attributes in their preferences of what fruit to choose to eat and for what occasion. Implication Implication: If exporters want to capitalize on the exotic fruit image, its quality is of the essence in order to enjoy the benefits of premium pricing. But if a critical mass is needed to harness orders from supermarkets, consumer awareness of the nutritional benefits through extensive consumer promotional campaigns (at supermarkets, fruit fairs, specialty stores, educational media, etc.). FAMA can play a leading role in promotion. Effective grading and labeling with nutritional information for consumers are vital, to signal quality and the health benefits they promise. Slide 13 13 Slide 14 14 Slide 15 15 Slide 16 16 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS4.The ten tropical fruits from Malaysia are still generally perceived by consumers in Europe as exotic fruits and not (commercial) fruit commodities such as bananas (predominantly from Central America), apples, oranges, pears, grapes and pineapples (predominantly from Costa Rica) to be eaten daily as a quick snack/refreshment. Implication Implication: To compete with the Euro spent on fruits with other freshly eaten fruits such as apples, oranges, pears, bananas, our fruits have to be eating-friendly, snack-friendly pre- packaged (e.g. in individual portions) and pre-cut, with assortments in fruit boxes. Slide 17 17 Brochure Promoting Tropical Fruits Slide 18 18 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS5.Malaysia carambola (starfruit) has the largest export potential to Europe; relative to the 3 other tropical fruit clusters under study. Cluster 2 (Mango, Papaya, Pineapple) has very high market demand, but the European market is very competitive with so many suppliers already dominating the market. Cluster 3 (Pummelo, Dragon fruit) has medium market demand with moderate level of competition. Cluster 4 (Rambutan, Durian, Jackfruit, Mangosteen) has few suppliers and presently low market demand. Slide 19 19 Market Demand Market CompetitionLowHigh Mango, Papaya, Pineapple Pummelo, Dragon Fruit Rambutan, Durian, Jackfruit, Mangoesteen Star fruit Potential Positioning Map for Selected Tropical Fruits in European Market Market Competition refers to number of competitors in market/intensity of competition Market Demand is the estimated level of demand by importers Positioning map is based on researchers observation of the market, interviews with industry players Slide 20 20 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS5.Implication: Each cluster open possibilities for different marketing strategies. Star fruit Invest in market positioning & generate higher demand from importers Concentrate effort on maintaining its current strength especially the positive association of star fruit and source from Malaysia Leverage the familiarity of the fruit to create market niche among high-end market Promote more usage of fruit. Not just for garnishing but promote it for daily consumption Expand supply to meet the EU critical demand (timing & quantity) Slide 21 21 Mango Concentrate investments in positioning our mangoes for profitable segments (probably specialty stores, airlines, hotels, banquets e.g. by promoting Malaysian mangoes as tastier and tender). Promote Malaysian mangoes for high-end market. (Avoid competing head-on in supermarket shelves based on price, e.g. with Indian mangoes) KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Slide 22 22 Pineapple and Papaya Challenge for market leadership by emphasizing the fruit quality Build selectively on strengths. For example, Josephine for the sweeter taste Reinforce vulnerable areas especially for papaya. Invest on R&D to improve the quality of fruit KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Slide 23 23 Pummelo and Dragon fruit Invest heavily in most attractive segments Build-up ability to counter competition. Fruit size for pomelo need to be reduced as preferred by Europeans Educate the target market to try dragon fruit KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Slide 24 24 Durian and Rambutan Can invest in pre-packed frozen durian for carefully targeted segments (e.g. via Oriental Market stores) Promote rambutans in fresh fruit assortment ready to eat. Possible consideration in processed e.g. canned with syrup. KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Slide 25 25 Jackfruit and Mangosteen Increase awareness since they are presently seen as exotic fruits Invest in educating the consumers (converting non-users to users) Jackfruit: pre-packed in ready-to-eat form Mangosteen: fresh & potential processed food due to high perish ability Good packaging to enhance their shelf life Position the fruits for eating (emphasize the unique taste) KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Slide 26 26 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS6. Fruit importers main concern in selecting suppliers (Malaysian exporters) are conformance to: EUREPGAP, HACCP, ISO certification Guaranteed uninterrupted supply Ability to fulfill order quantities Ability to meet timing of demand. Implication Implication: (a)Ensure effective supply chain management system in local Malaysian market by: Enhancing vertical cooperation: Farmers, Distributors and Exporters Alliances. Enhancing horizontal cooperation between industry players. Slide 27 27 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Further development of EUREPGAP compliance working team, farmer groups Encourage more Commercial-based farming and infrastructure Transportation cost subsidization-Double tax deduction for carriers (e.g. airline service providers) (b) Ensure the effectiveness of market makers in the Malaysian market. Enhancement/increase effectiveness & efficiency of market makers institution. Setting up an independent (non-profit) research unit at IPTA to develop market intelligence and coordinate the European market. Slide 28 28 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS Enhancement of integrated tropical fruit facilities and processing Integrated Fruits-based Central-Kitchen (IFCK): this Central Kitchen acts as a planning and processing centre of fresh fruits -To reduce fruit wastage -Produce high value-added processed fruits -Overcome the short shelf-life of fresh fruits (c) Enhancement of strategic alliances with key foreign channel members. Enhancement of Strategic alliances with foreign importers and wholesalers Strategic partnership with importers because importers are the first- tier market player that control the distribution network and market creator that pushes the demand down the channels to end users via retailers. Slide 29 29 KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS (d) Large scale consumer awareness marketing campaign. Conduct large scale consumer marketing campaign Collaboration with foreign universities to promote Malaysian tropical fruits Young generation: develop positive perception towards tropical fruits consumption Periodical In-store promotion Slide 30 30 Consumer awareness of tropical fruits value and consumption Study on close competitors marketing practices (e.g. packaging, branding, quality assurance, pricing) Specific study on value-added tropical fruit products, for example processed fruits, pre- packed ready-to-eat fruits. Slide 31 31 Other Potential of Processed Tropical Fruits Slide 32 32 Any enquiries please contact: Professor Dr. Aliah Hanim M. Salleh Graduate School of Business Universiti Kebangsaan Malaysia (UKM) Tel : 03-89215761 Email : [email protected] Website : www.ukm.my/gsbukm