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Prof. Dr. Mohd. Fauzi bin Mohd. Jani, Prof. Dr. Aliah Hanim bt Mohd. SallehProf. 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”An Assessment of Market Potential of Selected Tropical Fruits in the Netherlands”

Malaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, MAEPS SerdangMalaysian Agricultural Horticultural and Agrotourism (MAHA) 2008, MAEPS Serdang

Exploring the Market Potential of Fruits in Europe: Exploring the Market Potential of Fruits in Europe:

Key Lessons for Malaysian Tropical Fruits Exporters.Key Lessons for Malaysian Tropical Fruits Exporters.

For

(Marketing & Service Management Research Group UKM)

Excerpt from

By Research Team from UKM

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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.

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Geographical scope:

The NetherlandsThe Netherlands as the gateway to the European fruit market.

This study focuses on the market potential of tenten tropical fruits as listed below:

Starfruit

Dragon fruit

Pineapple

Rambutan

Durian

Pomelo

Papaya

Mango

Mangosteen

Jack Fruit

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1.1. Focus Group Discussion

2.2. Interviews (n = 100) with industry players:(a)Local exporters and producers(b)Foreign importers, wholesalers, and retailers

3.3. Observation of open markets in the Netherlands.

4.4. Participation of 26th Fresh Produce Forum, 7th Feb 2007, Berlin.

5.5. Interviews with Fruit Logistica tradefair participants, 8-10 Feb 2007.

6. 6. Warehouse site visits in the Netherlands, Nov/Dec 2006, 13-16 Feb 2007.

7.7. Feedback from local industrial experts

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Discussion during FAMA-Discussion during FAMA-UKM workshopUKM workshop

Interview sessions with the Interview sessions with the representatives of Solfruit representatives of Solfruit (Fruit Logistica tradefair (Fruit Logistica tradefair participant) participant)

Hilton Hotel, Petaling Jaya, Hilton Hotel, Petaling Jaya, November 27, 2006 November 27, 2006

Berlin, February 7, 2007 Berlin, February 7, 2007

6Warehouse site visits - Hispa Fruit’s Cold Room Feb. 13, 2007

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Eating

Garnishing

Gifts

Table Deco

Various Tropical Fruit Uses In EuropeVarious Tropical Fruit Uses In Europe

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

1.1. Demand for fruits in Europe is “pushedpushed 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.

ImplicationImplication: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.

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Large ScaleImporter/

Wholesaler/Exporter

Importer/Wholesaler/Exporters(Retailer)

Large ScaleRetailer

Supermarket

Retailer/ Wholesaler

End Consumers

Distribution Center /

Warehouse

Open market

Retailer

Re-export

Cross-SupplyIndicator:

An Overview of the Marketing Distribution Channels for Tropical Fruits in the Netherlands

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

2.2. Consumer demand for fresh tropical fruits in Europe is also “pulledpulled” up through the channels by large-scale and small retailers such as the supermarket chains.

ImplicationImplication:(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.

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

2.2. (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)

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

3.3. 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.

ImplicationImplication:• 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.

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

4.4. 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.

ImplicationImplication: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’.

17Brochure Promoting Tropical Fruits

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

5.5. 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.

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Mar

ket

Dem

and

Market CompetitionLow High

High

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

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

5.5. 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)

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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

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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

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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

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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

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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

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KEY LESSONS FOR MALAYSIAN TROPICAL FRUITS EXPORTERS AND IMPLICATIONS

6.6. 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.

ImplicationImplication:(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.

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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.

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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.

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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

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• 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.

31Other Potential of Processed Tropical Fruits

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Any enquiries please contact:

Professor Dr. Aliah Hanim M. SallehProfessor Dr. Aliah Hanim M. Salleh

Graduate School of BusinessGraduate School of Business

Universiti Kebangsaan Malaysia (UKM)Universiti Kebangsaan Malaysia (UKM)

Tel : 03-89215761Tel : 03-89215761

Email : tdgsb@ukm.myEmail : tdgsb@ukm.my

Website : www.ukm.my/gsbukmWebsite : www.ukm.my/gsbukm