Few Taiwanese have ever heard of Baimaotai in central Taiwan, a rugged mountain area 700 meters above sea level. And yet the area is famous among Japan's epicures. The key to its overseas fame is its much-prized Kyoho grapes. The elevation of Baimaotai and its hot, bright sunlit days and relatively cool nights are perfect for the production of the finest textured purple-black fruit, which yields two crops a year.
"Baimaotai's grapes have a sweet-tart flavor, which is perfect for the Japanese palate," says Chang Kuo-hsing, owner of a Baimaotai vineyard. "Japan has been importing our grapes for some time. Japanese farmers also grow grapes, but they can only harvest once a year. So our grapes serve to satisfy Japanese cravings for Kyoho in the winter."
In contrast to mountainous Baimaotai, Guanmiao is situated on Taiwan's southern plain, and swelters in year-round sub-tropical heat. Both the soil and the temperature make it a perfect place to grow pineapples. As February draws near, thousands of tonnes of pineapples, fertilized with imported and costly "organic calcium," will be ready for harvest.
"About 70 percent of my pineapples are exported to Japan," says Kuo Chung, production and sales chief at Guanmiao. "Japanese love the unique sweet taste of Taiwan's pineapples. Not only that, the shelf life of Guanmiao's pineapples is up to 17 days, much longer than the 10 days of fruit from the Philippines," Kuo says.
Taiwan might have a worldwide reputation for its electronics but it is seldom thought of as a major fruit grower. Yet thanks to its climate and geographical features, Taiwan is particularly well suited for growing fruit of a remarkable diversity, from tropical pineapples, mangoes and papayas, to temperate fruit such as pears and strawberries. More than 30 kinds of fruit are grown all year round in Taiwan.
A Declining Industry
Actually, long before Taiwan became a digital giant, it was a major fruit producer and many of the older generation can remember the heyday of the "kingdom of fruit." But the size of the fruit industry has contracted sharply over the years, with exports--at around 68,000 tonnes last year--having halved in the past 10 years. Fruit exports are now being targeted at more specialized consumers, either those seeking products raised in more environmentally and health-conscious ways or those who are prepared to pay a significant premium for outstanding flavor.
In the 1970s, Taiwan's bananas were one of its major export moneymakers, accounting for 9.54 percent of total export earnings. Pineapple exports also reached a peak in the 1970s; during the industry's golden period, some 300 tonnes of canned and fresh pineapples were shipped from Taiwan every day.
As Taiwan's economy shifted from agriculture to light manufacturing in the 1960s and 70s, then to heavy industry and chemicals in the 70s and 80s and high technology in the 80s and 90s, the soaring cost of labor crippled the agricultural sector's profitability, while other countries ate into its international market share.
Two other factors have dogged fruit farming. One has been the opening of Taiwan's once-protected agricultural produce markets as a result of World Trade Organization (WTO) entry in 2002, which has led to much greater competition. Another has been the copycat tendency among Taiwanese farmers to rush into growing the previous year's most profitable crop. The result is an annual glut and plummeting prices of whatever crop did well the year before, and those farmers who grow more end up losing more.
"Growing pineapples is sometimes rewarding. But when sales stall, it becomes an unbearable torture. I have to focus on exports because I have to deal with the excess output," says Kuo. As for grapes, when Chang is faced with too low a market price, he has to look for markets with a higher consumption capacity.
In the two years after Taiwan's entry into the WTO, fruit exports saw a 42-percent rise from the previous year. Following this, the government formulated policies to strategically promote exports of agricultural products.
"My idea is that we should reach out with our good stuff. Competition is vital since it enables the sustainable development of the agricultural industry," says Chen Wen-deh, director-general of the Department of International Affairs at the Council of Agriculture (COA). "We can't just sit and wait for other countries to take all of the market. We should bring our native or acquired advantages into play. And eventually, competition will upgrade the quality of our agricultural industry."
Finding a Niche
Taiwan's fruit industry has to be a pioneer in this regard. The country's relatively high pay levels make labor-intensive fruit production very costly. If Taiwan cannot compete on price alone, then the agricultural sector--like its manufacturing counterpart--needs a development plan which can produce higher value products and a strategy to market them. Taiwan needs to market its fruit on the basis of quality and health consciousness rather than try to compete on price. And attempts to export surplus fruit with little knowledge of different governments' import regulations can fail and even damage the country's reputation. One example of this is the recent rejection of a cargo of Taiwanese bananas by Japan after they were found to have a higher level of chemical residue than Japanese regulations allowed.
Taiwanese custard apples entered the Chinese market two years ago. (Photo by Huang Chung-hsin)
To help farmers obtain the knowledge and refine the techniques required to grow marketable fruit, the COA has established a number of "quality fruit production orchards" (QFPO), which concentrate on growing 12 highly competitive fruits, including lychees, bananas, mangos, star fruit and tangerines. Participating farmers are obliged to follow the COA's regulations on matters such as pest control, technical training, and establishing production and distribution systems.
Chang's vineyards and Kuo's pineapple orchards are among these governmentally certified that are run according to ethical agricultural practices. Before joining the COA's QFPO program, they stood out for their attention to quality control. "My production costs are high, but my fruit is healthier and more free from chemical pollutants. My grapes have met the strict residue-testing standards of the Japanese government for eight years in a row. Now my orchards are targeting consumers at the top end of the market," says Chang, standing in front of four cameras installed for consumers to view online the real-time activities at the orchard 24 hours a day.
As an added incentive to raise product quality, the government also provides assistance for qualified farmers to obtain ISO 9001 certification. "After acquiring ISO 9001 certification, we are confident that Chang's vineyard will acquire certification from EuropGAP, the European agricultural benchmark, next year," says Liu Fang-mei, a COA technician. Liu visits Chang's orchard on a regular basis to inspect all aspects of fruit production.
Tracing Origins
In response to safety consumption measures practiced in Europe, Japan and the US, the COA since 2004 has been promoting a program "from farm land to the dining table" which aims to create a system to enable consumers to pinpoint the place of origin, track the marketing journey and give information on the characteristics of agricultural products. It will be fully operational by 2015.
"We are not competing on price. We are promoting healthy, high quality fruit, targeting the top end of the market," says Tony Hung, executive director of the Strategic Marketing Department at the Taiwan External Trade Development Council (TAITRA).
TAITRA was commissioned by the COA in 2004 to create a series of advertising campaigns to promote Taiwan's agricultural products abroad. It has actively participated in a number of international food exhibitions, found more overseas retail outlets, and placed commercial advertisements.
In June 2006, with the sponsorship of China Airlines, a plane painted with images of Taiwan-grown fruit made its debut flight to Japan. Despite the high-profile nature of the promotional campaign, the COA was able to cap the cost of agricultural product promotion at a mere NT$50 million (US$1.56 million), according to Tsai Chuen-ying, a COA official.
The COA effort has paid off. Taiwan's papayas were eventually able to enter the Japanese market in December 2004. Its mangos were granted permission to enter New Zealand's market in 2005, and Taiwanese fruit has also been sold in a large number of other countries, such as Canada, Mexico and the Netherlands. The export value of Taiwan's fruit in 2005 totaled US$83 million.
Although Taiwan's high-priced fruit is well liked in Japan, it is still too expensive for other countries. "The unit price of Taiwan's fruit is too high. We have found it relatively difficult to break into the European market. The Japanese market, though, is rather a different story. Japanese people are more willing to spend more on quality food," says Chiu Hung-pin, vice president of Lytone Enterprise Ltd.
"We won't give up. We'll expand into markets in Europe and in the Middle East. Taiwan's fruit seems expensive because consumers don't know about its value and attributes. The government can play a crucial role in facilitating consumer understanding. It has been doing an excellent job in Japan," says Chiu.
Wary of China
Tony Hung of TAITRA says that, in order to achieve marketing success, all the crucial elements such as the logo, branding and packing, have to be well designed. Much of the current material, however, needs improvement, something that farmers' associations or exporters are not really capable of doing. Kuo Chung admits to knowing little about branding, "I don't have time for that! Managing orchards consumes all my energy."
Another factor important for successful overseas marketing is long-term supply consistency and reliability. But in Taiwan, when an unexpected shortage drives prices up--for example in the aftermath of a typhoon--farmers frequently default on their contracts with exporters, and this lack of reliability has proved a major stumbling block.
Currently, only 5 percent of Taiwan's total fruit output is exported, according to Huang Mei-hua, director of the Crop Production Division at the Agricultural and Food Agency. "There is still plenty of room for fruit exports to grow," she says, adding that current export markets are over-concentrated on Japan, the US and Hong Kong. "But hopefully we can diversify if we can achieve technology breakthroughs in extending shelf life and better transportation techniques." Japan accounted for 37 percent of the total value of the nation's fruit exports in 2005, followed by the US at 17 percent and Hong Kong at 12 percent.
China appears to be a promising market and currently Taiwan's government imposes no restrictions on the export of agricultural products across the Taiwan Strait. However, Chinese demand for Taiwan's high-priced fruit is extremely limited, and the lack of direct transportation links also hinders developing a market there. China has, according to some reports, been suggesting to Taiwanese fruit growers that they set up in China itself. The government, however, is opposed to this because of the risk of intellectual property theft. Large quantities of both money and effort have been expended on improving both plant stock and growing techniques, and these superior materials could easily be stolen and techniques copied in China, with the possible result that China-grown fruit of Taiwanese varieties could end up replacing Taiwan's own produce in international markets. In 2005 China (not including Hong Kong) accounted for 3 percent of the total value of Taiwan's fruit exports, according to COA statistics.
Last year, six typhoons swept across Taiwan, wrecking many orchards and destroying the hopes of fruit farmers. This year has been a good harvest year. Time, effort and painstaking experimentation on the part of both farmers and the government have given Taiwan's fruit a wider international profile. No one knows how much long-term success this export orientation might have. What they do know for certain is that in order to stay competitive in the international market, they need to keep their fruit as fresh, healthy and delicious as possible.