2011

American International
University - Bangladesh

Ali, S. M. Furkan

[AUSTRALIAN CHERRY INDUSTRY]

1.0 Industry Environment

Australian agriculture, as a whole, faces a rapidly changing global environment and only those
primary industries that respond appropriately to these changes will survive and prosper in the
future. For the Australian cherry industry to have a strong and viable future it needs a clear
understanding of the environment in which it currently operates and the challenges and
opportunities it could face in the future.

The Australian cherry industry is a relatively small agricultural industry by national standards,
with an estimated total number of 701 growers spread across Australia. There are about 3000
hectares under cherry production across Australia and like most agricultural industries there is a
wide range of growers from hobby producers through to fully commercial production systems.
The common rule of thumb that 20 per cent of growers supply 80% of produce also seems
applicable to the Australian cherry industry.

Unfortunately a lack of objective information is available on the Australian cherry industry. This
must be addressed by industry to provide an accurate basis on which to develop future priorities
and pathways for development.

The industry is concentrated in New South Wales, South Australia and Victoria and has smaller
but important production areas in Tasmania and Western Australia. Key production areas within
these States include the Young, Orange and Bathurst regions (NSW), the Dandenong Ranges
(Vic), Mount Lofty Ranges and Riverland area (SA), Huon Valley (Tas) and the Bridgetown and
Mt Barker areas (WA) (see Figure 1).








Figure 1: Geographic spread of cherry production across Australia



The Australian cherry season extends from November, in most mainland States, through to late
February in Tasmania, with the majority of the crop harvested during December and January in
most areas. Fruit supplies are limited during the early and late parts of the season.

Fruit supply and quality are the key factors that affect pricing, with producers receiving the
highest prices early and late in the season when supplies are short. Producers also can
achieve premium prices for fruit that is large in size (more than 28 millimeters), firm and free
from blemishes.

Bridgetown
Mt Barker
Dandenong
Ranges
Young
Orange and
Bathurst

Huon
Valley
Mt Lofty Ranges
Riverland area
Australian cherry production is tending to move towards larger scale operations that are linked
to irrigation areas such as the Murray River and Goulburn Valley. Production areas have also
moved to areas that are considered more protected from weather extremes (less risky areas)
and areas that are achieving particular supply windows.

Most cherries are currently sold on the domestic market. But with supply rapidly outstripping
demand and limited access to export markets, producers are being forced to address their
existing market strategies and future options immediately.

2.0 Cherry Production
Cherries are produced in 6 states, with New South Wales and Victoria the two largest producers.
Tasmania has had a rapid expansion in plantings and is currently the third highest producer. It
has a strong export focus, enhanced by its relative pest and disease freedom. South Australia is
the 4th largest producer with a significant proportion of its production sold interstate and a small
percentage also exported. Both Western Australia and Queensland are relatively small producers
primarily focusing on their domestic markets. The Australian cherry season extends from
November, in most mainland States, through to late February in Tasmania, with the majority of
the crop harvested during December and January in most regions.
Australian cherry production is small by world standards, accounting for less than 1% of world
production. Australian cherry production is spread amongst the southern states, with around
2,000 hectares under production.
Table 1: Main cherry Production Areas in Australia
VIC NSW SA TAS WA
Yarra Valley Young Mount Lofty Ranges; Huon Valley South-west Region
Upper Goulburn Orange Riverland area Derwent Valley
Cobram Bathurst
Strathbogie
Wangaratta



2.1 New South Wales:
New South Wales (NSW) have traditionally been around the centers of Young and Orange.
Newer areas include Hillston, Mudgee, Wellington, Tumut and Batlow. These new areas have
started growing cherries to try to extend the NSW cherry season.

2.2 Victoria:
The main cherry growing regions of Victoria are located in North East Victoria, Goulburn, and
Valley, Upper Goulburn / Strathbogie and the Southern Victoria area. These areas produce
approximately. 85% of Victorias cherry production. Other smaller areas are located
throughout Victoria in areas such as Bendigo, and Kerang.

2.3 South Australia:
There are 3 significant cherry production areas in South Australia. The largest area is the, Mount
Lofty Ranges (commonly referred to as the Adelaide Hills). The other two are located in the
Riverland region and the South East of South Australia.

2.4 Tasmania:
The Tasmanian cherry season commences early in December with early-maturing cherry
varieties, and continues through to late February. The peak of production is through mid to late
January. In Tasmania cherry mainly grows in Huen Valley and Derwent Valley.

2.5 Victoria:
The main cherry growing regions in Western Australia (WA) are located in a narrow growing belt
stretching from Donnybrook to Pemberton in the south west of the state. This region involves
some larger growers in both the Donnybrook/Kirup and Manjimup/Pemberton areas as well as
smaller ones through the Balingup and Bridgetown shires. This belt produces approximately 85%
of Western Australias cherries. Other smaller producing areas are located between Mt Barker
and the Albany region with a few growers in the Dwellingup area.

2.6 Queensland:
The main cherry growing area of Queensland is the Granite Belt region of south-east
Queensland, centered around Stanthorpe. This region mainly involves smaller growers who use
cherry production to supplement other farm incomes. Only a small number of enterprises use
cherries as their main income source. The main production is in the Glen Aplin and The
Summit districts of the Granite Belt, with smaller producers in the Amiens, Pozieres and
Severnlea areas. This area produces 100% of Queenslands cherries.
Table 2: Cherry Production by State 2009/10
NSW QLD SA TAS VIC WA Total
Production (t) 3,000 18 1,400 3,000 2,500 400 10,300
Area (ha) 1,322 17 531 827 894 79 3,670

Australian annual cherry production is variable depending on climatic conditions, and ranges
from 8,000 to 12,000 tons (HAL, 2010). The Australian mainland export around 8% to 10% of
cherry production annually and Tasmania export around 25% to 30% of their cherry crop
annually. It is estimated that 70% of exports are of the varieties of Sweetheart and Lapin, with
Bing and Ron's Seedling also having significant export volumes.

3.0 Production trends and projections

Australia currently produces in excess of 12000 tonnes of cherries per year.

NSW has historically been the major producer of cherries in Australia, with about 40% of the
national cherry crop being grown in NSW. Young, NSW is considered the cherry capital of
Australia. Over the past decade some decline in production in the Young region has been
noted, mainly as a result of the drought. Some production lost in the Young area has been
replaced by cherry production in areas such as Orange and Batlow. More recently large
plantings have occurred in Hillston. NSW cherry production is generally early to mid season.

Victoria is the second largest cherry producing state, producing about 30% of the Australian
crop. The major production areas use to be close to Melbourne but the pressures of
urbanization in areas such as the Yarra Valley, have seen many cherry growers move to new
areas including Wandin, Shepparton, Wangaratta and the ranges towards the North East of the
State. Cherry production is generally mid season and is strongly built around the Christmas
market.

South Australia has a small cherry industry focused around the Mount Lofty Ranges. During
recent years cherry production has moved into other regions of the State including the Riverland
and South East. SA produces about 12% of the national cherry crop. South Australian cherry
production is early to mid season with the Christmas market being important.
Tasmania is a relatively small producer of cherries by volume, an estimated 1200t during 2005
representing about 12.5% of the national crop, but has advantages on both the domestic and
export markets. As the peak cherry season falls later than on the mainland (during late
January), it has access to the dwindling mainland market during this time. In addition to this,
TAS is free from fruit fly and together with the later season this provides Tasmanian cherry
producers with a significant export advantage over mainland producers, with up to 75% of the
Tasmanian crop being exported annually. Production is mid to late season.

Until recently, Western Australia has been a closed market and production has relied very much
on local growers. Fruit from SA has only been allowed into the WA marketplace during the last
two years. WA cherry production represents 5% of the national crop. The major growing regions
are the Perth Hills and the South West corner of the State. Cherry production is generally mid-
season.

4.0 Cherry Markets

The industry vision for the Australian cherry industry is, to grow the cherry industry to capture
domestic and export market opportunities through the development of efficient and effective
supply chains which maintain industry profitability and consumer confidence.

This vision needs to be clear in the minds of all stakeholders when marketing decisions are
made for both the domestic and export markets. Industry needs to be consumer-focused to
satisfy the needs of the customer.

A thorough understanding of the marketplace, drivers and consumer needs is essential to any
industry going forward. A high priority for the Australian cherry industry must be the use of up-
to-date market research to monitor and evaluate the changing environment in which it operates.

Increases in cherry production are forecast during the next five years, which cannot be expected
to be absorbed by the export market alone. With limited current access to export markets and
access to a number of potential export markets considered to be long-term projects, the
Australian cherry industry must maximize the potential for growth within the domestic market.
Industry needs to focus on building the domestic market and ensuring cherry quality is of the
highest standard. By developing a culture of premium-quality production, growers can capitalize
upon their opportunities within both domestic and future export markets.
4.1 Domestic markets

The Australian cherry industry is predominately focused on the domestic market, particularly the
mainland, with only 10-15% of cherries currently exported.
The domestic marketplace is price-sensitive and there is competition between regions for
market share. Growers also move reactively between the domestic and export markets
depending on prices. This is a large threat to the Australian cherry industry, particularly in the
export market, as the integrity and reputation of product is jeopardized.

Growers often view the increasing market power of the retail sector negatively. Growers often
feel they are price takers rather than price makers. Although supermarket specifications are
improving, the internal store supervision and training needs improvement. A partnership
between retailers and the cherry industry is lacking and methods to engage the retail sector in
the process need to be sought. At present retailers do not work with industry to move volume in
years of bumper crops.

Opportunities exist for the Australian cherry industry to develop advantageous relationships with
the retail sector. Horticulture Australia Limited (HAL) is doing some work with the retail sector
that is a start to the process.

An opportunity exists to drive the domestic demand for cherries through promotion. Historically
the cherry industry has relied on the Christmas environment to market cherries. There could be
a significant unplugged opportunity if the industry promotes cherries outside this peak Christmas
period. Increased promotional activities would best profit from the inclusion of retailers and
consumers in the promotion process and the view is that promotion in-store using people rather
than literature creates an edge and excitement for the product amongst consumers.

Previous research has shown that people over 25 years of age are the primary market for
cherries and they mostly buy cherries for their own consumption. Most people (65%) buying
cherries eat them as a snack. These two key points can be used to good advantage in any
advertising and promotion of cherries.

To help understand the marketplace, the cultural issues that determine and drive the market
also need to be understood. Consumer and in-store retail research is essential to further
develop this process.
The Australian domestic market is becoming more accessible to international suppliers and
Australian producers may be competing with producers from around the world for a share of the
domestic market. The Australian Government is committed to supporting free-trade agreements
in agriculture, which at times has negative consequences on some local industries.

Most consumers have no understanding or knowledge of the different cherry varieties on the
market and most do not appear to want to know. Rather if the cherries have the qualities
consumers are looking for they will buy them.
HALs Consumer fruit usage and attitude research found that consumers are less tolerant
towards quality variations in seasonal fruit. They have an expectation of the fruit as a treat or a
positive experience. Eating experiences are driven by taste and flavor and fruit buying is based
on appearance and smell.

Post-harvest quality assurance processes need to be investigated so systems are put in place
across the cherry industry that ensure a consistent supply of high-quality cherries is made
available to consumers.

Fruit quality will also affect pack out in-store. Consumers often hand pick their cherries, so how
much do retailers throw out? Industry needs to have a clear understanding of wastage as these
impacts on price and what retailers are willing to pay for cherries. But retailers also need a clear
understanding of how best to preserve fruit quality in-store to maintain quality for as long as
possible.

Research suggests that most consumers do not want to buy pre-packaged cherries. Issues
raised about pre-packaging included concern about the environment, what might be hidden in
the pre packs and people would simply rather select their own cherries for purchase. It is
recommended the marketing plan for the Australian cherry industry include marketing and
packaging options for cherries. Part of this research would include further consumer research.




4.2 Cherry consumption
Table 3: Cherry consumption on different market segment


Household
Young
single/couple
Young
family
Old
single/couple
Old
Family
Adult Total
Tonnes 132 264 171 522 233 1322
% share 9.9 20.1 12.9 39.8 17.6 100
Table 3 provides some indication of the consumption of cherries in Australia by different market
segments. The Australian Cherry Industry Consumer Market Research Report (2010) revealed
that families are the largest segment of the market consuming cherries, accounting for 59.8% of
cherry consumption. The group within this market segment which consumes the most cherries
is the old family group (39.8%), with young families being the second largest group consuming
20.1% of cherries in Australia. A total of 46% of the male population and 54% of females
surveyed (1373 in total) eat cherries. And only 15% of households said they had someone who
did not eat cherries with 32% of people agreeing with the statement we seem to be eating more
cherries then we did a couple of years ago. Agreement with this statement was most marked
among purchasers with young families (44%). In light of these findings there seems to be an
opportunity for increased promotion and awareness of cherries.

4.3 The Retail Sector
The retail sector of the export market is gaining market share rapidly, with supermarkets
seeking global suppliers who can provide large volumes of a range of produce over an extended
period. Unless export market trading relationships are improved and increased, Australia may
continue to lose market share in these markets.

Examples of international supermarket and food service chains building retail networks across
the world and sourcing globally to supply them include Tesco (UK), Dairy Farmers International,
Aldi (Germany), Royal-Ahold (Holland), Wal-Mart (US) and Carrefour (France).

In Asia alone there are five major global chains operating and at least another seven
multinational retailers with stores. These retailers are increasing their market share and
differentiating themselves from competitors by supplying consumers with exactly what they
want.
Produce is being sourced from fewer, larger and more sophisticated suppliers. The move
towards retail consolidation has seen increased supply consolidation with an increase in the
formation of horizontal and vertical alliances.

4.4 Export Markets
The Australian cherry industry currently exports cherries to more than 20 overseas markets.
There is significant potential for growth in all export markets, particularly with the supply of
cherries predicted to double in the next five years. Producers, particularly on the mainland,
currently rely on speculation on the highly fluctuating domestic market rather than committing to
the development of the export market. This attitude has delayed and prevented the
development of long-term trading relationships in many key export markets and is an attitude
that needs to change if the Australian cherry industry is to thrive and continue to go forward.

Australian producers compete with producers worldwide for a share of the global market.
Developments in improved communications and transport technologies and the removal of trade
barriers open up opportunities for Australian growers to export their produce to a wide range of
overseas markets.

Most Australian cherries are shipped by airfreight and arrive in Asia within 12 hours of leaving
Australia. Cherries to the Middle East arrive almost 24 hours after leaving Australia as trans-
shipment is usually involved. Fruit sent to the United Kingdom and Europe takes 2448 hours
depending on the route and flights selected.

Uniform quality and freshness must be selling points for this highly seasonal and globally
recognized fruit.

4.5 Australian Cherry Exports
In terms of value, Australia's top five cherry export destinations are Hong Kong, Taiwan,
Thailand, Singapore and Malaysia. Cherry exports were worth nearly A$19 million in 2010. The
volume of cherry exports was 1.4 thousand tonnes in 2010, a decline of 24 percent on the
previous year.


Table 4: Top Destination for Australian Cherry Exports by Value (A$'000)
Destination 2007 2008 2009 2010
World 12,863 17,755 20,218 18,707
Hong Kong 2,823 4,961 5,463 5,822
Taiwan 2,906 4,230 4,587 5,691
Thailand 1,611 1,774 2,328 1,954
Singapore 1,510 1,710 1,679 936
Malaysia 366 513 727 748
Netherlands 1,149 1,108 794 519
Russia 42 184 520 506
Vietnam 63 163 300 441
United Arab Emirates 687 1,022 1,033 422
Japan 287 388 730 408
Indonesia 69 213 315 373

4.6 Integrated Supply Chain
Cherry producers need to work together to identify economies of scale and develop critical
mass in production, handling, distribution and marketing.

For Australia to develop and maintain competitiveness in the both the domestic and
international marketplace, inefficiencies along the entire supply chain must be reduced. More
integrated and cohesive supply chains are needed to gain access into some of the growing
affluent international markets.

5.0 Why buy cherries?
Consumers buy cherries for a number of reasons including as a special treat, extra purchase to
other fruit, the look and appeal of cherries, taste and convenience in eating, season and the link
to Christmas and the festive season.

Results from existing consumer surveys suggest that any promotion of cherries for buying and
consumption needs to focus on the positive qualities mentioned above. But industry needs also
to be aware that some of these positive qualities could easily be threatened. For example, if
counter-seasonal cherries are imported to Australia the appeal of seasonality could disappear.
This quality may also be threatened if improved storage technologies and breeding programs
increase the overall length of the cherry season.

5.1 Cherry quality
Almost a quarter of people surveyed said they were not satisfied with the quality of cherries they
were buying. This sends a clear message to industry to make a conscious effort to improve the
supply of a consistent high-quality product to the marketplace.

Australian consumers are particular about what they want cherries to look like and it is important
cherry breeders bear these qualities in mind when implementing breeding programs.
Consumers want large cherries that are deep red in color, have a shiny skin and are plump and
firm to the touch.

5.2 Quality assurance systems
Reasonable cool chain systems are in place in the Australian cherry industry to ensure quality is
maintained from the farm gate to the retailer. The systems become questionable for fruit
delivery from the retailer to the consumer.

Cherries are a highly variable crop and the majority of growers have a number of different
grades for their cherries so as to protect their premium produce. There is a lack of training and
knowledge within the retail chain to deal with this variability. Implementing education and
training systems to improve the quality assurance systems currently in place will ensure high-
quality fruit is available for consumers.

Although industry standards exist, there is a lack of adoption of these standards and many
individual packers are setting their own standards.

6.0 Challenges for the Australian cherry industry going forward

While the volume of supply is rapidly increasing there seems to be a limited understanding of
the potential for growth of demand within the domestic market and limited current access to
many potential export markets. It is important the Australian cherry industry has a solid
understanding of expected production levels in order to plan future marketing strategies. A lack
of strategic planning to identify new markets or open access to currently restricted markets will
result in domestic oversupply and reduced returns to growers. If this occurs, there is a
significant risk that a number of growers could be forced out of the industry.

An inconsistent supply of quality produce due to uncontrollable seasonal circumstances and a
lack of industry standards is another key challenge for the industry going forward.

The total annual supply of Australian cherries is highly variable due mainly to climatic conditions
(rain, frost, hail and drought). Cherries are considered a highly perishable fruit and storage and
transport issues need to be addressed if the Australian cherry industry is to thrive and succeed
in the future.

Some industry standards are currently available but the challenge for industry is to get
widespread adoption of these standards. It seems a logical approach to focus adoption initially
at growers and then to proceed along the supply chain to processors and retailers.

To have in place industry standards which are adhered to across the board is critical if the
industry is to be a long-term player in the potentially lucrative export market. Relationships with
international buyers can be difficult to negotiate and being a small player in the global cherry
market, the Australian industry as a whole needs to develop a rock-solid reputation, based on
best-practice fruit production and handling systems and processes.

There is a lack of objective information available on the Australian cherry industry. Industry and
government must work together to collate this information so as to provide an accurate basis for
the development of future industry priorities.

The costs associated with growing cherries for the export market are comparable to those
associated with growing cherries for the domestic market. But a push by industry is needed to
encourage producers to grow cherries that will consistently stand up on the export market.
One of the major challenges facing the Australian cherry industry is the fragmentation of the
industry and lack of communication amongst industry stakeholders. Regional attitudes and
differences are quite distinct within the industry. It appears that producers in the more
traditional cherry-growing regions tend not to be as progressive and accepting of change as
those in the newer and less-established cherry growing regions across Australia. Rather than
the current situation where regions work individually, the industry may be better served in the
long-term if they can work together to develop new markets for Australian cherries and address
the current challenges facing the industry.

Competition between State boundaries and the sale of produce on interstate markets also
needs to be addressed by industry. Produce being sold on domestic markets is often poor
quality, which does little to improve and promote cherries to domestic consumers.

As mentioned previously in the report, the Australian cherry industry has the advantage of
strong leadership that has produced quality technical resources on a shoestring budget but the
lack of on-the-ground extension officers to promote adoption of these resources impedes the
further development of the cherry industry in Australia.

7.0 SWOT analysis

Market research should consider both the internal and external environment in which the
industry operates. Monitoring the external environment provides opportunities and threats to
the industry and monitoring the internal environment allows industry to see both weaknesses
and strengths.

Strengths
Strong leadership with vision.
Excellent knowledge base developed on minimal resources.
Producers of high-quality product.
Potential of season-long supply with extended seasons.
Established domestic market.

Weaknesses
Fragmented industry organized around State-based and sometimes regional interests,
resulting in lack of continuity of supply of high-quality produce.
Industry participants not necessarily aligned behind industry leaders vision.
Under-resourced industry organization.
Under-resourced research and development capacity.
Lack of branding and promotion.
Over-supply of product.
Limited objective production and marketing data.
High costs of production.
Not competitive with other Southern Hemisphere producers.
Hope that export market access will solve over-supply issues.

Opportunities
High-quality well-coordinated domestic supply, better communication amongst key
players.
Opportunities for growth and working with the retail sector.
Export development (market access).
Well-coordinated export approach.
Counter-seasonal supply to Northern Hemisphere markets.


Threats
Integrity and reputation of product (product coming off domestic wholesale market for
export and residue issues with unprofessional growers).
Low-cost Southern Hemisphere producers with continuity of supply.
Distrust between producers and others in supply chain.


8.0 Capital investment in the cherry industry

To be successful in the long-term any business or industry must provide an adequate return on
investment. If an adequate return on capital is not achieved, over time the capital will move to
businesses and industries where an adequate return can be achieved.

In any investment the level of return considered adequate is directly related to the level of risk
associated with the investment, with lower-risk investments requiring a lower return and higher
risk investments requiring a higher return.

The cherry industry can be considered a high-risk industry that is subject to:
Production risks
o Weather and climate variation and events.
o Availability of irrigation water.
o Diseases and pests.
Marketing risks
o Perishable product.
o Seasonal production cycle.
o Changes in retail market opportunities.
o Changes in access to export markets.
o Competition in export markets.

With the high level of risk, the return on the capital invested in the cherry industry is
commensurably higher



9.0 Industry achievements
The Australian cherry industry has a National industry organization - Cherry Growers of
Australia Incorporated and an executive with members who represent each cherry-growing
State. This is a major benefit to the industry and the extensive skills and knowledge within the
executive have the potential to be better used to further develop the industry and to allow it to
be sustainable and self-reliant well into the future.
Australian cherry industry has made significant progress to date, with exceedingly limited
resources. Key industry achievements include the production of The Cherry Manual (a
technical guide to cherry production and handling), Australian Cherry Color and Size Guide and
the Australian Cherry Quality Guide. The industry also has carried out some consumer-based
market research and has a detailed strategic plan for the industry through until 2012. But given
recent changes in export market access and escalating production levels, the existing strategic
plan requires updating to take into account changing priorities for the industry. It is important the
strategic plan has a clear focus of what is achievable by industry.


References
Cherry growers of Australia (www.cherrygrowers.org.au/)
Cherry growers production guide
Australian cherry quality guide
Cherry Industry of Australia working plan
Horticulture Australia limited (www.horticulture.com.au/)
Kodinin Group (www.kondinin.com.au/)
GTIS Australian Customs Data