MARKETING AND EXPORT OF CITRUS FRUIT IN PAKISTAN

Worldwide one of the most demanded, studied and consumed fruit has been the citrus concurrently its production has been increasing considerably for the few years .Citrus is the leading fruit of Pakistan in terms of area, production and export, contributing to around 50% of the total fruit production and about 25% of the country’s fruit export. Although Pakistan is generally ranked tenth in production of citrus fruit worldwide, it has yet to achieve a significant place in the export of citrus fruit. Worldwide affluent mass market of citrus fruit and its production in few countries clearly signify very high potential for Pakistan in export markets, thereby boosting foreign exchange earnings.

MARKETING CHAIN

MARKETING SYSTEM
Like other fruits, citrus fruit trade is with the private sector. However, Government largely facilitates the system by providing physical infrastructure especially wholesale markets & communication, market intelligence, market promotion and regulatory measures for smooth business operations. The flow chart of citrus fruit for export and domestic marketing is presented above. The harvested Kinnow is generally exported through different channels. First, exporters purchase Kinnow from the beoparies (middleman), process and then they export it. Secondly, exporters directly purchase the commodity from the farmers, process and then it is exported. Thirdly, exporters have their own orchards, process the produce and then they export to different countries. The produce is brought to Kinnow processing factories generally in 20 and 40 kg plastic buckets on Mazda vans (small trucks). After unloading, the produce is washed, dried, waxed, again dried, graded, packed and labeled in the processing plant. After packing (cardboard and wooden boxes), fruit is transported to Karachi Port either in open-top trucks or refrigerated containers. Then it is shipped to different countries. Majority of the exporters (66.7%) use refrigerated containers. However, open-top trucks are also used for transporting the fruit to Karachi Port. The problems associated with Kinnow export include low produce quality, lack of storage facilities, non-availability of quality packing, poor transportation facilities, high freight charges, weak role of export promoting agencies and inconsistent government policies. Perishable commodities require proper packing otherwise it may lose its value in the market. Benefits of quality packing includes intact freshness of produce with less damage, longer shelf life and better appearance. Both the cardboard and wooden boxes

were used for export. Kinnow exported to Middle East especially Dubai and KSA in the wooden and cardboard boxes. However, Kinnow exported to Russian States, Far East and Europe was totally packed in cardboard boxes.

INTERNATIONAL MARKETING CHAIN
In the international citrus marketing chain harvested fruit may go to the fresh fruit market, in order to be consumed fresh, or squeezed freshly at home to be consumed as juice, or it may enter the processing industry, in order to obtain orange juice (mainly in the form of Frozen Concentrated Orange Juice, FCOJ, for ease of transport in international trade) and other by-products. There is increasing competition in this sector, with restructuration and changes in the marketing chain, in a context of globalization. The market is increasingly consumer driven. International trade in the fresh citrus fruits sector is characterized by the reduced degree of concentration of supply, with a multitude of medium-sized firms providing the fruit, although there is a certain trend towards concentration of producer groups as a response to buyers consolidation. There is also an important presence of cooperatives in this sector, which favor the obtention of better prices and conditions, improve negotiating power and coordination of activities of growers On the contrary, orange juice trade is highly concentrated. A small number of companies that operate in Brazil and Florida dominate the market. These companies are highly vertically integrated, since size and scale are an important competitive advantage, particularly in bulk transportation of the juice. During the recent past, the international orange juice marketing chain has been marked by different developments, such as the penetration of global beverages brands (e.g. Coca-Cola with Minute Maid and Pepsi-Cola

with Tropicana) and the concentration in FCOJ supply. A simplified representation of the citrus fruit marketing chain, identifying the major agents in the chain (although, given the vertical integration existing in the orange juice sector, a company may be present at different stages), is shown in the following chart:

Source: UNCTAD Secretariat

There are two kinds of orange juice processors: bulk processors, who produce most of the world’s orange juice, and marketing processors, who sell the packaged juice under their own brand name and often purchase additional juice from bulk processors. The beverage industry buys the FCOJ in order to add the water and transform, bottle and market it. These bottlers have undergone a process of mergers and acquisitions, where juice companies are becoming part of major multinational beverage companies. This is

leading increasing concentration in the sector. Global retail chains are playing an increasing role in the distribution of produce in developed countries. Increasing concentration and consolidation in retail chains, as well as their global expansion, has improved their position and augmented their buying power in the market. It allows them to influence the marketing chain in order to better control it, imposing more stringent requirements when determining conditions of production and distribution. The wholesale sector’s importance has declined dramatically as long-term relationships between retailers and growers/shippers have developed. Following suit, some citrus fruits growers and citrus processing companies are reacting, shifting from their production orientation to a more market oriented approach, improving supply chain management, in order to better meet consumers demands.

CITRUS EXPORT MARKETING IN PAKISTAN
Export marketing practices of almost all products are usually quite different from that of domestic marketing. On account of their comparatively sensitive nature and short life cycle, perishable commodities in general and citrus fruit in particular, demand special care, when traded internationally. Export marketing practices of citrus fruit in Pakistan is altogether different from domestic marketing.

CITRUS EXPORT OF PAKISTAN
Citrus fruit in general and mandarins, Clementine & oranges in particular are among the most favored tree fruit crops in the world. The world market for citrus is expanding. The exporting countries are striving to further expand their market share as new markets open up with world trade liberalization. The soil and climatic conditions in Pakistan have given ‘Kinnow’ a unique flavour which distinguishes it from other comparable cultivars

(Mandarins) grown in the World. Though fluctuating from year to year, export of kinnow from Pakistan has exhibited an increasing trend. The quality and quantity of export of citrus fruit, largely depends on method of cultivation and production. It is important to note that export of citrus fruit represents on average 4% of the total citrus production of the country, whilst post harvest losses of citrus fruit contribute above 40% each year. This shows that if only 10% losses may, somehow be avoided, Pakistan can double its exports without any increase in production level. From 1999-00to 2003-04, production of citrus has declined on an average by 4.5% but export of citrus had not been affected considerably. Although proportion of export of citrus fruit in export of all fruits and total citrus production has been increased considerably during last decade, about 110 and 190 percents respectively, it has still to achieve a notable position. The insignificant proportion of export of citrus fruit has been mainly because export markets and opportunities have not been properly exploited. In spite of brisk increase in consumption of citrus fruit and juices throughout the world export market and opportunities in Pakistan have been confined to a few countries. The growing trend of export of citrus justifies high potential and opportunity in the international markets. The need of the hour is that fruits in general and citrus in particular should be given priority consideration as an important source of generating foreign exchange through export. No special consideration has been given to produce and market citrus fruit according to international standards.

CITRUS EXPORT MARKETS
The distinct taste, size and other quality characteristics of citrus, especially kinnow mandarin produced in Pakistan appeal to mass market worldwide. The main target markets of Pakistan have been Middle East and Far East countries. Pakistan has been focusing on these regions for decades but ignoring many other opportunities. ″About half of kinnow exports are destined to South Asian markets – Indonesia, Sri Lanka, the Philippines, Singapore, Malaysia and Hong Kong. Of the remaining half, Dubai is the leading market followed by Afghanistan, Saudi Arabia and Europe. Though a large proportion of export of fruits, including citrus, goes to Middle East, still huge opportunities available in this region are unexploited. It is interesting to note that Saudi Arabia alone imports around 400,000 tons of fresh fruits each year. The increase in tariffs from 5% to 25% in Indonesia combined with overvaluation of kinnow for tariff calculation purposes had significant adverse impact on export. Indonesia is the single largest market for kinnow. Annual exports of kinnow to Indonesia are around 30,000 tons. Export of kinnow alone contributes about 97 percent in total export of citrus fruit from the country. Information on country-wise citrus fruit exports is contained in Annex 1. The kinnow exports are mainly directed to Indonesia, Dubai, Philippines, Afghanistan and Sri Lanka. The regional distribution is as follows: . Middle East/Gulf 30% Far East 31% Europe Afghanistan 16% 17% Others 6%

About 20,000 to 25,000 tons kinnow is exported to Central Asian Republics via Afghanistan (Chaman Border). This however remains unaccounted.

CITRUS EXPORT OPPORTUNITIES
Considering the fact that citrus fruit, especially kinnow mandarin, produced in Pakistan has high potential in the international markets, exploring new markets deserve immediate attention to exploit opportunities most effectively. Fifteen countries contribute more than 81% of total citrus production globally indicating high export opportunities. Furthermore, out of 18 Asian countries, having good purchasing power parity, 5 countries which include Pakistan, China, India, Israel and Turkey are major citrus producers. In addition this segment also represents more than 55% of world’s population. Considering the fact that China and India are the two most populous countries, representing around 37% of the total population of the world, most of their citrus is consumed in their domestic markets. Turkey and Israel though other major players of citrus fruit in this region are mainly known as key producers and exporters of Lemon and grapefruit respectively.

Analysis of the 18 Asian countries reveals that with the exception of five countries, including Pakistan, the other 13 countries which represent a market of around 849 million people, most of then having strong purchasing power parity are not main producers of citrus fruit. This shows a great opportunity for Pakistan citrus exporters to capture this target market because they have comparatively better understanding of socio-economic environment of this segment and the advantage of proximity.

Europe has been known for production and export of citrus fruit for centauries. Spain is the only major orange producer and exporter in the Europe. This zone represents a mass market of about 232 million people, most of them having very strong purchasing power parity. Analysis reveals that Brazil and Spain are the main exporters of citrus fruit and juices (FCOJ) respectively in the European countries whilst Pakistan has been mainly targeting the Middle East and Far East countries. More than 85% citrus mainly kinnow mandarin goes to five countries of this region, ignoring the huge market of Europe.

In summary it can be said that Pakistan is though the largest kinnow producing country of the world and quality characteristics of Pakistani kinnow mandarin are better than many of the competitors, it does not gain significant share and name in the international market mainly due to ineffective marketing practices. For Pakistan, Eastern European countries may emerge as potential markets. In some countries including Russian Federation & Ukraine It has already made entry. Pakistan with its distinct quality kinnow mandarin and advantage of proximity can avail the opportunity through effective market practices.

EXPORT TARGETS
Pakistan is reported to have exported 122,760 tonnes of kinnow worth about $32.727 million in the financial year 2006-07. It had also accomplished the export target of 110,000 tonnes for the year 2007-08. During this period total yield of kinnow stood at estimated 2.5 million tonnes. This year (2008-09), kinnow exporters have set a target of exporting 225,000 tonnes and the main markets were Russian Federation, Iran and UAE. Pakistan had already faced a hard task in the cropping season this year due to bad crop, inclement weather and pesticides attack which destroyed the bulk of crop. A steep decline is anticipated and kinnow production is to stay around 1.6 to 1.8 million tonnes. The exporters may not be able to meet the export target but however under the free trade agreement (FTA), if Pakistan is able to meet Chinese quality standard by the kinnow exporters, it would be more or less possible.

Citrus (Kinnow Production)
Anticipated production (2008/09) 1.6-1.8 million tons

COMPETITION
Pakistani exporters are experiencing competition from China. China starts exporting easy peelers to the Far East markets in October, earlier than Pakistan, and the Chinese season ends early March. Quality of Chinese citrus has been improving rapidly and citrus are packed in cardboard cartons only.

Existing Main Markets Market Dubai Indonesia Volume (Tons) 28,788 29,042 Value (US$000) 5,684 6,230

(Drastic decline in 2004/05 due to increase in tariffs) Afghanistan Philippines Saudi Arabia Sri Lanka Netherlands 25,524 15,778 14,484 9,115 5,611 4,586 3,133 2,992 1,825 1,269

Emerging Markets
China (MOU signed) Iran (MOU signed) Russian Federation & East Europe (Already entered) South Korea (To be accessed) South Africa (To be accessed) .

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