Oct 12, 2022
On September 5th, HONGJIU FRUIT (洪九果品) became the first Chinese fruit company
listed in HKEX with market capitalization of HK$19 billion. The dominating Chinese
distributors of Thai fruits are eye catching recently. Prof Dr. Tang Zhimin, Director of
CASPIM, explains their roles with the model of Supply Chain Integration (SCI) proposed in
a recent research sponsored by NRCT and KNIT.
HONGJIU, the largest durian distributer in China, accounted for 11% of the market
(93,774 tons, ¥3.479 billion) in 2021. It bought the fruit directly form Thai orchards,
processed with its local factories and distributed through its sorting centers to
wholesalers, new retailers (like Hema) and supermarkets in China. Such large scale
operation is impossible without a heavy pocket of capital. HONGJIU acquired at least ¥2
billion from 17 external investors such as Alibaba since 2016. Supply chain integration
pays well. The gross profit margin from durian is 20.7% in 2021, compared with 15% for
fruit industry on average.
The other Chinese giant PAGODA (百果园) covers even longer supply chain with its
retailing network (See table below). It has more than 5,300 shops serving 80 million plus
members in 130 cities in China. In a new model of cooperation with its production bases
in Thailand, the firm also helps local farmers optimize fruit varieties and enhance
agricultural production skills.
One strategy to enhance fruit export of Thailand is to construct a “Demand Driven Supply
Chain” (DDSC), with better mechanisms of demand detection, communication, adaptions
and collaboration among every step of the supply chain. The ideal of DDSC could be
realized through supply chain integration (SCI) driven by emerging leaders of importers or
retailers (from both Thailand and China), which have expanded to almost every steps of
the supply chain, from farming to retailing and customer service.
HONGJIU and PAGODA are good cases to the point. Their roles could be described in a
5i model:
1) Information (Quick feedback from retail end) ;
2) Initiation (Trigger reactions in networks of SMEs, research units, & farms) ;
3) Interconnection (Coordinate along the supply chain) ;
4) Inspection (Establish and implement higher standard with trace back
system) ;
5) Investment (Bring in financial, technological and human resources
leveraging the economy of scale)
These roles will be more significant in the context of digital transformation. They should also be complemented by active government regulations to protect the interests of Thai farmers and SMEs, and make sure the Thai and Chinese stakeholders abide laws and get their fair shares of benefits.
