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This project is funded bythe European Union

Integrated Supply Chain Management of Exotic Fruits

from the ASEAN Region

This document has been produced with the financial assistance of the European Union. The contents of this documents are the sole responsibility of Postharvest Technology Research Institute, Chiang Mai University, and under no circumstance be regarded as reflecting the position of the European Union

Integrated Supply Chain Management of Exotic Fruits f rom the ASEAN Region

Pomelo

Lychee

Longan

Mango

Mangosteen

Table of ContentsIntroduction xx

Pomelo xx

Lychee xx

Longan xx

Mango xx

Mangosteen xx

Conclusion xx

{ 01 } Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region

Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region { 02 }

Introduction

Only in Thailand, fruit production and related services generated employment to at least one million people and revenue of approximately Euro 315 million in 2007 and Euro 412 million in 2008 (Department of Export Promotion, DEP).

Beside the importance for the economy (employment, income, investment, competitiveness), fruit production in South-East Asia is highly relevant for the sustainable use of natural resources social wellbeing, health, capacity development and the commercial organization of local farmers and service providers (see triple bottom line1 diagram below).

Good farming practices can keep erosion under control, soil and water sources maintained, CO2 bound and residues below internationally accepted levels. Supply chain cooperation of different actors involved (Farmers, Packing houses, Processors, Traders etc.) is – in combination with improved logistics – crucial for improving competitiveness at global markets and lead to multi-stakeholder benefits.

Diagram 1: “Triple Bottom Line”

1The triple bottom line is made up of “social, economic and environmental” the “people, planet, profit” phrase was coined for Shell by sustainability, influenced by 20th century urbanist Patrick Geddes’s notion of ‘folk, work and place’. “People, planet and profit” succinctly describes the triple bottom lines and the goal of sustainability. Source Wikipedia June 2009

Fruit orchards cover a significant percentage of ASEAN’s agricultural area and are providing an abundance of tropical fruits, such as pomelo, mango, longan, lychee, mangosteen and many other appealing varieties.

Worldwide, the EU is the largest importer of fruit and vegetables, (The horticulture sector in the European Union, 2003). Consumption of fresh fruits in the EU was 46 million tones in 2007 (CBI, 2009). The demand for high quality exotic fruits is continuously high, despite of the global financial crisis in 2009.

{ 03 } Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region

In the region, Thailand and Indonesia are among the top five suppliers, providing South East and East Asian consumers with high quality fresh fruit (Ir. N. Wassenaar, 2008). Surprisingly, the actual market share of ASEAN in the European fruit markets is still very small, with less than 5% (Ir. N. Wassenaar, 2008).

Disease, high chemical residues, low compliance with food safety standards, fragmentation of growers, poor and costly supply chain logistics, weak entry strategies and limited understanding of the benefits of market diversification by the actors are constrains, which have been identified in previous sub-sector assessments2.

As the prospects for fruit supplies from South-East Asia to lucrative oversea markets such as the EU are high and not systematically realized, ASEAN countries are urged to remove the constraints maximize

existing opportunities to ensure triple bottom line development guidelines and the countries’ further integration into global trade.

A consortium of three leading universities in the area of agri-business and food technology from Thailand, Indonesia, and The Netherland namely the Postharvest Technology Research Institute of Chiang Mai University (PHTRI,CMU), Bogor Agricultural University (BAU), and Wageningen University, joint hands to raise consumer awareness and improve fruit supply capacities by means of a project entitled Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region (ISCM).

The initiative is based on principles of sustained farming and fair trading practices.

The specific objective of this project is “Implement an integrated supply chain approach for the pilot sectors

of exotic fruits from ASEAN countries to EU markets.”

Since 2008, the consortium is working on Pomelo, Mango, Longan, and Lychee in Thailand and Mangosteen in Indonesia with a three step approach, consisting of

1) Improve farming techniques and facilitate farm certification 2) Optimize post-harvest treatment, processing and packaging include related certification schemes, logistics and post-harvest management

Raise consumer awareness and encourage business matchmaking

Progress is documented in the following pages. Each individual fruit specialty has its own story to tell. Moreover, lessons learnt and conclusions are derived to stimulate exchange among the development community on good practices and guidelines for multiplication.

2 References of sub-sector studies in Thailand and Indonesia

Pomelo

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PomeloPOMELO IS THE WORLD’S LARGEST CITRUS FRUIT. WHEN RIPE, THE COLOUR RANGES FROMPALE GREEN TO YELLOW WITH A CLEAR PALE YELLOW, PINK OR RED PULP. THE FRUIT TASTES LIKE A MILD, SWEET GRAPEFRUIT. THE STRONG TISSUE BETWEEN THE TRANCHES CAN BE EASILY REMOVED. THE RIND IS THICK AND SPONGY AND IS ONE REASON OF THE EXTRAOR-DINARY SHELF-LIFE OF THE FRUIT (UP TO TWO MONTHS). POMELO IS A GREAT SOURCE OF POTASSIUM AND VITAMIN C. IT DOESN’T CONTAIN SODIUM AND THUS THERAPEUTIC TO PATIENTS WHO SUFFER FROM CORONARY HEART, CARDIOVASCULAR AND KIDNEY DISEASES. MOREOVER, POMELO HELPS TO DECREASE THE LEVEL OF CHOLESTEROL IN BLOOD. POMELO HAS BEEN INTRODUCED TO EU MARKTES APPROXIMATELY 5 YEARS AGO. SUPPLIERS OF EU MARKETS ARE ISRAEL, CHINA VIETNAM AND THAILAND.

Vital statistics of pomelo in Thailand are shown in the table and graphs below.

Table 1: Fresh Pomelo Production in Thailand (2009)

Number of households 65,455

Number of employments (each household employs at least two people)

130,910

Production area (ha) 32,158

Production volume in tons 305,500

Export price (Baht/ton) 30,000

Source: OAE, 2009.

Main Production Areas: Pomelos are grown in many parts of Thailand included Chiang Rai. However, the top five of production areas are in Samut Songkram, Pichit, Chumporn, Nakorn Srithammarat, and Karnchanaburi.

Exports: Export volume of fresh pomelo from Thailand increased gradually from 7.5 thousand tons in 2005 to 12 thousand tons in 2009. In contrast, export value of Thai fresh pomelo slightly decreased from Euro 3.19 million in 2005 to Euro 2.13 million in 2009. Export volume and value of fresh pomelo are shown in the graph below.

Main Export Markets: Main export markets for pomelo from Thailand are Hong Kong, Canada, China, and Singapore.

Pomelo farm in Wiang Kaen , Chiang Rai, Thailand

Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region { 06 }

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Figure 1: Volume and Value of Thailand’s Fresh Pomelo Exports (2005-2009)Source: OA E, 2009

Pomelo ClusterThe production cluster with which Chaing Mai University is working since 2006 is located in Northern Thailand, Wiang Kaen District, in Chiang Rai Province. ISCM is focusing on the “Wiang Kaen Pomelo Cooperative (WKPC), which has 51 members, with an annual average production of 840 tons.

Map

Figure 2: Location of Wiang Kaen Pomelo Cluster, Chiang Rai

The reasons to select Wiang Kaen: (1) The relative proximity to Chiang Mai (2) Wiang Kaen is the only area in Thailand, from which whole fruit pomelo can be exported to the EU. Other areas are affected to citrus canker and can only be exported as peeled fruit tranches (fresh cuts). Since 2005, Wiang Kaen has been established as “canker free area” by the Department of Agriculture (DOA). A corresponding certification can be obtained by farmers from the DOA, by installing and maintaining required disease control measures.

Key IssuesBy 2005, key bottlenecks of pomelo from Wiang Kaen were • Poorquality(taste,sweetness and appearance of the fruit) • Plantdiseasesnotfully controlled • Localgrading,packaging and pricing practices are not in line with requirements of international traders • LimitedFoodSafetyandlack of GLOBALGAP certification

Support Network

ISCM is working in cooperation with • TheHorticultureResearch Center from Mae Fah Luang University (MFL) • TheChiangMaiPest Management Center • Selectedlocalpacking houses and traders

MeasuresThe improvement of the product quality was given as a high priority. An initial test shipment of Pomelo to The Netherlands (August, 2008) indicated a very low sweetness (Brix factor 6-8%) and product underweight as essential constraints. One Thai trader and one EU based importer were involved in the trial. In consequence, ISCM and partners implemented the following measures:

1. Soil improvement ISCM introduced the soil quality development program by biological control. The program resulted in an improved Brix factor from 6-8% in 2008 to 8-10% in 2009. Pomelo quality from WKPC was supervised and monitored in compliance with the standard and requirements of one EU-based importer.2. Integrated pest managementISCM trained 50 WKPC farmers in biological control as a part of

Integrated Supply Chain Management of Exotic Fruits from the ASEAN Region { 08 }

Integrated Pest Management (IPM).

In association with MFL, ISCM introduced the bagging techniques to WKPC in order to decrease plant diseases. After a 3-month test period, damage by fruit borer was reduced almost 100%, black mold ca. 70%, and black spot ca. 90% compared to the conventional practices without bagging.

3. GlobalGAP certificationISCM trained more than 50 farmers in upgraded farming techniques and prepared the group systematicallyfor the GlobalGAP audit. As a result, WKPC received GlobalGAP Certificate Option 2 in July 2008.

Complementary to the activities mentioned above, ISCM guided WKPC on improving its administrative structure, increasingly understanding roles and fulfilling responsibilities of the cooperatives and its members and to further build organizational capacity. ISCM also communicated the improved quality of pomelo from WKPC to traders and exporters.

Impacts and Results

Within a period of two years the following changes happened: • TheawarenessofWiangKaen

farmers on the importance of product quality increased significantly. Farmers learned to understand the benefits of measures to prevent plant diseases. Farmers adopted improved farming practices and techniques almost 100%. • Asacollaborativeachievement of farmers, traders and supporters, more than 50% or 420 tons of Wiang Kaen pomelo met EU quality requirements in term of sweetness, GlobalGAP certification, and grading consistence, as farmer adopted improved farming techniques. • Trainingservicesfor Certification for the Pomelo Production Area in Wiang Kaen are offered now by two private and one public service providers.

By improved product properties, demand for Pomelo from Wiang Kaen from traders and exporters grew considerably.

As a result of the intervention process of ISCM, exports from WKPC to the EU increased from 0 ton in 2006 and 2007, to 18 tons in 2008, and 270 tons in 2009 (about 32% of average annual production of targeted grower group in Wiang

Kaen). Pomelo were mainly exported to the UK and The Netherlands. (Please refer to Figure 3: Volume of Wiang Kaen’s Pomelo Exports to EU in tonnes 2008-2009)

By exporting to the EU, farmers received a price premium of 30% compared to prices paid for regional markets.

The results from the project’s moni-toring do not only reflect changes of the immediate target group. It indicates also that multiplication took place: other growers in Wiang Kaen have been copying improved farming, grading and food safety practices from WKPC.

Figure 3: Volume of Wiang Kaen’s Pomelo Exports to EU in tons (2008-2009)

0

50

100

150

200

250

300

18

270

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ISCM trained the pomelo farmers in Wiang Kaen on GlobalGAP practice

Experiment of bagging technique for pomelo quality improvement

ISCM introduced soil quality development program with the use of ‘Trichoderma’

The fruit is ready for harvest in June - August

ISCM conducted farm inspection and GlobalGAP practice follow up

Farmers in Wiang Kaen shipped over 270 tons of pomelo to European markets in 2009

Lychee