Hong Kong marketing pilot identifies niche opportunities for apples

This article was prepared by Hort Innovation for the June edition of the e-newsletter Industry Juice, produced as part of the Hort Innovation Apple and Pear Fund investment National apple and pear industry communications program (AP18000)…

Following an open tender in 2017, Tasmanian-based Hansen Orchards was one of the successful service providers chosen to undertake the project Pilot marketing activities to drive offshore demand for apples (AP17500).  Hansen Orchard Marketing Manager Baden Ribbon and Hort Innovation Apple and Pear Marketing Manager Olivia Grey report on the outcomes of the project. 

Boosting exports is a key industry priority identified in the Apple & Pear Industry Export Development Strategy and the Apple & Pear Strategic Investment Plan 2017-2021 (SIP). The aim of the marketing pilot was to help drive growth in some of the top markets identified in the export strategy through the development and roll out of marketing campaigns. Hong Kong was identified as one of these key markets, and marketing activity to complement Taste Australia retail and trade activity was developed and scheduled there.

The primary objective of the Hansen Orchards proposal was to build a premium brand for Tasmanian apples in Hong Kong. This was to be done in part by increasing awareness and sales of the existing Tiger Fuji™ branded apple, and ultimately by establishing a seasonal program with Hong Kong retailers for multiple varieties of Tasmanian-grown apples from a number of growers. Learnings from this project would inform the development of a program in which multiple Tasmanian growers and packing sheds could participate.

“The gap in price we require over our international competitors is larger than the gap in quality we have over our international competitors,” Baden said. “So, we cannot rely only on our premium quality alone. We need to be different and we need to be creative.”

Hansen Orchards worked with importer P&C International to develop branding for Tasmanian apples tailored to the Hong Kong market and with local retailers to develop the seasonal sales strategy.

The apples were graded and packed in Tasmania into bulk cartons, then sent to Hong Kong in 40-foot sea containers. Bulk shipping reduced the high labour costs, packaging and freight inefficiency that contributes significantly to Australia’s lack of competitiveness in international markets. P&C International then received the apples in Hong Kong and repacked into retail bags to orders received from retailers.

The key activity for the 2018 program was in-store tastings, supported by point of sale (POS) material, and social media posts on the P&C International-owned Frutodor Facebook page.

In-store tastings were undertaken because eating quality is seen as key to overcoming the historical resistance by Hong Kong consumers to higher priced Australian apples. The in-store tasting was timed for early in the program to encourage consumers to buy Tasmanian apples for the entire season.

Hansen Orchards and P&C International selected Yata Supermarket to be the retail partner for 2018. Yata is a modern Japanese lifestyle department store with 11 branches across Hong Kong. It provides a one-stop convenient shopping experience to customers covering food, cosmetics, apparel, furniture and household product. Yata is especially famous for its high-quality food that appeals to both middle and upper-class local households with high purchasing power. Yata was also chosen as having a customer demographic that was more likely to purchase higher priced apples, and had a willingness to try something different with a longer-term view.

The strategy for Yata was to sell three different varieties: Tiger Fuji, Royal Gala and Rubigold. Each variety was sold in a three-piece bag. Selling a three-piece bag allowed a better sell of the ‘story’ of the product to the consumer, as the bag, and story, is taken home with them. Three-piece bags being sold ‘per unit’ also eliminated direct price ‘per kg’ comparison against the other much cheaper apples.

Sampling was done in 11 stores for three consecutive days in each store, from 22 – 24 June, and 29 June – 1 July 2018. This was supported by boosted posts on the Frutador Facebook page, directing people to Yata stores, and attracting 4000 visits over the two-week period.

Point of sale including posters and bunting complemented the apple displays in store and was key to drawing attention to and educating consumers / purchasers. The apple bags and POS were designed to promote Australia, and to be simple, fun and eye catching.

Overall, Yata thought the promotion to be a success. Feedback from the tastings gave some valuable insights, including that Tiger Fuji have bigger sales because the customers like its thin skin and sweet flavour, and the Australian origin gives customers a higher confidence in the product.

Orchards also partnered with HKTV. HKTV is a Hong Kong based e-commerce company that provides a shopping and entertainment platform named HKTVmall. Apples in five-piece bags were marketed on HKTVmall from June – August 2018 and this resulted in an increase in sales for this retailer of 260 per cent compared to the prior year.

In terms of the competitive landscape, other retailers in Hong Kong sold apples from USA, New Zealand, and Japan. Tasmanian apples were more expensive than those from USA and New Zealand, but cheaper than the Japanese apples. However, the Tasmanian apple taste and texture impressed customers positively when compared to apples from USA, New Zealand and Japan.

The key learnings from the pilot are that Tasmanian, and all Australian apples, need a point of difference to have any chance in the Hong Kong market. The strategy used in this project was effective in creating a point of difference, both through emphasis of premium provenance and taste, and also through the use of three-piece bags to shift pricing from per kg to per unit and so avoid direct price comparisons with cheaper alternatives.

“The support from Hort Innovation has allowed us to advance our existing Tiger Fuji program and develop a platform to create a genuine opportunity for multiple Tasmanian apple growers for exporting into Hong Kong and potentially other Asian markets,” Baden said.

The Pilot marketing activities to drive offshore demand for apples (AP17500) project was a strategic levy investment under the Hort Innovation Apple and Pear Fund. It was funded by Hort Innovation using the apple and pear levy and funds from the Australian Government and delivered by Hansen Orchards.