citricos canada

Mostafa Amine, Simon Desbois, Georges El Murr, Dominic Rossi, Laurent Verbruggen 1

EL MERCADO DE LOS CITRICOS EN CANADA

I. Peru overview

1) Country and resources

Peru is one of the largest countries in South America with an area of 1.28 million km2. It is

located on the Western Coast of the continent, bordering Bolivia, Brazil, Chile, Colombia and

Ecuador. The capital is Lima. The country is divided into three geographical regions: the coastal

plain (Costa) bordering the South Pacific ocean, the Andean Mountains (Sierra) in the centre, and

the dense forest of the Amazon Basin (Montana) in the East. The natural resources are copper,

silver, gold, petroleum, timber, fish, iron ore, coal, phosphate, potash, hydropower and natural

gas.

2) Population and society

The population is of 28,409,897 inhabitants (July 2003 estimate), of whom 90% are Roman

Catholic. The majority of Peruvians people speak Spanish (first official language), around 25%

of Peruvians speak Quecha (second official language) and in the South of the Andes and in the

area of Lake Titicaca, people speak Aymara (unofficial language). The Ethnic groups are

Amerindian 45%, mestizo (mix of Ameridian and white) 37%, white 15%, with the last 3% being

a mix of black, Japanese, Chinese and other backgrounds. Since the Constitution of 1993, Peru is

a constitutional republic. The president of the republic and the 120 members of Congress are

elected for 5 years. The current president is Alejandro TOLEDO. Peru is subdivided into 24

departments and 1 constitutional province but the country is currently implementing a

decentralizing program to change this into 25 regions.


3) Economy 50% of the population is under the official poverty line and around 10% are unemployed. Over one third of people are farmers, many people have a small piece of land which provides them with subsistence, while others work in small or large farming. The currency is the Nuevo Sol (PEN), which was worth approximately USD 0.29 and CAD 0.38 on 26 March 2004. The mining industry is very important for the economy, because Peru is one of the world’s biggest producers of silver (2nd), lead (4rd), tin (5rd) and copper (8rd). Petroleum, natural gas and steel are also extracted in important quantities. The small farms located in the Sierra and Montana produce for the internal market, whereas the large farms located on the coast work for the export sector. Peru’s main agricultural products are: coffee, sugar cane, rice, corn, coca, cotton, wheat, poultry, potatoes, wool, beef, dairy products, fish, and plantains. The fishing industry is also an important part of the export industry. Other significant industries are: textiles, clothing, food processing, metal fabrication, auto assembly, shipbuilding and cement. The forest that covers 54% of the country is not significantly exploited by industry. 4) Foreign trade and trade agreements Peru has developed and maintains good relations with many partners across the world. The most important export partners are the US, China, UK, Switzerland and Japan. The main exported products are fish and fish products, gold, copper, zinc, crude petroleum and petroleum by-products, lead, coffee, sugar and cotton. As for imports, most important partners are the US, Chile, Spain, Colombia, Brazil, Venezuela and Argentina. The main imported products are machinery, transportation equipment, foodstuffs, petroleum, iron and steel, chemicals, and pharmaceuticals. Peru is member of the Andean community. Foreign trade is regulated by GATT (WTO), the Asociación Latinoamericana de Integración (ALADI: Latin American Integration Association), and Peru has signed the Free Trade Agreement of the Americas (FTAA: Área de Libre Comercio de las Américas = ALCA) with Bolivia and preliminary discussions around the FTAA are in progress with Canada.


5) Relations with Canada

The official relationship between Peru and Canada began in October 1944 with the naming of the

first Canadian ambassador to Peru, Jean-François Léon Henry Laureys. Canada is now the largest

foreign investor in Peru’s mining sector and the third largest foreign investor overall. Currently,

Peru ranks 6th among Canada’s South American commercial partners and 53rd in the world. The

value of recent trade between Canada and Peru is given below in Canadian dollars (CAD).

1999 2000 2001 2002 2003

Peruvian total exports to Canada 149,935,225 188,834,056 251,436,968 293,129,973 262,416,886

Peruvian total imports from Canada

175,350,795 207,342,727 189,852,480 169,137,061 132,330,270

Balance of payments -25,415,570 -18,508,671 61,584,488 123,992,912 130,086,616

Chart 1: Balance of payments between Canada and Peru in CAD – Source: Strategis web site.


6) Peruvian exports of fruits to Canada

Peruvian Fruits represent 0.3% of the world export of fruits and 1.8% of the South America

export of fruits to Canada. Furthermore, Peruvian citrus represent 0.7% of the world exports of

citrus and 12% of South American citrus exports to Canada. Overall, Peru is the 15th largest

exporter of citrus to Canada (see appendix 1 for global imports and appendix 2 for imports from

South America). Currently, exports are exclusively comprised of mandarins and hybrids of

mandarins. Since 1999, citrus exports have increased every year, and actually doubled in 2003,

which is particularly significant given that total world exports decreased by 8.87% in 2003.

Global imports of citrus to Canada

00,5

11,5

22,5

33,5

4

1999 2000 2001 2002 2003

CAD Millions

Years

Citr

us im

port

s fr

om

Peru

050100150200250300350400

CAD Millions

Wor

ld c

itrus

impo

rts

Peru : Mandarins-type citrus Peru : All citrus World : All citrus

Chart 2: Citrus imports from Peru versus world citrus imports to Canada in CAD – source: Strategis web site


In addition, citrus exports are currently going exclusively to Quebec, British-Columbia, Alberta

and Ontario. Since 1999, exports have increased every year in each province, but in 2003 there

was a reduction in Ontario, no change in Quebec and an increase in British-Columbia (see

appendix 3 for citrus imports sorted by province and appendix 4 for mandarin-type imports sorted

by province). That is significant because the South American exports have decreased by 14.87%.

Global imports of Citrus to Canada

0

0,5

1

1,5

2

2,5

3

1999 2000 2001 2002 2003

CAD Millions

Year

Citr

us im

port

s fr

om

Peru

0

5

10

15

20

25

30CAD Millions

Citr

us im

port

s fr

om

Sout

h Am

eric

a

Quebec Ontario British Columbia South America

Chart 3: Citrus imports from Peru versus citrus imports from South America to Canada in CAD – source: Strategis web site

Overall, this information concerning Peruvian citrus exports to Canada is positive, as it suggests

that Peruvian citrus is competitive on the Canadian market. However, the exceptional results

obtained in 2003 may in part be due to production difficulties in competing countries, because

citrus production decreased in the northern hemisphere - especially in Mexico, China, Japan,

USA and the Mediterranean basin due to cold weather, frost and storms in early 2003.

Furthermore, production also decreased in the southern hemisphere due to bad weather, plant

diseases on some plantations, currency appreciation in South Africa and drought in Australia.


II. Analysis of the export process from Peru to Canada 1) Product Category The Citrus family contains many products such as the Clementine, mandarin, and tangerine. Our focus in this project will be the Clemenvilla (a hybrid of the Clementine and the Satsuma) and the Minneola (a hybrid of the mandarin and the grapefruit), and the rules that would apply to the export of these products to Canada. This category of products falls under the codex SH or the classification number 080520. This is broken down into subcategories as shown in the table below: Tariff Item

SS Description of Goods Unit of Measure

MFN Tariff

Applicable Preferential Tariffs

0805.20.00

Mandarins (including tangerines and satsumas); clementines, wilkings and similar citrus hybrids

11 Tangerines KGM free UST, CCCT, LDCT, GPT, MT, CT, CRT: Free

19 Other KGM 20 Dried KGM Chart 5: SH classification of mandarin-type citrus. Source: CUSTOMS TARIFF – SCHEDULE, Chapter 8: EDIBLE FRUIT AND NUTS; PEEL OF CITRUS FRUIT OR MELONS; Jan/1/04


2) Administrative procedure and requirements

The following procedures and requirements are available on the Canada Border Services Agency

web-site. We extracted some relevant information from RC4041 Guide to importing commercial

goods, but further details can be found in this guide.

a) Administrative documents required

The Canada Customs and Revenue Agency (CCRA) control Canada's entry points to protect

Canadian people, businesses and society. Their responsibility is to provide fair, courteous, and

efficient service. Their service will be provided in the official languages of Canada (English or

French). The presence the CCRA at the border helps to control the illegal entry of goods into

Canada. They keep out goods that could threaten national health, environment, or agriculture.

They also help keep Canadian businesses competitive by enforcing trade agreements and

import/export policies.

An importer must keep books and records to substantiate what goods he has imported, the

quantities, the prices paid, and the goods' origin. He must keep records in Canada, in either paper

or electronic format, for six years after the year that the goods were imported. If the importer

plans to keep his records outside Canada, he must first obtain written approval from Customs

Canada. Even if a customs broker carries out customs activities on behalf of the importer, the

importer should also keep the records on his premises. The importer is responsible for all records

on reporting, releasing, accounting for, and paying for goods, as well as any later adjustments.

The Certificate of Origin applies to goods covered by the General Preferential Tariff (GPT) or the

Least Developed Country Tariff (LDCT). It is issued by the exporter in the country where the

goods originated. It is relevant to point out that there is no quota on the Clementine, mandarin or

Tangerine as these are fresh products that are not harvested in Canada.


Your carrier has to keep records at the place of business in Canada for three years after the year it

transported your goods to Canada. These records can include charts of accounts, trip logs,

movement history reports, and bills of lading. They may include paper documents or those stored

electronically. Carriers can keep these records outside Canada if they receive written permission

from Customs Canada.

Your carrier must either report all commercial goods you import into Canada on an approved

cargo control document (CCD), or, in the case of rail and marine shipments, electronically

transmit the cargo information using electronic data interchange (EDI) before arriving at the

Canadian border.

At the CCRA, Customs Canada identifies each shipment with a unique 14-digit transaction

number. They use this transaction number to identify your shipment at various times throughout

the customs process. Under the cash option, they assign a transaction number to the documents in

the accounting package when you present them to obtain release of your goods.

A final accounting package for shipments into Canada has to be submitted. In most cases, a

complete accounting package consists of:

• two copies of the cargo control document (CCD);

• two copies of the invoice;

• two copies of a completed Form B3, Canada Customs Coding Form;

• any import permits, health certificates, or forms that other federal government

departments require; and

• A Form A, Certificate of Origin (when necessary).

You can present paper copies of these documents or, if Customs gives you the authorization, you

can transmit this information using EDI.


b) Shipment process

Customs processes most shipments at the border point (e.g., highway border, rail border,

international airport, seaport, or customs mail centre). Customs can process and release

international mail only at the five customs mail centres across Canada. However, you can choose

to have Customs Canada release the goods at an inland office, which is a customs office not

located at the border. For example, your shipment arrives at Fort Erie, Ontario, but you want

Customs to release it in Toronto. In this case, after your carrier reports the goods at Fort Erie, it

must have posted security with the CBSA (Canada Border Service Agency) to carry them to one

of the approved inland Toronto sites. Only carriers who have posted security with Customs

(bonded carriers) can transport non-duty-paid goods between points in Canada.

There are 22 customs offices that offer commercial service 24 hours a day. Others provide

commercial service from 8:00 a.m. to midnight, and others are only open to release commercial

shipments during regular office hours (e.g., 8:00 a.m. to 5:00 p.m.).

If you are importing goods that you need to use immediately in production or manufacturing, you

may benefit from releasing your shipment during off-peak times. During off-hours, traffic

congestion and waiting lines for counter service are reduced. Therefore, Customs should be able

to release your shipment more quickly at that time than during busier periods.

c) Import permits and health certificates

Some goods are subject to the requirements of other federal government departments and may

need permits, certificates, and examinations. CBSA administers the import portions of legislation

on behalf of these departments. For example, the Canadian Food Inspection Agency examines

and gives permits for some meat products, and all restricted or controlled drugs require an import

permit from Health Canada. The CBSA verifies the permits or conducts inspections on behalf of

the other federal departments and detains the goods if necessary.


d) Carriers and brokers

Carriers provide Customs with the appropriate documents to report the arrival of your shipments.

The transportation mode determines what type of reporting document the carrier must use. As an

importer, you also need to submit release or accounting documents, which you can either prepare

yourself, or hire a customs broker to do on your behalf.

Customs Canada licenses customs brokers to carry out customs-related responsibilities on behalf

of their clients. A broker's services include:

• Obtaining release of the imported goods;

• Paying any duties that apply;

• Obtaining, preparing, and presenting or transmitting the necessary documents or data;

• Maintaining records; and

• Responding to any CBSA concerns after payment.

The importer will have to pay a fee for these services, which the brokerage firm establishes.

Brokers do not work for the federal government and they are not federal public servants. The

importer remains liable for all duties owing until either he or your broker pays them. This applies

regardless of whether or not the importer has paid the amount to the broker.

Your counterpart in Canada needs to be registered with a Business Number. The business number

(BN) has 15 digits: nine numbers to identify the business, plus two letters and four numbers to

identify the program and each account. The system includes major types of Canada Revenue

Agency and Canada Border Services Agency programs that many businesses may be registered

for:

• GST;

• payroll deductions;

• corporate income tax; and

• Import/export (identified by RM).

For example, the import/export account will look like this: 123456789RM0002


e) Examination of the shipment

The importer may not experience this step in the import process. Customs do not examine all

shipments before releasing them. Under the Customs Act, Customs Canada has the authority to

randomly select shipments for examination to verify compliance or to take samples in reasonable

amounts. The frequency of examinations will depend on the importer’s compliance record and

that of other persons or organizations involved with the shipment as well as the type of goods you

are importing.

Custom Canada may choose to examine the shipment for several reasons:

• to detect prohibited or restricted items (e.g., pornography, narcotics) or smuggled goods;

• to fulfil other government departments' legislative requirements (e.g., meat inspection,

import permits); or

• to ensure the goods comply with customs legislation (i.e., to verify their description,

value, quantity, and marking against the invoice information).

Because carriers are responsible for making shipments available to CBSA for examination, there

may be some examination costs associated with unloading and loading cargo. The importer may

also have to pay special service charges for a customs officer's time and travel costs when the

officer conducts examinations and releases goods at locations other than designated CBSA

facilities, or when the importer needs after-hours service.

Peru is among the Most Favoured Nations (MFN) that benefit from free duty and taxes on

importing goods. These preferential measures, implemented by Canada to help some developing

countries, are intended to adjust their trade balance. Those products have to prove that they were

at least 60% manufactured in the country in question in order to benefit from MFN status.

Furthermore, because the products cited above are considered basic groceries that are not

harvested in Canada, they are subject to no quotas or to the Goods and Services Tax (GST).


The importer can use three invoicing options:

• a Canada Customs Invoice (CCI), which either the importer or the vendor can complete,

or a commercial invoice containing the same information as a CCI; or

• a commercial invoice which indicates the buyer, seller, country of origin, price paid or

payable, and a detailed description of the goods, including quantity, and a CCI that

provides the remaining information.

If the importer is using release on minimum documentation (RMD), the invoice must contain:

• the importer’s name and the import/export account;

• the exporter's name;

• the unit of measure and quantity of goods;

• the estimated value of the goods in Canadian dollars;

• a detailed description of the goods;

• the goods' country of origin; and

• a bar-coded transaction number that you affix to the invoice

f) Phytosanitary import requirements

Citrus and tropical fruits are exempted from further Canadian phytosanitary import requirements,

as these fruits are not normally expected to harbour plant pests that could become established in

Canada. Imported fresh fruits must comply with the health and safety requirements of the Food

and Drug regulations, e.g. for maximum chemical residue levels measured in active ingredient, as

you can see in appendix 6. Some of the fruits from peculiar countries are subjected to plant

protection requirements such as phytosanitary certificates or permits to import. In other cases,

the product may be refused to enter in Canada until a pest risk assessment has been checked.

Fruits and vegetables which enter Canada via a United-States port and then travel by road, are

likely to be fumigated by the U.S. authorities, because the U.S. Department of Agriculture

(USDA) is concerned about tropical diseases and pests. To avoid a delay or refusal at the border,

importers generally contact the CFIA prior to ordering the shipment. So, Incoming shipments

must be free of pests, soil, sand, leaves and plant debris. Besides, phytosanitary certificate and

import permit are not required.


Fruits may be subjected to CFIA inspection on arrival at the first port of entry in Canada to

determine whether the shipment meets Canadian import and inspection requirements. The cost of

the inspection is the responsibility of the importer.

In case of non-compliance, shipments of citrus fruits may be refused entry, returned to origin or

disposed of if they are found to be contaminated with soil, sand, leaves, or plant debris, or

infested with any quarantine or regulated pest. The importer is responsible for any and all costs

relating to disposal, removal, rerouting or diversion to processing facilities or treatment,

including costs incurred by the CFIA to monitor the action taken. The Plant Health and

Production Division of the CFIA will advise the National Plant Protection Organization of the

country of origin of any quarantine pest interceptions or other non-compliance with import

requirements.

Other Canadian import requirements, which are in addition to those stated above, include:

• chemical residue standards as established under the Food and Drug Regulations;

• licensing and inspection requirements as established under the Licensing and Arbitration

Regulations under the Canada Agricultural Products Act;

• regulatory inspection as established under the Fresh Fruit and Vegetable Regulations

under the Canada Agricultural Products Act; and

• packaging and labelling requirements as established under the Consumer Packaging and

Labelling Act and Regulations.

It is the importer's responsibility to know and satisfy these requirements.


3) Packaging and Transport standards

The following recommendations are provided by the Food Agriculture Organization and the

World Health Organization.

The code that regulates packaging recommends proper packaging and transport of fresh fruits and

vegetables in order to maintain products quality during transportation and marketing. This will

cover the following areas:

- Destination;

- Value of the produce;

- Degree of produce perishability;

- Amount of produce to be transported;

- Recommended storage temperature and relative humidity;

- Outside temperature conditions at origin and destination points;

- Time in transit to reach destination by air, land, or ocean transport;

- Freight rates negotiated with the carriers;

- Quality of transportation service.

Although most carriers check their transport equipment before presenting it to the shipper for

loading, the shipper should still check the equipment to ensure it is in good working order and

meets the needs of the produce. Shippers should insist on clean equipment. A load of produce can

be ruined by:

- Smell from previous deliveries or incompatible loads;

- Toxic chemical residues;

- Insects nesting in the equipment;

- Decaying remains of agricultural produce; and

- Debris blocking drain openings or air circulation channels along the floor.

Packages coming into Canada have to be labelled in English and French. They have to specify the

exporter’s name and address, the country of origin, lot number, the product name and type, the

size of the box and its weight. Shipping containers must be clearly marked on at least two sides.


Packaging items such as boxes, plastic trays, cases or containers have to be proper and clean. As

for the labelling, this has to be conformance with Canadian standards. Therefore, the exporter has

to double check with the buyer on the exactness of the label. The exporter can send a draft copy

to make sure it conforms with Canadian standards. Notice that the province of Quebec may

impose certain criteria as to the use of the French language. Any missing labelling regulations

will affect the sale of the goods. For more information on labelling, contact or visit the CFIA at

www.inspection.gc.ca .

4) Quality standards

Canada ranks among the countries with the highest imports per capita, and has one of the most

developed food quality infrastructures in the world. Exporters must therefore offer a completely

new product to push suppliers with more attractive offer in term of quality. Canadian consumers

demand citrus fruits with an eye-pleasing, blemish-free appearance. They are prepared to pay

higher prices for high quality. Produce should be sorted into standard categories according to

their size, weight, variety, ripeness, overall quality and case content. By enforcing high standards

on a country’s produce, the resulting positive international reputation will lead to improved

competitiveness and export earnings as a result of a better national “brand image”.


III. Canada consumer market analysis and trends

1) Overall data

Citrus fruits are the most important fruit crop in terms of value of international trade.

Approximately 10% of citrus fruit production is exported. An interesting trend in citrus trade

during the last two decades is the growth in trade of small fresh citrus fruits (tangerines,

Clementines, mandarins…) at the expense of oranges. World production of tangerines is

projected to increase at an annual rate of 2.8% to 17,4 million tonnes in 2005. Global

consumption of fresh tangerines is expected to rise at an annual average rate of 3.3%. However,

much of the increase in consumption is expected to take place in China and in developing

countries.

According to Statistics Canada in 1998, fruits and vegetables make up a large share of

Canadians’ food consumption. As a matter of fact, the average Canadian consumed 121 kg of

fruits in 1998, compared with 111 kg in 1990. The consumption of oranges and Clementine-type

fruits is of 10 kg per year. According to Statistics Canada, Canadian people consumed 2.89 kg of

mandarins in 2002, which represents an increase of 34% in ten years. It is interesting to draw a

parallel with the consumption of oranges, which decreased by 13% during the same ten years.

Moreover, the price of fresh fruits increased by 13% between 1992 and 2002. In 2002, each

Canadian consumed 93 kg of fresh fruits, which corresponds to a 15% increase in ten years.

According to the FAO (Food and Agricultural Organization of the United Nations), Canada is the

sixth-largest importer of fresh citrus in terms of quantity. More specifically, Canada imported

405 000 tonnes in 2002, which represents a 6% increase over 2001. However, Canadian imports

of citrus were stable between 1997 and 2001. Moreover, Peruvian mandarin-type citrus imports

into Canada have increased significantly since 1999. According to Statistics Canada, these

imports were valued at CA$ 2,597,845 in 2003, which represents a rise of 579% since 1999. Still,

the overall value of imports of mandarin-type citrus increased of only 2% since 1999.


The four biggest exporters of mandarin-type citrus to Canada are Morocco, Spain, China and the

United States; these countries accounted for 80% of the imports of these citrus fruits in 2003.

Peruvian imports of mandarin-type citrus constituted only 2% of the total mandarin-type citrus

imported in 2003. As Canada does not produce any mandarin-type citrus, the size of the market

can be evaluated by the imports of mandarin-type citrus. This imports amounted to CAD$

125,248,104 in 2003.

We can identify a major trend in consumer preferences in terms of food. Canadians are paying

more and more attention to eating healthy and convenient food, and fruits and vegetables in

general are benefiting from this trend. Consequently, the consumption of mandarin-type citrus is

likely to continue to rise, because mandarin-type citrus are both perceived as convenient and

healthy foods.

Another interesting trend in the Canadian food market is the steadily growth of the organic food

market. In general, consumers prefer organic to conventional products, because organic food is

perceived to be of better quality and healthier. The most important quality characteristics to

consumers are nutritional value, freshness, flavour or taste, and general appearance. Consumers

of organic foods are influenced mostly by quality characteristics and not by the price premium.

However, non-purchasers do not purchase organic products because of the price and availability

of the product. There is also evidence that consumers are willing to pay a price premium of

approximately 10% for organic attributes and characteristics. According to the main organic

distributors in Canada, sales of organic products are rising by 20% a year. Nevertheless, organic

food sales represent less than 2% of the total food sales in 2002. We can explain this dramatic

growth by the increasingly wide availability of organic products in the major grocery store

chains. As organic food is probably the fastest growing segment in the Canadian food market,

this market segment consequently provides a great opportunity for newcomers or small exporters

on the Canadian market.


2) Analysis of opportunities and threats on the Canadian market

Opportunities Threats -a Canadian consumed 2,89 kg of mandarins in 2002 -a Canadian consumes 10kg of oranges and mandarin-type citrus per year -mandarin consumption in Canada increased by 34% over the past 10 years -Canadian consumption of fresh fruits has increased by 15% over the past 10 years and amounted to 93 kg in 2002 -Canada does not produce any citrus -Canada is the sixth largest importer of fresh citrus in the world -mandarin-type fruits imported from Peru more than five-fold over the past 5 years -14% of Canadian people buy mandarins once a month or more -Canadian people pay more and more attention to eating healthy and convenient food -sales of organic products are rising by 20% a year, and Peruvian fruits are often associated with natural fruits cultivated without chemicals and preservatives

-Morocco, Spain, China and the United States represent 80% of the imports of mandarin-type fruits in Canada -imports of mandarin-type citrus from Peru represented only 2% of the total imports of these fruits in 2002 -only 15% of Canadian people are familiar with Minneola-Tangelos and less than 3% with Novas-Clemenvillas -Canadian people are reluctant to buy unknown fruits -the Canadian food market is very competitive


IV. Analysis of the Canadian distribution channels

The Supply Chain

The information in this section was obtained through a series of face-to-face or telephone

interviews, and some emailed responses. The questionnaires used for the interviews are provided

in Annex 10. The first questionnaire was pre-tested with a fruit and vegetable store owner known

to one of the researchers, before subsequently being used on other interviewees. The

questionnaires were modified slightly depending on the position of the interviewee in the supply

chain.


Transportation

However, as there is only one Callao-Vancouver ship every 15 days, the great majority of these

shipments have been routed through East-coast ports, namely, New York, Philadelphia or New

Jersey. From there, the fruit is trucked to Toronto or Quebec City. This East-coast route takes

about 14 days to reach Toronto or Quebec, and transportation costs add approximately US$2 to

the price of each carton, for a total of US$8.50 per 10 kg carton. At current USD-CAD exchange

rates of approximately US$0.75 to the Canadian Dollar, that means a Canadian price of $11.35

per carton, or $1.13/kg ($0.51/lb).

If the fruit is destined for Western cities, it travels from Toronto or Quebec to Calgary and

Vancouver by rail. Sometimes the Calgary shipments go directly there and sometimes they are

routed through Vancouver first. The trip west adds an additional US$1.50 - $2.00 to the price of

a 10 kg carton, for a price of US$10.00 to $10.50, or CAD$13.35 - $14.00 per carton.

Direct Callao-Vancouver sea traffic takes approximately one month, whereas Callao to Toronto

or Quebec through an eastern US port takes about 14 days.

Peruvian fruit tended to be small, and that consumer tastes in the East prefer larger fruit. As a

result, he viewed attempts to export to eastern Canada as more risky.


Major Retailers and Importers

Sobeys is the second largest grocery chain in Canada, and operates 1,326 stores across the

country under various banners: Garden Market IGA, IGA, Food Town, Thrifty Foods, Price

Chopper, Sobeys, Foodland, Knechtel, IGA Extra and Les Marchés Tradition. Its total sales in

2002 were of $9.7 billion for all banners, giving it a market share of 17%.

Given its size, Sobeys does not deal with Canadian distributors and deals directly with foreign

exporters and agents. According to Mr. Sbrocchi, his main concern as Sobeys’ Director of

Produce is to assure continuity of supply, and the company therefore places a great deal of

emphasis on established, long-term relationships with suppliers.

Mr Sbrocchi emphasised that Canada’s fruit market is very competitive, more so than the US

market. He cites several reasons for this, such as competition between the major grocery chains,

who operate their own “discount banners” – such as Price Chopper for Sobeys and No Frills for

Loblaws - and a vibrant market of smaller retailers who might operate half a dozen large stores in

a metropolitan area. The result is that the market is relatively saturated with product.

When asked about the prospects for Minneolas, Mr. Sbrocchi replied that they comprised about

15% of his mandarin sales, the other 85% being Clementines, most of his Minneolas being of

Chilean origin. He remarked that some producers do not realise that Minneolas from different

countries can have significantly different taste, due to the exact hybrid that grows best in each

region, and that different consumers’ palettes will prefer Minneolas from different countries.

When asked about the quantities of mandarin imports during the March-July period, Mr.

Sbrocchi replied that the main demand during that period was for Navel Oranges. In the earlier

part of that period, Sobeys supplies come from California, and switch to primarily South African

sources and some South American (Chilean) suppliers in the later period.


Mr. Sbrocchi knows the Clemenvilla, recognising it as a hybrid of the Clementine and the

Satsuma.1 When asked what he thought of it, he replied that it was “alright”, one drawback being

that it had too many pips. When asked why the Clemenvilla was not seen on the Canadian

market, he said that it had never really been given the opportunity2. He suggested that the

Clemenvilla might actually represent an ideal compromise for Canadian tastes between the

Satsuma (which is popular among Canadians of East Asian origin, but has not yet become very

popular among other Canadian consumers)3 and the Clementine.

Loblaws is the largest grocery chain in Canada, operating 1,697 stores under different banners

across the country: Atlantic SaveEasy, Atlantic Superstore, Dominion, Extra Foods, Fortinos,

Loblaws, Lucky Dollar Foods, Maxi, No Frills, Provigo, The Real Canadian Superstore, the Real

Canadian Wholesale Club, Shop Easy Foods, SuperValu, Valu-mart, Your Independent Grocer,

Zehrs Markets, Cash & Carry and other banners. Its total sales in 2002 were of $23 billion, and it

holds a market share of 40% of the Canadian Grocery Market and 43% of the Canadian fruit and

vegetable market.4

We obtained most of our information about Loblaws from a telephone interview with Mr. Michael Borcsok, and an emailed reply to our questionnaire. Mr Borcsok purchases citrus for Loblaw’s Eastern Canadian stores, which represents over 70% of the Canadian market. Loblaws distribution system reaches practically the whole Canadian population, and therefore provides a distribution channel to over 30 million people. Although the sale of fruits and vegetables accounts for roughly 10% of Loblaws’ business, that still means sales of over $2 billion annually. Loblaws’ stores are large, varying in size from 40,000 square feet to 165,000 square feet (3,700-15,350 m2), and the Loblaw group of companies has some 135,000 employees.

1 Note that the Satsuma is also marketed in Canada under the name “honey tangerine”. 2 Apparently, some are available (probably in Toronto), under the Caputo brand. 3 Note that the Asian market is growing in Canada, as the number of Canadians with East Asian origins grows. There are approximately 1.4 million Canadians of Chinese descent, most of whom live in the cities of Vancouver and Toronto. 4 Interview with Mr. Michael Borcsok.


On the question of which mandarin-type fruit Loblaws carries at different times of year, Mr. Borcsok provided the following list. Although he did not specify volumes, he did note that all orders were of full containers.

• In the Autumn and Winter, Loblaws carries Tangerines and Ortaniques (Florida), Clementines (Morocco and Spain), and Minneolas (California).

• In the Spring and Summer, Loblaws carries Tangerines (Brazil and Argentina), Clementines (Chile and South Africa), as well as Mandarins and Ellendales (from various South American countries).

Of the preceding types of citrus, the best-selling fruit (in decreasing order of importance) are Clementines, Tangerines, and then Mandarins. Minneolas currently are small sellers, but Mr Borcsok has noticed that the quantities increase every year. Another important observation of his is that large Minneolas sell much better than small ones. Mr. Borcsok did not provide any information regarding the potential for the Clemenvilla and how he would introduce new fruit. However, in his opinion, the two most important characteristics to consumers are: 1) appearance, to incite consumers to try the fruit, and 2) taste, to make them buy it again. Summary

The Canadian food industry is very competitive. According to Mr. Michael Borcsok, it is more

competitive than the US industry, and he cites the existence of discount banners under each of the

main chains. There is significant concentration amongst the big players, yet there exists a vibrant

market for smaller retailers, who can operate several large stores in a metropolitan area.

Furthermore, there are regional differences, namely, those between Québec and the rest of the

country. In most of Canada, the major supermarket chains control about 65% of the market,

whereas they only control about 30-35% of the Quebec market. This is attributable to cultural

differences and a preference in Quebec for more frequent shopping trips to local stores.


Below is a summary chart that presents the cumulative mark-up factor for mandarin-type citrus

from Callao (Peru) to Ottawa (Canada).

Description Profit Margin Price

USD/10kg Price

USD/kg Price

CAD/Kg Price

CAD/Lb

Total price FOB Callao 6.50 0.65 0.87 0.39 Transportation TOR/MTL 2.00 0.20 0.27 0.12 Wholesaler 8.50 0.85 1.13 0.51 Wholesaler profit margin 20% 1.70 0.17 0.23 0.10 Retailer TOR/MTL 10.20 1.02 1.36 0.62 Retailer profit margin 40% 4.08 0.41 0.54 0.25 Consumer TOR/MTL 14.28 1.43 1.90 0.86 Retailer Ottawa TOR/MTL +10% 11.22 1.12 1.50 0.68 Retailer profit margin 40% 4.49 0.45 0.60 0.27 Consumer Ottawa 15.71 1.57 2.09 0.95 Chart 6: Cumulative mark-up factor for mandarin-type citrus from Callao (Peru) to Ottawa (Canada)


The latest chart is obtained from our calculation of price escalation throughout the distribution

channel. However, we believe that it is worthwhile to compare these figures with the fluctuations

of Clementine from Chile and South Africa and tangelo mineola from Peru on the Canadian

wholesale to retail market of Montreal and Toronto between Jun to September 2003.

15

17

19

21

23

25

27

29

31

31/5

7/6

14/6

21/6

28/6 5/7

12/7

19/7

26/7 2/8

9/8

16/8

23/8

30/8 6/9

13/9

20/9

27/9

4/10

CAD

Pric

e

Cl

Minneola from Peru Clementines from South Africa

Chart 7: Price fluctuations of selected mandarins between June and September 2003. Source: Canadian wholesale to retail market of Montreal and Toronto


V. Competition 1) World environment for Fresh Citrus According to a market study done for 2002-2003 season in the Northern Hemisphere by the United Nations’ Food and Agriculture Organization (FAO), citrus production declined in 2002-03 from the previous season in most regions of the Northern Hemisphere including the United States, Mexico, China, Japan and the Mediterranean rim. In the latter region, output fell markedly in Italy (due to frost and the eruption of the Etna volcano in Sicily), Turkey (due to cold weather) and Egypt. A storm in Spain at the beginning of 2003 slightly curtailed the citrus harvest (-2.6 %). On the other hand, production rose in Morocco and Greece, which recovered from the frost of the previous season. Overall orange output contracted, as reduced harvests in the United States, Spain, Italy and Mexico were not compensated by higher output in Morocco and Greece. Conversely, the Northern Hemisphere's tangerine crop was larger, with increases in Spain, Morocco and Greece. Exports of citrus from Spain reached a record high of 3.4 million tonnes in 2002-03 due in part to an excellent promotion campaign in Europe. Similarly, shipments of oranges rose in Morocco, Greece, Turkey and the United States (aided by the lower exchange rate of the US dollar). Exports of Clementines expanded in Spain and Morocco, but declined in Turkey. Concerning the southern hemisphere, the output of citrus was expected to decline in Brazil in 2003 due to a reduced orange crop. Estimates of the harvest vary significantly across sources, but according to USDA (US Department of Agriculture), the total crop would be close to 387 million 40.8 kg-boxes, down 14 percent from the previous year. The main reasons for this fall are adverse weather, the tree cycle and the reduced number of bearing trees due to diseases such as CVC and the sudden death of citrus. Similarly, the Argentinean citrus harvest was expected to be down (-25 %) on the previous year due to poor weather. Australia forecast a smaller orange crop due to drought and strong winds, which would reduce exports. Citrus prices showed different trends across markets and products in 2002-03. Import prices for fresh oranges were lower than in the previous season in the European Union and the United-States. Grower prices for processing oranges rose in Brazil and the United States.


2) An overview over some competitors and their environment In this part, we chose to give an overview of three major competitors on the Canadian market: Morocco, Spain and the United-States. a) Morocco The history of citrus culture in Morocco dates back to Roman times, but today the industry is as modern as any in the world. The total citrus acreage is 213,284 acres with 72% oranges (mainly navels), 26% mandarins (Clementine and Satsumas), 1.1% lemons and limes, and 0.35% grapefruit and pummelos. While the Moroccan citrus industry produces only 0.89% of world citrus tonnage, it is the fourth largest fresh citrus-exporting country and the second largest fresh mandarin exporting country in the world (USDA statistics, 2000). European Union (EU) markets account for most of Morocco’s citrus exports. Morocco’s top-quality citrus are exported to the EU, and its second-quality fruits are exported to Eastern Europe and Russia. (P.L. Arribas, 2000. CLAM 99/2000: previsión de exportació). Citrus farms are relatively large in Morocco (larger than those in Spain) with each unit averaging more than 200 acres (80 hectares). The cost of labour in Morocco is very cheap compared to both Spain and the United-states. Inexpensive labour is perhaps the biggest advantage the industry has over those in other countries. The Moroccan products are available between November and March in Canada. b) Spain Spain is the world’s largest fresh citrus exporter, despite being fourth in total production behind Brazil, the U.S. and China. Almost 70% of their production is exported to Europe with most going to Germany, France, the United Kingdom, and the Netherlands. In the 1999 - 2000 seasons, a severe oversupply of mandarins in export markets caused the price to fall below profitable thresholds for growers. Many blocks were not harvested due to low prices resulting from oversupply. In 1999, approximately 284,000 ha (701,000 acres) of citrus were harvested. The Spanish product comes a few days later than the Moroccan product and it stays on the market for almost the same period.


c) United-States

The U.S. exporters are few miles away from the Canadian market. This gives them a significant

competitive advantage over the others citrus exporters. As one of the US competitors on the

Canadian market, World fruits sales that combines California and Arizona product has a harvest

period from December to April for Minneola Tangelo (Honeybell) and a harvest period from

October to December for Fairchild Tangerine.

3) Canadian Market

There are about 31 million Canadians living in 10 provinces and three territories. The two official

languages are French and English. 90% of Canadians live within 200 km of the southern border

with the USA. The five biggest agglomerations are Toronto, Montreal, Vancouver, Ottawa-

Gatineau and Calgary.

“Year-round consumption of citrus fruits is high in Canada, with imports valued at $332.7

million in 2001, up to from $307 million in 1997. The US and Morocco were the top suppliers.

Imports from Chile and Costa Rica rose, the former enhanced by the Canada-Chile Free Trade

Agreement, while imports from Colombia and Ecuador fell over the five year period.’’ (TFOC,

Fresh Fruit and vegetables/2002).

According to Statistics Canada, there are 15 exporting countries for citrus products of the

mandarin and tangerine categories. Those countries are Argentina, Peru, Morocco, South Africa,

Spain, China, Australia, Taiwan, USA, Uruguay, Mexico, Italy, Brazil, Chile and South Korea.

The top three importers are Morocco, Spain and USA.

All Canadian importers have their addresses on Canadian territories. They exist mostly in the big

agglomerations like Toronto, Montreal, Vancouver and Calgary, as you can see in annex 11.


The table below shows the share of clementines and mandarins export countries in the imports

total value to Canada. The global total value in Canadian dollars for 2002 was $131 412 152.

Exporter of Clementines and Mandarins Number of Canadians Importers Total Value (CAD)

Morocco 3 42,200,000 Spain 6 22,000,000 USA 19 15,900,000 Peru 3 1,200,000

South Africa 7 2,600,000 Brazil 4 2,000,000

All the rest 45,500,000 Chart 8: share of clementines and mandarins export countries in the imports total value to Canada. Source: Statistics Canada, 2002 This table shows the same data from another perspective. It demonstrates the amount of the

market controlled by the top numbers of importers:

Numbers of importers Value of imports (CAD) Cumulative % of imports

3 39,862,200 30.33 6 61,710,368 46.96 10 83,158,867 63.28 16 104,492,542 79.52 All 131,412,152 100.00

Chart 9: Amount of the market controlled by the top importers of clementines and mandarins to Canada in CAD. Source: Statistics Canada, 2002 The table below lists the Canadian importers of mandarin-type citrus from Peru. The total value

of these imports was $1.2 million in 2002.

Company name City Province

DOMINION CITRUS LIMITED Toronto Ontario COURCHESNE, LAROSE LTEE Montréal Quebec KROWN PRODUCE INC Saskatoon Saskatchewan Chart 10: Canadian importers of mandarin-type citrus from Peru.


4) Competitive Advantages of citrus

Peruvian products have an advantage over their competitors, since they harvest their products

(tangerine and mandarins) when their main competitors (Morocco, Spain and the USA) are

absent from the Canadian market. In general, the products that come from Morocco and Spain

include expensive transportation in their cost structure. As Peruvian products are available

between May and July, their main competitors are the other South American exporters, or South

African exporters. The table below indicates the citrus harvest periods for most competitors on

the Canadian market.

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

US Florida

US Arizona

US California

Morocco

South Africa

España

Peru

Argentina

Uruguay

Nova Clemenvilla Tangelo Mineola All types of citrus

Chart 11: Citrus harvest periods for most competitors on the Canadian market


5) Competition of substitute products

While Peruvian fruit has this advantage, we need to remember that there are other substitute

products that Canadian consumers can purchase during the northern summer. Among those

competitors’ products, there is the rest of the citrus family, as well as locally available fruit,

including grapes, peaches, nectarines, various berries, etc... We must also consider that consumer

behaviour is different in the summer, as much of the fruit products consumed are in the form of

juice.

The following statement is particularly relevant: “According to the Canadian produce marketing

association (CPMA), $3 out of $4 of the fresh produce sold in the Canadian market is imported.

However, during the summer and autumn, Canadian producers supply 65%- 70% of the market.

The Canadian harvest season generally runs from July to October, so the main import period is

from November to June.”(TFOC, Fresh Fruit and vegetables/2002).

Informe elaborado por: Estudiantes del MBA de la Universidad de Ottawa: Mostafa Amine Simon Desbois Georges El Murr Dominic Rossi Laurent Verbruggen

citricos canada

Documents

peru overview1 country

fish products

south american citrus

foreign trade

important partners

world export of fruits

south americaexport

peruvian exports of