Fruit retailer Pagoda plans 10,000 stores by 2020

Fruit retailer Pagoda says it is opening new stores in Mainland China at the rate of four or five a day and anticipates opening its 10,000th store by 2020.

Pagoda, which held a supplier convention in Hong Kong last week, already operates more than 2500 outlets selling produce from New Zealand, the US, South Africa, Israel, Chile and around Asia.

The Hong Kong event was the largest in the 15-year old company’s history, drawing representatives of fruit exporters from 14 countries, including Zespri, SunWorld, AgroFresh, Prize and Core.

Pagoda expects that by 2030 it will be purchasing some RMB13 billion (US$2 billion) worth of fruit globally for resale in China.

The company opened China’s first and only franchised fruit shop in 2002.

“There was no precedent for a global fruit chain store and as a result, the industry lacked a talent pool for fruit business management,” recalls Pagoda founder and chairman Huiyong Yu.

He saw in that an opportunity to become the world’s “King of Fruit Chain Stores”.

“There was no precedent because everyone is aware of the overwhelming odds and shrinks back in the face of difficulties. If it wasn’t this way, Pagoda would never have this opportunity, which is why we must live up to it.”

In its first year, Pagoda’s annual sales amounted to just RMB560,000.

It took 10 years for the chain to grow to 344 stores and a turnover of RMB700 million. Last year, turnover snowballed to RMB6 billion.  

Yu believes a growing demand in China for quality fruit is behind the success of the retail business, with consumers willing to pay a premium for imported produce they trust.

International partnerships

Peter Zhu, head of Pagoda’s international procurement business department, has visited over 20 countries in the past two years to source more overseas fruits to Chinese consumers. In the process of exploring the origins of superior fruit resources, Zhu and his team have successfully enlisted cooperations of direct procurement of 22 overseas locations including the US. (cherries), Peru (grapes), Mexico (avocados), Israel (pomelos), South Africa (conserves) and Thailand (durian).  

US cherry plums were mainly delivered to China by air in the past, leading to relatively high costs. After Pagoda’s participation in 2012, sea transportation was adopted in order to effectively reduce cost without impairing fruit quality – with the price of sea transportation having an advantage over air transportation by RMB8 per kilogram. Now, customers can buy the fruit from retail ends at a lower price and allow US cherry plum growers to clear their fruits.

“The major difficulty of direct procurement from overseas bases lies in output standards”, said Zhu. “No matter if it’s collecting 90 per cent naturally ripened durians or purchasing cherry plums.”

Educating Chinese consumers

Pagoda is also exploring opportunities to make upstream investments abroad. For example, avocados have become a popular fruit in the Chinese market in the past two years. Its emergence and popularity are closely related to Pagoda’s investment in the fruit.

To help educate Chinese consumers, Pagoda has provided customers with avocado eating guides and free avocados in its outlets since 2013. This is an exemplar of Pagoda’s business concept: seeking business development and increasing market share through customer education rather than taking advantage of consumers who lack knowledge of certain fields. In April 2017, to increase the market share of the avocado and offer better products to Chinese consumers, Pagoda, Mission Produce, and Lantao founded an avocado joint venture in Shanghai Free Trade Zone and launched an instant avocado brand Mr. Avocado. It is also the first avocado ripening center in China.

Sales volume of Mr. Avocado have trebled from one container to three containers per week. After the instant avocado product was launched, in three months time, the sales volume of avocado-related products of Pagoda’s outlets in Shanghai has increased by over 400 per cent. In addition to pioneering new fruit products, such as avocados, in China, Pagoda is also good at remodeling “potential fruits”. The South African Fuji is an apple originally exported to Malaysia that intermittently came to the attention of Zhu. Pagoda introduced it to the Chinese market in 2016, with a trial sale of five containers. This year, Pagoda plans to order 31 containers of the fruit.

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