Small cities in focus for fresh fruit giants

Global brands bet on rising health awareness, growing disposable incomes, and evolving retail ecosystems to drive growth

A worker moves kiwi fruit at Shanghai Nangang wharf in March 2024. (CHINA DAILY)

As international fresh fruit giants Zespri and Driscoll's deepen their roots in China, both companies are shifting their growth strategies toward lower-tier cities, betting on rising health awareness, growing disposable incomes and evolving retail ecosystems to drive growth.

To strengthen its presence, Driscoll's is partnering with popular streaming shows. The company has collaborated with the iQiyi reality series Let's Farm, which follows 10 young participants each season as they operate a real farm, sell products via livestreaming and interact with consumers.

"The show's audience is mainly young people aged 18 to 25 in smaller cities, making it a perfect platform for us to build brand familiarity and trial," said Henry Yoon, marketing director of Driscoll's China.

Driscoll's has seen even more pronounced growth in these markets. "In the past two years, our sales growth rate in lower-tier cities has outpaced that of first-tier cities," said Yoon.

"People in top cities like Shanghai or Beijing face more pressure and are more price-sensitive. But in second and third-tier cities, malls and premium retailers like Hema are bustling. That's where we're placing our strategic bets."

"Cities below the second-tier level, starting from third-tier cities, represent a vital frontier for our mid to high-end positioning," said Leo Li, e-commerce manager of Zespri, a New Zealand-based kiwi fruit brand.

"The rise of livestreaming and the relatively untapped purchasing power in these cities are driving our decision to go deeper."

Zespri's approach to market expansion is captured in its internal "widen and deepen" strategy, which focuses on increasing outlet numbers within existing cities while entering new urban centers.

"If a city used to have 100 retail points for our kiwi fruit, we aim to increase that to 150 or more," Li said. "Though we imported 1.4 billion kiwi fruits into China last year — one for every citizen — the actual household penetration rate is still far lower. That's why penetration market remains a key growth driver for us."

To ensure consistent quality and availability, Zespri has built a robust distribution and e-commerce ecosystem. It operates across 72 cities and 55,000 stores in China and plans to expand its supply to over 60 million standard boxes by 2028.

The company is also collaborating with platforms like Tmall, JD, Douyin, Meituan and more to reach consumers through both traditional and interest-based e-commerce channels.

"China's breadth and depth are extremely attractive. Even in mature markets like Shanghai, where our household penetration is about 45 percent, there's still room to grow," Li said. Other cities like Beijing, Guangzhou and Shenzhen of Guangdong province, hover around 30 percent, while Chengdu of Sichuan province and Chongqing stand at roughly 15 percent.