Imported Fruits Juice Up Indian Markets

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After Hermes saris, Louis Vuitton bags and Porsche cars, it is now demand for Washington apples, New Zealand kiwis, and China pears that is adding a new sheen to India's booming consumption story.

Imports of fruits and vegetables soared 70 percent to $1.6 billion during the last fiscal year ended in March 2012, according to the Ministry of Commerce. Fruit imports have been growing at 25 percent for the last few years, according to industry estimates and are expected to double to $464 million this year ending March 31, according to government data.

"India is fast becoming the fruit bowl of the world. If we stopped importing American apples, the producers there will face a serious setback," said Mumbai-based importer Ambrish Karvat.

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In the last fiscal year India imported $197 million worth of apples and according to the U.S. Apple Association, India is now the third largest importer of American apples, after Mexico and Canada.

This surge in imports is despite the fact that India imposes a 50 percent duty on apples and 33 percent for most other fruits with a view to protect local producers. India is also the second-largest producer of fruits in the world, after China, being the largest producer of bananas and mangoes, according to the National Horticulture Board.

The growth in imported food consumption mirrors the overall prosperity of the Indian people as its economy has been growing at a healthy pace despite the recent slowdown, leading to an increase in discretionary spend, said country watchers. According to the Mckinsey Global Institute, India's aggregate consumer spending will quadruple to $1.4 trillion by 2025.

"With 70 percent of its over one billion population under the age of 35 there is a growing awareness about healthy eating and a perception of imported fruits being better in taste, quality and variety," said Keith Sunderlal, managing director of SCS group, a fresh produce advisory firm.

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The year-round availability of imported fruits coupled with a growing retail infrastructure has helped sales not just in metros but in tier two and three cities of India as well.

"We import almost 25 varieties of fruits including rare varieties like blue berries, black berries, red currants and dragon fruits. Imported fruit accounts for nearly a third of our fruit sales," said Mohit Khattar, managing director of Godrej Nature's Basket, an importer of fine foods with 25 retail stores India-wide.

Foreign fruits, however don't come cheap and often command a premium of 50 percent over locally produced fruits. For example, kiwi fruit grown in the hill regions of India retail for $3 to $3.5 per kilo, while the New Zealand variety can fetch $4.5-$6 a kilo.

Yet consumers are not hesitating to buy 'imported' fruits in towns as distant as Kanyakumari at the southernmost tip of India and in small towns in the northern Indian state of Uttar Pradesh. "Business is brisk in the tier 2 and tier 3 towns, some recording 25-30 percent growth versus 15 percent in the metros," said Karvat. Since 1998 when his company Yuppa started importing fruits, the international division's turnover has grown from $4 million to $200 million.

"Imported fruits look better, taste better and are more juicy. I don't mind spending a little more if I can get better quality," Shoba Mathur, a Delhi-based housewife, told CNBC.

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Positive Impact

The popularity of imported fruits has also led to an increase in the price of local produce. For example, before the market opened, the most premium Indian apples were available at less than $1 a kilo. Today they regularly sell at nearly $3 a kilo.

"No one had thought that the Indian consumer would be willing to pay more than the psychological barrier of rupees 100 or $2 a kg for local produce. The price gap between imported and domestic apples has narrowed," said Sunderlal.

Indian fruit growers are also meeting imported competition by cultivating new varieties of their own, For example, The National Research Centre for grapes in the western Indian city of Pune has developed the red globe grape after demand for the imported California variety picked up in the market. Also bright yellow canary melons from Thailand are now being cultivated in the southern Indian state of Andhra Pradesh.

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While Indian growers are upping the ante on competition, marketers are cashing in on the diversity of India's consumers. "There are no rich or poor cities for imported fruit. Each city, each area, has its share of rich and poor. So there will always be Indian consumers who will be willing to pay a higher price for quality," said Sunderlal.

This is one story where all stakeholders are enjoying the fruits of globalization.