Not many people know that the vitamin-rich, soft, green-fleshed, fuzzy kiwifruit that we normally associate with New Zealand is actually native to China. It is also known as mihoutao — “macaque fruit” in China, and was brought over to New Zealand by Mary Isabel Fraser in 1904, according to New Zealand’s official history website. The fruit’s association with the term “kiwi” came about when New Zealand first began exporting it to the United States in the 1950s and named it after their flightless, national bird.
While most of the Kiwifruits found in our local supermarkets are from New Zealand, it is China that has, in recent years, become the world’s leading producer and consumer of Kiwifruits. The kiwifruit industry in China has grown from RMB 17.8 billion in 2013 to RMB 25.6 billion in 2018, representing a CARG of 6.2%. In 2021, China also imported 128,000 tons of kiwifruits worth US $550 million. Vying for a share of this premium kiwifruit market is China Shenshan Orchard Holdings (SGX:BKV).
China Shenshan Orchard Holdings (previously known as Dukang Distillers Holdings) was listed on the mainboard in July 2021. The name change was to reflect the group’s acquisition of the kiwifruit business and the disposal of its previous baijiu business.
China Senshan Orchard is a horticultural marketing company and adopts a vertically integrated business model as an end-to-end kiwifruit producer. Its business operations encompass the planting, cultivating, and sale of kiwifruits in China. The group possibly has one of the largest domestic kiwifruit orchards (spanning a total land area of 6.5 million sqm) from its forest use rights at eight strategically located orchards in Chibi City, Hubei Province, China.
With over 10 years of experience in the kiwifruit industry, the management is mainly focused on strengthening its presence in China and expanding its market share in the premium kiwifruit market segments with its “Fairy Gold” and “Sunshine kiwi” kiwifruit brands.
For investors keen on the food service industry, here are 5 things to know about China Shenshan Orchard Holding’s business.
#1 Having A “Moat” Or A Competitive Advantage Is Something Many Investors Look For In Companies They Invest In. Can You Share How China Shenshan Orchard Has A Strong Advantage?
Being the largest kiwifruit producer in China, the Group has more than 10 years well-established experience in the plantation and cultivation of kiwifruit in China, adopting a vertically integrated business model.
The Group also has strong R&D capabilities where the Group developed own kiwifruit varieties and has been granted 6 premium kiwifruit variety rights, sealing its status as the company with the most premium kiwifruit variety rights in China. The Group’s cultivated hybrid variants of kiwifruits are less susceptible to pest infestation, biological diseases and more resistant to fluctuations in weather conditions.
The Group deploys advanced technology in its entire vertically integrated business model.
#2 Can You Elaborate On The Harvesting Or Lifecycle Of Kiwifruits?
The growing season for kiwifruits typically lasts up to 240 days a year while the harvest season takes place from Aug to Sep each year. Sales of harvested kiwifruit will typically occur thereafter, within the same calendar year.
Kiwifruit vines typically begin cropping in the 3rd to 4th year of cultivation, reaching full yield potential in the 4th year, and can continue producing for the next 40 to 80 years. The average age of the Group’s plants is approximately 4.4 years.
#3 As The Harvesting Of Kiwifruits Is Seasonal, How Can The Group Maintain Profits During Off-Peak Seasons?
The Group is looking for opportunities to venture into the management of kiwifruit plantation and cultivation operations in third-party kiwifruit plantations during off-season.
On 5 Jul 2021, the Company’s wholly-owned subsidiary, Chibi Shenshan Xingnong Agriculture Technology (Chibi Shenshan) entered into a memorandum of understanding (MOU) with Chibi Green Industry Development Investment for the joint development of a land area spanning up to or 3.33 km2 located in Chibi City for kiwifruit planting and cultivation.
This joint development and cooperation covers a 30-year period commencing from 1 Jan 2022, with a total investment amount of approximately RMB150 million. Chibi Shenshan is responsible for the construction and development of the kiwifruit plantation, day-to-day management, operations over planting and cultivation of the kiwifruit plantation.
#4 What Are Some Of The Key ESG Factors That Are Material To China Shenshan Orchard? How Do You Address These Factors?
Sustainability is integral to the success of our kiwifruit business. We believe that kiwifruits have ample vitamins, minerals and fibre, which have health benefits for consumers and help them move towards a plant based and earth-friendly diet.
Leveraging technology and experience, we can improve the yields of our orchards while reducing environmental impacts. There is also a positive social dimension in that we provide employment, skills training and economic benefits to the local communities where our orchards and operations are based.
Food Quality and Safety – The Group takes great care in ensuring that the kiwifruits it grows and sells is of the highest quality possible. This safeguards customers’ health and satisfaction, protects our brand in the market, and generates steady income to sustain the business in the long term.
Human Resource – People are the Group’s most precious assets, and crucial in ensuring that the entire value chain runs smoothly, in our innovation process and keep us ahead of our competition. We comply with relevant labour, social insurance and housing fund laws and regulations in China.
Environmental Conservation – The Group aims to minimise environmental impact and protect natural assets so that our orchards continue to be productive, and our workers and communities can enjoy a clean and healthy environment.
#5 Could You Elaborate On How China Shenshan Orchard Is Intending To Tackle The Strategy Of Commercialising Kiwifruit Varieties And Technology?
The Group will license standardised kiwifruit variety to farmers free of charge in the first 5 years and commit to purchase qualified kiwifruits from them at a higher price upon harvest, ensuring profits for these farmers.
The Group will also provide these farmers standardised planting and production guidelines as well as crop protection plans. We also have a professional technical team to provide consultancy services to the farmers to ensure quality consistency.
Besides targeting individual farmers, the Group is also planning to enter into agreements with township governments for the provision of kiwifruit variety and technology licensing.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 19 April 2022 and have been republished with permission. You can read more on the SGX website.
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