china: organic apple juice

China: organic apple juice concentrate

Development of an integrated chain for the production and processing of organic apples in Liaoning Province

Project location: Liaoning Province, China
Consortium: DO-IT B.V., HuaEn Organic Food Co. Ltd., Ariza B.V.
Project budget: Euro 1.5 million
External financing: 50% grant funding by PSOM
Project period: July 2006 - May 2009

Abstract

China is a strong player in the world market for apple juice concentrate (AJC) with an annual output of some 500,000 tons, but profitability for local growers and processors is marginal due to low world market prices. On the other hand, there is a shortage of organic apple juice concentrate (OAJC), for which the world market pays high premiums offering the prospect of much better margins.

HuaEn Organic Foods from Dalian, China, specialises in growing, processing and export organic produce. In the last nine years HuaEn developed a strong trade relation with DO-IT (Dutch Organic International Trade) from the Netherlands, which in turn cooperates closely with Ariza, also from the Netherlands. This consortium plans to set up China’s first OAJC production chain. The project will be located in an apple growing area of Liaoning Province, which is relatively far away from the established conventional AJC factories. Its main results will be:

Ÿ joint venture established between DO-IT, HuaEn and Ariza,

Ÿ 500 ha of apple orchards certified as “organic” and 1000 ha of apple orchards certified as “in conversion”,

Ÿ plant set up capable of processing 10 tons of apples per hour into apple juice concentrate, certified for HACCP, Organic Processing and Corporate Social Entrepreneurship (SA8000),

Ÿ permanent employment of 20 staff, seasonal employment of some 300 workers and training in organic practices to 2000 apple growers.

In 2005 HuaEn started working in the project area by supporting farmers with the conversion of 500 ha of apple orchards to organic production. The joint venture will continue this process and make necessary investments with PSOM support. The project envisages this area to be certified as “organic” by 2008, whereas within the project term another 1000 ha will be “in conversion”. The best apples (30% of the apple yield) will be sold to the fresh market of which a quarter for export, but the bulk (70%) will be processed. The hardware investment in this project concerns the set up of an OAJC plant with a capacity to process 10 tons of apples per hour.

Technical assistance will include training of training of agronomy staff to provide extension on organic best practices to at least 2000 apple growers. Factory staff will be trained in technical, quality and safety aspects of plant operation. The plant will be certified for food safety (HACCP), organic processing, and corporate social responsibility (SA8000).

The joint venture’s OAJC exports will target the organic premium markets of Japan, the USA and the EU. The envisioned factory capacity is the minimum scale for a viable operation. There is however enough potential to increase the capacity, either by enlarging the existing plant or building a new one at another location. The consortium envisages a doubling of the OAJC production within five years following successful implementation of the PSOM project, which would also entail a doubling of investment and turnover and of staff, workers and growers.

Advance Consulting was engaged to develop the project proposal including business plan, acquire PSOM grant financing, prepare formation of the joint venture, and manage the project according to PSOM requirements.