Few people know that the vitamin-rich, sweet, green-fleshed, fuzzy kiwi we normally associate with New Zealand actually originated in China. It is also known as mihoutao – “macaque fruit” in China, and was brought to New Zealand by Mary Isabel Fraser in 1904, according to New Zealand. official story site. The fruit’s association with the term “kiwi” originated when New Zealand began exporting it to the United States in the 1950s and named it after its flightless national bird.
While most of the kiwifruit found in our local supermarkets comes from New Zealand, it is China that has become the world’s largest producer and consumer of kiwifruit in recent years. The kiwifruit industry in China grew 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 kiwifruit worth US$550 million. China Shenshan Orchard Holdings (SGX:BKV) is vying for a share of this premium kiwi fruit market.
China Shenshan Orchard Holdings (formerly known as Dukang Distillers Holdings) was listed on the motherboard in July 2021. The name change was to reflect the group’s acquisition of the kiwifruit business and the divestiture of its former business baijiu.
China Senshan Orchard is a horticultural marketing company and adopts a vertically integrated business model as an end-to-end kiwi fruit producer. Its business activities encompass the planting, cultivation and sale of kiwifruit in China. The group has probably one of the largest national kiwi orchards (covering a total area of 6.5 million m²) thanks to its forest use rights on eight orchards strategically located in the city of Chibi, in the province of Hubei, China.
With over 10 years of experience in the kiwifruit industry, management is primarily focused on strengthening its presence in China and expanding its market share in the premium kiwifruit market segments with its kiwifruit brands. “Fairy Gold” and “Sunshine Kiwi”.
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#1 Having a “gap” or competitive advantage is something many investors look for in the 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 of well-established experience in planting and growing kiwifruit in China, adopting a vertically integrated business model.
The Group also has strong R&D capabilities where the Group has developed its 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. . Cultivated hybrid variants of the Group’s kiwifruit are less susceptible to pest infestations, biological diseases and more resistant to fluctuations in weather conditions.
The Group deploys state-of-the-art technology throughout its vertically integrated business model.
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#2 Can you provide any details on harvesting or the life cycle of kiwifruit?
The growing season for kiwifruit typically lasts up to 240 days per year, while the harvest season occurs from August to September each year. Sales of harvested kiwifruit will generally take place thereafter, during the same calendar year.
Kiwifruit vines usually start growing between the 3rd and 4th year of cultivation, reaching their full yield potential in the 4th year and can continue to produce for the next 40 to 80 years. The average age of the Group’s factories is approximately 4.4 years.
#3 As the kiwifruit harvest is seasonal, how can the group maintain its profits during lean seasons?
The Group seeks opportunities to venture into the management of kiwifruit planting and cultivation operations in third party kiwifruit plantations during the off season.
On July 5, 2021, the Company’s wholly-owned subsidiary Chibi Shenshan Xingnong Agriculture Technology (Chibi Shenshan) entered into a memorandum of understanding with Chibi Green Industry Development Investment for the joint development of an area extending up to 3.33km2 located in Chibi City for planting and growing kiwi fruit.
This joint development and cooperation covers a period of 30 years from January 1, 2022, with a total investment of about RMB 150 million. Chibi Shenshan is responsible for the construction and development of the kiwifruit plantation, daily management, plantation operations and cultivation of the kiwifruit plantation.
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#4 What are some of the key ESG factors that are material to China Shenshan Orchard? How do you deal with these factors?
Sustainability is integral to the success of our kiwi fruit business. We believe that kiwifruit contains many vitamins, minerals and fiber, which provide health benefits for consumers and help them adopt a plant-based and environmentally friendly diet.
Through technology and experience, we can improve the yields of our orchards while reducing environmental impacts. There is also a positive social dimension as we provide jobs, skills training and economic benefits to the local communities where our orchards and operations are based.
Quality and food safety – The Group ensures that the kiwis it grows and markets are of the best possible quality. This keeps customers healthy and satisfied, protects our brand in the market, and generates stable revenue to sustain the business for the long term.
Human Resources – People are the Group’s most valuable asset and crucial to ensure the smooth running of the entire value chain, in our innovation process and to keep us ahead of our competitors. We comply with applicable labor, social insurance and housing fund laws and regulations in China.
Environmental Preservation – The Group aims to minimize 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 explain how China Shenshan Orchard intends to tackle the commercialization strategy of kiwi fruit varieties and technology?
The Group will grant farmers a license on a standardized variety of kiwifruit free of charge during the first 5 years and will commit to buying qualified kiwifruit from them at a higher price at harvest, thus guaranteeing profits for these farmers.
The Group will also provide these farmers with standardized planting and production guidelines as well as crop protection plans. We also have a professional technical team to provide advisory services to farmers to ensure consistent quality.
In addition to targeting individual farmers, the Group also plans to enter into agreements with township governments for the supply of kiwifruit varieties and technology licenses.
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Editor’s Note: Some responses for this article were taken from SGX 10 in 10 series released on April 19, 2022 and have been republished with permission. You can find out more on the SGX website.
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