South Korean Market bears fruit

Editor's note

As the cherry harvest continues in the Yakima Valley and the Pacific Northwest, the Northwest Cherry Growers on Wednesday will hold its second annual Cherry Day, the biggest retail promotion for the group in South Korea. The promotion has been a key factor in a nearly 300 percent increase in exports over last year.

While traveling to South Korea on a cultural exchange with the Rotary Foundation, reporter Mai Hoang interviewed retailers, marketers and importers to examine the reasons for this rapid growth.

SEOUL -- A young Korean woman, sporting a hot-pink apron over a black sweater, white blouse and a blue jean skirt, attempts to catch the ear of other women shopping for groceries at the Shinsegae Department Store.

She makes eye contact with them while saying "Annyong haseyo," a Korean phrase for hello, and flashes a big smile.

Most of the shoppers stop what they're doing as the woman gestures to a plate of dark red fruit and neon green toothpicks.

She urges them to take a bite. These are fresh cherries, she says.

For many of these shoppers, that one bite is all it takes. Next to the sampling area they pick up a heart-shaped box of Bing cherries. They don't even wince at the price -- more than 13,000 Korean won -- pronounced "wan" -- which is nearly $13 in U.S. currency, for less than a pound of fruit.

The store demonstrator will go through about 13 pounds of Bing cherry samples by day's end.

But it's a worthwhile investment for the department store chain, one of the largest in South Korea. During the first weekend in May, the company made $30,000 (U.S.) selling California cherries at a half-dozen stores in the Seoul area.

"Once they taste the cherries, they come back," said Cho Yong-seol, a Shinsegae assistant manager and buyer.

Before the arrival of sweet cherries from the Pacific Northwest, California and New Zealand, South Korea's exposure to cherries was limited to maraschino cherries in cocktails.

But now Koreans can't get enough of them. In 2007, the value of all fresh cherries shipped to South Korea more than doubled over the previous year to nearly $32 million. At more than $11 million, Pacific Northwest cherries got about a third of that business and had nearly three times the number of 20-pound boxes exported to South Korea than a year ago.

The Northwest Cherry Growers, the region's promotion group, said the Asian country was a major contributor to a successful export season that generated nearly $750 million for the five-state growing region and supported more than 41,000 jobs. Washington reaps most of the benefits, because it harvests a majority of the fruit.

With Korean consumers willing to pay $10 to $13 or more a pound for large, quality cherries, including Bing, Chelan and Sweetheart varieties, South Korea may help the industry through what has been a difficult harvest season so far.

Unusually cold spring weather decreased the volume of the region's cherry crop, leaving some growers with little or no fruit and delaying the harvest for everyone else, making it difficult to enter some key domestic markets for Fourth of July sales.

Because South Korea's peak selling season is later in the summer, sales there may make up for the delayed harvest.

"The foreign markets end up being a shining star because (we've) got the size and quality the market demands," said B.J. Thurlby, president of Northwest Cherry Growers. "And they've been willing to pay the price."

South Korea has indeed shone the brightest as the fifth-largest importer of Washington-made products. In 2007, it imported nearly $3 billion in products, including about $700 million in food and agricultural goods.

Fresh Washington cherries have been exported to South Korea for more than a decade, but there was little promotional support.

That came as a surprise to Keith Hu when he started about four years ago as international marketing director for Northwest Cherry Growers.

Hu, who often traveled to Seoul in his previous job working for the Hasbro toy company, knew the country's economic and personal income growth could benefit the cherry industry.

"There's a high assumption that they like premium imports," Hu said.

The organization's research confirmed that cherries could be marketed as a high-quality but affordable item.

And when they hired Korea Business Services Inc. in Seoul to begin promoting cherries more than three years ago, the timing couldn't have been better.

"Korea is more focused on food consumption," said Ken Yang, president of Korea Business Services Inc.

He's referring to the "well-being" trend. Governments are developing new literature advertising tourist activities such as spas and outdoor recreation that align with a more healthy lifestyle. South Koreans have been poring over magazine and newspaper articles searching for the latest health trends and discussing the benefits of the foods they eat.

"A long time ago, people only consumed things for their appetite," said Kim Yong-nam, a buyer for the Hyundai Department Store in Seoul. "But these days they're eating for health."

Koreans in their 60s and 70s lived through the pre-industrialization of South Korea, when the focus was having enough to eat. Most diets were in grains. Fresh fruit was rare.

But now South Koreans have access to an abundance of foods from around the world with just a trip to the supermarket.

"People reach a certain level of spending and affluence and they start to consider safety, nutritional and health benefits in the food they're eating," said David Mudd, an international trade specialist for the International Marketing Program at the state Department of Agriculture.

Not only are Northwest cherries healthy, they fill a void left by the lack of domestic fruit in the summer months, said Cho of Shinsegae Department Store. Northwest cherries provide about 8 percent of the chain's monthly fruit sales. Produce overall makes up 15 percent of all store sales.

"They definitely present it as a luxury item -- an affordable luxury item," Thurlby said. "That's the secret to our success."

South Koreans have little time to themselves. With nearly 50 million people in a land mass the size of Western Washington, there's not much choice.

Most South Koreans live in high-rise apartment buildings. High school students spend a lot of time together studying for university entrance exams. And rather than entertain in their apartments, they spend evenings dining out, soaking at public baths, singing karaoke together or attending Bible studies and church activities.

As a result, word of a new trend spreads quickly.

"The whole country is a single gossip network," said Clark W. Sorensen, chairman of the Korean studies program at the Henry M. Jackson School of International Studies at the University of Washington.

Negative trends spread, too. The prospect of importing U.S. beef, for example, has prompted street protests and candlelight vigils because of a widespread fear among South Koreans about mad cow disease and a desire to maintain the vitality of the nation's beef industry.

Cherries, in contrast, have benefited from South Koreans' desire to keep up with anything that promotes abundance and luxury.

While most South Koreans drive domestic cars -- Kia, Hyundai and Daewoo -- to support an industry that's key to the nation's economy, they also crave luxury imports such as French Bordeaux wines or Gucci handbags that improve their status among others, Sorensen said.

So when cherries are promoted, there's less emphasis on what the product is, and more on the lifestyle they represent. Take, for instance, a headline from a Korean media publication on Northwest cherries last summer. It boldly declares "Summer fruits make you healthy and beautiful!"

It's a message that easily drives South Koreans to try the fruit.

"They feel they are special," said Kristie Park, project manager for Korea Business Services Inc.

Still, even the hottest of trends can fade quickly.

They will pay for high quality, but if it doesn't meet expectations, consumers will stay away, even if the price is low.

"If there's a flap about pesticides or hygiene, that can really dent your market," Sorensen said. "You want to be careful to not force an inferior product."

South Korea, to the chagrin of those in the industry, is one country that requires fumigation, or the spraying of pesticides, to ensure high sanitary standards. The process, though, can cause a cherry to lose its firmness and dry its stem, reducing freshness and quality.

That's why growers, importers and retailers go to great lengths to ensure the fruit maintains optimal quality.

Producers no longer just select cherries for export; they produce cherries specifically for it. That's true for fruit marketers like Sage Fruit Co. that work closely with producers on pruning techniques and spraying programs.

"If they grow it properly, we have more options," said Brian Birdsall, Sage's export manager.

At the retail level, staff members scan the store regularly to ensure cherries aren't rotten or soft. A retail buyer may even refuse to purchase cherries that aren't picked by a certain date.

Costco and E-Land, a South Korean retail company, import cherries directly to reduce the number of hands touching the product. Others are considering doing the same.

"We sell the cherries in one grade," Kim said. "All are high quality."

A major step toward future growth is the proposed free trade agreement between the United States and South Korea. If implemented, a 24 percent tariff on cherries would immediately be eliminated, opening the market to more price-conscious, lower-income customers, Park said. The agreement was signed last year but needs to be cleared by lawmakers in both countries before it goes into effect.

Fruteria, a South Korean importing company, estimates that consumption of Northwest cherries could increase as much as 40 percent to 50 percent if the tariff is lifted.

Officials wonder, however, if there are enough cherries to keep up with demand. Hu previously hoped to export 400,000 boxes to South Korea this season, but with a smaller crop they're trying now to match last year's exports, which topped out at nearly 125,000 fewer boxes.

But that does not deter the Northwest Cherry Growers group from much loftier long-term plans.

"My goal is to make Korea bigger than Japan," Hu said. Japan is the third-largest importer of Northwest cherries, behind Canada and Taiwan.

Retailers in South Korea share his confidence. They stress that more aggressive marketing will not only maintain Korea's interest in cherries, but may help separate the Northwest from other cherry-growing regions worldwide.

"More aggressive marketing will help Washington cherries compete," Kim said. "Consumers (will) know the difference."

* Mai Hoang can be reached at 577-7685 or mhoang@yakimaherald.com.

Where to buy cherries in South Korea
n Department stores. Korea has three major department store chains — Lotte, Shinsegae and Hyundai. The stores have multiple floors and offer a variety of products and services including women’s clothing, groceries and fine dining.
n Costco. Costco Korea runs six stores nationwide, including three in Seoul. The Yangjae store in Seoul is the No. 1 Costco worldwide in sales.
n Discount retailers. Popular retailers include Lotte Mart and E-Mart.
n Open-air markets. Most cities have markets every couple of days; some have them daily. A variety of fruits, vegetables, meat and seafood are available.

— Source: Various retailers
and Northwest Cherry Growers.

Fast facts
Full name: Republic of Korea
Capital: Seoul
Official language: Korean
Population: 48 million 
Gross domestic product: $957 billion U.S. dollars (2007)
GDP per capita: $19,751 (2007)
Major industries: automobile production, technology, telecommunications, electronics, steel.

— Sources: Lonely Planet, CIA World Factbook, International Monetary Fund

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