Expanding the Chile-China cherry connection
If you’ve ever eaten a cherry in China, there’s a fair chance you’ve sampled the products of Garces Fruit China, the China offshoot of the Chile-based Garces Fruit company that stretches back three generations. But what is the fruit market like in China today? And, does the history attached to a proud family name provide food suppliers like Garces Fruit China with an edge in such a highly competitive industry? Garces Fruit China CEO Hernan Garces Gazmuri (Global EMBA 2021) shares his insights on doing business in China, and what to expect from the third-generation executive of a family-run firm.
From Chile to the US and China – A fruitful career to date
Garces Fruit was started by Hernan’s grandparents in 1965. His father and uncle took over the business in the late 1990s. Hernan learnt the ropes from a young age and spent his summers working in various roles, including quality control and other orchard-based operations. However, his career with the company didn’t formally begin until 2009. This was by design, as both he and his father believed it would be a good idea to begin his career outside of the family firm.
“My dad used to say, ‘Go learn and make mistakes somewhere else. That way, you’ll probably make fewer mistakes when you come back to the company!’ That was good advice, and we both value the importance of wide-ranging experience,” Hernan says.
Accordingly, after attaining his degree in Chile, Hernan spent two years working in the banking sector as a risk analyst. At that time, his father called upon him to head a new project: opening a fresh fruit import branch in the United States. Within six months, he quit his job in banking, got married, moved to Philadelphia and established the company’s US branch. Six years later, the company was selling fruit to practically all of America’s best-known retailers. At that point, Hernan decided it was time for a change.
“I found it increasingly difficult to get out and establish good connections with smaller, more regional retailers. I wanted something new, and at the time China represented 60-70% of our sales, but we had no office there. I thought that needed to change, so I appointed a new general manager for the US business and relocated to Shanghai,” he explains.
China’s love of Chilean cherries keeps growing
Since arriving in China in 2017, Hernan has seen his home country’s dominance in the Chinese cherry market expand significantly. In 2020, Chile accounted for 92% of all Chinese cherry imports, supplying 195,000 tonnes out of 210,000 tonnes shipped in total. This represented an estimated $1.6 billion USD in sales, with no other country coming close to denting Chile’s position as the number one cherry supplier.
Of this massive cherry pie, Garces Fruit China owns roughly 10% of the market share today. This is a significant slice of a growing market that continues to rely on Chile’s tailor-made climate and soil conditions to satisfy its demand.
“The reasons behind China’s growing love of Chilean cherries are cultural as well as practical. China’s climate is not suitable for growing cherries in winter, but Chile’s location in the southern hemisphere, combined with its climate and terrain, makes it perfect for growing cherries during this season. Since Chinese New Year usually falls in late January to mid-February, demand for fresh cherries soars, as they’re sweet and red, making them the perfect New Year gift,” Hernan says.
Something for all seasons, and all tastes
While cherries are the company’s main business, Garces Fruit China also supplies nectarines, plums, prunes, kiwifruit, peaches and more, all grown in Chile. Looking ahead, Hernan hopes to expand into other fruits, and other varieties of their best seller, the cherry.
“We’re always thinking about the future. Our goal is to connect with Chinese consumers and growers as much as possible. We want to know what they like, what they feel is missing from stores and what they would prefer to see on offer. This is why a lot of my work relies on travelling across China; I need to see for myself what the regional differences and preferences are,” Hernan explains. “For something like fruit, where personal taste is such a critical factor, it would be a big mistake to view the Chinese market as a whole just from what’s happening in Shanghai or Beijing. This is a lesson I’ve reinforced at CEIBS, to avoid looking at China as a homogenous entity. The Chinese fruit market is as diverse as its geography and population – we have to travel widely, listen attentively and have a clear understanding of what the market really wants.”
Another major step forward for Garces Fruit China is the recent launch of a dedicated Chinese brand, called Ji Zhi. This was pioneered by Hernan as a way to connect with Chinese consumers more deeply and increase brand awareness on key social media platforms, including WeChat, Tik Tok and Weibo. Launched in 2021, Ji Zhi is another example of the importance of tailoring the fruit shopping experience to specific audience.
What’s in a name? The importance of family in business
People like to know where their food comes from. While supermarkets and online deliveries offer convenience, choice and economies of scale, they lack personal connections with grocers, butchers, bakers and others in the local community. Being able to connect the food we buy with the face of a reliable and trustworthy vendor is an important psychological element in enjoying what we eat. It’s no surprise then that so many large food and beverage suppliers try to create a wholesome brand image, an image that relates to the identity and personal story of their founders, in an effort to present a trustworthy face to their consumers.
But does this have practical implications for doing business in China? Does a family business that has been operating for multiple generations bring tangible benefits, or even drawbacks, when it comes to forging deals and partnerships? Hernan believes that, in his experience, the impact is both subtle and situational.
“Culturally, there is a lot of faith in the family here. It’s also true in Central and South American cultures. However, I don’t think that being part of a family-led company provides you with a significant edge over a non-family business. Building a reputation for fairness and reliability is essential in the fruit industry because of its complexity and time-sensitive nature, but both family and non-family firms are equally capable of establishing and maintaining such a reputation. Even family firms rely on dedicated teams and key figures outside the family to help them excel – and we certainly do! We owe our success to an incredible team of professionals who work with us, and it’s by no means a one-man show. On the other hand, I do feel my job is easier because of the company’s good reputation my father has worked to build. The people we work with – from growers to logistics suppliers and distributors – they trust us because of the track record established over many decades. There is weight to a family name, in that there is a sense of continuity and perhaps an assumption of shared values across different generations,” Hernan says.
And, what are the internal dynamics of being a leading executive in a family-run company? Are the pressures and expectations similar to those faced by any C-level leaders? While every company is unique, regardless of its origins, does the ‘family factor’ matter when it comes to making decisions both big and small? Again, Hernan believes that the difference is marginal.
“Sure, you always want to do the best you can for your family. There may sometimes be a feeling that you can always do more. But I assume that’s how the best leaders feel about their companies and their teams, even without family connections. We talk a lot in the Global EMBA classes about responsible leadership and its central importance – you don’t need to be in a family firm to feel this way. Personally, I have been very lucky in my career, as I get to work with my family, but I still have enjoyed a lot of independence and flexibility in my different regional roles. Sometimes there is pushback on doing new things – such as the “If it isn’t broken, why fix it?” mentality – but there is always a discussion to be had and, generally speaking, there may be less bureaucracy and fewer internal complications to deal with than the average non-family firm,” he says.
Success in China’s fruit business requires a personal touch
For Hernan, the future of the Garces Fruit company in China is to expand its already large and well-established network of growers, distributors and logistical partners. He is always looking for ways to build and extend such partnerships for the long term, where mutual trust and reliance make for better relationships. Doing this in a market as diverse and regionalised as China is a challenging task, which requires a diligent yet also flexible and open-minded approach. Being able to look ahead, plan confidently and consider new avenues of business strategy while keeping abreast of business realities in China was the main motivator for Hernan to undertake an EMBA, and particularly at CEIBS.
“I thought I was busy before starting the Global EMBA! The programme keeps you on your toes, which is a good thing, as it requires you be disciplined in your time management. That’s probably the biggest immediate benefit I’ve gained from the programme. The other is my new perspective on China’s business culture. The professors speak from a position of first-hand knowledge and expertise, which helps to expose students to the latest case studies that genuinely reflect what is happening in China right now. For me, someone who used to travel 150-200 days of the year across China (before COVID!), this has been invaluable in helping me understand how I can grow my local connections in a more productive way. The programme does come with a heavy workload, as you would expect, so I would like to thank my wonderful wife and children for their unconditional support as I continue this learning journey,” Hernan says.
So, the next time you have a cherry in China during the winter, remember that it may come from a Garces Fruit grower, and almost certainly from Chile!
Effy He and Michael Thede