The truth behind the huge profits: Did the Chinese who did the cherry business in Chile make money?
This Spring Festival, the cherries that reveal the luxury in the dark red are still the top New Year's goods.
"The price of cherries fell to 20 yuan per catty" rushed to the top of the hot search, and a bunch of people were full of question marks: Where did you buy it? Why did my 5 catties here rise by 60 yuan? Some people frantically showed off 5 catties and 5 catties, anxiously searched for "what will happen to the body if you eat too many cherries", and as a result, popular science said that if you don't eat too much, you will be fine, and if you eat too much, "you will be poor".
Most of the cherries that are marketed around the Spring Festival have crossed the ocean from Chile to China. Throughout 2023, more than 90% of the cherries imported in China will come from Chile, and 85% of the cherries produced in Chile will be exported to the Chinese market. Different from the domestic selling price of dozens or even hundreds of yuan a catty, the cherries in the local market in Chile only cost five yuan a catty, which is still a slightly better quality price.
The seemingly huge interest space has led many gold diggers to Chile, including many Chinese. They either buy a farm in Chile and plant fruit trees with the expectation that they will grow into a veritable cash cow in a few years, or they invest in factories that connect the local and Chinese trades. We are curious, what factors affect the price of cherries, and whether Chinese who go to Chile to do the cherry business can make money?
A native of Chengdu, Sichuan, Xu Lan has lived in Chile for 10 years, becoming an importer of cherries as early as 2015 and later putting down roots in the country and starting an export business. Contrary to the imaginary profits, she told us that this business is full of excitement and helplessness of betting against God, and almost no one can become the lucky one who gets rich overnight at the poker table, and can only accumulate chips from small profits.
The following is Xu Lan's story:
Text: Wang Xiao
Edited by Xin Ye
Killer whales
There was a lot of rain, the helicopters were "noisy", and the farmers broke the contract
Do you feel that the Chilean cherries you have eaten in China this year are generally a little bumpy and pitted? That's because since mid-November last year, three heavy rains have fallen in the core producing areas one after another, and the output of cherries has been reduced again and again, and the quality has also dropped again and again.
These three rains hit the cherries waiting to ripen and sweeten, so that the already ripe fruit absorbed the water, slowly pulling the thin coat of the fruit, and finally cracking the fruit directly. And those fruits that are not cracked at the time of selection, when they are picked and transported to China for a long time, the amount of water in the fruit may also stretch the fruit coat, leaving a crack.
These imperfections will affect the appearance and taste of the cherries, which will ultimately be reflected in the price of the dive. In order to speed up the evaporation of the rain, as soon as the rain stopped, the growers hired a swarm of helicopters to hover over the farm, relying on the non-stop propellers to fan the water on the leaves, and then fly to the next row after blowing one row to continue blowing. This is a routine practice for Chilean growers, and the barely audible whirring of helicopter blades whirreting air over farms last November was particularly noisy.
But even so, this season's production has been severely affected. I have contracts with a lot of growers in Curico and Lankagua (the main cherry producing region in Chile), and it stands to reason that they were going to give me the first batch of fruit last November, and I also scheduled a large number of shipments in November. As a result, the yield did not rise at all, and some fruit farmers did not even have a single fruit hanging on their trees, and the whole army was wiped out.
▲ The cracks in the cherries affected by the rain are obvious. Photo / Douyin @Chile Dalanlan
The increase in rainfall was like a butterfly flapping its wings, and then a series of chain reactions appeared-
The first to panic were the growers. In Chile, it costs a farmer about US$1.5 to grow one kilogram of cherries, and on average, one hectare of fruit trees produces 10,000 kilograms of cherries, while Chilean growers start with at least 10 hectares of farms. If not a single fruit is hung, a small Chilean fruit farmer will lose 150,000 US dollars (about 1.08 million yuan) this year. Every time I went to the farm, they all had sad faces.
The next panic was the export company. The cherry variety that was launched in November last year was called Santina, and because of the rains, Santina lost a lot of production and no fruit came out. At that time, everyone panicked, and the original delivery plans promised by various export companies were all in vain, and all large and small export companies came out to find goods, and cherries suddenly became very tight.
This has led to a direct change in the way you buy and sell. Originally, the cooperation between the Chilean export company and the fruit farmers was a consignment mechanism, that is, the fruit was bought from the fruit farmers at a price of about 2 US dollars per kilogram, exported and sold to China, and after the payment was received, the export company divided the profits with the fruit farmers. The risk of doing so is very low, which means that no matter whether the market is good or bad, there are fruit farmers to share the risk with themselves.
But as soon as the output decreased, the fruit farmers all of a sudden "turned over and sang" and broke the contract one after another. They chose to sell the fruit directly in the field and sell the fruit at a fixed price, so that the risks caused by market changes were all pressed on the export company, and the cost became very high. In November last year, the price of a kilogram of fruit for a farmer even reached US$7 (about 50 yuan).
Cheerilee keeps going up and I'm losing a lot
On short video platforms, going to Chile to do a cherry business seems to be a lucrative business. But the truth is far from that simple.
The cherries sold in the local market in Chile are indeed very cheap, only five yuan per catty, which is still a slightly better quality price. But the cherries that can appear in the Chilean market do not have the "feet" that went to China at all, they are the second-best quality fruits. A lot of cherries sold in the Chilean market have dry poles, and you have to pick and choose to find the same, unlike the green poles that are shipped to China.
In China, 5 kilograms of cherries are sold for more than 300 yuan because they are worth so much in the first place. For example, when the price of the fruit from the trees was about US$4 a kilogram, I had to buy at least 6 kilograms to fill a box of 5 kilograms of cherries before I could select a batch of cherries that were in good condition for export.
In addition to the loss, the service fee for the packaging of the gift box is also counted, so that the cost price of a 5-kilogram box of JJ-grade cherries directly reaches 34 US dollars (about 245 yuan). For goods exported to China, the exporting company will charge an additional 8% operating fee. There is also the cost of transportation, taking the most commonly used sea freight as an example, cherries need to be stored in a freezer, and the price of reefer transportation from Chile to cherries is very high, this year the sea freight of a container will be 8,000 US dollars, and the cost will be increased by another 2.5 US dollars to each box of cherries.
When it finally arrived in China by sea, the CIF (landed price) of a box of cherries reached about $40. And that's not all, the VAT at the time of customs declaration and the entry fee for various markets in China must also be counted, and the final cost price is almost 45 US dollars. This is the price of sea freight, and the cost of air freight is even higher.
According to the exchange rate, the cost price of a box is more than 300 yuan. However, the market price that can be accepted by the market is almost more than 300, and sometimes it is even less than 300, and this batch of goods is equivalent to a tie and scrapped.
The loss of the lion's head came on New Year's Day. I had a batch of goods at the time, and the final FOB (fob price) soared directly to $48, and the domestic market was relatively cold after New Year's Day, plus the quality of Santina this year was not very good, and finally calculated that a box was sold for $32, and a cabinet was lost $60,000, and a total of two freezers were sent at that time, and a batch of goods lost $120,000.
▲ In January 2024, the price of cherries sold in a domestic supermarket. Photo / Visual China
Now, taking out my mobile phone and opening the latest market inquiry of Cheerilee has become my subconscious habitual behavior. Yesterday (the day of the interview was February 1) A box of 5 kg of JJ-grade cherries, the market price is almost 330 to 360 yuan, then this batch of goods is almost just tied, maybe just enough for the book.
This year is destined to be a losing year. Judging from the current state of the market, the loss will definitely not be able to make up.
It stands to reason that the end of the year is approaching, and in previous years, there would be a small upsurge in the market at this time, but this year has been tepid. The price gap between cities in China is also narrowing, and we generally refer to first-tier cities such as Beijing and Shanghai as the "primary market", and inland second-tier cities as the "secondary market".
When the market is good, the primary market is very fierce, everyone's expectations are high, confidence is enough, and the price is also high, this year is the lack of confidence, has been very sluggish, and even the primary market and the secondary market prices are almost the same. The strategy has also changed, now it is a batch of goods arriving at the port, depending on the market of the day, where the market is good, where to sell.
Doing this business is like betting against God
Different from the model of middlemen making the difference, I feel that the cherry business is more like stock speculation, but also like gambling, betting against God.
In this industry, everyone often says that the cost of all links is ultimately the fruit of the money. Cherries are a seller's market, as long as there is fruit, the quality of the fruit is good enough, there is no money to do it, there are a lot of importers will give you money to complete the business.
But the quantity and quality of the fruit are a gamble with God. Cherry saplings need to be raised for at least five years, and the two seedlings pollinate each other before they can begin to bear fruit, and for fruit growers, the first five years of planting are equivalent to pure input, and what kind of fruit they produce in the final fifth year, and whether they can make money back, depends on the sky.
When I entered the farm last November, I saw a tree with red, green, black, and cracked fruits, and even a tree that was old did not have a single fruit. If this happens after five years of investment, the risk is too great.
▲ In November 2023, Xu Lan photographed the fruit trees when she received the goods in the Chilean orchard. Photo / Douyin @Chile Dalanlan
The industry that relies on the sky to eat is always a bit "mysterious". There are two main kinds of cherries produced in Chile, Santina and Rabins, from the perspective of ripening time, Santina is in the front, Rabins is behind, and the fruit farmers I know who have lost a lot are basically Santina fruit growers, they are all affected by the rainfall, and the ones who grow Rabins are fine.
But these fruit farmers who have lost a lot of money are exactly the ones who have made a lot of money in the past few years. During the epidemic, the fruit farmers who planted Santina were picked relatively early and shipped to China very early, which was also very profitable, and when the Rabins were ripe, they just in time for the virus to be detected on the outer packaging of the cherries, resulting in the loss of the fruit farmers who planted Rabins later.
I've been in the industry for a long time, and sometimes I really wonder if it's God who is balancing.
Not only the planting link, but all the links in this business chain are very "mysterious" and full of uncertainty. Every year, the domestic cherry market is declining, and the beginning of November is generally the highest price, when the price of a box of cherries in the market will even exceed 2,000 yuan, and the amount of fruit is also small. It would be very profitable if we could be the first batch of cherries to enter China, but we couldn't grab this kind of very early goods in the old Chilean cherry export companies such as Jizhi and Popan.
What we can grab is to get on the first ship and catch the highest wave of the market. But whether we can go up or not, it is not up to us to decide, we can only rely on luck, sometimes the fruit farmers I sign happen to have ripe fruits, and the amount is enough, you can catch up, otherwise you can only line up the next one.
The market is the biggest gamble in this business. Whether this batch of goods can make money depends on the market after arriving in Hong Kong for more than 20 days, and this is the largest blind box.
A fruit farmer can sell the goods to many export companies, and if any of them sell very poorly, they are likely to not get the goods next year. I remember one time a farmer divided the same batch of goods between me and another company, each with a capacity of 10 pallets, and the other company was chartering the shipment, and the shipping cost was $6 per box, and it was in China in two days.
I used a regular commercial flight, which cost less than $5 per box, but I had a twist and turn, connecting to several countries, and it was almost two weeks late.
I thought that I must be scolded to death by the fruit farmers, but who would have thought that another company arrived very early, just in time for the bad market at that time, and I was two weeks late, just in time for the market to rise, and finally that company was scolded by the fruit farmers.
The era of steady money
Unexpected years aside, buying and selling cherries in Chile is a good business.
The previous consignment mechanism was very stable. According to the 2 US dollars per kilogram at the time of the consignment, a box can be obtained at a cost of more than 20 US dollars, and then put it on the Chinese market to sell, except for the special years affected by the epidemic, it is profitable. Later, we will share the commission with the fruit farmers, and everyone will be able to make money.
Although the gross profit margin of importers and exporters is stable at about 6%, small profits are quick turnover, and there is a lot of demand, at least small profits can ensure that they can make money. The only risk is that the market is not good, but when the market is bad, there are fruit farmers to share the risk, and the worst result is that the fruit farmers just keep their capital, and in this chain, all links except the fruit farmers have money to make.
For Chile, cherries are the most special fruit. Every year, the Chilean government and the Chilean Export Association and the Trade Promotion Agency spend money to promote Chilean cherries, and the sea is also very convenient, and the relevant agencies and major shipping companies are actively cooperating with this business - as long as you have the fruit, you can ship it out smoothly. Even the cherry express line has been opened, and the shipping time has been shortened from the original 35 days to 22 days.
For domestic importers, cherries are also in demand, which can bring traffic to various markets and supermarkets, and if importers want to have a "masterpiece", it is cherries. For fruit importers, if you don't even have cherries, why would someone else come and buy your rake mandarins and other fruits?
▲ Chilean cherries sold at Sam's Club in Shanghai on January 17, 2024. Photo / Visual China
I started as an importer, majoring in Spanish, and at the end of 2014, I went to work as a teacher at a Confucius Institute in Chile. At that time, I was working as a translator for an older sister who came to Chile from China to buy cherries, and she said that cherries could make money, but it would be difficult to do because there were already many people in the market doing this business.
I was a little tempted, thinking that imported food must be a sunrise industry, plus I just happened to live in Chile, and I had geographical and language advantages, so I was short of domestic sales channels. When I returned to my hometown in Chengdu during the Spring Festival that year, I decided to give it a try.
At that time, my father was not optimistic, he felt that this thing would definitely not work, and he asked me: the market is already very mature, why should people cooperate with you?
I don't believe in evil. During that time, I traveled to all the stalls in the Chengdu wholesale market, recommended myself to the stall owners, told them that I had the goods, and asked them if they could sell them. After running a lap, the bosses were very interested in the cherry business and knew that it could make money, but they didn't want to cooperate with me who had no experience.
Seeing that I am going back to Chile after the new year, I am not reconciled, I can't run one lap, so I will run another lap. This time, I just happened to meet a straightforward stall owner, "if you have the goods, you can sell them".
It was only after the sales channels were settled that I started looking for sources. After returning to Chile, I began to contact the major export companies one by one, and went directly to discuss with others: I will help you sell the goods to China, and you will give me some rebates. At that time, the foreigner was amused: you first find out that cherries are a seller's market, and you have to give me money to help you find goods.
At the end of 2015, I flew two pallets of cherries back to China, and that's when business started. Although I have no experience, but at that point in time, the cherry import and export industry is still worth entering, two trays of a total of 240 boxes, I helped the domestic partner earn one or two thousand yuan, the partner invited me to have a meal, although the income is not much, but I think this business can be successful. In 2018, I started exporting again, opening my own export company in Chile, and in 2023, I partnered with another colleague boss to open my own air freight forwarding logistics company.
These links are small profits, but slowly accumulated, the business is steadily expanding, up to now, my partner and I are already the largest cherry importer in Sichuan, with an annual business turnover of nearly 100 million.
Chinese go to grow cherries, can they make money?
Now many Chinese are considering whether to come to Chile to do the cherry business. My advice is to look at the high costs first.
Costs can come from stiff competition. In this seller's market, growers are free to decide whether or not to continue working with me, which means that if I pay less for them this year than other exporters, they will probably be out of stock next year.
After the end of the payment every year, each export company in Chile has to pay a price comparison table for this year to the fruit farmers, just like the elimination of the last KPI, the fruit farmers will give an average price, if a company gives the money back to the fruit farmers is lower than this average price, you have to pay your own money to make up the money, higher than the average price, the fruit farmers will not return the money to you.
There is also a smaller range of competition - the price comparison of the same ship, and the various export companies on the same ship also have to roll the price. In the same way, if the price is low, you have to pay for it yourself.
In order to win others, I need to control the sales rhythm well, when to sell, what market to sell, and what customers to sell to. But in this process, I can really put in very little effort, how the probability of sales depends on luck, no one can accurately predict the market in each city, and it is even more difficult to predict which importer in the same city sells well.
Our volume, to a greater extent, is still in the volume of luck, volume market, bad luck has to use the "money ability" to make up.
For Chinese, doing business in Chile is more costly. The first step is the language problem, Chile speaks Spanish, if you can't speak it, you need to ask for a translator here, and the cost of Spanish translation is not low, if you want to do business for a long time, you have to set up a team, build a large factory, and hire local workers.
Locals earn a lot of money per hour, and a single contact with an average grower can cost $5,000 to $10,000 a month, or several.
▲ Picking cherries in Chile can earn more than 10,000 per month. Photo / Douyin @Chile Dalanlan
It is also expensive to invest in building a factory. In Chile, the construction of a cherry screening plant requires a small investment of 100 million yuan, and the purchase of a screening machine alone requires four or five million US dollars.
The excessively high threshold has also led to the fact that there are not as many Chinese who come to Chile to open export companies to do business, and I know no more than five Chinese who have built factories in Chile.
But the Chinese who come here to pan for gold are very mobile, although there may not be many people left in the end, and more and more Chinese who want to enter the industry have come to Chile in recent years. I found that the reason for the high mobility is that many people who come are "novices", and if they don't have a deep understanding of Chile, it is very easy to step on the pit.
When doing business in Chile, you must keep your wallet tight and don't put your money anywhere easily, otherwise not only will you not be able to generate profits, but the principal is likely to be gone.
I call the pit in Chile "paying tuition", and part of the tuition fee is for the growers, who usually need to pay an advance payment in September and receive the fruit in December.
In 2018, I made an agreement with a fruit farmer to harvest the fruit in December, and I paid an advance payment of nearly $300,000 at that time, but when the fruit was harvested, the farmer was stunned and did not pay the fruit. But we obviously signed a contract and hired a lawyer, and then we fought a lawsuit with him, and we still couldn't get the money after winning, and I haven't seen a single fruit so far, but I have nothing to do with him, so I can only admit it.
$300,000 is just the tip of the iceberg. In 2018, when I first opened an export company, a big fruit farmer introduced me to a company accountant, and as a result, the accountant falsely issued more than 20 million yuan of invoice tax refund, and from then to 2022, nearly 3 million yuan of tax has been accumulated and not returned.
Some of the Chinese who came to pan for gold were deceived into returning home several times, and some were marginalized locally. I know a Chinese who grow cherries in Chile, they are very small, they never invite locals, when I ask, I know that they are afraid of pits, and the Chilean locals they invited before either hide in the corner of the farm during working hours to sleep, or take the pesticides they just bought to secretly resell for money, and even the packaging factory has changed their goods. After a lot of time, they began to be extra cautious and do everything themselves.
In order to resist risks, I can only continue to expand the industrial chain, and if I only occupy one link in this industrial chain, it is easy to have problems. Take exporters as an example, if I only do exporters, my gross profit margin is only 6% when the market is stable, and once the market deteriorates, I will lose a lot of money, so I am both an importer and an exporter, and I also opened an air logistics company.
It can't be helped, this business is tempting and dangerous, but I still think it's a good business to do slowly.