Photo: In Beijing, the legitimate SunGold kiwifruit is very popular. Zespri believes counterfeit fruits are not being sold in so-called tier one Chinese cities. (ABC News )
Cuttings of prized SunGold kiwifruits were smuggled to China and NZ growers are divided over what to do about it
Kiwifruits are native to China but it was New Zealand that perfected the golden variety found on supermarket shelves today.
It costs New Zealand farmers a sizable amount of money to license the SunGold kiwifruit and sell it across the world.
New Zealand even has a kiwifruit regulator that makes decisions on all national issues pertaining to the little furry fruit and at the moment there is one brewing between local growers, the owner of the SunGold copyright and China.
Central to the story is a man named Haoyu Gao, who is accused of smuggling cuttings of the prized SunGold to China’s Sichuan province, enabling local farmers to cultivate several orchards of counterfeit plants.
Now New Zealand needs to decide how to deal with China — SunGold kiwifruit lover, customer, and “pirate”.
SunGold kiwifruits are known for their tangy sweetness and bright yellow flesh. They’re smooth in texture and have fewer seeds than their green counterparts.
Another quality of the SunGold is its tolerance to a disease that devastated the previous variety of golden kiwifruits.
In 2010, an alleged biosecurity breach brought the pseudomonas syringae pv actinadiae (PSA) disease to New Zealand’s fertile plains.
PSA destroyed crops and saw orchard owners rip out vines or cut them down to the base in an event that was “as close as you’d get to an overnight collapse” of the industry, according to Richard Rennie from Farmers Weekly.
Mr Rennie has been following the New Zealand kiwifruit industry for 13 years and says that event left many growers without a crop.
While necessity is the mother of invention, New Zealand had been developing the new gold varieties well before PSA hit.
A little luck and good planning resulted in the quick development of a variety that was far less susceptible to PSA and by 2012, farmers were sowing seedlings of the new SunGold kiwifruit.
After enduring the kind of disease outbreak customs departments dread, the development of SunGold was indeed like striking gold.
“It’s proving to be quite fortuitous,” Mr Rennie said.
“As a fruit, it has a better taste profile. It’s easier to pack and it grows really prolifically. You get a really high yield off it as a crop.
“It’s the best of both worlds, really.”
Zespri is the co-operative that owns the SunGold brand and the body that sells farmers the licence to grow it.
The payment is a one-off and farmers gain access to global supply chains and marketing campaigns.
Farmers purchase licences by the hectare. At the moment it costs more than $500,000 for every new hectare of SunGold farmers want to plant — a sizable investment.
But the variety has become the golden child of the New Zealand kiwifruit family, selling the most trays across the world and driving the $3 billion in global sales Zespri made last financial year.
Farmers get a nice return too, both in gate prices and a dividend paid by the co-operative.
There is a lot on the line.
The ‘pirate’ and his golden cuttings
While New Zealand producers take on costs to expand their orchards, plantations of counterfeit SunGold kiwifruits are growing across China.
The vines are producing a golden variety of kiwifruits, but they are not licensed or held to the same quality standards as those grown by Zespri farmers in New Zealand, so they are referred to as counterfeits or “unauthorised” plants.
The first plants in these unauthorised Chinese orchards were believed to have come from Haoyu Gao.
Court documents reveal how Zespri came to discover their SunGold plants growing in China and the private investigation that led them to Gao.
It started with a rumour.
It was 2016 and Zespri’s China-based staff had heard their prized SunGold variety was being grown locally.
They engaged private investigators and on their advice, contacted a grower in China who “openly admitted” he was cultivating SunGold kiwifruit and welcomed Zespri staff onto his orchard to see for themselves, according to court documents.
The Chinese grower did not say how he had obtained the plants, but the investigation allegedly revealed a connection to Gao.
Gao bought an orchard in New Zealand in 2013 and signed with Zespri to grow SunGold, but Zespri alleges he then went ahead and made some agreements of his own, promising exclusive access and supply to the Chinese grower, according to court documents.
Zespri took their case to New Zealand’s High Court and Justice Sarah Katz found Gao had breached both NZ intellectual property law and his licence agreement with Zespri.
In her judgement, Justice Katz wrote that Gao had taken “budwood” of the SunGold kiwifruit to China, supplied growers and had likely been paid for it, although the exact amount was not clear.
She found in favour of Zespri and ordered Gao to pay $15 million in damages. He is now appealing.
The court result was a win for Zespri, but it didn’t change much.
Zespri now estimates there are more than 5,000 hectares of counterfeit SunGold in China, predominately in the Sichuan Province.
Zespri said the industry there was “increasing rapidly” and would soon “compete head-to-head” with the New Zealand season, in a document sent to growers.
“Unauthorised growing [is] forecast to surpass Zespri exports into China by 2023,” another Zespri document reads.
The situation puts the New Zealand industry in a delicate spot.
It must work to defend its intellectual property and the value of its licence, but China is also one of Zespri’s biggest buyers of real deal SunGold kiwifruits.
There is a proposal on the table that would see some of the Chinese growers brought under the Zespri tent, effectively licensing the fruit from the stolen plants.
The idea is not without risk, but as Associate Professor of politics and international relations at Auckland University Stephen Hoadley says, it could be the “least bad option”.
“Zespri is in negotiation with some state firms in China’s Sichuan province to work out a deal to cooperate with the … rogue, or pirate, growers of this New Zealand-developed kiwifruit brand,” he said.
“Zespri thinks cooperation will be more effective in the long run, in terms of fiscal health of the kiwifruit industry in New Zealand, [rather] than confrontation, litigation and other kinds of attempts to gain justice.
“I think it makes a lot of sense. It’s very progressive.”
Search for a solution
The value of New Zealand’s trading relationship with China sits at about $19 billion a year and while kiwifruits make up only a small portion of that, analysts are quick to point out how exposed the small nation is to the Asian superpower.
“In terms of the large trade picture, the kiwifruit is a minor item,” Mr Hoadley said.
“The New Zealand government could make a larger issue out of this, but we have Australia’s example front of mind that if New Zealand criticises China too directly … the possibility of retribution is always there and the Chinese could easily do without New Zealand’s imports.
“They’re growing half as many kiwifruits in their country as we’re growing here already, so just by ramping up production they could do without New Zealand completely.”
New Zealand Minister for Trade, Export Growth and Agriculture Damien O’Connor said the New Zealand Government was in regular talks with Zespri over the SunGold planting in China, but it was a private matter.
“The New Zealand Government is not involved in Zespri’s discussions with potential Chinese partners on its proposed commercial trial in Sichuan,” he said in a statement.
“This is a commercial matter for Zespri’s consideration arising from the nature of the situation on the ground. It is not a matter between the New Zealand and Chinese governments.”
The Economic and Commercial Counsellor’s Office in China’s New Zealand embassy was contacted for comment.
Growers are split on what to do and their opinion matters because Zespri’s proposal to trial working with some of the Chinese growers will come down to a vote.
One grower, who didn’t want to be named, told the ABC he was not in favour of the trial.
“My view is leave them alone. You’re not going to stop it, even if you do go over there and legitimise some of the fruit,” he said.
“I wouldn’t like to lose the Chinese market.
“There’d be a dramatic drop in price if we lost China.”
Zespri wants to use the trial to see if the Chinese-grown fruit can meet its quality standards and to test whether or not Chinese consumers would be willing to pay a premium for fruit without the “Product of New Zealand” sticker.
Zespri’s chief grower, industry and sustainability officer Carol Ward said there was no single legal, political or commercial solution.
“What is currently proposed is a small-scale one-year trial which would see us work with a small number of growers to test a restricted amount of fruit on-orchard, through our supply chain and with consumers,” she said in a statement.
“While we are not in the position we would like to be in respect to the spread of our licensed variety, we believe that the best pathway forward and that which has the best likelihood for a long-term positive result is one which works with the Chinese industry.”
The vote opened to growers this week and will run until June 25.
Growers get to have their say on two resolutions — that the trial can go ahead and that the fruit produced as part of it can be sold with an official Zespri label, albeit with China noted as the country of origin.
Securing the golden gooseberry
Research kiwifruits, China and New Zealand long enough and someone will make one very simple historical point.
“You could argue we stole the kiwifruit, then originally known as the Chinese gooseberry, early in the 1900s,” Mr Rennie said, referencing how the kiwifruit came to be in New Zealand in the first place.
“And you could say they’ve done an adept job of stealing it back from us.”
Intellectual property law is supposed to protect those who invest in developing unique goods, but it isn’t always easy in the global marketplace.
Zespri holds the plant variety rights (PVR) to the SunGold kiwifruit in New Zealand, which is why Gao was ordered to pay damages, but those rights mean little in the Chinese marketplace.
That only protects Zespri branding, not the unique plants the fruit grew on.
And as Mr Hoadley points out, what happens in Shanghai, and even at a national government level, does not always align with what happens on, or in, the ground.
“The [Chinese] government is concerned to protect its own intellectual property and the spin-off is it would then have to protect other countries’ intellectual property,” he said.
“It’s a big country and provinces often diverge from Beijing policy — there is a certain amount of corruption, a certain amount of political party interference in affairs.
“That’s why the Zespri [proposal to form] a direct relationship with the company in Sichuan is a very interesting one because it might be more effective to do that than, say, go from Jacinda Ardern to Xi Jinping and make a big issue of this.”
New Zealand’s kiwifruit regulator did not approve Zespri’s original proposal for the trial in China, saying it posed “more than a low risk” to producers.
Zespri made some amendments and now the growers will decide if it can go ahead.
The story of the SunGold kiwifruit is one about managing risk, both commercial and political, and the complexities of doing business with China.
New Zealand’s golden kiwifruit is its star export.
And there are big questions about whether working with Chinese growers will reduce the chance New Zealand growers lose out in the future.
There are risks either way, something that has been apparent since the SunGold cuttings were smuggled out of the country.
The only thing New Zealand producers know for sure is the quality of what they grow on their own farms.
And many will tell you, the best thing they can do to keep New Zealand-China kiwifruit trade on track is to simply grow a product Chinese customers love.
Their hope being that a “Product of New Zealand” sticker continues to be considered kiwifruit gold.Posted 1 JunJune 2021, updated 1 JunJune 2021
Kiwi wars: the golden fruit fuelling a feud between New Zealand and China
17 June 2021 | Tess McClure | The Guardian
It is the story of a global superpower, a smuggling operation, pestilence and a small hairy fruit.
Ubiquitous on supermarket shelves and in lunchboxes, the humble kiwi is New Zealand’s most valuable horticultural export. Recent battles for control of the fruit, however, have shone a light on tensions in New Zealand’s relationship with China.
In the mid 2010s, a kiwi grower took the lucrative secret of a New Zealand golden strain and smuggled it to China. Thousands of hectares of illicit orchards have since sprung up, and New Zealand has spent years scrambling to protect its intellectual property. Now the stark choices facing the country’s growers also reveal wider challenges for the country’s relationship with its largest trading partner.
The holy grail of kiwis
Kiwis are big business for New Zealand. Zespri, the country’s giant kiwi cooperative had operating revenues of NZ$3.9bn (£1.9bn) last year. Perhaps the most valuable of all is the Sungold, a new variety of golden kiwi that helped save the local industry from catastrophe. By 2010, the country’s kiwi orchards had been destroyed by a new disease called PSA. The vines oozed red fluid, flowers rotted and the fruit collapsed. It was a horticultural and economic nightmare that cost around NZ$900m, and the newly-popular golden varieties were among the worst hit.
Zespri joined other funders and invested millions of dollars in the search for an alternative. It winnowed down 50,000 varieties to a shortlist of 40, of which four made it to orchard trials. From those trials emerged Gold3, the strain that would eventually hit supermarket shelves as Sungold.
Its attributes represented a holy grail of kiwifruit properties: robust and attractive on the shelf, sweet with a pleasant tang, rich in vitamin C, cheap and plentiful to grow. Crucially, it was also resistant to the vine canker that had decimated the industry in New Zealand and Italy. Sungold was Zespri’s golden goose, and the company moved quickly to register exclusive ownership of it in countries around the world. Gold overtook green in kiwi exports, and New Zealand’s kiwi industry was rebuilt partly on Sungold’s back.
It might have been a golden end to years of strife for Zespri. But in 2016, an unpleasant rumour reached headquarters: Sungold had been spotted growing in China. The company hired private investigators and found the rumours were true.
An investigation traced the source to Haoyu Gao, an enterprising man who had bought a kiwi orchard in Opotiki, a tiny town in New Zealand’s Bay of Plenty. According to court documents, he smuggled a precious cargo of budwood to Sichuan, where he hawked female sprouts for NZ$60,000 a lot. In the end, however, the gamble did not pay off. He denied wrongdoing, but New Zealand’s high court ruled against him and ordered him to pay NZ$14m in damages.
Zespri won the courtroom battle, but it lost the war to control the spread of Gold3 through China. Its attempts to take subsequent legal action have fizzled without strong support from the government in Beijing, and in the meantime Gold3 vines have spread. In a recent report to growers, Zespri wrote that the area under illicit cultivation had doubled between 2019 and 2021 to more than 5,200 hectares.
“From the trajectory we see, it’s clear that unauthorised Gold3 is rapidly taking hold in China,” the report says, and the country is on track to produce between 30 and 90m trays of Gold3 fruit a year. At the lower end of those estimates, it would be producing as much as New Zealand exports to China, which stood at 30m trays to China last season.
An audacious proposition
There’s a certain irony to New Zealand having kiwi strains co-opted in China. The fruit was, after all, originally Chinese, and came to New Zealand in 1904. It thrived in the local climate, and the country began exporting it in the 1950s. In a moment of marketing genius, exporters coined the term “kiwifruit” after New Zealand’s iconic bird, with whom it shares a fuzzy brown exterior. In European and American eyes, the fruit gradually became synonymous with New Zealand.
Back then, China had little recourse against a fruit of local origin being mass-marketed as another nation’s motif. Today, however, it’s New Zealand that finds itself in a tough position and Zespri has proposed an audacious deal to growers: if you can’t beat ‘em, join ‘em – or at least buy ‘em. Rather than going after unlawful orchards, they propose a yearlong trial of buying up and marketing counterfeit kiwifruit grown in China under the Zespri brand.
The question will come to a head next week, as growers vote on whether to pursue a strategy of confrontation or cooperation with the new generation of Chinese growers.
Zespri’s proposal “would suggest that maybe the horse has bolted,” says Jason Young, an associate professor at Victoria University and director of the New Zealand Contemporary China Research Centre. “The Zespri question is really one of what happens if you lose control of your intellectual property in the Chinese market?”
Pragmatism or principle
The conflict over the fruit also highlights competing approaches of pragmatism and principle, at a time when New Zealand has been accused of treading lightly to avoid offending Beijing. It also shows the difficulty that a small geopolitical player faces in confronting a Goliath, and New Zealand’s lack of leverage with its largest trade partner.
“The word ‘small’ overemphasises how big we are,” says Andrew Gillespie, an international law professor. “We’re a dot.”
Pushing the matter hard could anger Beijing, he says: “It’s like with all law cases. You can win in theory, but often, the price of winning is greater than what you can achieve … They could find themselves in the middle of a very large storm and the ultimate consequences would be much greater than this one issue of intellectual property.”
That storm is a risk that New Zealand’s government and industry is acutely aware of. The foreign minister, Nanaia Mahuta, used the same word when she warned exporters of their vulnerability if New Zealand were to provoke Beijing’s anger.
“This is really a test for the relationship,” says Dr Hongzhi Gao, an associate professor at Victoria University’s international business school with a background in provincial government in China. “There’s also an opportunity here, for the New Zealand government to make a very clear case to Chinese central government.”
On China’s side, “it’s a question of political will more than anything else,” says Young. Central government has “a huge political emphasis on development, particularly rural development, and on addressing poverty issues within China”. That may mean Beijing is less inclined to crack down on rural farmers who have adopted a productive and popular new kiwivine.
Zespri has used this hypothesis to argue against more confrontational measures, but experts say the same dynamics could work against it if it were to take a gentler approach and then try to enforce licensing agreements down the line.
The company declined an interview, but said in a written statement that “seeking a commercial solution, and possibly an alignment with the Chinese industry, gives us the best chance of a successful outcome”. Such a solution “would also need to work for both sides in order to succeed,” it said.
“It’s very naive,” says Gao. “You are relying on local authorities to protect your interests. And if they don’t, what do you do?”
It is clear that the cultivation of Sungold in China is happening with the tacit permission of local governments, he says: “Such large-scale growing … it’s not individual.”
Beijing may feel a degree of pressure to protect its global image, but state and local government officials are far less likely to be driven by China’s international obligations or reputation, he says. “Local government officials do not care,” he says. “. They don’t care about a free trade agreement between New Zealand and China. You have very little leverage to really get local authorities on your side, because they are not on your side. They are on the side of local growers.”