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Shifting Tides in the Banana Trade: How Vietnam Surpassed the Philippines in China's Market

Published Jan 16, 2025
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Once the top banana exporter to China, the Philippines experienced a significant decline in market share due to the combined impact of Panama Disease, rising production costs, and heightened political tensions with China. In contrast, Vietnam leveraged this situation by marketing its Chuối Sứ (Choo-ay soo) bananas as a premium product and filling gaps in China’s processed banana supply chain. This enabled Vietnam to surpass the Philippines in market share for the first time.

Background

China has significantly reduced its banana imports from the Philippines, leading to a sharp decline in the latter’s market share in China's banana imports. This resulted in an export volume loss of approximately 37% in the Q1- 2024 compared to the same period in 2023. With this development, Vietnam has emerged as the supplier with the largest share in China's banana market.

In 2023, the Philippines held the top position as China’s largest banana exporter, achieving the highest market share of 40.97%. However, the recent decline has jeopardized its leading position, with competitors taking advantage of Philippines’ setback.

Figure 1. Philippine Banana Export Value to China per Quarter

Source: Tridge, International Trade Centre

This is the first time that any country ever surpassed the Philippines in terms of banana exports as it accounted for 44% of China’s total banana imports from 2020 to 2024. This unprecedented turn of events has sent ripples throughout the banana industry, creating a shift in market dynamics and enabling rivals such as Vietnam to secure a more significant portion of the export share.

Why Philippines Banana Exports Decreased

The reason behind this drastic shift can be attributed to two factors: a steep decline in banana production caused by Panama Disease and the South China Sea territorial dispute. Each factor is connected to a range of causes, from environmental issues to political dynamics.

Philippine bananas have been severely impacted by Panama Disease, a soil-borne fungal infection that disrupts the plant's ability to transport water and nutrients, eventually causing its death. This is not the first time the Philippines has faced such a crisis. In 2017, approximately 20% of banana farms in Mindanao, the Philippines' largest banana-producing region, were infected with Panama Disease, leading to a production decline of over 26% compared to five years prior.

As of Feb-24, the disease had affected about 4% or approximately 18 thousand hectares (ha) of banana plantations. While this proportion may seem small, the affected areas include the country's primary regions for export-oriented banana cultivation — Davao, Mindanao, and Soccsksargen. Consequently, farm gate prices for Q1-2024 rose by 17.3% compared to the Q4-2023, while production plummeted by 31.7%.

Figure 2. Philippine Banana Production and Export Price per Kilogram

Source: Tridge, Philippine Statistics Authority

Adding to these challenges, political tensions between China and the Philippines have further contributed to a decline in Philippine banana exports to China. The two nations have long been entangled in disputes over territorial claims in the South China Sea, particularly regarding the Spratly Islands. In Jan-24, tensions escalated significantly when a Chinese Coast Guard vessel rammed a Philippine Coast Guard ship. In response, the Philippine President signed the Philippine Maritime Zones Act and strengthened military ties with the United States (US), actions that further inflamed relations with China.

Given the timing of China's reduced banana imports from the Philippines, it is plausible that the political conflict has had an implicit impact on trade volumes, exacerbating the challenges faced by the Philippine banana industry.

Vietnam’s Secret to Success

The environmental and political dynamics between China and the Philippines present new opportunities for competing markets to shift the banana export monopoly paradigm that the Philippines has held its rein on for decades. Vietnam has seized the perfect opportunity to increase its export shares through two strategies: premium banana marketing strategy and compensating for the disadvantages of China's low banana processing rate.

Vietnam has effectively positioned its Chuối Sứ bananas as a premium export product, breaking away from the traditional dominance of Cavendish bananas in the global market. While the Philippines and Ecuador focus heavily on Cavendish due to its sweet, creamy texture and affordability, Vietnam leverages the unique qualities of Chuối Sứ to stand out. Smaller and sweeter than Cavendish, this variety boasts high fiber content, a dense texture, and durable skin—features that not only enhance its transportation safety but also make it a versatile ingredient in Chinese cuisines. By marketing Chuối Sứ as a specialty fruit with an exotic taste that blends seamlessly into dishes like banana sticky rice, Vietnam has successfully created a niche for this variety. The premium branding has allowed Chuối Sứ to maintain its popularity in China, even at higher price points, as consumers perceive it as a high-value product tailored to their culinary and cultural preferences.

Figure 3. Characteristics of Chinese/Vietnamese Bananas

Source: Tridge, Philippine Statistics Authority

While substantial, China’s domestic banana production predominantly caters to domestic fresh consumption, with only 10% allocated for processed goods like dried banana chips. This creates a significant gap in the supply chain for processed banana products, which Vietnamese exports are perfectly positioned to fill. Chuối Sứ’s firm texture, balanced sweetness, and high fiber content make it an ideal ingredient for banana chips and fermented banana dishes, aligning well with the growing health-conscious trends among Chinese consumers.

Additionally, Vietnam’s ability to cater to the demand for processed bananas has been further bolstered by the rising popularity of banana chips. According to Chinese consumers, brands like Sabava and Dan-D-Pak exhibit brand awareness among Chinese consumers, as evidenced by over 10,000 purchase records on one of China's largest e-commerce platforms for fresh food.

Combined with the USD 78.17 billion gross merchandise volume of China’s fresh food e-commerce and the USD 1.67 trillion valuation of its food and beverage (F&B) market in 2022, Vietnam’s strategic exports effectively bridge the gap between China's consumer demands and its low self-production capabilities, driving higher imports of bananas.

Figure 4. Vietnamese Dried Banana Popularity in Chinese ecommerce

Source: Tridge, Taobao.com

Conclusion

Although the Philippines' banana exports have declined due to various challenges, the country remains a dominant player in the global banana market, with export values recovering to USD 1.2 billion worldwide in 2024. However, as tensions between China and the Philippines remain unresolved, competing countries such as Laos, Cambodia, and Ecuador have opportunities to expand their market share. Tridge recommends adopting strategies similar to Vietnam’s, which effectively utilized the unique qualities of Chuối Sứ bananas through premium branding and by meeting China’s demand for processed banana products.

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