Isn't a lemon just a lemon? Perhaps, but when it hits the production line in Tongnan, a district of southwest China's Chongqing city, it can become anything from fruit tea to facial mask to essential oil.
China is not a traditional grower of lemons, but Tongnan dominates the domestic market with nearly 100 processed lemon products, and exports them to nearly 30 countries.
More than 40,000 families plant nearly 13,000 hectares of lemons in Tongnan. The district aims to have around 30,000 hectares of lemon groves generating 30 billion yuan (4.3 billion U.S. dollars) of output value by 2020.
Tongnan's success is an example of agricultural supply-side structural reform in action. The local government has placed much hope in the Huida Group, leader of the country's nascent lemon processing business.
Dai Xiaoping, founder of Huida, believes the company's success lies in what he calls “deep processing,” meaning that he makes use of all parts of the fruit.
“The flesh of a lemon can be made into dried lemon slices and drinks, its skin and seeds into fruit tea, and the oil in the skin can be used in cosmetics,” Dai said.
Dai did not come up with his zesty business model until suffering a major setback from the traditional “grow-buy-sell” mode. Local farmers started to grow lemons about 50 years ago and sold the fruit to dealers from other parts of the country.
In 2007, Dai returned to Tongnan, his hometown, to start a lemon grove. A bumper harvest came in 2011, but a glut in supply invariably leads to a fall in price and farmers were frustrated at selling their produce for a paltry 0.6 yuan per kilogram. That was when Dai learned that fresh fruit is vulnerable to price volatility. What's more, fruit which looks ugly, nearly a third of the yield, is harder to sell.
“The lesson was that growing good lemons is only half the battle; selling them is the other half,” he said.
So he came up with the idea of processing them. “The new business enables us to bypass the risks of the fresh fruit market and it's also a way to deal with the ugly ones.”
In 2012, Dai set up Huida, spending heavily on a R&D center. A year later, a production line, at a cost of over 300 million yuan, was launched to produce food, beverages, cosmetics and health care products.
One tonne of fresh lemons sells for 8,000 yuan while dried lemon slices made from them sell for 120,000 yuan, he said.
The production line can handle more than 20,000 tonnes of fresh lemons a year and that capacity will rise when a new production line opens at the end of this year. Tongnan now has 10 lemon processors, providing hundreds of jobs both in the factories and in the fields.
As the largest of them, Huida has contracts with 84 cooperatives to supply fresh lemons.
“Since our products have higher added value, we can offer a higher price for growers. The misery we experienced in 2011 may never happened again,” Dai said.