How China Swiped the Secret to American Blueberries

0:05Our colleague Jon Emont is based in Singapore, where he writes about business and geopolitics. And recently, he's become somewhat of a blueberry expert. What do you think makes a good blueberry? That's a great question. There are four things that you're looking for in a blueberry, okay? So there's taste, of course. You want a nice balance between sweetness and acidity. And then there's size. Ideally, you want a large, plump blueberry. Crispness. You want a crisp blueberry. A little crunch. And then here's the fourth one. Something called a bloom. B-L-O-O-M. You might notice on blueberries, sometimes there's this sort of whitish powder.

0:46You could even sometimes confuse it for a mold, but it's not. It's a sign of freshness. Uh-huh. The reason John knows so much about blueberries is that he recently went down a reporting rabbit hole. The story had to do with Driscoll's, the American berry giant. So I go to the grocery store and I've started noticing that Driscoll's was selling all these berries in Singapore grocery stores that were grown in Yunnan in Southwest China. And I'm quite familiar with China. I did not remember there being lots of blueberries grown in Yunnan. And so I was just sort of intrigued and they were making their way all the way to Singapore.

1:27What is going on here? What was going on was that Driscoll's placed a huge bet on China. And it worked so well that it ended up backfiring. Because now, many of the blueberries being grown and sold in China aren't even Driscoll's. They're copycats. And the copycats are taking over.

1:53China was hardly producing any blueberries 15 years ago. And, you know, by 2021, it overtook the U.S. as the top, world's top blueberry producer. So like China has become a blueberry juggernaut. Yes, a blueberry superpower overnight. That's right. A blueberry superpower. It's sort of funny, but it's not funny if you're Driscoll's. No, no, this is deadly serious.

2:22Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Tuesday, September 29th.

2:35Coming up on the show, a very serious episode about how Chinese companies elbowed their way to blueberry supremacy.

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4:26For most of its history, China had been a land of no blueberries. And in the 2010s, Driscoll's decided it wanted to change that. When did China get on the radar, and what were they thinking? Yeah, so about 15 years ago, they were looking to expand further, and they were looking at places to grow. and China just quickly came to the top of the list. Japanese fruit makers were already in China growing strawberries. And after deciding that raspberries and blackberries were too foreign for the Chinese palate, Driscoll's decided that the Chinese market was ripe for blueberries. They saw something really smart, which was that there were all these macro trends converging in China.

5:05I mean, from just lightning economic growth to people wanting to eat healthier foods. They thought they had an hour window of time to get in fast and start growing before others came. And so Driscoll sent their top blueberry expert to the southwestern Chinese province of Yunnan to scout for places to grow. Yunnan had a lot of potential. The climate lends itself to growing berries. But there were some challenges too. They had some issues when they first rented land where waste was being dumped near their farms. They had issues with soil quality. You need a really high-quality soil to grow the best berries.

5:45And so these were real challenges for Driscoll's to grow there. They just needed to make sure that the water was going to be clean, that their neighbors were going to sort of understand what they were doing. Driscoll's had to develop new technology to grow berries, like high-tech greenhouses. And instead of planting the blueberries in soil, they used coconut husks. This allows you to perfectly control the amount of nutrition the blueberry is getting. It also can help prevent diseases because you're not actually getting diseases from the soil. This sounds like very difficult technologically. Yeah, I mean, Driscoll's told me that this was the most expensive, per hectare, it was the most expensive growing that they did anywhere.

6:29So if you think China is going to be cheap, they said this was not cheap. In addition to the greenhouses, Driscoll's also had to find the right variety of blueberry. When Driscoll's came in, they struck licensing deals with genetics companies. At a certain point, they developed something called Eureka Sunrise, which is just this really, really tasty blueberry. There are varieties of blueberries just in the same way that there are of grapes and apples, like the Honeycrisp versus the Fuji. Exactly. And you're trying to make sure it's right for various climates, right? because a blueberry that is right for Maine wouldn't necessarily be right for Yunnan, right?

7:06And so this one worked really well in Yunnan, and Driscoll's licensed it exclusively.

7:15When Driscoll's berries arrived in Chinese supermarkets, they were a total hit. And Driscoll's sold them as a premium, high-end treat. They were very expensive, but as a result of that, it was the type of thing that you'd give as a gift as well, because they were still this kind of exotic fruit, but it was suddenly being grown in China at very high quality. And Driscoll's is a private company. They don't disclose their profits or revenue to me. But people who were involved with the company at the time said, yes, Driscoll's was minting money in the early days. And how did these blueberries taste compared to the ones that many in our American audience may be used to eating here in North America?

7:51The blueberries are amazing. So in case you've got any ideas that, oh, well, a Chinese blueberry, it's not going to be as good for some reason. No, these blueberries are exquisite. They're large, they're crisp, they taste really great. We did speak to Chinese consumers who specifically knew this variety of blueberry associated with Driscoll's, and were like, this is the good stuff. This is the real blueberry, you know? At first, Driscoll's blueberry foray into China seemed in itself like a eureka moment. But soon, the blueberry battle would begin. Even though it's a very expensive, you know, growing system, as we've established with these high-tech greenhouses and fertilization irrigation methods, you could earn that back within one season.

8:38Profits were so good in the early days. So as one person told me in the industry, that secret does not last long. And so pretty quickly, we started seeing big Chinese companies get into it. And the thing is, after Driscoll's has been doing this with his partners for a few years, there's suddenly a lot of knowledge in China about how to do this. And pretty soon you have, I mean, nearly identical farming systems developing. How big of a surge are we talking about? We're talking about... A tidal wave of blueberry juice? Yes. I mean, look, basically between 2021 and 2025, China added more blueberry production than the United States has in total.

9:18And the United States is the world's top blueberry producer. And we grow blueberries everywhere, from Oregon to Maine to California to Florida. And China, in four years, just added more blueberry production than the United States has. Wow, that's huge. These days, blueberries are all the buzz in China. You can find things like blueberry cake, blueberry tea. And there's video on social media of travelers absolutely astonished by these giant berries, which can grow to nearly the size of a quarter. All right, let's try these gigantic blueberries. Look at how gigantic these are. Like, wow. Guys, it's really tasty.

10:00And blueberry here in this region is so sweet. Yeah, way more juice. Juicy and bigger. Juicy, bigger. But it's also more tasteful. Because normally when a food... Part of what has helped the blueberry industry in China boom is that the government has encouraged more local companies to get in on the action, and state banks have been giving out a special category of loans. But some of these new Chinese competitors took a little more than inspiration from Driscoll's. That's next.

10:38How and when did Driscoll start to suspect that some Chinese blueberry companies might be copying their blueberries? So their partner, the company behind Eureka Sunrise, started seeing that these really great blueberries that they had developed were being grown widely by companies that were not paying them any type of licenses or royalty fees if they hadn't agreed to give the blueberries to. How would these Chinese farmers grow blueberry plants that aren't theirs, though? How does that work? That's the thing. It's super, super easy. It's very easy to steal blueberry plants because they are grown inside greenhouses.

11:17So, okay, so they're not, it's not like just, you know, you can't just drive up to the side of a field and quickly make a cutting. But basically all you have to do is just cut off parts of a blueberry plant and then you can propagate it and grow your own blueberry plant. And, you know, to do it at scale requires a certain amount of equipment and expertise. But this isn't rocket science either. This isn't very difficult. Initially, Driscoll's was reluctant to go after these suspected copycats. Driscoll's is actually selling these blueberries to grocery stores, and it has Driscoll's on the label.

11:48So if Driscoll's starts suing Chinese farmers, and it gets a bad rap because of that, it's this big, you know, American fruit giant that's going around to small farmers in Yunnan and saying, hey, that's actually not a blueberry you're allowed to use. This is our proprietary blueberry. We're going to have to destroy your plants, and you're going to have to pay us a lot of money. Well, that could be a real PR nightmare for Driscoll's. So they were worried about that. But the genetics firms that develop blueberry varieties didn't have that same concern. Most consumers probably didn't even know they existed.

12:21So they didn't have to worry about PR. They just wanted to protect their IP. How do you even prove that some blueberry that you find in the grocery store is your blueberry? Or that somebody else is growing your blueberry? Yeah, I mean, you know, you can do DNA testing or other... You can, like, go on Maury Povich and he'll be like, you are the father! I mean, it's like that, right? I mean, you're doing genetic testing, you're saying this blueberry is a genetic match with ours, and we have it logged into some Chinese system that this is a proprietary blueberry, and there it is. And to prove it, the genetics companies had to take a page out of the copycat's book.

13:00What companies in general started doing was they had to work with private investigators. There are different ways you can go about it, but you can be a private investigator, pretend to be a farmer or a trader or whatever, but basically you need to get your hands on these plants and rush these plants off to do genetic testing and prove that these were indeed their plants. And then you can go to a court and you can say, look, this nursery is growing my blueberries. In his reporting, John looked at one company, a Spanish blueberry genetics firm that went after a Chinese copycat. The Spanish company hired a private investigator to go undercover and talk to the Chinese grower.

13:40in the conversation that the illicit grower was having with the private investigator, they admitted that, oh yeah, we have some connections at a Driscoll farm. We were able to nab the plants. And Driscoll's, of course, would never give it to us because it's proprietary, but we managed to get it and we can give it to you, basically. Based on DNA testing and the grower's admissions, a Chinese court ruled that most of its blueberries were being grown illegally, including Driscoll's Eureka Sunrise variety. The Chinese grower had to destroy the plants and pay roughly$23 ,000 in fees and damages. It's a huge issue in the industry, and when I got to Yunnan, it dominated a lot of the talk.

14:19From both sides, from Westerners who were there who thought that this needed to get cleaned up because it was causing huge problems, and then from the Chinese side, people who were afraid of being prosecuted and paying fines because they were increasingly being ordered to do that and destroy their production and things of that nature.

14:40Driscoll's has also stepped up in court and filed more than 20 lawsuits against companies in China. It says it's hopeful China will strengthen its IP regulation. But there isn't much the company can do about the market. With more production, a.k.a. more supply, prices have fallen dramatically. This is something that U.S. companies have experienced in China before. After initially finding success, so many competitors flood the market that prices collapse. It's happened with everything from smartphones to coffee to sneakers. Economists even have a word for this extremely intense competitive cycle.

15:16They call it involution. Which is just this relentless competition within industries in China that essentially just erases margins and makes every business, no matter how promising, extremely difficult and competitive. And so it just drives down prices, and it makes it difficult to work in these industries. It means that in these industries, it's difficult to get raises or promotions because everyone's trying to cut costs as much as possible. It's like the Hunger Games. It is. And it came for blueberries, too. These days, blueberry prices in China have totally crashed. And if you're a blueberry customer, that's great.

15:57In fact, people in China are calling it blueberry freedom, where this once exotic fruit is now so cheap that anyone can afford it. If you're Driscoll's, though, this is bad for business. The company declined to provide specific figures, but according to one former grower and others John talked to, Driscoll's farmers in China are seeing shrinking profits. Despite the cutthroat competition, Driscoll says it has no plans to leave China and that it's optimistic about its future there. But with prices in China as low as they are, the company is also focused more on exporting to countries like Singapore, which is why John is now seeing more of their berries in the produce aisle.

16:40Is there a lesson for not just other fruit companies, but any company that wants to think about doing business in China? I think the lesson is if you go to China, there are opportunities to mint really good profits. But they're very short. I mean, obviously, in any market, you're going to face competitors if you're a successful company. That's proved that there's a market for the good you're selling. But in China, it comes at you so fast and at just such a great scale, often with a lot of state financing behind it. And then the thing is, these competitors that come up to face you could become your global competitors.

17:22Would it be fair to say that Driscoll's blew it?

17:29What's clear is that what seems like a very promising market has become an extremely cutthroat market. And Driscoll's is not the only American company that has learned this. And China is very tantalizing for all sorts of reasons for just about every company under the sun. But it's cutthroat and competitive. and even if you rigged your A game that companies you hadn't even heard of that weren't even on your radar are going to figure things out fast. I think that's a lesson.

18:16That's all for today. Tuesday, September 29th. The Journal is a co-production of Spotify, and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.