What Factor Come into Play While Pricing A Durian

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Durian prices have skyrocketed over the previous decade or so. If you haven’t eaten a durian in 20 years, you’d be surprised at how pricey the king of fruits has become these days. But, on the other hand, what were formerly common durians are now accessible at highly reasonable costs. What distinguishes today’s durian industry is the presence of a distinct and considerable premium market above the mainstream market. And in locations like Singapore, where consumers have considerable purchasing power, the mass and luxury markets have gradually merged and intermingled. So much so that it is not far-fetched to say that the premium market in Singapore is greater than the mainstream market.

Please don’t misunderstand me. At numerous booths, you can still get inexpensive durians for $2. However, after you’ve tried luxuries like mao shan wang and black thorn, the lure of paying high amounts for good quality may be highly enticing. People are not illiterate. And consumers are prepared to pay astonishing amounts for good durians continuously because they see value in their purchases.

The problem is that individuals who can afford to spend $50 for a durian expect the fruit to be worth $50 as well. If high-end customers wind up with durians that they believe are worth $10, the premium market would have fallen a long time ago. There is clearly a huge demand for premium cultivars, allowing them to fetch such high prices. But the most crucial question is why are quality durians like musang king so costly. Is the retail price justified by manufacturing costs and the added value of the whole supply chain?

The Durian Value Chain’s Cost

There is a supply chain between the first planting of the seed and the fruit finally landing in the hands of customers, as with any company, especially one as traditional as consumable crops. Unless otherwise indicated, we are addressing it exclusively in the context of musang king and money in Singapore dollars for the sake of this debate.

The following are the critical players.

  • Farmers

If you ask any farmers about the costs of producing, cultivating, and harvesting their crops on their plantations, chances are they would paint a bleak image of high production costs.

They would discuss how much money had been put in technology and equipment and how much labour would be required to create great durians. Then you may talk about how tough it is to make money, yet the farm owners are all multi-millionaires.

There is nothing wrong with becoming wealthy through the production of a high-demand product. Many regard this as a market service that completely justifies its revenues. Consider that when farmers initially begin planting their durian plants, they are taking a significant risk.

There is no assurance of success, and it will take years, if not decades, for seedlings to develop into mature trees bearing premium grade fruits. This means that farmers must invest a significant amount of cash with little return for many years before making it large.

Remember that durian trees are not the simplest plants to care for and take a lot of extra man-hours to produce healthy fruits that taste delicious. All of this reduces plantation owners’ gross profit. As a result, the financial benefits they receive for excellent harvests are justifiable from a capitalist standpoint.

However, some customers question if farmers really need to make such a significant profit from durians. After all, leasing land for farming in Malaysia is very inexpensive from the perspective of businesspeople with venture capital to burn. In addition, labour is relatively cheap.

So, why are fresh durians so pricey?

Before delving more into the idea that farmers are defrauding customers, keep in mind that the typical price plantations sell to wholesalers, big volume purchasers, and durian retailers is approximately $15/kg to $20/kg (SGD). Yes, we are talking about musang kings.

When we examine how much these products finally sell to end consumers, the profits that farms make don’t seem that outlandish when considering how much effort, time, and money they put into producing top-quality durians.
This brings us to the following link in the supply chain.
  • Middleman

There are always agents and brokers in any trading firm who help connect the items supplier and the merchant who wants to acquire the chain. The durian trade is no exception.

They essentially earn money in four ways. Either:

  • The plantation pays them, and the commissions are included in the selling price; alternatively.
  • The merchant pays a service charge, which can be a fixed price, a percentage of the amount requested, or a price per basket of durians;
  • They buy the durians directly from the plantation and resell them to the merchant at a profit.
  • Or all of the above

All of these factors contribute to the expenses of items that durian vendors must consider before establishing their selling price to clients. Because the volume of these transactions may be pretty large, they can easily earn money with minimal markups but high volume.

In recent years, an increasing number of plantations have gone direct to the booths of durian vendors. Some even open their own durian stores under their own brand to clear off their inventory from the farm.

While this may seem appealing and “authentic” to some buyers, keep in mind that these plantations seldom yield high-quality durians and are thus shunned by seasoned durian merchants. As a result, they must start their stores to sell their fruits because no one else would!

In any event, such direct operations are presumably intended to lower the expenses paid to middlemen and pass the savings on to customers. At least, that’s how they’re usually advertised.

However, I seldom see these sorts of companies selling at a lower price than the competitors. This suggests that, rather than passing savings on to customers, they are instead depositing money in their own bank accounts.

Again, nothing is wrong with this. Even deceptive advertising can leave a bad taste in your mouth. Just that, unlike musang kings, where the bitterness is exquisite, this is just repulsive.

While there will always be intermediaries in the background, an increasing number of durian merchants have direct contact with plantations and place their orders.

  • Durian vendors

As was said regarding farmers earlier in this debate, if you celebrate the amount of money a durian vendor is earning in his face, he will instantly complain about how he is losing money or “not making much.”

Is this genuine or simply a stretch of the imagination? How can durians purchased for $18/kg and sold for $35/kg be a loss-making venture? What happens to the profit margin?

To begin, it should be noted that the retail price of MSW can range between $20 and $40 per kilogramme with husk. The most I’ve ever spent on something was $35. So, broadly speaking, the markup from wholesale to retail is 100 per cent, give or take.

So a $5,000 investment in merchandise results in a $10,000 collection, resulting in a $5,000 profit, correct?

If a temporary selling site is hired for $100 per day and $5,000 worth of durians are sold out in two days, many people believe that the gross profit is $4,800. Not bad for two days of effort.

On the surface, though, it is what customers perceive. A lot is going on beneath the surface, where the gigantic iceberg is exposed.

Outside of inventory expenses, most individuals would recognise the total costs of renting and labour. There is also the transportation expense from (say) Pahang to Singapore, which is around $100 per basket of durians.

There are several more unnoticed, hidden expenses. For example, just because a merchant receives 300kg of durians does not indicate that all 300kg are grade A mao shan wang. This means that not all of them would be able to get a retail price at the upper limit of the market price at the moment.

When growers select durians to be sold to merchants or exported to Singapore, they primarily consider two factors: Size and physical damage.

It is not an exaggeration to state that if a durian is not too small and is not physically damaged, such as having wormholes or being broken open, it will be placed into the basket for shipment to the buyer. When the durians arrived at the durian stall, the vendors would sort them and grade them appropriately, determining the final selling price to their customers. It is very feasible that just 20% of the arrivals will qualify for Grade A. And it is pretty viable that 20% or more of the durians are classified as waste.

This wastage might be related to them failing to satisfy the vendors’ criteria or the durians breaking open due to being banged around during travel or being dropped while moved. An honest vendor may offer these “wastage” items at a low price and inform buyers that they have been unintentionally broken open. These may be as little as $10/kg. Yes, I’m referring to MSW. I’ve previously purchased these durians for $8/kg.

Then there are the astute merchants who will dehusk these durians, place them in a vacuum box, and continue to sell them at premium rates. This is why buying from a container is a risk, particularly if you are paying top money.

Consider that when a new batch of durians arrives at the booth, the vendor has little more than three days to sell them in perfect shape. Otherwise, the fruits begin to degrade in quality or go bad, resulting in a loss or a personal durian feast at home.

It’s a Risky Industry.

In any case, the longer the durians remain unsold, the lower the price vendors would be willing to sell them for.

Imagine importing $4,000 in musang king and only having $1,000 in stock, and they would lose value with each passing minute that they remained unsold and then back to zero the next day. It makes more sense to recuperate as much money as possible rather than incur the greatest potential loss.

And at this stage, any profits generated from their activities are not exactly money in the bank because vendors must utilise the proceeds from sales to purchase additional durians and then repeat the process.

It’s a cash-flowing operation.

Quite honestly. While I am upset that customers must pay almost double the cost that merchants spend to bring in the durians, when we look at the economic side of things, we may conclude that high pricing for quality musang kings is justified to some extent.

The bright side is that prices fall when there is an ample supply, as we witnessed firsthand in 2018.

If you are still not satisfied with paying exorbitant amounts for quality durians, you can wait until peak seasons when prices are at their lowest.

Above all, remember that if you’re paying top dollar, there’s nothing wrong with wanting top-notch quality and service.

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