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Good U.S. apple volumes mean great promotion opportunities

by Christina DiMartino | January 19, 2009
When the U.S. Apple Association's annual Market Outlook Conference, held Aug. 21-22 in Chicago, drew to a close, apple professionals from around the world returned home thinking that the U.S. apple crop, which helps to dictate projected seasonal movement and prices internationally, would be short on volume.

The season, as predicted, started strong. John Rice, president of Rice Fruit Co. in Gardners, PA, said, "Our company started out with a strong market year, but in the last couple of months, it has become much more competitive." Mr. Rice explained that in August, Michigan apple producers did not think they would have as many apples for the fresh market because of weather issues during the growing season.

"Washington also reported decreased volumes," added Mr. Rice. "About 100 million boxes is normal for the state, and they initially thought they would have from 90 to 95 percent of a normal crop. The crop was also late coming off the trees, so they did not get the very strong jump on movement as early as they usually do."

New York also projected a smaller-than-normal crop due to a devastating hailstorm that swept across the state last June. Once the damage was assessed, it was determined that 6 million to 7 million bushels had been damaged.

Jim Allen, president of the New York Apple Association in Fishers, NY, said that the damage assessments have remained true, but the remaining undamaged crop took an unexpected turn for the better.

"The rest of the crop enjoyed perfect growing conditions during the remainder of the growing season," said Mr. Allen. "Moisture and sunshine came in perfect proportions. The apples matured into larger-than-normal sizes with excellent appearance and eating quality. That helped to boost New York's volumes."

Washington also had a turnaround compared to predictions in August. Todd Fryhover, president of the Washington Apple Commission in Wenatchee, said that the state's crop has averaged somewhere between 90 million and 104 million boxes over the past five years. But this year, about 112 million boxes will be filled.

"What we see today is the result of growers' efforts in removing varietals of less interest to consumers and replacing them with those of increasing demand," he said. "These new trees produce better, so the same acreage replanted with the new varieties produces more fruit. This is a good indication that in the short-term future, volumes will be higher -- but on apples that match consumer preferences."

For many years, Washington has been known for its large, beautiful Red Delicious and Golden Delicious apples. The Red Delicious, for example, represented between 50 percent and 60 percent of the apples produced a decade ago. Today, it represents about 30 percent of the total crop.

"Consumer preferences have changed over the years," said Mr. Fryhover. "Today about 18 percent of our crop is in the Gala. The Fuji, Granny Smith and Golden Delicious are in the 10 to 12 percent range. Rather than one variety representing two-thirds of our manifest, we now have nine varieties that are predominant and make up 90 percent of the apples we grow. Although volumes in Washington have increased this year, they are on the varieties that consumers prefer. The crop volume translates into outstanding promotional opportunities for retailers from now through next fall's harvest."

There is another factor affecting the apple industry this year. The United States is not alone in its financial crisis. In many countries, including those that typically import a lot of U.S. apples, the economy is even worse. Of Washington's typical 100 million-box crop, for example, 70 million boxes usually go to the domestic market and 30 million go to export. This year, the export figure has dropped to about 20 million. Mr. Fryhover said that when the export-domestic movement is out of balance, it takes a while to get it back.

Mr. Rice said that apples were short and prices were high last year. Retailers usually feature apples through May and even into the summer months with promotions, but last year supplies could not support promotional activity in late spring and summer.

"This year we have a more normal year in the country, and with supplies good, promotional activity could play out until the next crop," said Mr. Rice. "In a year such as this one, with consumers being economically challenged, they could purchase six or seven apples at the same price they paid for four apples a year ago. This is a wonderful opportunity for consumers to eat a healthy product that is affordable."

Mr. Allen agreed. "This is a tremendous opportunity for retailers and consumers alike," he said. "We have ample supplies of the best-quality apples that we've had in years and a variety of flavors to offer. It's a real win-win for customers. We have great storing abilities, so apples will ship from storage in perfect condition."

Mr. Allen added that high retail prices can be good, as everyone wants to see higher profits. But it is not good to merchandise product that will hurt movement. As long as retail prices reflect delivered prices, and those are passed on to consumers, it could be an outstanding year for everyone. "As soon as the typical lag time between wholesale and retail passes, these saving can start to be passed on to consumers," he said.

Getting the message out to retailers and foodservice operators alike is where the U.S. Apple Association in Vienna, VA, can help. Nancy Foster, president and chief executive officer of the association, said that when she was working on the November and December editions of its monthly survey of apple movement and storage, Market News, it became very clear that more apples were coming on in the United States than expected.

"And prices to packers reflected the increase," said Ms. Foster. "We want demand to be strong, so we need a coordinated effort between packers and retailers for it to work. It would not be good if the difference between retail and wholesaler were out of sync. People, especially today in this difficult economy, are looking for value in stores, and they are aware of the nutritional benefits and great flavor of apples. The new technology used in storage techniques enables packers to ship apples of outstanding quality year round."

Ms. Foster added that the research results on the nutritional benefits of apples have enjoyed strong media attention in recent years, which has caused demand to increase. Consumers want apples today, and the only thing that could stop them from buying them is unaffordable prices.

The U.S. Apple Association does not get involved in pricing. It represents the industry on national issues, aims to increase the demand for apples and apple products, and provides information on matters pertaining to the apple industry. Through its government affairs, nutrition research and consumer education, industry information, membership services, and National Apple Month programs, USApple strives to provide all segments of the apple industry with the means to profitably produce and market apples and apple products.

"We have a leadership meeting of 25 officers and board members from across the country this week," Ms. Foster said the week of Jan. 12. "The crop and how best to market it will be on the table for discussion. We are ready to move in a flash with press releases and other efforts that the board decides should be done. Apples are a great value, and are very profitable in the produce sector. The industry needs to move this crop so it doesn't back up and so the industry is in a healthy position as they prepare for next year's crop."

Ms. Foster added that the apple crop is of very good quality and it is important that consumer needs for value are met -- and that is going to take great promotions from retailers.

"With buy local so important today, this crop presents a great opportunity for retailers to build relationships with consumers as well as with suppliers," she said.