Change Creates Opportunities in Asian Markets
Supermarkets use high-quality products such as Washington State apples to differentiate themselves from rival stores.
Cheap Chinese apples have replaced Washington apples in many wet market stalls.
Although the average export price for Washington apples during the 2007-2008 season was 13 percent higher than in 2006-2007, the volume shipped dropped by only 2 percent. A weaker dollar has certainly helped offset higher FOB prices, but transportation costs also rose to increase landed costs so that all in all, Washington apples were one of the more costly imported fruits in many export markets.
Several factors have helped Washington maintain a premium position and high-value image in Asian markets. Certainly, the most important is the high quality that goes into every box, but other factors also have helped the brand weather changes in overseas markets, including the shift away from outdoor stalls known as wet markets to Western-style shopping formats.
Gone are the days when Washington apples dominated the Asian wet markets; abundant and cheap Chinese apples have replaced shiny Red Delicious as the mainstay in many wet market stalls. However, with the development of the organized retail sector in overseas markets, Washington apples have moved from the wet market to the supermarket. The growing middle class
in these developing countries is becoming more time-starved and looking to upgrade their shopping experience, and air-conditioned supermarkets and hypermarkets are developing at a record pace to meet this emerging demand.
Vietnam was recently ranked the most attractive emerging retail market by the consulting firm AT Kearney. As Vietnam relaxes restrictions on foreign ownership of retail stores, several large international retailers are racing to construct supermarkets, hypermarkets, and convenience-type stores to service the growing middle class. Metro, the world's fifth-largest retailer, recently named their Vietnam division as the most successful out of the 30 countries in which they operate, with the fruit and vegetable category experiencing a 40 percent growth in profits over the past year. In order to service the retail expansion, importers and wholesalers are investing in infrastructure, including cold-storage facilities to replace aging buildings built during the French occupation.
One of the characteristics of wet markets is their competitiveness. With several stalls lined up next to one another, merchants must compete on a basis of visual appeal and price for each item in their limited inventory. Fruit is carefully hand-stacked and arranged to attract customers, many of whom develop longstanding relationships with the vendor. Because of the limited space and product line, merchants are conservative and will only carry items they know will sell, such as high-color Red Delicious, or, in the case of Vietnam, full-color Gala (preferably the Gale Gala).
Supermarkets and hypermarkets, on the other hand, know that consumers are likely to visit only one, or at most two retailers, and make their purchases based on factors like convenience and variety, with the cost of individual items a secondary consideration. In contrast to packaged goods, perishables such as produce and meat give retailers the opportunity to differentiate themselves from rival stores by having a range of high-quality products such as Washington apples.
While Red Delicious still makes up approximately 50 percent of the volume of Washington apples exported to international markets, the need to develop markets for other varieties is increasing as production increases. The organized retail sector in many of the importing countries offers an avenue to introduce our target consumer (usually middle to upper-middle–class women) to Washington apples through attractively arranged displays as well as in-store sampling and promotional materials designed to provide information on taste and usage of the new varieties. Retailers appreciate this support, as it helps drive additional volume through their produce department and creates a winning partnership between Washington apple growers and retailers. Promotions can be timed and targeted to optimize the impact at peak sales times, or to help stimulate sales at a slower time of the year (such as after Chinese New Year).
Wet markets will continue to play an important role in distribution and sales of Washington apples in many Asian markets, and the WAC will continue to offer support such as attractive point of sale materials and giveaways for the wholesale customers. However it is the retail sector that promises the growth needed to meet both the future varietal mix and volume challenges that the industry faces on the horizon.