Export funding increase unlikely
Market opportunities abound overseas, but the funding outlook is less promising.
Todd Fryhover, president of the Washington Apple Commission, is concerned about a possible decrease in federal funding for export promotions.
Photo by Geraldine Warner
Since generic apple promotions in the U.S. market are a thing of the past, export markets seem to offer better opportunities for selling more apples, Washington Apple Commission President Todd Fryhover says.
“Right now, it doesn’t appear to me that there’s anyone out there building demand and increasing consumption domestically,” he said. “So, I would agree that export markets provide the only viable alternative.”
Since the Apple Commission stopped domestic promotions in 2004, marketers have stepped in to promote their own brands with retailers. But the industry still largely depends on the Apple Commission to build the apple category in markets overseas.
Fryhover said there are three types of export markets: mature, emerging, and growth. Mature markets include Canada, the United Kingdom, and Taiwan, which are similar to the U.S. market in that consumers have a wide choice of fresh produce year round and it would be difficult to increase apple sales further.
Emerging markets, such as Vietnam, Indonesia, India, and China, are where the real opportunities lie, Fryhover believes. India has 1.2 billion people and the potential for its middle class to grow by a couple of hundred million people. Those are the people who can afford to buy Washington apples, even though they are subject to a 50 percent duty. Other possibilities are South Africa, which took its first shipment of U.S. apples two years ago, and Australia, which recently opened to Chinese apples, but not yet to U.S. apples.
“There’s no stone too small to be overturned,” Fryhover said, “because if our crop does go to 120 million boxes, which everyone thinks it can, we can’t afford to not look at every market.”
Those in the growth category are established markets where sales could increase by 5 to 10 percent annually. They are places where the United States has access, the Washington brand is established, and consumers just need to be convinced to buy more Washington apples.
Dr. Des O’Rourke, agricultural economist with Belrose, Inc., in Pullman, Washington, has explained that the commission’s budget is inadequate to take advantage of opportunities overseas.
The commission collects an assessment of 3.5 cents per box, but the equivalent of 1.0 cent per box is passed on to the U.S. Apple Association and 0.5 cent to the Northwest Horticultural Council. It receives funding of about $4.6 million from the federal Market Access Program, bringing the total available to spend on export promotions to around $6 million.
The MAP funding comes with many strings attached and is dependent on the growers providing funding through the assessment, too. MAP funds are more likely to shrink than grow, given the current focus in the U.S. Congress on cutting spending, Fryhover noted, and it might even be eliminated. And an assessment increase would be a long shot, too.
In 2007, before Fryhover was president, the commission ran a referendum asking growers for an increase of 1 cent per box in the assessment. It required 66 percent of the growers, representing at least 66 percent of the acreage, to vote yes in order to pass. Just under 59 percent of the growers, representing 62 percent of the acreage, voted in favor, so the measure failed. Fryhover said the proportion of ballots returned was very low at under 20 percent.
With the effects of the recession and Washington State University running a major fundraising campaign, the outlook today seems no more favorable.
“The board of directors is not entertaining the idea of an assessment increase,” Fryhover said. “It’s not on the table for discussion.”
But Fryhover said he agreed with O’Rourke that a $2 billion industry, which relies on a third of its fruit going overseas in order to maintain overall profitability, needs to leverage its resources to build demand for Washington apples overseas.
“I’m not saying we need to double our assessment or triple our assessment or anything of that nature,” he said. “It’s going to be a gradual path. We just need to be realistic about the future and try to get the best estimates about what’s going to happen politically with the MAP program and be progressive rather than reactive.”
Fryhover said the U.S. Congress could help boost exports by approving free trade agreements. While the European Union is aggressively pursuing agreements, and has signed one with Colombia, the United States’s free trade agreement with Colombia, signed in 2006, has yet to be approved by Congress. As a result, U.S. apples still face a 15 percent tariff in that country.
The European Union has also signed a free trade agreement with Egypt where U.S. apples still face a 20 percent tariff.
Fryhover urged growers to be more involved in industry affairs and to contact Washington’s congressional representatives. “You have to have a voice,” he said. “We’re in a very competitive business. This is a world business.”