The New Mantra: Demand
It’s important that consumers place a higher value on apples.
“Increase consumption” has been the mantra of the U.S. apple industry for many years. As producers feel the pressure of downward prices, getting people to eat more apples may seem like a good cure for industry woes.
But, logically, per-capita apple consumption is simply the number of apples produced (with adjustments for imports and exports) divided by the population. How do you increase consumption? Produce more apples. Somehow, somewhere, those additional apples that are pushed onto the market will be sold and consumed, raising per-capita consumption figures.
So, while purveyors of quality-enhancing products might like to take credit for recent gains in apple consumption between 2002 and 2004, larger crops probably had much more to do with it (see chart).
Many years of experience have shown that producing more apples is not the road to high profits for producers. Often, it has the opposite effect. Generally, the more apples produced, the lower prices tend to be. Agricultural economist Dr. Desmond O’Rourke has calculated that additional production beyond a certain volume can not only lower f.o.b. prices, but result in less total revenue from the crop. Rather than selling more apples at lower prices, the industry needs to stimulate demand for apples. It needs to elevate apples from a commodity to a sought-after specialty product. It needs to give consumers fruit that satisfies them so much that they place a higher value on apples. Experience with Honeycrisp, touted as one of the best eating apples, has shown that f.o.b. prices of $50 a box are possible if there’s strong consumer demand. Though a minor variety, it’s one of the more profitable for growers.
That’s the premise behind managed fruit varieties, which are produced in limited volumes according to stringent quality standards. Scarcity has value. Overproduction is a liability.
In this issue of Good Fruit Grower, we explore how the tree fruit industry can adjust to the future and the role that managed varieties might play. Club varieties take a more disciplined approach to apple marketing, with the aim of generating profits for everyone involved—including the variety developer and the grower—and offering value to the consumer even at a higher price.
Many issues relating to club and managed varieties still need to be addressed. Who will be allowed to grow, pack, and sell them? Who will develop the strategy for inventory and quality control? Who will develop the marketing program? There are no guarantees of marketing success.
But, as O’Rourke states, the old “Arnold Schwarzenegger” approach—lowering unit costs by producing more—is not a winning strategy for the future. What the industry needs is the “Einstein” approach, which will involve complex research and marketing programs to find out why consumers buy fresh apples and how they could be persuaded not just to buy more of them, but, more importantly, to pay more for them.
It’s all about increasing demand, which should be the new mantra as the tree fruit industry adjusts to the future.