The industry needs a new approach
There is no simple answer to the fruit industry’s problems. A complex strategy is needed.
Solving the tree fruit industry’s problems will require brain power and market intelligence, agricultural economist Dr. Desmond O’Rourke believes.
“You have to be careful about anyone who comes along and says any one solution will solve your problems,” he told growers at the B.C. Horticultural Forum in Penticton, British Columbia, Canada, last fall. O’Rourke described a number of strategies that tree fruit producers are using.
The Arnold Schwarzenegger Approach: This is based on the idea of overpowering your problems, and lowering unit costs by creating bigger orchards and consolidating packing and sales operations. People using this approach adopt new weapons of technology, such as higher tree densities, trellises, and hail nets in order to yield earlier and larger crops and blow their competition away.
The Henry Kissinger Approach: Producers see their salvation in alliances with like-minded firms and are engaging in complex negotiations across borders, cultures, and languages. They’re participating in areawide insect control programs, regional marketing groups, national efforts, and international alliances.
The Madonna Approach: Named after the convent student turned super star, this means reinventing yourself to match the changing times, and challenging conventions. It might involve repackaging a product or forming appellations to give the product a geographic identity or brand, or clubs to control trees planted, volume sold, product specifications, and promotions.
There’s been so much backlash against planting the generic varieties that the industry has gone to the other extreme of trying to make every variety into a club variety, O’Rourke said.
The Bono Approach: The idea is that if everyone works together and uses other people’s money (e.g., grants), all the problems can be solved. For apples, that means getting large pots of government money and persuading consumers to buy more apples. Possible justifications are to address obesity and rural development issues.
Problems with these approaches
The difficulty with the Arnold Schwarzenegger Approach is that production continues to rise and price pressures remain. Costs, which are dictated by suppliers, kept increasing at the same time as there’s been a downward pressure on apple prices. “We’ve gone to very large, integrated companies that are able to get production earlier and increase production with less acreage, but you really can’t produce yourself out of these problems,” he said.
A problem with the Kissinger Approach is that it requires ceding problems to others, and international alliances can be difficult.
With the Madonna Approach, producers must weigh the costs and benefits of each new initiative and decide which club programs will work and which won’t. For example, while the Pink Lady Alliance has been successful in the United Kingdom, it has struggled in the United States because it has an identity problem, O’Rourke said. Some of the plantings are considered to be Cripps Pink and are not part of the alliance. Kiku, a brand of Fuji, is not a restricted club. Growers who grow Kiku to required standards can use the Kiku label, and this is working well in Europe, he said. “It will be interesting to see how far you can go by using a common brand. The question will be, will the benefits exceed the costs?”
The club concept is right, he said. Because of intellectual property laws, it’s difficult for a breeder to release a variety in any other way than a restricted management system.
“But that doesn’t guarantee marketing success,” he stressed. “On most retail shelves, ten major varieties are already there. If you try to add two or three club varieties, something’s going to go to the wall.
“The key to the grower is, are you marrying yourself to a club that’s going to be a winner? Can the marketing organization really deliver what it says it can deliver?”
The problems with the Bono Approach are that it’s difficult to obtain funding, and the promotions will not work if the products are not what consumers want.
A different strategy is needed in order to sustain industry profitability long-term, O’Rourke said. He calls this the Einstein Approach.
“We need a much more complex approach based on understanding the way consumers are changing. We have to use accurate measures of market potential.”
While high yields of top quality fruit are still important, the industry will need complex research and marketing programs to find out why consumers buy fresh apples, what could persuade them to buy more and pay more for them, and what attributes they’re looking for in new apple products.
It’s important to develop new products, he said. “Another bicolored variety really doesn’t do much if you cannibalize the existing ones, unless it’s opening up a new niche because of some special taste or other attribute.”
The industry will need to be aware of rising sensibilities about food safety, health, and food origin. It will have to understand how consumers differ in emerging markets compared with existing markets.
The mass market is gone, O’Rourke said. Consumers are fractionating into subgroups. The industry will have to use more complex promotional methods to reach specific segments of the market.
“It will require new attitudes and commitment from the industry,” O’Rourke stressed. “In general, growers have been reluctant to invest in consumer information and marketing. How are you going to survive in the highly competitive market ahead unless you do it? The future will be in applying brain power to the apple industry’s problems.”