Not all issues solved for club varieties
How will managed varieties deal with direct marketing and off-grade fruit?
It is hoped MN 1914, the still unnamed variety released last year by the University of Minnesota, will be profitable
Managed varieties are becoming more prevalent in the world apple market, but there are still some issues to work out, says Chris Sandwick, director of marketing for Pepin Heights Orchard, Lake City, Minnesota.
Not all the "bugs" have been worked out of the club variety concept. Concerns about how direct marketing fits with managed varieties and finding an outlet for lower grade fruit are a few of the issues confronting the grower cooperative The Next Big Thing, he said.
The Next Big Thing, a grower cooperative formed last year, involves five grower-packer shippers in Nova Scotia, New York, Minnesota, and Washington. The first variety that the cooperative will manage is the yet-unnamed selection MN 1914, released in 2006 by the University of Minnesota and licensed to Pepin Heights Orchard.
"Managed varieties are all about extending the profitability portion of the product's life cycle," he said, adding that they also provide long-term revenue streams for breeding programs.
"It's the wrong idea that you can take any variety," Sandwick said at the Great Lakes Fruit, Vegetable, and Farm Market Expo in Grand Rapids, Michigan. "It has to be a great variety with consistent quality that you can limit volume and hope for high prices. There are only a select few varieties that qualify. Consumers are looking for the apple that bites back."
While Honeycrisp apples have shown all the attributes of a managed variety—record sales and profits, record retail pricing, record consumer satisfaction— Sandwick doesn't think the high grower returns will last much longer because it is an open variety.
All must benefit
For the three-way relationship to work between grower, marketer, and consumer, managed varieties must benefit all parties, he explained.
Growers benefit from the coordination between producer and marketer, avoidance of market saturation, uniform quality, one-desk price management, and a guaranteed marketing program. He said that consumer advantages include increased confidence in uniform quality standards, consistent eating experiences, and limited brand erosion.
Sandwick said the board of directors governing The Next Big Thing is discussing how the direct marketer or farm market fits into the managed variety equation.
"We [Pepin Heights Orchard] have a retail store," he explained. "We saw with Honeycrisp how direct markets helped get the buzz going. But with a managed variety, we are creating a national brand, not just a local variety."
While he didn't offer a solution to the direct market issue, he said that they are looking for a way to bring in the direct marketer.
Another issue is what to do with lower grade fruit. Quality standards are an important part of managed varieties and are established to ensure consistent, high quality eating experiences at the retail level.
"Currently, there is not an outlet for number 2 or 3 grade fruit," Sandwick said. Lower grade fruit can to go to processors, but processors are not allowed to use the brand name.
"We realize that movement of lower grade fruit is essential to maximizing crop profitability," he said.
While there is "no perfect solution" yet, the cooperative is tasked with developing a market for less than perfect fruit, he added. For the lower grade fruit, they are exploring innovative packaging, geographical marketing or opening specific markets for the second quality tier.
Grower exclusion is a sore point with the managed variety concept because it means that not everyone will get to grow everything. But he believes there will be multiple managed programs and multiple opportunities for growers.
"Higher apple prices will benefit all of the industry," he said.
"There's not a perfect way to do this, but I believe there is room in the category for select groups of varieties…and they will help extend profitability."
As to growers fronting all the risk in a new variety because of the planting costs, Sandwick said that under the club concept, growers know there is a marketing program behind the variety, which is not the case for many existing varieties today.
"We're talking the cream of the crop for managed varieties," he said, adding that the vast majority of releases will continue to be open. "We have to find ways for the breeder to continue to make money or the breeding programs will go away," he said, noting that the breeding program budget at the University of Minnesota was recently reduced by 28 percent.