Club varieties a gamble
The biggest hurdle is getting the consumer to pick up a new variety. The grower perspective
Planting a managed apple variety is a big gamble with high stakes, and growers should be wary about planting them if they can't take the losses, warns Yakima, Washington, orchardist Dave Allan.
Allan, a partner in Allan Brothers, Inc., has planted the ENZA varieties Pacific Rose and Jazz from New Zealand.
For a new variety to be successful it must give value to the consumer at a relatively high retail price and must be better than existing apples on the market, he explained during a Fruit School on Competitive Orchard Systems in Washington in January. But how do you tell if a managed variety meets those criteria?
Allan Brothers has gone out into the community asking people to compare samples of a new variety and an existing variety. Since consumers eat apples after several months of storage and a few days on the retail shelf, that's how the apples must be treated for the tests, Allan stressed.
"For between $2,000 and $4,000 for this kind of activity, you can get a pretty good feel for what that new variety is going to do compared to an existing variety," Allan said. "You can gain a lot of information."
But when a new variety actually goes to market, the biggest hurdle is what Allan calls "the 24-inch gap" between the consumer and the product. What will motivate shoppers to pick up an apple they haven't tried before?
"If I give 100 people a Red Delicious and I give 100 people a Pacific Rose, 85 percent of those people say they would be willing to pay $1.99 for Pacific Rose and not Red Delicious," Allan said. "The problem is how do you tell the people that this apple is a much better apple than Red Delicious? There's a 24-inch gap. People are that close to your product, and they don't know about it."
As more new varieties go onto the market, more promotion will be needed, Allan said. "It's very possible as we move forward that we will be investing as much into promotion as into the orchard operations. That's something we need to be anticipating and planning for."
It takes good integration and communication from the grower all the way to the retailer for a managed variety to be successful, Allan said.
"Some people may have that total integration within their own organizations, but I don't think that's going to happen very often because of the capital needs going forward. I don't think any one organization is going to have that kind of capital. I think it's going to be a number of people investing capital into these ventures."
Dain Craver, a grower at Royal City, Washington, commented that managed variety programs demand a large investment from the grower because of acreage and production royalties that growers have to pay.
"When is enough enough?" he asked. "When are they going to level it out so there's less risk to the grower?"
Allan said there are basically two business philosophies. His company has adopted a very aggressive approach to adopting new varieties, but others in the industry are not planting them at all.
"In time, we'll figure out who's right or wrong," he said. "The other thing is you don't have to participate in these new varieties. You can wait until the patents are up and then participate, or you can wait until more of the answers are there."
Tim Smith, Washington State University Extension educator, said it appears that problems associated with varieties, such as susceptibility to fireblight or bitter pit, tend to be kept secret, and the industry doesn't know about them until the variety is in production. He suggested that the variety owners could lower the risk to the grower somewhat by letting them know about problems ahead of time.
Allan said growers find out fairly quickly when there are problems, such as the susceptibility of Jazz to fireblight.
"We've bumped into this fireblight problem, and we've known it for a couple of years, and that's the way it goes. When you're moving fast, you don't get all the answers."
Allan said he felt the concept of the owner or developer being able to protect the variety through patents and trademarks is a good one, but said there is more risk in planting a managed variety than a generic one. If retailers decide they don't want the new variety because their customers aren't buying it, the value of the grower's orchard is close to zero, apart from what can be salvaged from the irrigation and trellis system. "Maybe you lost 90 percent of the investment."
On the other hand, if the grower planted Gala, for example, the potential return is not as high, but it's an established variety, and in all probability consumers will still want Gala five years from now. "Even if the price of Gala goes down, we're probably going to capture part of the investment," Allan explained.
ENZA is about to launch a new variety called Envy, and Allan said that if it is better than Jazz, his company will need to start producing it.
"When you're investing in these new varieties, it's like gambling. You have to be able to take the losses. Some are going to win. Some are not going to win. Don't put up money you can't lose with these new varieties."
Asked if the multiplicity of new varieties is likely to confuse consumers, Allan said he is confident that the new varieties coming along will be better than existing varieties and will encourage consumers to eat more apples.
"We have to go as fast as we can. There's going to be confusion, but we'll sort it out. We have a mission of improving the health of the world through better apples. I think that's a great opportunity."