In My View

Defying conventional wisdom, a look at the growth of the cherry category

A hundred thousand tons (10 million 20-lb. equivalent boxes). In the early 1990s, this figure was widely believed to represent the top end of the cherry market. Produce more than 100,000 tons and face the consequences; fire sales to avoid letting the cherries melt and drastically reduced grower returns. While this forecast may have been spot-on given the market conditions at the time, three consecutive years of successfully selling 110,000-plus tons out of the Pacific Northwest (Washington, Oregon, Idaho, and Utah) conclusively revealed that today’s cherry market is not what it used to be.

Not enough

In fact, although the Northwest produced a record 117 thousand tons in 2005, the number-one complaint from retailers around the world (and a large dilemma for sales organizations) was that there wasn’t enough product to go around. In other words, in the course of roughly 15 years, the Northwest cherry industry went from believing that 10 million boxes would saturate the market, to knowing that 12 million boxes is a very marketable crop.

Looking back

To better understand this transition, it is helpful to take a brief historical look at the Northwest cherry crop. From 1976 to 1995, the growth of fresh sweet cherry production in Washington State, the nation’s leading producer of sweet cherries, was relatively slow, increasing from nearly 52,900 tons to more than 68,300 tons. Although the small annual growth of production throughout this 20-year time period can be attributed to numerous factors, perhaps the largest factor was risk. Producing cherries is inherently risky. Consequently, tree fruit growers in Washington historically focused their attention on other tree fruits. For example, over this same 20-year time period, production of apples in Washington grew from 830,400 tons to 2,800,000 tons.

Despite this traditional approach, tree fruit growers in the Northwest, and in other cherry production regions as well, refocused their attention on sweet cherries over the last decade. This change is evident in the North American sweet cherry production statistics where, from 1995 to 2004, production increased from 180,000 tons to 280,000 tons.

As the leading producing region in North America, cherry growers in Washington, Oregon, Idaho, and Utah, who collectively market their fruit under the banner of Northwest Cherries, are pacing this growth in production. Since 1996, cherry production in the Northwest has grown from some 50,100 tons to about 117,300 tons, a more than 130 percent increase.

Likewise, production in California, the nation’s second leading production region, has grown from 13,925 tons to more than 50,000 tons. Although production growth over the last ten years in the Northwest and California has been steep, tonnage increases are not expected to slow down in the near future. Since 2000, cherry tree sales from nurseries in Washington and California alone have averaged more than 1 million trees.

Innovation, opportunity

Although some observers of the cherry industry may view this quick growth as cause for concern, the reality is that recent innovation throughout the industry has created opportunity for larger crops to be successfully marketed. Thanks to a decade of advancements in the orchards, packing houses, marketing systems, and merchandising approach, demand for cherries has outpaced supply. In fact, changes like improved packaging; growing larger, firmer cherries with more shelf life; extending the season with new early and late varieties; and advancing the quality of Rainiers to become a major fresh-market variety, have created an environment where many retail accounts now view cherries as the key to their summer season. This is especially true for strong cherry retailers, where cherry sales can account for 10 percent of their entire produce department sales in July.

Despite the recent success, big questions still remain: Can the industry sustain the production and marketing innovations that led the way the last ten years? Can the industry continue to grow profitably?

Tipping point

In many respects, the cherry industry has reached a tipping point. The innovations of the past have created a critical mass. The category is viewed positively by retailers and consumers alike, and opportunities exist for future expansion. That said, to be successful going forward, the cherry industry must continue to expand demand. This is a huge task that will require a focused, industrywide effort and major investment.

Changing customers’ buying habits for any product is difficult, and for a luxury item like cherries, the task will be no different. Expanding the cherry market within the United States will require reaching and making customers out of the 70 percent of U.S. households that do not currently purchase cherries. Additionally, it will be important to encourage current cherry customers to buy more frequently than twice a year and increase their typical per-purchase size.

To achieve these objectives, the industry must continue to invest in strong promotional programs that reach out directly to consumers and keep retailers focused on the value of the category.

Abroad, strong export market growth in countries like Canada enabled the Northwest cherry industry to expand exports from 22,700 tons in 1999 to 32,500 tons in 2005. Going forward, the industry must seek out and take advantage of opportunities in potential growth markets like Korea, China, and Mexico to continue to expand export sales.

Although the success experienced within the cherry category over the last decade bodes well for the future, the industry’s ability to expand future demand for cherries will be the key to profitable growth.