Quality is Washington’s niche
It can’t compete as a low-cost provider.
Scott Marboe (left) and Steve Reinholt with the World Trade Club’s 2006 Trader of the Year Award that Oneonta received.
In the crowded global apple market, where does Washington fit?
Washington State producers need to focus on producing high quality apples, says Steve Reinholt, export sales director for Oneonta Starr Ranch Growers in Wenatchee, which ships apples and other fruits to 45 countries around the world.
While there’s still a market for low grades, the return usually doesn’t cover the Washington grower’s production costs, Reinholt said.
The international marketplace has evolved in the past few years, with the availability of cheap fruit from China and other growing regions that have much lower production costs than Washington. “They’re going to take away a certain amount of the apple-buying dollars in markets that don’t have strong currency growth, and where the individual doesn’t have a lot of money,” Reinholt said. “But, really, there hasn’t been anyone arise that can do quality the way we can do out of Washington. We’re never going to be a low-cost provider. The upper end of the market is what we should be shooting for. That’s the niche we need to fill.”
Because of the drop in demand for low-grade apples from Washington and a strengthening of the domestic market, Oneonta is exporting a smaller proportion of its fruit than it has in the past. Fifteen to 20 years ago, 45 percent of Oneonta’s business was overseas. Now, less than a third of its business goes to the export market.
People around the world will pay a higher price for quality, Reinholt said. For some markets, quality is a dark red apple that they can’t grow. For others, quality has to do with internal quality. Part of it is the American image. Washington apples are viewed as a luxury and are sought after by the increasing numbers of middle-class consumers around the world.
Though the quality of fruit coming from other areas, such as China, is improving, Reinholt believes Washington still has an edge in producing quality fruit because of its long experience and unique climate—a climate that’s particularly conducive to growing high-quality Red Delicious apples.
And Red Delicious is still big in some markets, points out Scott Marboe, Oneonta’s director of marketing. At times, Washington has produced more Red Delicious than it could market profitably, but in recent years, poor-coloring strains and orchards in areas that don’t grow high-quality Red Delicious have been removed.
As Red Delicious has declined as a percentage of the total crop, supply and demand are more in line.
“It’s a big part of our export program,” he said. “That’s one apple that grows better in Washington than anywhere else. I think that perception is still there in the world marketplace, and they look at Red Delicious from Washington State as the quality Red Delicious worldwide.”
But at the same time, export buyers want more choices. In many emerging markets, such as Russia and India, local food markets are being replaced by Western-style retail chains that want more diversity on their shelves.
“Now that they have Western produce departments, they’re gobbling up fresh produce as fast as they can get their hands on it,” Reinholt said. “I see the global fresh fruit industry growing very rapidly, and I see no signs of it slowing down.”
This has increased demand for mixed loads from Washington. Oneonta exports large volumes of Gala and Fuji, and has been introducing the long-storing Cameo towards the end of the season.
Marboe does not see New Zealand or Chile as competitors because they’re in the opposite season. In fact, Oneonta has a partnership with a New Zealand company and brings apples into the United States from the Southern Hemisphere when U.S. supplies of Gala are winding down.
“That’s true global partnering, and we have all benefited from it,” he said.
Reinholt said Oneonta’s customers are large chain stores that want year-round supplies of the freshest product available. Out of the 8.4 million boxes of apples Oneonta sells each year, about 6 percent originate in the Southern Hemisphere.
Oneonta also ships about a half a million boxes of fruit from foreign countries to its export customers. For example, at a customer’s request, it might supply pears from China as well as Washington apples.
Over the years, Washington orchardists have become better growers and fruit quality is improving, Marboe observed. “The good growers have decided, ‘I’m going to stay in this business. This is my life. I’m going to educate myself. How are they growing fruit in New Zealand? What does the market want?’
“I think the growers are getting better at what they’re doing. They’re bringing a better product to the warehouse, which in turn allows us to bring a better product to the customer. That better product that’s going to the marketplace is helping everybody. The whole industry benefits.”
Reinholt said growers need to be diversified and not put everything into one variety or one market segment. They need to have the best strain of each variety and need to be constantly striving to improve their overall portfolio, which might mean diversifying into stone fruits, cherries, or pears. They need to grow a product that can be shipped overseas as well as sold on the domestic market, so they can cover as many of the available markets as possible.
Reinholt said Oneonta’s real customers are the growers. “Those are the ones we go through all these gyrations to take care of,” he said. “As an industry, everyone needs to remember that we have to take care of our buying partners…but without the growers, we don’t have anything to sell.