Apple pricing will be challenging this year
Starting right is important.
U.S. apple growers will market a smaller-than-average-size crop this year, but pricing the product won’t be easy, and there are penalties for making the wrong choices early in the season.
“Don’t lose October,” admonished Steve Lutz, executive vice president of the Nielsen Perishables Group, speaking to attendees at the U.S. Apple Association Outlook and Marketing Conference in Chicago in August.
He recalled 2008, when high apple prices in October turned consumers off and distorted the flow of apples well into the spring of 2009.
Growers, naturally, want to get as much for their apples as they can, but they don’t want high prices to discourage apple consumption in the future or leave apples unsold at the end of the season.
The U.S. apple crop is currently estimated by the U.S. Department of Agriculture to be 190.2 million bushels and by the U.S. Apple Association to be 202.1 million bushels. The USDA says that 135.7 million bushels will come from Washington State, while the East and Midwest crop will be much smaller because of severe freezes in April.
If the USDA forecast is correct, the U.S. crop will be down 14 percent from last year’s 224.3 million bushels. The 2011 crop was exactly on the five-year average.
Consumers are under stress, Lutz said. Food prices are rising, and consumers are considering price more strongly in their buying decisions than they did a year ago, he said. That shows up in produce buying patterns for the last year. Consumers are responding to paying more by buying less or making switches and tradeoffs. Apples are particularly sensitive to pricing, he said.
USDA statistics indicate that the season-average price for all apples to growers was 29.2 cents a pound in 2011, four cents higher than 2010. But consumers ate fewer apples and apple products, with per capita consumption in 2011 falling to 43 pounds, five pounds less per person than in 2010. Fresh apple prices to growers averaged 38 cents a pound last year, 17 percent higher than the year before.
Grapes are available as an alternative fruit this fall. “Grapes stand ready to steal your promotions, and citrus will be a factor as well,” Lutz said.
Promotions didn’t give much lift to apple sales last year, and that was true for all produce. Retailers offered fewer deals; promotions didn’t offer consumers much price savings and did not produce much boost in volume, he said. Promotion support from retailers is declining, Lutz added.
He predicted that retail promotions this year will be fewer. Promoted prices will be almost as high as regular prices and will generate smaller lifts to sales volume.
Consumer confidence has been flat since the first quarter of 2008, when it plunged from confident to pessimistic. It reached a low in the third quarter of 2011, rose quite rapidly in the first quarter of this year, then fell again.
Consumer behavior can sometimes be hard to interpret. While many consumers are showing price concerns—buying less when the price is higher and choosing 20-percent-cheaper private store labels over higher-priced brands—others are paying more to buy local or organic produce and choosing more convenience items, Lutz said.
“Convenience items continue to gain traction with consumers, showing strong growth despite rising retail prices,” he said. •