Imports eat into canned pear market
Overseas producers are developing new products and packaging.
Cheap imported pears from China and Thailand are taking an increasing bite out of the market for canned pears in the United States. The U.S. pear industry's share of the domestic market dropped from 94 percent to 84 percent between 2002 and 2006, according to a report published by the U.S. International Trade Commission.
The report cites several reasons for U.S. processors' loss of market share, such as:
- Most U.S. processors did not gear up to produce pears in the new types of packagingsuch as single-serve cups and plastic jarsthat many consumers now prefer;
- Thailand and China are able to produce canned foods more cheaply because they produce a variety of canned foods in their factories, which increases efficiency and reduces unit costs;
- Costs for raw fruit and labor are less expensive in competing countries.
The U.S. House of Representatives called for the ITC investigation at the urging of the California and Pacific Northwest pear industries and the California canned peach and fruit cocktail industries, which have been concerned about competition from cheap imports. The ITC's report provides an overview of the canned fruit industries in the United States, China, Thailand, and Europe, and compares their strengths and weaknesses.
Brendan Lynch, ITC trade analyst for agriculture and fisheries, presented highlights of the report during Pacific Northwest pear industry meetings in Portland, Oregon, in May.
The value of global exports of canned pears totaled almost $93 million in 2006, a 70 percent increase from 2002. South Africa and Australia lost global market share, while exports from China and Thailand more than tripled during that five-year period. The major canned pear importers are the United States and the European Union. The United States takes about half of China's total canned pear exports.
The United States is the world's largest producer of canned pears, producing about half the world's total. In recent years, between 65 and 70 percent of the Bartlett pear crop has been processed. Canners are generally large-scale operations employing modern production process.
Currently, there are five canners of Bartlett pears in Washington, and one canner in Oregon. The three largest pear canners in WashingtonDel Monte, Snokist Growers, and Northwest Packingaccount for most of the U.S. canned pear production. Three fruit canners in California process Bartlett pears grown in California.
Although the United States shipped about 13 percent of global canned pear exports in 2006, almost half of them were shipped to Thailand, and most of those were destined for repackaging into retail products and re-export to the United States. However, exports of canned pears to Thailand dropped off in 2007 as Thailand sourced more canned pears from other parts of the world, including China.
Labor costs are higher in the United States than in competing countries. U.S. producers incurred labor costs of 14 cents per kilo of fruit produced in 2007 (6 cents per pound), which represented 15 percent of the total production costs. U.S. factory labor rates were the highest among major producers at $20 an hour, compared with about $1.50 an hour in China. The average field-wage rate in the United States ($14.30 an hour) was the second highest among global producers.
U.S. processors are competitive with foreign processors in terms of other production costs, such as for energy, packaging, capital, storage, and regulatory compliance. However, fixed costs for U.S. canners can be high, as some firms process fruit for only a few months a year. In contrast, the fruit canning industries in Europe, Thailand, and China handle a greater variety of fruit and operate for longer periods of the year, reducing their unit costs.
In the United States, a large domestic market gives U.S. canners a potentially important competitive advantage. However, canners may not have fully realized this advantage over foreign suppliers, the report states. The U.S. market is made up of three segments: retail, institutional, and the U.S. Department of Agriculture. While consumption of traditional canned fruit products (in metal cans) has been declining, demand for newer products has been growing, particularly by schools and hospitals that previously bought traditional products. A substantial portion of the newer products are supplied by imports. Snokist has been packing pears in single-serve plastic cups since 2006.
Growers of processed pears in the United States receive no direct government price support, as their counterparts in Europe do, but the competitiveness of the U.S. canned pear industry is enhanced by U.S. government purchases for federal food programs and school lunches. In 2006, USDA canned pear purchases totaled $20 million.
China is the world's leading producer of fresh pears, producing 12 million metric tons in 2006, which was 61 percent of the world total. Most of its production is made up of varieties unsuitable for processing. However, it has a substantial supply of crunchy pears, mainly snow pears, for canning. Processors pay about 5 cents per kilo (2.25 cents per pound) for snow pears, which gives China a substantial cost advantage.
Canned pear production in China increased by 55 percent between 2002 and 2006. The growth has been driven by sales of these low-cost snow pears, which are sold mainly through dollar stores and institutional outlets, such as prisons, hospitals, and schools in the United States. Chinese pears accounted for 60 percent of the U.S. canned pear imports in 2006, with Thailand accounting for an additional 20 percent.
Wages for orchard workers in China were reported to be about $2 a day in 2006. Wages for cannery workers were reported to be between $133 and $266 per month before benefits. Companies generally provide workers with dormitories and canteens. With labor supplies short and wages in canneries rising by about 20 percent annually, fruit processors are expected to introduce more mechanization. Processors are developing new products and packaging, such as plastic cups, glass and plastic jars, gel packs, and different fruit combinations.
Canned fruit processors in China receive no direct government aid, though the Chinese government eliminated agricultural taxes on agricultural households in 2005. Taxes were typically 8.4 percent of the value of production.
China's competitive disadvantages include small-scale farms, small-scale processors, a small domestic market in China, and relatively little use of machinery. China has about 40 canneries producing fruit for export, along with other products, including vegetables and meats. Most are in the provinces of Shandong, Hebei, and Zhejiang.
Although Thailand produces very few fresh pears, it has become a major exporter of canned pears to the United States. Dole Thailand, Ltd., a subsidiary of the Dole Food Company produces the vast majority of the country's canned pears. Dole's pear processing operations in Thailand import canned fruit in institutional-size containers primarily from China, the United States, and South Africa, and repackage it into smaller plastic containers for export.
Thailand's competitive advantages are its history of canning tropical fruit, its inexpensive labor, and the technological investments provided by Dole Food Company. Cannery wages range from about $4.73 to $5.35 per day. However, labor accounts for a small share of total processing costs because of widespread automation in Dole's plants. Its competitive disadvantages are its dependence on imported canned fruit for repackaging and its distance from major markets.