With more than 40 percent of his acreage in the New Zealand apple varieties Pacific Rose and Jazz, Scott Smith admits he’s taken a big gamble. But planting new varieties has been his strategy for surviving in the Washington State tree fruit industry as a small grower and packer.
Smith’s company, Smith & Nelson, in Tonasket, just 20 miles south of the Canadian border, is one of few remaining fruit packers in the area. Thirty years ago, there were more than 80 packing houses in north central Washington, with three in Tonasket alone. Today, there are barely 20 in the region.
For many years, producers in the northern districts earned a premium by producing high-quality stripey Red Delicious for the export market. But as production grew, premiums shrank, and the Asian financial crisis of 1997 plunged many producers and packers into financial difficulties.
Smith & Nelson’s larger neighbors, Chief Tonasket and Regal Fruit Company, which had been building storages and buying equipment to handle larger volumes of fruit, lost growers and tonnage. Both went out of business about 12 years ago.
“I think we survived partly because we had invested in Galas,” Smith said. “We hunkered down and tried to survive by upgrading the orchards. That’s where we still are.”
The business was established by Smith’s grandfather Harold, who moved to Washington from New York in the early 1900s. He worked in packing houses in Quincy and Wenatchee before homesteading in Tonasket. Several people were planting orchards there, so Harold set up a small warehouse in town where he could draw on his experience and pack apples for his neighbors.
Smith & Nelson was incorporated in 1928. “Doc” Nelson, a veterinarian, was a part-time orchardist but, more importantly, probably one of the few people in town who had two dollars in his pocket to invest, Smith said.
Harold’s son Monte (Scott’s father) joined the business, as did Scott after graduating from Washington State University in 1972 with a bachelor’s degree in business administration and agricultural economics.
Scott started out in sales, but when his father retired in 1992, he saw a need to have someone else handle the sales so he could run the company. Retailers were consolidating, and a small company like Smith & Nelson could not take care of the year-round needs of the large supermarkets. NuChief Sales in Wenatchee took over the sales, and continues to represent the company today.
In the late 1990s, recognizing that standard apples, such as Red Delicious, were becoming commodities and that margins were too thin to make a profit growing them in small volumes, Smith became interested in the emerging club varieties.
In 2001, he and Blair Losvar, a grower and partner in nearby Loomis, took a trip to New Zealand to look at the new apple varieties developed by ENZA. They became part of a limited group of growers in Washington State franchised by ENZA to produce Pacific Rose and Jazz. The fruit is marketed by the Oppenheimer Group (now known as Oppy) and Rainier Fruit Company in Yakima.
Pacific Rose turned out to be a good variety for export to Asia because of its attractive red color and sweet flavor. It’s taken some time to establish Jazz in the U.S. marketplace, but Smith said it’s reached the point where he should be able to reap the rewards from the effort and investment that have gone into the plantings.
“Now, Jazz are being pulled through the marketplace because of their desirability. That’s really the key to a new variety—for the consumer to be able to pick up that fruit and find it consistent every time, and find value in terms of taste and flavor,” he said.
“It was a learning process and we’re still going through that,” he added. “One of the challenges—and the key to success—for any new variety is marketing. If you’re going to start a new variety, you’re going to have to put money up-front to be successful. There’s no other way.”
Smith, a member of the advisory committee for Washington State University’s apple breeding program, said there’s debate in the industry about how to make new varieties that come out of the program available to all Washington growers and at the same time ensure that some entity takes the lead in marketing.
On the one hand, the retail chains want consistency and volume—a product they can market every day. On the other hand, they all would like something new. But they would like new products to be successful before they get them, which is almost impossible, Smith noted.
“And for us, as growers, to put out $20,000 to $30,000 an acre for a high-density block of something and not be assured you’re going to get your money back—that’s very risky,” he said. “That’s where we are as an industry today. That’s why you see a lot of people more concerned about bins per acre with the established varieties they have, because the cost of these new plantings is very high and the risk is, I think, considerable.”
When it comes to volume per acre, Smith knows he can’t compete with growers who farm on expansive tracts of land in Washington’s Columbia Basin, where the virgin ground is rich and consistent and the trees are uniform and easy to manage. He’s astonished by some of the yields he hears about, though he thinks there’s a cost in terms of fruit quality from pushing the trees to their maximum productivity.
Smith’s 250 acres of orchards are on picturesque hillsides in various locations and different altitudes, where the ground is rocky and variable. With limited farmable land, orchards are upgraded by grafting or replanting, not expansion.
Though Smith is convinced he can produce fruit with superior flavor that might hold up better in the marketplace, he recognizes that there’s no longer a direct reward from the market for that.
So, what are his rewards? “The advantage we have is what you see,” Smith said, surveying the breathtaking landscape of mountains and lakes. “This is a beautiful place to live. And I feel very good about the fruit we grow. I think we grow the highest quality of fruit you can grow in the state because of where we grow it, and the particular climate and microclimates. If you want profit, you probably want to be growing fruit someplace where you can farm in a larger manner.”
Smith & Nelson is among the smaller packers in the state with annual production of 250,000 boxes.
The Rainier, Skeena, and Sweetheart cherries he grows are packed and sold by Rainier Fruit Company in Yakima. Crane & Crane, Inc., in Brewster, one of the designated packers for ENZA varieties, packs his Pacific Rose and Jazz.
Smith packs the rest of his own fruit and some for local growers. Varieties include Gala, Honeycrisp, Golden Delicious, Granny Smith, and a few Red Delicious for export, as well as Bosc, Bartlett, and d’Anjou pears.
He enjoys the packing side of his business, but says one of the biggest challenges he faces is the multiplicity of food safety requirements. His wife, Montie, a retired teacher, has taken on the role of food safety director. Another challenge is the high cost of packing technology. Smith uses mechanical or manual, rather than computerized, systems, and does very few special packs or euro trays.
He keeps his packing house running for about six months of the year with a crew of 35 to 40 local people.
“We have very loyal people who’ve been working for us for a long time,” he said. “Those people mean a lot to me. There are very few businesses here in these small communities, and we would like to keep operating as long as we can. There are lots of challenges with that process, but when you’re packing good fruit, then it’s fun.”