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Changes in the fruit industry are related to changes in the global economy, says Terry Bacon of Sun World.

California’s stone fruit industry is in a deep crisis. Growers and marketers are being squeezed out of business by rising costs, overproduction, stagnant prices, water shortages, and the difficulties of getting financing, Terry Bacon said during the International Fruit Tree Association’s annual conference in Germany.

It’s estimated that more than 7,000 acres of stone fruit will be pushed out or abandoned this year in California’s Central Valley.

Bacon, director of variety development at Sun World International, LLC, in Bakersfield, California, said the challenges that California stone fruit growers face are similar to those faced by other fruit growers around the world, because changes in the fruit industry are related to changes in the global economy. He quoted author Thomas Friedman, who pointed out in his book The World is Flat, that technology and free-market capitalism are creating a global economy and supply chain, and that flattening puts pressure on the supply end.

Technology and the world economy are changing at a faster rate than ever before, Bacon said, so growers need to position themselves to deal with change. He suggested several ways to do this:

Get bigger through collaborations

Food retailers have been adapting to the flattening economy by consolidating. In the mid-1990s, the top five food retailers controlled less than 20 percent of the retail market. Today, the top five control over 50 percent of the market, and their ability to force price concessions is stronger than ever. Even more significant is the change in retail pricing philosophy from margin markups to space utilization.The produce section has not grown significantly, but the number of products has doubled in the last 15 years. Pricing based on space utilization means that retail prices are often unrelated to the prices growers receive.Growers and marketers must also get bigger, with global collaboration between grower, marketer, and buyer, Bacon suggested. Retailers want a competitive edge and are seeking out premium varieties and brands. Sun World has found that when marketers sell a branded variety of premium quality, retail buyers become excited about it, and it becomes a collaborative effort. It can also work in reverse when a buyer knows a brand or variety and gets marketers and growers on board to supply it.

Watch emerging markets

The export picture is changing with the growth of the middle class in regions such as China, India, Russia, Mexico, and South America. Along with this has been an explosion of supermarkets replacing wet markets and other traditional markets. In China, the supermarket sector grew from zero in 1990 to more than $100 billion in revenues in 2006. Supermarkets tend to have more sophisticated cold storage and sell a higher percentage of imported fruit.These emerging markets are good for counter-seasonal niches and for products they can’t grow well, Bacon said, though they are not dumping areas for standard commodities. He urged producers to try to become established in emerging markets as quickly as possible.

Get certified

Certification requirements relating to food safety, quality, and traceability, as well as treatment of labor, continue to increase. Typically, they’re viewed as intrusive and difficult to implement, Bacon said, but growers cannot afford to ignore them. Even if the markets they represent are only a small percentage of those they serve, they generally open doors to business, and producers need to be ready for opportunities.

Adopt new products and marketing ideas

The fresh-cut industry, for example, has grown from about $3 billion in sales in the 1990s to $16 billion today. McDonald’s alone sells more than 50 million pounds of cut apples in its salads and fruit-dipper cups. Value-added products can take on many forms, Bacon said. Sun World, which packs a selection of different colored grapes in a clamshell, has been testing a rainbow plum pack.He expects to see more branding in the fresh-cut and foodservice sectors in the future. “Someday, I’m sure we’ll see the Jazz Apple Chicken dish, or some other brand associated with a dish,” he said. Leveraging one brand with a stronger brand is a good marketing strategy that Pink Lady has exploited by offering coupons for Sundowner apples with purchases of Pink Lady.Web sites are a good way to reach the consumer and get your brand noticed on a broad scale for a small investment, he added.

Incorporate new management and planting systems that make sense

Often, stone fruit growers continue using traditional management systems and old varieties, in spite of the changes going on around them. When updating to a new system, find one that works for you and makes sense for your market. “I’ve seen systems that look ugly but work well, and I’ve seen systems that look elegant and high-tech but cost far too much,” Bacon said.Typically, a grower will want to start with an improved premium variety, and then adopt a production system that encourages early high returns, improves labor efficiency, and encourages good light interception, uniform quality, and large fruit size. Consider the possibility of mechanization, even if you don’t incorporate it right away.When positioning yourself for the future, finding ways to improve the value of your product and enhance the consumer’s eating experience is a better objective than reducing costs or increasing yields, he said.

Use premium managed varieties

Typically, managed programs are established with the goal of enhancing and protecting the value and longevity of a variety and controlling production and quality from the grower to the customer. It usually begins with a special variety that, with the help of good marketing, will create demand-driven premiums instead of being a commodity.

Apple varieties are good candidates for managed systems, because they often have a unique look, flavor, or texture, and can be sold over a long period to take advantage of marketing opportunities. Soft fruit varieties, however, are often developed just to fill a ten-day window. Sun World is now branding a series of similar varieties with the idea that the buyer can buy, for example, Black Diamond brand plums throughout the season.

When looking for a managed program, make sure it has the resources, discipline, and will to limit plantings in each region, to prevent overproduction. The key to a good managed program is long-term and relentless marketer support, with a clever and consistent marketing theme, eye-catching logo and packaging, and a strong budget for photography, trade ads, and press releases. It should also have a generous budget for technical support, Bacon said.