Grower-owned Tree Top faces daunting competition from low-cost foreign producers, but the Selah, Washington-based organization aims to ride the organic boom to bigger sales and better profits.
That’s one of the messages from Tim Fortier, vice president for ingredient sales, who spoke in December at the annual meeting of the Washington State Tree Fruit Association and who gave further details in an interview with Good Fruit Grower.
As a cooperative, Tree Top buys culled apples and pears from producer-members and turns them into juice or added-value products such as grab-and-go convenience snacks.
Members naturally want higher prices for their culls, but that puts Tree Top at a cost disadvantage with competitors from China and elsewhere. In order to return profit to its members, Tree Top has to hustle to innovate, competing in value-added categories while low-margin juice sales have flatlined. Sounds tough. But then, whoever said the fruit industry was easy?
You get a sense of Fortier’s challenging business environment by looking at the golf posters that adorn his office walls. The fairways of Bandon Dunes in Oregon look inviting, but winds from the Pacific Ocean can drive the best ball bad. Not to torture the metaphor, but anyone selling food products against foreign competition knows about head winds.
Even so, Tree Top faces challenges with certain strategic assets: high quality apples, strong relationships with many of the best-known food makers, a beloved, trusted brand and a powerful “Made in the USA” label that sways many buyers. In recent years, consumer preferences for all-things organic has strengthened Tree Top’s move into higher-priced categories and to consumers who are especially interested in buying from trusted, known producers.
At the tree fruit association meeting, Fortier and his Tree Top colleague, Bryce Godfrey, director of marketing, presented some statistics to illustrate the megatrend that is organic buying by U.S. consumers.
Among the stats:
—Organic represents about 5.3 percent of U.S. retail food sales. Organic fruit and vegetable sales total $15 billion.
—The number of new organic food products is exploding, everything from “spoonable” yogurt packages to energy bars, baking ingredients, baby goods, dog snacks, cold cereals and more. In 2017, 1,312 organic food products were introduced; of that more than 100 were apple-related products.
—Sales of conventional apple juice and conventional applesauce are showing declines while organic products are showing gains, growth by 3 percent for juice and by 10 percent for sauce.
—Nearly every household buys some organic food products. The national average is 82 percent of U.S. households, pushing all organic food sales to nearly $50 billion in 2016.
The premium price for organic remains a barrier for some consumers, but Tree Top said many retailers have strategies to “bridge that gap.” The purchase last year of the Whole Foods chain by online giant Amazon is expected to spur further growth in organic sales by lowering prices and expanding distribution.
With such strong growth in demand for organic food expected through 2020, Tree Top is aggressively pushing the message to growers that it can utilize all organic varieties that are produced, including “ugly fruit.”
Tree Top will introduce new products using organic ingredients and will compete on price to unseat its foreign competitors. You can already see such products as bagged apple chips, packages matching apples with cheese, apple-cinnamon “supersnacks” and protein bars. Organic apples go into dried apple products, fruit powers, fruit purees and fruit concentrates.
Tree Top’s products face competitors from Turkey, Argentina, Chile, New Zealand and China, all selling organic apples and pear products into the U.S. Two years ago, competing with those foreign supplies was daunting — Tree Top was having to pay $450 to $550 per ton for apples. Today, with culled apple prices falling to $150 to $250 a ton, Tree Top saw its position strengthened. That’s helped.
Grower-owned since 1960, Tree Top wants to be the first choice in the market of fruit products. “We’re working hard to grow this business,” Fortier said. •
‘The tide will turn’
TreeTop closed its fiscal year 2017 with disappointing results, a loss of $2.84 million on sales of $375.8 million. That compares with a loss of $1.78 million on sales of $390.8 million the previous year.
“We began the year slowly and, for a multitude of reasons, did not get the fruit needed to run efficiently,” cooperative chairman Jim Divis told members. “We then had our largest plant shutdown as our wastewater system was overloaded from the winter’s heavy snowfall and rain. The six-week shutdown put us further behind, forcing us to run later in the year, and June and July operating inefficiencies ran into the millions.” To add to the problems, the cooperative was trying to rebuild inventory with processing apples that were nearly a year old, “and the result was huge quality and production issues,” he said.
Divis was positive about the year ahead, based on initiatives by new management. “The No. 1 initiative is fruit procurement — it must be improved,” Divis said. He said the Tree Top brand and products remain in high demand, and sales are growing in many categories. “The board is confident the tide will turn.”
The cooperative said the decrease in sales from 2016 was the result of ending two business segments, frozen apples and fresh slice. Tree Top is based in Selah, Washington.
—by O. Casey Corr