A 20-million-box crop? Is that where Pacific Northwest cherry production is headed? Since 1999, shipments of fresh, sweet cherries have increased by nearly one million boxes each year to arrive at the
14.7 million cases shipped in 2006. With new planting continuing apace and more than 8,000 acres of young trees slated to reach fruit-bearing maturity within one to three years, it does not take much to imagine a 20-million-box crop in the near future.
The rapid growth in tonnage brings with it much talk of market saturation and the related concerns of soft prices and unsold inventories. How much production can the market bear? At what point does production volume begin to diminish grower returns? There are no concrete answers to these questions, but a quick look at the domestic retail market suggests much reason for optimism and points towards promising prospects for growth.
Rather than approaching saturation as some fear, it appears that the domestic cherry market is in its infancy. Total market penetration for cherries is just 27 percent. This means that in a given year, less than a third of all consumers are purchasing cherries. For perspective, this number can be compared to that of more ubiquitous produce items such as bananas (85 percent penetration) and apples (80 percent penetration).
With an average of 17,500 shoppers walking the aisles of a supermarket each week, a penetration rate of just 27 percent means that nearly 13,000 potential customers are missed on a weekly basis. That’s 13,000 people in each of the nation’s more than 14,000 grocery stores. Executing this quick calculation brings to light the tremendous potential upside for cherry sales.
So, how do you increase market penetration? How do you convince an extra 40, 30 or even just an extra 10 percent of shoppers to purchase cherries? Certainly, there are a host of challenges, but these challenges are not de facto restrictions on demand growth but rather opportunities to be exploited with efficient and directed marketing efforts.
Perhaps the largest challenge in growing the cherry category is one of the very features that makes the fruit so unique. Mother Nature dictates that cherries are on limited release. Each summer, cherries arrive to market in May and are gone by August. Indeed, there are shipments from production regions in the Southern Hemisphere to whet the consumer’s appetite for cherries during winter months, but the high cost of freight and the impact of extended travel on fruit quality allow only a negligible market presence for off-season fruit.
Generally speaking, as the summer months wind down, cherries fade from store shelves. Cherries will never become a year-round product, the likes of apples and bananas. Cherries will not find their way onto shopping lists week after week like milk or bread.
As cherries disappear from store shelves towards the end of the summer, they leave the collective consumer consciousness as well. Consumers then have eight months to forget about the cherry season, and this inevitably hurts sales. However, rather than maintaining a glass ceiling on cherry sales to which the industry must resign itself, the fleeting nature of cherries is an industry feature that requires targeted and efficient marketing. Like the release of a new feature film, cherries must be promoted and consumer excitement must be built towards the release of the new crop. Marketers must work hard to alert consumers that cherries are in stores and ready for purchase. When combined with the excellent quality fruit for which the Northwest is famous, such marketing efforts can result in greater consumer penetration.
Despite cherries’ limited release, there is no reason that outstanding product and effective marketing cannot move market penetration well beyond 27 percent. Hornbacher’s, a grocery chain in North Dakota, provides an excellent case study of the potential for increased cherry sales.
The Hornbacher’s paradigm
Hornbacher’s has six stores scattered throughout the twin cities of Fargo, North Dakota, and Moorhead, Minnesota. Despite the relatively small size of the chain, the performance of its cherry category is incredible, and truly a departure from the norm. Through full-page advertisements, and the creation of a "Cherries for Charity" campaign, Hornbacher’s latches onto cherry sales during the peak production month of July and wrings more from the cherry category in that one month, than many retailers accomplish in the entire season.
Each of Hornbacher’s six stores sell an average of 3,359 pounds of cherries per week during the month of July. That is more than three times the national average of 932 pounds. Further, cherry sales contribute 14 percent of total produce department sales to Hornbacher’s in July, more than double the national average of around 6 percent.
Although information is not available on the market penetration of cherries in Fargo and Moorhead, Hornbacher’s performance versus the other national indices, puts market penetration well beyond 27 percent and closer to 50 percent. Despite the seasonality of cherries, Hornbacher’s has proven in the Fargo market that it is possible to take a limited-release, seasonal fruit and elevate market penetration to that of a strong year-round fruit. Hornbacher’s category performance is something that marketers and retailers alike are looking to emulate throughout the market.
How high can the market penetration for cherries climb? It is difficult to tell. However, with targeted, efficient marketing and the quality Northwest fruit itself driving impulse sales and repeat business, the industry will soon find out. Maybe 20 million boxes of cherries won’t be enough.