Stemilt Growers, Inc., in Wenatchee, Washington, already handles more than twice as many apples as the entire British Columbia, Canada, fruit industry. But company President West Mathison said further consolidation is needed in Washington State to bring profitability back into the apple business.

Stemilt, which ships 11 million boxes of apples annually, has about a 12 percent market share.

"The apple industry is going through a really tough transition," Mathison told growers at the B.C. Horticultural Forum in Penticton this winter. "There is no clear market leader. We need to have consolidation. We have too many sellers trying to sell to too few customers."

In 2004-2005, Washington produced a record crop of 104 million boxes of apples. The average return for all grades and varieties was $13.25 per box. For Red and Golden Delicious, which accounted for 50 percent of the crop, prices did not meet breakeven levels. Yet, retailers sold the crop at high prices, Mathison noted. "We failed, as a marketing community, to deliver that value back to the grower. We need to have more consolidation in the industry to drive more value back to the grower. Consolidation has got to occur."


The retail market has become polarized, with Wal-Mart thriving at one end of the spectrum and specialty retailers, such as Whole Foods Market, Inc., doing well on the other. The retailers in the middle are not growing and are trying to figure out how to compete with the businesses that are on either end. They want to differentiate themselves, and the produce department is the place to do that because produce is the number-one reason people shop at a particular store.

"We have an opportunity to merchandise and market our product in a way that helps the retailer compete in the marketplace," Mathison said. "Consumers are begging for quality, and they’re not getting it on a consistent basis."

To provide value to customers, producers need to have a year-round supply. "If you don’t have anything to sell, you have no reason to call your customer," he said. "In order to be engaged with our customers, we need to be calling them every day."

Producers need a supply of organics, for which demand is growing, and food safety certification. Quality is a given.

The tree fruit industry needs to "decommoditize" apples and work at getting apples into consumers’ hands in places other than the retail store, Mathison said, because it’s unlikely that gaining additional shelf space will move any more volume.

He sees great potential in sliced apples, which are being sold in club stores and fast-food restaurants, as well as grocery chains.

Asked what can be done with Fancy grade apples that don’t meet the highest color standards, Mathison said growers could leave them in the field, though many find it difficult to do that.

Growers should minimize the amount of low-grade fruit they deliver to the packing house, but marketers need to find creative ways to sell the lower-grade fruit that they receive, rather than selling it to a retailer and having it sit on the shelf.

"One of the biggest opportunities in Galas, Cameos, Grannies, and sometimes Pink Ladies is to slice them," Mathison said. "That’s where the best opportunity lies for those lower grades and smaller size ranges. We have to create new products with those."

Asked if apples will ever be sold based on their internal quality rather than external appearance, Mathison said Stemilt has been trying to differentiate some of its apples by guaranteeing a minimum sugar level. The soluble solids levels in the fruit are tested on line using near-infrared equipment to legitimize the claim that the fruit tastes better.

"We’re trying to pay our growers on something other than size or color," Mathison explained.

Stemilt has been offering its Flavor First fruit for a year, but only recently found retailers who were willing to pay a premium for it. Retailers liked the idea, he said, but buyers were afraid to pay more unless it truly was a different product.


To survive and prosper in this industry, producers must continue to innovate, Mathison said, and that can also be done with new varieties.

Stemilt is the exclusive supplier in the United States of the Piñata apple (a European variety previously known as Pinova, Corail, and Sonata). The apple has scored higher than Gala, Fuji, and Pink Lady in taste tests-information that Stemilt shares with retailers.

Last season, Stemilt had 2,000 cases of a late-season Rainier-type cherry called Stardust, a recent release from the breeding program in Summerland, British Columbia. It offered them all to a small retailer in the eastern United States and made point-of-sale cards. The customer was pleased to have an exclusive item.

"People want to feel like they’ve got something different and unique," said Mathison.