Marketing Fruit Crops in the United States

1. Marketing Fruit Crops in the United States Wen-fei Uva, Ph.D. Senior Extension Associate Department of Applied Economics and Management Modified by Georgia Agriculture Education Curriculum Office June, 2002

2. Presentation Outline • Situations of Fruit Production in U.S. and New York • Consumption Trends • Marketing Systems • Marketing Risks and Opportunities

3. Situations of Fruit Production

4. Fruit and Tree Nuts Production in the United States • $11.6 billion Farm Production Value in 2001 • 122,892 fruit farms (1997 Census of Ag.) • 5.3 million production acres (1997 Census of Ag.) • 7% of farm receipts (inc. livestock and crop) • 14% of total crop sales in the U.S. • $11.9 billion in 2000, $12.0 billion in 1999 • Low receipts for citrus, apples & cranberries

5. Major Fruits Produced in the U.S. • Orange, Grapes, Apples and Strawberries are the four major crops dominate the industry (61%) Source: Economic Research Service, USDA, 2002, Fruit and Tree Nuts Outlook

6. Regional Specialization of Production Source: Economic Research Service, USDA, 2002, Fruit and Tree Nuts Outlook

7. Hawaii is the only state producing bananas • CA produces almost all of the canning peaches • FL processes 95% of their oranges • CA-AZ producers market 75% of U.S. fresh oranges, • WA apple production Challenge: Balancing Marketing Power

8. Trends in New York Fruit Production (Millions of Dollars) Source: New York Agricultural Statistics Services

9. Relative Value of New York Fruit Crops Total Fruit Production - $179 million, 2000 Source: New York Agricultural Statistics Services

10. Characteristics of Fruit Marketing From Producer’s Perspective • Perishability - “Sell it or smell it” • Product Bulkiness - Processing facilities • Sensitive to Price & Quantity Risks - Supply & demand • Seasonality - Global sourcing

11. Consumption Trends

12. Per Capita Consumption of Fruits and Vegetables Total per capita use of fruits and vegetables rose 24% from 573 pounds in 1970 to 711 pounds in 1997

13. Changes in Per Capita Consumption, 1970-99

14. Away-From-Home Consumption are Up • About 50% of food spending in U.S. on meals away from home (2000) • Spending increases during 1990’s (adjusted for inflation) • Meals away from home: 25% • Food at home: 5% • Product exposure - A good target for new products

15. American Food Consumption Trends • Year-round availability • “Natural”, “Organic”, “Wholesome & Healthy” - Functional Food • Convenient products

16. American Food Consumption Trends • Something New - “Exotic” and “Ethnic”

17. American Food Consumption Trends • Packaged well- image, food safety

18. American Food Consumption Trends • Branding - Private Labels and National Brands

19. Retailers Responded with Bigger and Better Produce Departments

20. Fruit Marketing Systems

21. Fresh Market Channels for Fruit Growers • Wholesale • Packer/shipper • Wholesale distributor • Auction • Sales agents • Brokers • Terminal markets • Retailer distributors • Food service outlet • Export/Import • Retail • Farm stands • Pick your own • Farmers’ Markets • Mail order/E-commerce • CSA

22. Processing Market Channels for Fruit Growers • Sell to proprietary processors • Market through processing cooperatives • Custom processing for the grower • Grower’s own processing facilities

23. Major Marketing Channels for Fruits in the U.S. Exports Imports Shippers & Packers Retail Outlets Consumers Wholesalers & Distributors Growers Institutions & Food Service Outlets Processors Brokers Direct Marketing

24. Dynamics of the U.S. Fruit Marketing System Exports Imports Shippers/ Packers Retail Outlets Wholesalers & Distributors Consumers Growers Processors Institutions & Food Service Outlets Brokers Direct Marketing

25. Total Apple Juice Imports Vs. Price 100 10 90 9 80 8 70 7 60 6 $ PER CWT MILLION BUSHELS 50 5 40 4 3 30 Million Bushels 20 2 Dollars Per Gal. 10 1 0 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 YEAR Trends Influencing Fruit Marketing • Globalization

26. Imports - Fruits: $4 billion (2000) • Top four fruit imports • 1. Bananas; 2. Fresh grape; 3. Fresh & frozen pineapple; 4. Fresh apples • Export • Fruit Exports at $3.4 billion in 2000 • Fresh Fruit -- 62% • Destinations • 1. Canada , 2. Japan, 3. Taiwan, 4. Mexico, • * Export to India and Australia increased -- Trade agreement for allowed U.S. grapes to market

27. Sales of Top 8 Chains as a % of Total Grocery Sales • Growing concentration in the retail sector

28. Continuous concentration of retail buying • Fewer produce buyers in 2001 • Centralized buying • Buying more from top 10 suppliers

29. More Contracting

30. Changing retail marketing practices • Growing category management(58.5% in 2001) • Establishing and enforcing performance guideline with produce suppliers (70% in 3-5 yrs) • Looking to share responsibilities

31. Sales of Top 10 & Top 20 WA State Apple Shippers • Changes in Wholesaling

32. Depressed grower/commodity prices

33. Changes in consumer attitudes • Need for alternative marketing strategies Survival of producers is often atRISK!

34. Crisis Risk Opportunity

35. How Can Farmers Get their Fair Share??

36. Changing Opportunities and Challenges in Fruit Marketing • Consumer can have direct input and interaction with any point of the supply chain • Middleman’s changing roles - Become the Preferred Supplier • Food Safety issues • Effective and efficient market tools- To satisfy the needs of specific customer sectors • Multiple interfaces - transaction efficiency • Barriers of Entry

37. Challenges and Opportunities for the NE Growers • Market fragmentation -- Small compared to major fruit producers, but many are too big to depend solely on direct marketing • Nearness to market- Blessing or Curse?? • Food travels an average of 1,300 miles before reaching the consumer’s table in the U.S. - Can we become the preferred supplier for the NE marketers and consumers? • Better Marketing is Critical - Collaboratively • Be Small Do Not Have to Look Small!!

38. Differentiation -- Meeting Customer’s Needs and Wants Mega Player Niche Player, or Former Player? • Max Brunk (1983) • Marketing is Not Just Selling! • To Market is to Create Value; • To Offer a Service Which Someone is Willing to Pay.