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. PerishabilityPerishability - “Sell it or smell it” Product BulkinessProduct Bulkiness - Processing facilities Sensitive to Price & Quantity RisksSensitive to Price & Quantity Risks - Supply & demand SeasonalitySeasonality - Global sourcing Characteristics of Fruit Marketing From Producer’s Perspective

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

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

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

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

18. American Food Consumption Trends ¢Branding - ¢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 WholesaleWholesale –Packer/shipper –Wholesale distributor –Auction –Sales agents –Brokers –Terminal markets –Retailer distributors –Food service outlet –Export/Import RetailRetail –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. Growers Exports Imports Wholesalers & Distributors Brokers Consumers Retail Outlets Institutions & Food Service Outlets Processors Direct Marketing Shippers & Packers

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

25.  Globalization Trends Influencing Fruit Marketing

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

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

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

29. More Contracting

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

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

32.  Depressed grower/commodity prices

33.  Changes in consumer attitudes  Need for alternative marketing strategies Survival of producers is often at RISK!

34. RiskOpportunity Crisis

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’sMiddleman’s changing roles - Become the Preferred Supplier +Food Safety +Food Safety issues +Effective and efficient market tools +Effective and efficient market tools- To satisfy the needs of specific customer sectors +Multiple interfaces +Multiple interfaces - transaction efficiency  Barriers of Entry

37. Challenges and Opportunities for the NE Growers Market fragmentationMarket fragmentation -- Small compared to major fruit producers, but many are too big to depend solely on direct marketing Nearness to market- Blessing or Curse??Nearness to market - Blessing or Curse?? Can we become the preferred supplier for the NE marketers and consumers?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? - CollaborativelyBetter Marketing is Critical - Collaboratively Be Small Do Not Have to Look Small!!Be Small Do Not Have to Look Small!!

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