Value Added Apple Products: A Marketing Study

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Value Added Apple Products A Marketing Study

• Agribusiness Economic Outlook Conference
• December 14, 1999

Modified by Georgia Agriculture Education
Curriculum Office June, 2002
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Overview

• Background
• Inter-departmental Research Project
• Marketing and Economic Analysis Research Plan
• Processor Survey Results

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US Per Capita Apple Consumption 3-Year Averages
-- 1978-1998
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US Per Capita Processed Apple Product
Consumption 3-Year Averages -- 1978-1998
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Changes in US Consumption 1978-1998

• Fresh Apples 9.4
• Processed Apples 60.8
• Juice 109.7
• Canned -3.9
• Dried 11.7
• Frozen 52.0

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US Per Capita Consumption Canned Apples and Fruit
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US Per Capita Consumption Apple and Fruit Juice
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US Per Capita Consumption Frozen Apples and Fruit
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US Per Capita Consumption Dried Apples and Fruit
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Apple Prices, 3-Year Averages 1977-1997
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Processing Apple Prices, 3-Year Averages
1977-1997
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Prices Changes 1977-1997

• Fresh 55.4
• Processing 30.1
• Canned 39.7
• Juice 17.0
• Frozen 49.2
• Dried 12.1

• Inflation 138.1

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Inflation Adjusted Price Changes 1977-1997

• Fresh -34.7
• Processed -45.4
• Canned -41.3
• Juice -48.6
• Frozen -37.3
• Dried -52.9

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US Apple Production (5-Year Rolling Averages)
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Apple Production US, China, World
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Processing Apple Production
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Apple Utilization US and NY, 1997
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Marketing Challenges

• Raw product supply
• Mature markets for finished products
• Environmental concerns
• International competition
• Consolidation
• Profitability
• Labor

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MARKET SHARES FOR U.S. GROCERY CHAINS
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TOP 10 GROCERY DEALS IN 1998
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TOP GROCERY DEALS IN 1999
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EVIDENCE OF CONSOLIDATIONWHOLESALERS
Sources 1 Private Label, March/April
1999 2 Food Distributors International
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Development of an Environmentally Sound, More
Profitable System for Production and Marketing of
Value Added Processing Apple Products in the
Northeastern United States

• Project Goals
• Develop a more environmentally sound,
  cost-effective apple production and pest
  management system
• Stimulate growth of apple processing industry
  with new technologies that support commercial
  production of diversified, high value apple
  products
• Assess economic impacts, marketing potential, and
  consumer reactions to new products

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Project Participants

• Entomology
• Harvey Reissig
• Art Agnello
• Plant Pathology
• Wayne Wilcox
• Horticulture
• Terence Robinson
• Steve Hoying

• Food Science
• Cy Lee
• John Roberts
• Agricultural Economics
• Brian Henehan
• Jerry White
• Kristin Rowles

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Marketing Economic Analysis Objectives

• Economic analysis
• New production systems
• Marketing analysis
• Marketing opportunities
• Consumer acceptance of new products

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Economic Questions

• What are the costs of the new production systems?
• Are the new production systems economically
  feasible in the processed apple industry?

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Marketing Questions

• What is the condition of current markets for
  processed apple products?
• Where are the best, new marketing opportunities
  for processed apple products?
• What are the characteristics of industry vitality?

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Marketing Questions

• How do current consumer trends affect the
  industry?
• What do consumers want in new processed apple
  products?

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Recent Marketing Research

• Industry overview
• Competitive analysis
• Processor survey
• Universe of products
• Consumer trends
• New product evaluation
• Advisory Council

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Marketing Research Plan

• Focus Groups
• Consumers
• New products
• Preferences
• Chefs
• Surveys
• Retail food buyers
• School foodservice

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Marketing Research Plan

• Foreign markets
• Costs of production
• Case studies/Benchmarking
• Apple industry
• Other industries

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Processor Survey

• Interviewed 21 processors, July to September,
  1999
• 15 from New York State
• 2 from Pennsylvania
• 1 from Massachusetts
• 2 from Virginia
• 1 from Vermont

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Processor Products

• Apple Products
• Applesauce
• Apple Juice
• Cider
• Hard Cider
• Frozen Apples
• Cider Vinegar
• Pie Filling
• Canned Apples
• Apple Butter
• Dried Apples
• Baby Food

• Other Products
• Juice drinks/ades
• Spring water
• Iced tea
• Frozen fruit
• Fresh fruit

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Processor Apple Purchases

• 34.6 million bushels purchased per year
• 12.4 million bushels purchased from NYS growers
  per year

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Processors Customers

• Retail food chains (10)
• Brokers/wholesalers (9)
• Foodservice (5)
• Independent retail stores (3)
• Direct marketing (3)
• Bakeries (3)
• Food processors (3)
• Government (3)

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Processors Purchasing Activity

• Direct from growers (15)
• Use brokers (6)
• Co-op (2)
• Other factors
• Buy in bulk trailers only
• Track pesticide records
• Diverse geographic range
• Grow our own apples
• West Coast apple prices
• Year round

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Preferred Suppliers

• Long-term relationships
• Loyalty
• Honesty
• Dependability
• Quality
• Pesticide records

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New York State Factors

• Electric rates
• Proximity to growers
• Freight
• Size of crop
• Long-term relationships
• High acid?

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Major Strategic Challenges

• International trade
• West Coast competition
• Labor availability
• Loss of growers and processors
• Lack of investment in marketing
• Consolidation of customers
• Oversupply
• Environmental regulation

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Technology

• Nothing revolutionary on the horizon
• Packaging innovation
• Need for better storage to support year round
  operation

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Processors Outlook

• 8 Negative, 4 Neutral, 2 Positive
• Concerns for future
• Profitability
• Oversupply
• Foreign competition
• Lack of innovation
• Stiff price competition
• Consolidation
• Productivity