Transcript Opportunities_Challenges_Marketing Fruits_US-W. Uva

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
Presentation Outline
• Situations of Fruit Production in U.S.
and New York
• Consumption Trends
• Marketing Systems
• Marketing Risks and Opportunities
Situations of Fruit Production
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
Major Fruits Produced in the U.S.
• Orange, Grapes, Apples and Strawberries are the
four major crops dominate the industry (61%)
Grapes
23%
Others
36%
Oranges
20%
Strawberries
9%
Apples
12%
Source: Economic Research Service, USDA, 2002, Fruit and Tree Nuts Outlook
Regional Specialization of Production
State
Farm Receipts
% of U.S. Sales
Major Commodities
$ billion
%
1. California
6.75
58.1
Grapes, almonds, oranges,
strawberries, walnuts
2. Florida
1.55
13.2
Oranges, grapefruit, strawberries,
peanuts
3. Washington
1.41
12.2
Apples, pears, cherries, grapes
4. Oregon
0.26
2.2
Pears, cherries, apples
5. Michigan
0.21
1.8
Apples, cherries, blueberries
6. New York
0.19
1.6
Apples, grapes, strawberries
Source: Economic Research Service, USDA, 2002, Fruit and Tree Nuts Outlook
 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
Trends in New York Fruit Production
(Millions of Dollars)
250
Total
225
213
200
210
193
192
203
192
179
176
165
170
159
Apples
$ millions
150
128
133
130
134
139
141
116
100
140
110
109
101
100
Grapes
50
58
42
41
49
40
38
47
37
40
46
39
26
0
1989 1990 1991 1992 1993
Source: New York Agricultural Statistics Services
1994
1995
1996
1997
1998
1999
2000
Relative Value of New York Fruit Crops
Total Fruit Production - $179 million, 2000
Pears
3%
All Berries
6%
Cherries
2%
Peaches
3%
Grapes
26%
Apples
60%
Source: New York Agricultural Statistics Services
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
Consumption Trends
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
500
Vegetable
Pounds (Fresh Farm Weight)
450
400
442
409
418
419
430
448
450
451
455
436
350
300
300
288
276
269
273
284
286
287
Fruit
296
250
200
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Changes in Per Capita Consumption, 1970-99
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
American Food Consumption Trends
 Year-round availability
 “Natural”, “Organic”, “Wholesome &
Healthy” - Functional Food
 Convenient products
1
Items
Packaged Salad
2000
10.40% (1999 - 8.81%)
2
Bananas
7.85% (1999 – 8.68%)
3
Tomatoes
7.05%
4
Apples
6.88%
5
Grapes
6.46%
6
Potatoes
5.52%
American Food Consumption Trends
 Something New - “Exotic” and “Ethnic”
American Food Consumption Trends
 Packaged well - image, food safety
American Food Consumption Trends
 Branding - Private Labels and National
Brands
Retailers Responded with Bigger and
Better Produce Departments
1996
Ave Produce Department Size
Retail Store SKUs (Store
Keeping Units)
Ave Produce Department Share
of Total Store Profits
2001
2006*
3,462 ft2 4,070 ft2 4,368 ft2
430
574
664
14.6%
15.9%
18.7%
Fruit Marketing Systems
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/Ecommerce
– CSA
Processing Market Channels for Fruit
Growers
• Sell to proprietary processors
• Market through processing
cooperatives
• Custom processing for the grower
• Grower’s own processing facilities
Major Marketing Channels for Fruits in the U.S.
Imports
Exports
Shippers &
Packers
Growers
Wholesalers &
Distributors
Processors
Brokers
Retail Outlets
Consumers
Institutions &
Food Service
Outlets
Direct Marketing
Dynamics of the U.S. Fruit Marketing System
Exports
Imports
Shippers/
Packers
Growers
Retail Outlets
Wholesalers &
Distributors
Consumers
Processors
Brokers
Institutions &
Food Service
Outlets
Direct Marketing
Trends Influencing Fruit Marketing
Globalization
Total Apple Juice Imports Vs. Price
10
9
8
7
6
5
4
3
2
1
0
$ PER CWT
MILLION BUSHELS
100
90
80
70
60
50
40
30
20
10
0
Million Bushels
Dollars Per Gal.
YEAR
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
 Growing concentration in the
retail sector
Sales of Top 8 Chains as a % of Total Grocery Sales
65
70
53
60
50
40
30
29
26
26
26
25
'29
'48
'63
'75
20
10
0
'94
'99
'04
 Continuous concentration of retail
buying
 Fewer produce buyers in 2001
 Centralized buying
 Buying more from top 10 suppliers
1996
2001
2006*
Percent of Produce Purchase from
the Top 10 Suppliers
61.0%
68.2%
71.6%
Percent of Produce Purchased
through “Spot Buying”
10.6%
9.5%
9.0%
More Contracting
55
60
43 44
40
34
36
30
percent of
firms
1996
20
15
13 13
8
11
0
0
0%
1-10%
11-25%
>25%
percent of produce purchases
2001
2006
 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
Changes in Wholesaling
Sales of Top 10 & Top 20
WA State Apple Shippers
60
40
20
Top 10
Top 20
0
1986- 1987- 1988- 1989- 1990- 1991- 1992- 1993- 1994- 1995- 1996- 199787
88
89
90
91
92
93
94
95
96
97
98
Depressed grower/commodity prices
Changes in consumer attitudes
Need for alternative marketing
strategies
Survival of producers
is often at RISK!
Crisis
危機
Risk
Opportunity
How Can Farmers Get their Fair Share??
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
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!!
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.