May 4, 2012

Expert says this decade is pivotal for the apple industry

The apple industry’s “real competition” isn’t between producing states or nations.

No, it’s all of the other fruits and snack foods competing for consumer attention – and dollars.

That was the message Desmond O’Rourke brought to the annual meeting of the Michigan Processing Apple Growers, held recently in Grand Rapids, Mich. President of the Pullman, Wash.-based Belrose Inc., world apple market analysts, O’Rourke said that apple growers are up against domestic and worldwide trends and market changes that are creating a perfect storm of challenges. While not insurmountable, they will require vigilance, strategic planning, diversification, cooperation and promotional resources.

Evolving markets, trends

Noting the industry’s shift to growing more apples for the fresh market and development of new varieties that lend themselves to fresh consumption, O’Rourke said demand has evolved in the past 15 years or more.

For one, the recession left its mark in the decline of young households likely to consume apples and apple products – as young adults have delayed marriage and the birth rate has slowed. Consumers have also become thriftier, and O’Rourke said “that may not go away for years.”

The China factor

O’Rourke predicted that apple production would continue to grow worldwide into 2020, especially with modernization in what he described as “developing/transition” countries and expansion in China.

China remains a wild card. When China flooded the U.S. market with low-priced apple juice concentrate, peaking at nearly 1,600 million liters in 2008-2009, “U.S. grower prices were tanking,” he said.

China has been pulling back on production and exports of apple juice concentrate, however. And U.S. juice prices started to come back up in 2010. This is all as China’s domestic fresh apple market has been expanding, driving up prices and stalling growth in its fresh exports.

“Many worry that what China did in apple juice concentrate, it could also do in fresh apples,” he said. “China’s decisions may be crucial to world fresh and processed apple markets.”

What growers can do

That leaves growers’ best efforts directed to things they can control. Many have diversified, and more should follow their cue, he said.

“On the West Coast it’s sweet cherries, and also a lot in the berry category,” he said. “The share in total produce sales of apples was down by 1 percent during the recession. The share of berries went up.”

The domestic apple industry can also flex more muscle if it stands together.

“Firms at different levels need to explore new structures, networks and modes of cooperation,” O’Rourke said.

He doesn’t see the sliced apple market as having significant legs.

“2004-2006 saw great growth, but it’s been flatter since.”

Nor does he view organics making a significant dent.

“I think the future is with sustainable … to fit the conditions, rather than rigid organic regulations,” he said.

The United States needs to continue aggressive export programs, O’Rourke said. And research and promotion will be critical.

“Competing snack manufacturers have huge promotional budgets,” he said. “The competition is not going to get any less intense.”

By Kathy Gibbons, Editorial Director