Oct 1, 2012

Apple slice processors get ready for ‘interesting’ season

When your product is as simple as fresh-sliced apples, substitutions aren’t an option.

You need fresh apples. Period.

So producers of fresh-sliced apples are in for an interesting ride.

With a significantly reduced crop in the wake of last spring’s freeze followed by pockets of hail damage, processors are watching to see how the crop plays out as they look for ways to economize and make contingency plans.

“The supply of apples is certainly going to affect our business this year,” said Steve Cygan, owner of Appeeling Fruit in Dauberville, Pa. “It’s going to affect pricing, it’s going to affect the volume – and demand, to some degree.”

As a regional processor who normally sources apples closer to home, Cygan said he’s fortunate that the growers around him didn’t take the hit that those in New York and Michigan did. USApple estimated a 76 percent drop in the Midwest crop, and 52 percent in New York state.

“There’s kind of a bubble of fruit-growing area here in Pennsylvania that was relatively unaffected, so that’s kind of close to home and that’s good we have a lot of suppliers,” he said. “But what affects the rest of the country – even globally – affects prices here in my back yard.”

That’s not to say supply won’t become an issue.

“We’ll have fruit in our back yard of good quality for the next few months, and as we get into the first of the year, it will get a little tougher for us to get supply … we may have to pull off the West Coast,” he said. “And we’re a year-round operation – most fresh-cut processors are – so I would say one of the biggest impacts we’ll see of this is we’ll have to shift over and rely on offshore fruit, Chilean fruit, earlier and for a longer period of time next year.”

Tony Freytag, senior vice president for sales and marketing at Crunch Pak in Cashmere, Wash., said the company processes 1 million pounds of apple slices a week. So a hit to the crop like this year’s, which included significant hail damage to what had promised to be an excellent crop in Washington, is cause for alarm.

Crunch Pak normally uses apples from Washington, turning to Chile to get through summer. As for this year?

“It’s going to be an interesting ride, I can say that, and how short we are and what we have to do to get fruit, we don’t know yet,” Freytag said. “We believe we have good sources, we have good supply partners, but there’s only so many apples on the tree.

”At this time of year, our only choices, obviously, are there’s none in Michigan, which we have not typically gone to anyway. There’s fewer in New York. Nothing in Canada – all of eastern Canada was hurt just as bad as Michigan and New York. Then you’re pushed to Europe, and generally the U.S. is an exporter to Europe, not an importer. We’re not looking to Europe as a supply source.”

However it plays out, one thing Freytag said the industry needs to think hard on is how to handle pricing in light of the short supply.

“From a slice standpoint, we’re for the most part retail oriented, so over 80 percent of our business is at the retail level in slices,” he said. “And so, any upward pressure on the price … of course is going to be passed on to the consumer.”

If prices go too high, he cautioned, consumers might walk.

“The real concern is, as with anything, will the consumer sort of vote with their feet and say, ‘I really like sliced apples and think it’s great and convenient but I’m drawing the line?’” he asked. “I think it’s going to be incumbent on us to keep the prices reasonable so we don’t lose the market. As with any value-added product, or any product, if you lose the consumer, just because the price changes back the next year, that doesn’t mean you get them back.”

Because barring another year like this one, the supply should just keep getting better.

“The good news is, on a long-term basis, we certainly see adequate supplies,” Freytag said. “As the total planted tree count continues to go up in key varieties here in Washington, that bodes well for the future.”

By Kathy Gibbons, Editorial Director