Jan 3, 2011Apple promotion needed in international markets
Domestic per capita consumption of apples has been declining by about 1 percent annually for the past 20 years, said Desmond O’Rourke.
Despite the domestic decline in consumption, O’Rourke sees tremendous opportunities for domestic growers in the international market. The key for economic survival of U.S. fruit growers lies in expansion into the developing international markets that are experiencing population booms and a rising middle class.
“There’s these tremendous opportunities in the international markets; countries like India, China, Indonesia, Brazil, Russia,” O’Rourke said. “Where there’s large populations and incomes are rising vary rapidly – and in many cases they can’t produce all of their apple needs.”
O’Rourke, CEO of Belrose Inc., global apple market analyst and former faculty member of Washington State University, addressed the Washington State Horticultural Association in December, during its annual meeting in Yakima, Wash.
For apple growers – both nationally and in the Columbia Basin – to compete in the international market, there are a number of issues they will have to correct on the supply and production sides.
O’Rourke said that growers are facing multiple demands in their efforts to be more efficient producers. There’s a real battle looming for resources such as land, labor, water and energy. In the Columbia Basin, where energy is relatively inexpensive, he cited Microsoft and Google as major competitors for land and energy, competitors that apple growers do not have the necessary capital to compete against.
“No apple grower is going to be able to compete with Microsoft or Google for good orchard land,” he said.
O’Rourke predicts that growers are going to face higher labor and input costs and will have to increase their productivity and efficiency if they are going to stay in business. Part of that formula for continued economic success can be found overseas.
Increased yield is important, but even more important is the quality of the yield, O’Rourke said.
“Quality – where you’re meeting the standards that Walmart is setting for you or the new federal standards of food safety,” he said.
International markets that are dormant – such as Japan and Europe, where high standards and regulations create barriers for U.S. growers – do not offer the opportunities to be found in countries such as India, Indonesia, China and Russia, according to O’Rourke.
“They are much less picky about those sorts of things,” he said. “They’re growing fast, they’re big and they’re not quite as demanding on the growers.”
India is a vegetarian country, another benefit for apple growers, O’Rourke said. And even though India has a billion people, the max it can produce is 2 million metric tons of apples. Because of India’s climate, there are limited areas where apples can be grown.
In Indonesia, there’s virtually nowhere where apples can be grown commercially, Markets like that offer tremendous opportunity, he said.
Due to China’s rapid economic expansion, O’Rourke predicts it will become a major importer of apples. He sees China as a major importer from the Southern Hemisphere, and anything that gets Chilean apples or New Zealand apples or Argentinian apples “off the world market and into China is good for the rest of us,” he said.
Washington state growers must assume a greater role in promoting apples, O’Rourke said.
Right now, for example, Washington state spends about $8 million on its global export promotion program. Trying to sell to 3 billion people by spending $8 million is just not going to work, he said.
If the Washington state apple industry is going to reverse the decline in apple consumption, it needs strong promotional and marketing programs (by “strong,” O’Rourke means $100 million a year or so). The Washington Apple Commission was declared unconstitutional several years ago, and the state hasn’t had a promotional program since then, he said.
Because Washington produces 60 percent of the apples in the United States, it has to take the lead in funding and promoting apples. There are a number of state promotional boards already existing, but the missing link is Washington state, O’Rourke said.
“Our absence from the promotional end is really felt.”
– Bill Schaefer