Marketing Fruit Crops in the United States

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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
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Presentation Outline

• Situations of Fruit Production in U.S. and New
  York
• Consumption Trends
• Marketing Systems
• Marketing Risks and Opportunities

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Situations of Fruit Production
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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

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Major Fruits Produced in the U.S.

• Orange, Grapes, Apples and Strawberries are the
  four major crops dominate the industry (61)

Source Economic Research Service, USDA, 2002,
Fruit and Tree Nuts Outlook
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Regional Specialization of Production
Source Economic Research Service, USDA, 2002,
Fruit and Tree Nuts Outlook
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• 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
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Trends in New York Fruit Production (Millions of
Dollars)
Source New York Agricultural Statistics Services
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Relative Value of New York Fruit Crops Total
Fruit Production - 179 million, 2000
Source New York Agricultural Statistics Services
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Characteristics of Fruit Marketing From
Producers Perspective

• Perishability - Sell it or smell it
• Product Bulkiness - Processing facilities
• Sensitive to Price Quantity Risks - Supply
  demand
• Seasonality - Global sourcing

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Consumption Trends
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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
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Changes in Per Capita Consumption, 1970-99
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Away-From-Home Consumption are Up

• About 50 of food spending in U.S. on meals away
  from home (2000)
• Spending increases during 1990s (adjusted for
  inflation)
• Meals away from home 25
• Food at home 5
• Product exposure - A good target for new products

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American Food Consumption Trends

• Year-round availability
• Natural, Organic, Wholesome Healthy -
  Functional Food
• Convenient products

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American Food Consumption Trends

• Something New - Exotic and Ethnic

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American Food Consumption Trends

• Packaged well - image, food safety

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American Food Consumption Trends

• Branding - Private Labels and National Brands

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Retailers Responded with Bigger and Better
Produce Departments
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Fruit Marketing Systems
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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/E-commerce
• CSA

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Processing Market Channels for Fruit Growers

• Sell to proprietary processors
• Market through processing cooperatives
• Custom processing for the grower
• Growers own processing facilities

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Major Marketing Channels for Fruits in the U.S.
Exports
Imports
Shippers Packers
Retail Outlets
Consumers
Wholesalers Distributors
Growers
Institutions Food Service Outlets
Processors
Brokers
Direct Marketing
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Dynamics of the U.S. Fruit Marketing System
Exports
Imports
Shippers/ Packers
Retail Outlets
Wholesalers Distributors
Consumers
Growers
Processors
Institutions Food Service Outlets
Brokers
Direct Marketing
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Trends Influencing Fruit Marketing

• Globalization

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• 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

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• Growing concentration in the retail sector

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• Continuous concentration of retail buying
• Fewer produce buyers in 2001
• Centralized buying
• Buying more from top 10 suppliers

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More Contracting
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• 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

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• Changes in Wholesaling

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• Depressed grower/commodity prices

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• Changes in consumer attitudes
• Need for alternative marketing strategies

Survival of producers is often at RISK!
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Crisis
Risk Opportunity
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How Can Farmers Get their Fair Share??
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Changing Opportunities and Challenges in Fruit
Marketing

• Consumer can have direct input and interaction
  with any point of the supply chain
• Middlemans 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

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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 consumers 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!!

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Differentiation -- Meeting Customers 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.