Marketing Apples in a Global Environment: Challenges and Opportunities by Dr. Roberta Cook University of California Davis March 2003

Marketing Apples in a Global Environment: Challenges and

Opportunities

by

Dr. Roberta CookUniversity of California Davis

March 2003

Overview of Presentation

•US apple situation – Area and Production– Trade– Consumption

•Global apple production•Emphasis on China•Global apple trade patterns•Global consumption patterns•Marketing issues

US Apple Acreage and Change in 90-92 and 00-02 State Shares

Source: USDA/NASS Jan. 03 and ERS

State 90-92

average00-02

average

WA 139,056 167,333NY 55,689 40,667MI 53,055 45,000CA 32,346 28,667PA 24,343 23,000Other 147,596 112,400US Total 452,086 417,067

7% 7%

40%31%

=168,785 hectares

Down 8%

Down 11%

Apple Acreage in Washington2001 Fruit

Survey*

Current

Estimate**

Reds 82,000 66,709

Goldens 27,000 25,324

Granny Smith 17,600 16,669

Fuji 24,400 22,537

Gala 25,500 23,775

Other 15,500 13,227

Total 192,000 168,241 *Washington Agricultural Statistics Service;**Tom Shotzko

Area peakedin ’99 at 210,000

Total Acres by Size of Apple Orchard -

Washington1987 1992 1997

Acres

25 AC

25-50 AC

50-100 AC

>100 AC

TOTAL

Less than 25 AC

Over 100 AC

28,249

27,716

33,126

73,519

162,610

%

17.4

45.2

23,664

25,216

30,382

89,846

169,108

%

14.0

53.1

20,518

22,233

34,690

127,234

204,675

%

10.0

62.2Source: Census of Agriculture, as reported by Tom Shotzko

Apple Acreage, by Variety in California and Washington, 2002

CaliforniaFresh*

Current WAEstimate**

Reds NA 66,709Goldens NA 25,324Granny Smith 6,200 16,669Fuji 5,146 22,537GalaPink Lady

3,7881,267

23,775NA

Other 2,302 13,227Total 18,703 168,241*CAC and **Tom Shotzko

Likely 22,000 total acres in Ca. including processing, and fresh area of 20,250 in 2000, CAC

Apple Production, U.S. and Selected States, 1990-2002, in million metric tons

0123456

90 92 94 96 98 00 02

OtherPACAMINYWA

Source: USDA

U.S. Apple Production and Selected State Shares, 1990-2002

WA 2,428,142 56% 46% 17%

NY 408,460 9% 11% -16%

MI 344,927 8% 9% -16%

CA 252,630 6% 8% -31%

PA 204,539 5% 5% -5%

Other States 690,872 16% 21% -29%

US 4,329,569 100% 100% -4%

Source: ERS and NASS, Jan/03

00-02 State Shares . . . . . . . . State Avg Metric Tons 00-02 90-92 % Change

California Fresh Apple Production, by Variety, 42 lb. Cartons

2002/03 2001/02

Granny Smith 2,235,993 2,437,835

Fuji 649,120 1,060,491

Gala

Pink Lady

1,015,111

266,877

1,102,086

239,581

Other 96,660 111,462

Total 4,263,761 4,951,455Source: California Apple Commission, as of Dec. 1, 2002

WA Fujis down to 9 million boxes in 02/03 and Pink Ladies down to 500,000; WAC

0

5,000

10,000

15,000

20,000

25,000

1998 1999 2000 2001 2002 2003

(f)

Western U.S. Fuji Production in 1000 42-lb units

Source: U.S. Apple Association, Aug.2003 update

0

100,000

200,000

300,000

400,000

500,000

1998 2000 2002(f)

Western U.S. Fuji Production in metric tons

Forecast prior to frost

2002 RevisedWa. and Ca.

Source: US Apples and 2002 revision from the WAC

0123456

77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2

US Utilization of Apples 1977-2002US Utilization of Apples 1977-2002

FRESFRESHH

PROCESSEDPROCESSED

In Million Metric In Million Metric TonsTons

‘‘77 77 ‘80 ‘85 ‘80 ‘85 ‘90 ‘90 ‘95 ’02*‘95 ’02*

Update:4,237,100 totalShort tons in 2002; 2002 fresh/proc. sharesestimated

Sources: Sources: thru 01 thru 01 ERS/USDA, ERS/USDA, 10-02; NASS 10-02; NASS Jan. 03 for Jan. 03 for 20022002

Ave. Item Number in the Ave. US Fresh Produce Department

173

345

050

100150200250300350400

Number of items

1987 1998Source: SupermarketBusiness, Oct. 1999

Pma study:574 SKU’s in 2001

U.S. Per Capita Consumption of Fresh Apples and Pears

12

10

8

6

4

2

077/78........................92/93......97/98..01/02

Source: ERS, USDA

kg

87/8897/98

APPLES

PEARS1.4

7.2

US Per Capita Utilization of Apples in pounds

0

10

20

30

40

50

60

76 79 82 85 88 91 94 97 00

Processed,excl juice

Fresh

J uice

Source: USDA/ERS

US PER CAPITA FRUIT CONSUMPTION, POUNDS 1977-2001

0

50

100

150

200

250

300

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

ProcessedCitrus

ProcessedNoncitrus

FreshCitrus

FreshNoncitrus

Source: USDA/ERS, Oct. 2002

Pou

nd

s p

er

cap

ita

273

90

85

2474

269

5426

71

118

Total for 2001 reaches 279 including some berries and olives.

US PER CAPITA VEGETABLE CONSUMPTION, POUNDS, 1976-2001

0

50

100

150

200

250

300

350

400

450

1976 1987 1989 1991 1993 1995 1997 1999 2001

ProcessedVegetables

ProcessedPotatoes

FreshPotatoes

FreshVegetables

Source: USDA/ERS, Vegetables and Specialties Yearbook, July 2002

Pou

nd

s p

er

cap

ita

17847

93

123

441

359

115147

125

77

50

0100200300400500600700

OthersHong KongI ndonesiaTaiwanMexicoJ apanAustraliaArgentinaSouth AfricaCanadaNew ZealandChile

Fresh Apples: U.S. Imports & Exports by Key Country

1000 m

etr

ic t

on

s

1992 1997

IMP EXP IMP EXP IMP EXP IMP EXP

2002

Source: ERS, USDA

2001

Chile

New Zealand

Canada

South Africa

Others

0

25

50

75

100

125

150

175

200

90 91 92 93 94 95 96 97 98 99 00 01 02

US Fresh Apple Imports, by Country, US Fresh Apple Imports, by Country, 1990-1990-20022002

In Thousand Metric In Thousand Metric TonsTons

Source: Source: Census Census Bureau, Bureau, US US Dept. of Dept. of CommerceCommerce

0100200300400500600700800

90 92 94 96 98 00 02

IndonesiaIndonesia

Source: Source: Bureau Bureau of the of the Census, US Census, US Dept. of Dept. of CommerceCommerce

US Fresh Apple Exports, by Country, US Fresh Apple Exports, by Country, 1990-1990-20022002

In Thousand Metric In Thousand Metric TonsTons

OtherOther

MexicoMexicoTaiwanTaiwanCanadaCanada

Hong Hong KongKong

Monthly US Imports of Fresh Apples by Country of Origin in 2002

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10 11 12

S. AfricaN. ZealandAustraliaJ apanChinaArgentinaChileCanada

Source: US DOC

Thousand Metric Tons

Months


0

10

20

30

40

1 2 3 4 5 6 7 8 9 10 11 12

S. Africa

N. Zealand

Argentina

Chile

Canada

Source: US DOC


Months


0

10

20

30

40

1 2 3 4 5 6 7 8 9 10 11 12

S. AfricaN. ZealandArgentinaUruguayBrazilChileCanada

Source: US DOC


Months

Monthly US Exports of Fresh Apples by Country of Destination in 2002

0

20

40

60

80

1 2 3 4 5 6 7 8 9 10 11 12

Other

Taiwan

China/Hong Kong

Southeast Asia

Middle East

Europe/Russia

U.K.

South America

C. America/Caribbean

Mexico

Canada

Source: US DOC


World Apple Production: Key Trends

• China can now provide over 1/3 of all world apple production vs. 11% in 89/91, but area has stabilized.

• The shares of production coming from N.A., Former Soviet Union, Other Asia and Europe shrank in the 90s, but Europe increased in absolute volume.

• The share of S. American suppliers slipped only slightly in the 90s as production grew about 1 million metric tons to 3.4 million; share changed to 5.6% in 2001 from 6.1% in 89/91.

• Recent adjustments downward in US, European, and possibly Chinese production for 2002/03 will likely boost Southern Hemisphere exports in 2003.

World Apple Production by Region (% total)

Sou

rce: W

orld

Ap

ple

Rep

ort

2002

Europe (exc FSU)38.7 33.0 23.9North America 13.0 13.6 10.2South America 4.2 6.1 5.4Africa 1.5 2.3 2.6Oceania 1.5 1.7 1.5F.S.U. 18.2 13.7 5.8China 8.0 11.1 34.8Other Asia (exc FSU) 14.9 18.6 16.5World 100.0 100.0 100.0

Avg Avg Avg Region 79-81 89-91 98-00

Global Pear and Apple Production, Million Metric Tons

Country Apples (2002) Pears (2000)

China 20 8.5

USA 4 .877

Chile 1 .333

New Zealand .462 .42

Argentina 1 .5

Australia .328 .156

Europe 14 3.9

World 60 16.9Sources: FAO and FAS

World Per Capita Fresh Apple Supplies 1990-2001, kilograms per person

0

4

8

12

16

20

90 91 92 93 94 95 96 97 98 99 00 01

China Rest of World

Production grew by 50% vs. 15% growthin world population.

Source: World Apple Review 2002

Source: FAS, USDA

Apples: Total Production & Net Fresh Production,in million metric tons, Key Selected Countries

0

10

20

30

40

50 South AfricaChileBrazilArgentinaAust/NZealandChinaOtherE. Eur/RussiaU.S.TurkeyJ apanFrance/GermanyBenelux

99/00... 00/01... 2002...

Fresh Fresh Fresh

TotalTotal

Total

Chinese Apples – Total Production, Net Fresh Production, Fresh Imports & Exports,in million metric tons

Sou

rce: F

AS

, US

DA

25

20

15

10

5

0

99/00 00/01 01/02

Production Net Fresh Imports Exports

02/03f

China's Fresh Apple Imports, By Country of Origin, MY 2001 (July-June),

Metric Tons

0

10,000

20,000

30,000

40,000

50,000

J ul-

Sep

Oct-

Dec

J an-

Mar

Apr-

J un

Total

Thailand/ J apan

Chile

New Zealand

USA

Source: FAS

N. Hemisphere Net Fresh Apple Production, Key Countries Excluding China,in million metric tons181512

9

6

30

Other

Russian Fed.

U.S.

Turkey

J apan

France/Germany

Benelux

99/00 00/01 01/02 02/03f Source: FAS, USDA

Southern Hemisphere Big Six: Long-term Upward Trend Broken

metr

ic t

on

s

0

1,000

2,000

3,000

4,000

5,000

90 92 94 96 98 '00 '02

Source: World Apple Review 2002 and FAS for 2001 and 2002, updated in 2003

0

5000000

10000000

15000000

20000000

25000000

1997/ 1998 1998/ 1999 1999/ 2000 2000/ 2001 2001/ 2002 2002/ 2003F

Total Crop.

Yantai North Andre Juice Co.,Ltd

Apple Production in China, 1997-03, Metric Tons

Area in 2000 of 2,254,100 hectares vs. 2,986,900 in 1996. 50% are Fujis,12-15% are Red Delicious.


Guo Guang Fuji

APPLE PRICES IN CHINA


0

1, 000, 000

2, 000, 000

3, 000, 000

4, 000, 000

5, 000, 000

6, 000, 000

7, 000, 000

1997/ 1998 1998/ 1999 1999/ 2000 2000/ 2001 2001/ 2002 2002/ 2003F

Shandong

Shaanxi

Hebei

Shanxi

Henan

Li angni ng

Chinese Apple Production, Distribution by Province, 1997-03, metric tons

Projection of 27,605,000 to 31,000,000 Metric tons by 2010; Desmond O’Rourke


OTHER

APPLES

CITRUS

PEARS

Banana

GRAPES

Chinese Fruit Production, % of Total by Type


1. Close Belt Pressing System for Hygienic Application

2. 5-Effect Evaporator

3. Storage in Apple Silo

4. Ultra Filtration system

5. R&D/Quality Assurance Center

2.Evaporator

3.Apple Silo

4.UF

5.Lab

1.Belt Press

USA HOLLAND JAPAN AUSTRALIA RUSSIA CANADA OTHERS TOTAL

1997 14,539,895 40,000 8,395,469 2,220,300 71,000 208,020 7,976,109 33,450,793

1998 45,931,936 603,240 6,998,836 6,187,716 75,840 4,467,945 16,332,980 80,598,493

1999 20,593,445 20,355,941 12,322,173 8,566,585 491,660 5,232,918 31,136,914 98,699,636

2000 39,747,133 24,000,098 19,434,619 11,519,230 4,288,130 7,189,964 36,135,419 142,314,593

2001 4,785,919 42,154,122 40,102,144 18,361,057 16,892,435 16,232,325 46,792,769 228,393,771

1997 – 2001 Chinese AJC Export, by Country

Unit : kg


Projection of 400,000,000 kg by 2010; Desmond O’Rourke

0

500

1,000

1,500

1997 1998 1999 2000 2001

OtherTURKEYHUNGARYITALYGERMANYCHINACHILEARGENTINA

US Apple Juice Imports, by Country, US Apple Juice Imports, by Country, 1997-1997-20012001

In 1,000 KLIn 1,000 KL

Source: Census Bureau, US Dept. of Source: Census Bureau, US Dept. of CommerceCommerce

Tariff code: 200970

World Fresh Apple Trade by Key Selected Country

Source: FAS, USDA

0

1

2

3

4

5

6OtherSouth AfricaChileBrazilArgentinaAustralia & N. Zeal.E. Europe & RussiaUnited StatesTurkeyJ apanFrance & GermanyBenelux

99/00 00/01 2002

in million metric tons

IMP IMP IMP

EXP EXP EXP

Chilean Apple Exports: Changes in Market Share by Destination

Europe 46% 35% 32% 32%

U.S.A. 7% 8% 12% 12%

L. America & Caribbean19% 37% 36% 39%

Other 28% 20% 19% 18%

Grand Total 100% 100% 100% 100%

Source: Chilean Fruit Exporter's Association

Country 92-93 97-98 00-01 01-02

Chilean Apple Exports by Destinationin million cartons (18 kg)

0

5

10

15

20

25

30

35

92- 9393- 94

94- 9595- 96

96- 9797- 98

98- 9999- 00

00- 0101- 02

Europe

Other L. America & Caribbean

USA

Source: Chilean Fruit Exporter's Association

Estimated European Per Capita Fresh Apple Consumption

05

101520253035

91 92 93 94 95 96 97 98 99 00 01

France Germany

EU- 11 Other Europe

kilograms per capita


Estimated Per Capita Fresh Apple Consumption: Other Major Producing Countries

0

3

6

9

12

15

18

91 92 93 94 95 96 97 98 99 00 01p

S.Hemisphere

Asia

N.America

Russia

kilograms per capita Source: World Apple Review 2002

US and EU: Trend in Grower Selling Prices for Fresh Apples

0

25

50

75

100

125

150

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

U.S. EU

Source: World Apple Review

2002

Indexed to 1985 base = 100

United States: Annual Average Retail Price of Fresh Red Delicious Apples 1980-2001

0102030405060708090

100

80 82 84 86 88 90 92 94 96 98 00

Actual Deflated

cents/lb - current & deflatedSource: World Apple Review 2002

Farm value 19¢Marketing bill 81¢

19¢

Other costs - 4.0¢

Business taxes - 3.5¢

Repairs - 1.5¢

Interest - 2.5¢

Rent - 4.0¢

Depreciation – 3.5¢

Advertising - 4.0¢

Profits - 4.5¢

Energy - 3.5¢

Transportation - 4.0¢

Packaging - 8.0¢

Source: ERS/USDA

Labor - 38¢

WHAT a DOLLAR SPENT for FOOD PAID FOR in 2000 in the USA

0

25

50

75

100

125

91 92 93 94 95 96 97 98 99 00 01

GrannySmith

McIntosh

U.S.: Producer Price Indexes 1991-2001 for Fresh Granny Smith and McIntosh Apples

Calendar Years, Base, Dec. 1991 = 100


Washington State: Relative FOB Prices of New Varieties - 1990-2001

050

100150200250300350400

90 91 92 93 94 95 96 97 98 99 00 01p

Fuji Gala

Braeburn All

Average price all varieties in each crop year = 100


World Apple Variety Trends, Excluding China

• Red Delicious and Golden Delicious will lose market share but remain in first and second place

• Gala/Royal Gala will be the principal winners, growing by 50% over the next decade, reaching third place

• Fuji will knock Granny Smith out of fourth place

• Combined volume of Jonagold and Jonagored will approach that of Granny Smith


World Apple Variety Trends, Excluding China

• Idared keeps growing, especially in Eastern Europe

• Braeburn follows in 8th place• McIntosh, Elstar, Cortland, Cox’s Orange and

Empire will be stable• Pink Lady production will triple between

2000 and 2010, but it won’t surpass 1% of production in the principal producing countries

• Other growth varieties: Cameo, Honeycrisp, Pacific Rose, Fiesta and Sundowner


France: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons

0 50 100 150 200 250

Former USSR

Germany/Austria

Scandinavia

Other

Benelux

Spain/Portugal

UK/ I reland

light = 1998dark = 2000

Totals:1998 - 766,207 tons2000 – 847,833 tons

Italy: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons

0 100 200 300 400

France

Former USSR

Benelux

Spain/Portugal

UK/I reland

Scandinavia

Other

Germany/Austria

light = 1998dark = 2000

Totals:1998 - 540,138 tons2000 - 579,053 tons

Netherlands: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons

0 50 100 150 200

Spain/Portugal

France

Benelux

Other

UK/I reland

Scandinavia

Former USSR

Germany/Austria

light = 1998dark = 2000

Totals:1998 - 376,870 tons2000 – 294,356 tons

Belgium & Luxembourg: Apple export destinations

& volumes, 1998 & 2000, 1000 metric tons

0 40 80 120 160

Scandinavia

Spain/Portugal

UK/I reland

Other

France

Benelux

Former USSR

Germany/Austria

light = 1998dark = 2000

Totals:1998 - 338,621 tons2000 - 364,033 tons

1 Supercenters U.S. $217.80 40%

2 Carrefour/Promodès France $62.29 71%

3 Holland $59.70 92%

4 U.S. $50.10 91%

5 Germany/Switz. $44.37 50%

6 U.S. $38.30 90%

7 Kmart U.S. $34.62 37%

8 Safeway U.S. $34.30 92%

TOP 2001 GLOBAL FOOD RETAILERS sales % grocery

rank sales company ($ billion) sales

30 grocery retailers account for 10% of global food retail sales.

9 CostCo U.S. $34.14 41%

10 U.K. $34.09 90%

11 Germany $33.66 70%

12 ALDI Markt Germany $29.05 84%

13 ITM Entreprises France $28.60 82%

14 J. Sainsbury U.K. $26.64 90%

15 Ito - Yokado Japan $26.53 47%

16 Edeka/AVA Germany $25.13 75%

%%TOP 2001 GLOBAL FOOD RETAILERS

sales % groceryrank sales company ($ billion) sales

Source: The Food Institute Report, June 17, 2002

17 Aeon/Jusco Japan $23.90 44%

18 Tenelmann Germany $23.01 75%

19 Auchan France $22.86 70%

20 IGA (Supervalu) U.S. $20.91 76%

21 Daiei Japan $20.60 40%

22 Casino France $19.71 85%

23 E. Leclerc France $19.26 52%

24 Delhaize “Le Lion” Belgium $19.18 92%

25 Schwarz-Group (Lidl) Ger. $16.68 84%

TOP 2001 GLOBAL FOOD RETAILERS sales % grocery

rank sales company ($ billion) sales

Source: The Food Institute Report, June 17, 2002

Building Retail Partnerships

Effective TacticsShopper Savvy

Loyalty Card Better Systems

Results-driven Tracking Focus

Dept. ProfitabilityStrategic Approach

Category DevelopmentBest PracticesStore-level ResearchPurchase TriggersConsumer DriversLong view

Fact-based Selling Innovative

Marketing/ Merchandising

Efficient Practices “Category” vs.

“Item” Perspective

Retailer/ Wholesaler Grower/Shipper Boards/Commissions

• Roles and Responsibilities

Source: Adapted from The Perishables Group

Documents

Marketing Apples in a Global Environment: Challenges and Opportunities by Dr. Roberta Cook University of California Davis March 2003