Marketing Apples in a Global Environment: Challenges and

Marketing Apples in a Global Environment: Challenges and

Marketing Apples in a Global Environment: Challenges and Opportunities by Dr. Roberta Cook University 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 State 90-92 average 00-02 average WA 31% 139,056 40% 167,333 NY

55,689 40,667 MI 53,055 45,000 7% 32,346 7% 28,667 CA PA 24,343 23,000 Other 147,596 112,400 452,086 417,067 US Total Source: USDA/NASS Jan. 03 and ERS Down 11% Down 8% =168,785 hectares Apple Acreage in Washington 2001 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 Total 192,000 Washington Agricultural Statistics Service;**Tom Shotzko *

13,227 Area peaked 168,241 in 99 at 210,000 Total Acres by Size of Apple Orchard Washington 1987 25 AC 28,249 25-50 AC 27,716 50-100 AC 33,126 >100 AC 73,519 TOTAL 162,610 Less than 25 % AC 17.4 Over 100 AC 45.2 1992 Acres 23,664 25,216 30,382 89,846 169,108 % 14.0 53.1 1997 20,518 22,233

34,690 127,234 204,675 % 10.0 62.2 Source: Census of Agriculture, as reported by Tom Shotzko Apple Acreage, by Variety in California and Washington, 2002 Reds Goldens Granny Smith Fuji Gala Pink Lady Other Total California Current WA Fresh* Estimate** NA 66,709 NA 25,324 6,200 16,669 5,146 22,537 3,788 23,775 1,267 NA

2,302 13,227 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 6 5 4 3 2 1 0 90 92 94 96 98 00 02 Other PA CA MI NY WA Source: USDA U.S. Apple Production and Selected State Shares, 1990-2002 Source: ERS and NASS, Jan/03 State 00-02 State Shares . . . . . . . . Avg Metric Tons 00-02 90-92

% Change 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% 4,329,569 100% 100% -4% US California Fresh Apple Production, by Variety, 42 lb. Cartons 2002/03 Granny Smith

2001/02 2,235,993 2,437,835 649,120 1,060,491 1,015,111 266,877 1,102,086 239,581 Other 96,660 111,462 Total 4,263,761 4,951,455 Fuji Gala Pink Lady Source: 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

Western U.S. Fuji Production in 1000 25,000 42-lb units 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 Source: U.S. Apple Association, Aug.2003 update (f) Western U.S. Fuji Production in metric tons 500,000 Forecast prior to frost 400,000 300,000 200,000 100,000 0 1998 2000 2002(f) 2002 Revised Wa. and Ca. Source: US Apples and 2002 revision from the WAC

US Utilization of Apples 1977-2002 6 5 4 3 2 1 0 In Million Metric Tons Update: 4,237,100 total Short tons in 2002; 2002 fresh/ proc. shares estimated PROCESSED FRES H 77 80 77 78 79 80 81

82 83 85 84 85 86 87 88 89 90 90 91 92 93 94 95 Sources: thru 01 ERS/ USDA, 10-02; NASS Jan. 03 for 2002

95 96 97 98 99 0 1 02* 2 Ave. Item Number in the Ave. US Fresh Produce Department 400 350 300 250 200 150 100 50 0 Pma study: 574 SKUs in 2001 345 173

Number of items 1987 1998 Source: Supermarket Business, Oct. 1999 U.S. Per Capita Consumption k of Fresh Apples and Pears g 12 10 8 APPLE 4 S 87/88 97/98 6 2 7.2 PEARS

1.4 0 77/78........................92/93......97/98..01/02 Source: ERS, USDA US Per Capita Utilization of Apples in pounds 60 50 Processed, excl juice 40 Fresh 30 20 J uice 10 Source: USDA/ER S 0 76 79 82 85 88 91 94 97 00 US PER CAPITA FRUIT CONSUMPTION,

POUNDS 1977-2001 300 269 Pounds per capita 250 200 150 118 71 100 50 273 90 26 54 85 24 74 Processed Citrus Processed Noncitrus Fresh Citrus Fresh Noncitrus

0 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 Total for 2001 reaches 279 Source: USDA/ERS, Oct. 2002 including some berries and olives. US PER CAPITA VEGETABLE CONSUMPTION, POUNDS, 1976-2001 441 450 Pounds per capita 400359 123 350 125 300 93 250 77 150 50 200 100

115 47 178 147 1976 1987 1989 Processed Potatoes Fresh Potatoes Fresh Vegetables 50 0 Processed Vegetables 1991 1993 1995 1997 1999

2001 Source: USDA/ERS, Vegetables and Specialties Yearbook, July 2002 1000 metric tons Fresh Apples: U.S. Imports & Exports by Key Country 700 600 500 400 300 200 100 0 1992 1997 2001 2002 IMP EXP IMP EXP IMP EXP IMP EXP Source: ERS, USDA Others Hong Kong I ndonesia Taiwan Mexico J apan

Australia Argentina South Africa Canada New Zealand Chile US Fresh Apple Imports, by Country, 1990- 2002 200 In Thousand Metric Others 175 Tons 150 125 100 75 50 25 South Africa Canada New Zealand Chile 0 90 91 92 93 94 95 96 97 98 99 00 01 02 Source: Census Bureau,

US Dept. of Commerce US Fresh Apple Exports, by Country, 2002 800 700 600 500 400 300 200 100 0 90 1990- In Thousand Metric Tons Other Indonesia Hong Kong Canada Taiwan Mexico 92 94 96

98 00 02 Source: Bureau of the Census, US Dept. of Commerce Monthly US Imports of Fresh Apples by Country of Origin in 2002 Source: US DOC 40 Thousand Metric Tons S. Africa N. Zealand Australia J apan China Argentina Chile Canada 30 20 10

0 1 2 3 4 5 Months 6 7 8 9 10 11 12 Monthly US Imports of Fresh Apples by Country of Origin in 2001 Source: US DOC 40 Thousand Metric Tons S. Africa N. Zealand 30

Argentina 20 Chile Canada 10 0 1 2 3 4 5 Months 6 7 8 9 10 11 12 Monthly US Imports of Fresh Apples by Country of Origin in 2000 Source: US DOC 40

Thousand Metric Tons S. Africa N. Zealand Argentina Uruguay Brazil Chile Canada 30 20 10 0 1 2 3 4 5 Months 6 7 8 9 10 11 12 Monthly US Exports of Fresh Apples

by Country of Destination in 2002 80 Other Thousand Metric Tons Taiwan China/ Hong Kong 60 Southeast Asia Middle East 40 Europe/ Russia U.K. South America 20 C. America/ Caribbean Mexico 0 Canada 1 2 3 4 5 6 7 8 9 10 11 12 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) Avg 89-91 Avg 98-00 Europe (exc FSU)38.7 North America 13.0 South America 4.2 Africa 1.5 Oceania 1.5 F.S.U. 18.2 China 8.0 Other Asia 33.0 13.6

6.1 2.3 1.7 13.7 11.1 23.9 10.2 5.4 2.6 1.5 5.8 34.8 18.6 100.0 16.5 100.0 Region (exc FSU) World 14.9 100.0 Source: World Apple Report 2002 Avg 79-81 Global Pear and Apple Production, Million

Metric Tons Country Apples (2002) China USA 20 4 Chile New Zealand Argentina Australia Europe 1 .462 1 .328 14 World 60 Sources: FAO and FAS Pears (2000) 8.5 .877 .333 .42 .5 .156

3.9 16.9 World Per Capita Fresh Apple Supplies 1990-2001, kilograms per person 20 16 Production grew by 50% vs. 15% growth in world population. 12 8 4 China 0 90 91 92 93 94 Rest of World 95 Source: World Apple Review 2002 96

97 98 99 00 01 Apples: Total Production & Net Fresh Production, in million metric tons, Key Selected Countries Total South Africa Total Total 50 Chile Fresh Fresh Fresh 40 30 20 10 0 99/00... 00/01... 2002... Brazil

Argentina Aust/ NZealand China Other E. Eur/ Russia U.S. Turkey J apan France/ Germany Benelux Source: FAS, USDA Chinese Apples Total Production, Net Fresh Production, Fresh Imports & Exports, in million metric tons 2 5 Production Net Fresh I mports Exports Source: FAS, USDA 2 0 1 5 1

99/00 00/01 01/02 02/03f China's Fresh Apple Imports, By Country of Origin, MY 2001 (July-June), Metric Tons 50,000 40,000 Thailand/ J apan 30,000 Chile 20,000 New Zealand 10,000 USA 0 J ul- Oct- J an- Apr- Total Sep Dec Mar J un Source: FAS

N. Hemisphere Net Fresh Apple Production, Key Countries Excluding China,in million metric tons 18 15 12 Other Russian Fed. U.S. 9 6 3 0 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 Source: World Apple Review 2002 and FAS for 2001 and 2002, updated in 2003 metric tons 5,000 4,000

3,000 2,000 1,000 0 90 92 94 96 98 ' 00 ' 02 Apple Production in China, 1997-03, Metric Tons 25000000 20000000 15000000 Tot al Cr op. 10000000 5000000 0 1997/ 1998 1998/ 1999 1999/ 2000

2000/ 2001 2001/ 2002 2002/ 2003F Area in 2000 of 2,254,100 hectares vs. 2,986,900 in 1996. 50% are Fujis, 12-15% are Red Delicious. Yantai North Andre Juice Co.,Ltd APPLE PRICES IN CHINA Guo Guang Fuji Yantai North Andre Juice Co.,Ltd Chinese Apple Production, Distribution by Province, 199703, metric tons 7, 000, 000 6, 000, 000 5, 000, 000 Shandong Shaanxi 4, 000, 000 3, 000, 000 Hebei Shanxi Henan Li angni ng 2, 000, 000 1, 000, 000

0 1997/ 1998 1998/ 1999 1999/ 2000 2000/ 2001 2001/ 2002 2002/ 2003F Projection of 27,605,000 to 31,000,000 Metric tons by 2010; Desmond ORourke Yantai North Andre Juice Co.,Ltd Chinese Fruit Production, % of Total by Type OTHER GRAPES Banana PEARS CITRUS APPLES Yantai North Andre Juice Co.,Ltd 4.UF 2.Evaporator 1.Belt Press

5.Lab 1. 2. 3. 4. 5. 3.Apple Silo Close Belt Pressing System for Hygienic Application 5-Effect Evaporator Storage in Apple Silo Ultra Filtration system R&D/Quality Assurance Center Yantai North Andre Juice Co.,Ltd 1997 2001 Chinese AJC Export, by Country Unit : kg USA 1997 1998 1999 2000 2001 HOLLAND JAPAN AUSTRALIA RUSSIA CANADA OTHERS TOTAL 14,539,895 40,000 8,395,469 2,220,300

71,000 208,020 7,976,109 45,931,936 603,240 6,998,836 6,187,716 75,840 4,467,945 16,332,980 80,598,493 20,593,445 20,355,941 12,322,173 8,566,585 491,660 5,232,918 31,136,914 98,699,636 39,747,133 24,000,098 19,434,619 11,519,230 4,288,130 7,189,964 36,135,419 142,314,593 4,785,919

16,892,435 16,232,325 46,792,769 228,393,771 42,154,122 40,102,144 18,361,057 33,450,793 Projection of 400,000,000 kg by 2010; Desmond ORourke Yantai North Andre Juice Co.,Ltd US Apple Juice Imports, by Country, 19972001 In 1,000 KL 1,500 Other TURKEY HUNGARY ITALY GERMANY CHINA CHILE ARGENTINA 1,000 500 0 1997 1998 1999 Source: Census Bureau, US Dept. of Commerce

2000 2001 Tariff code: 200970 World Fresh Apple Trade by Key Selected Country in million metric tons 6 5 4 3 2 1 0 EXP EXP IMP EXP IMP IMP 99/00 00/01 2002 Other South Africa Chile Brazil Argentina Australia & N. Zeal.

E. Europe & Russia United States Turkey J apan France & Germany Benelux Source: FAS, USDA Chilean Apple Exports: Changes in Market Share by Destination Country Europe 92-93 97-98 00-01 01-02 46% 35% 32% 32% 7% 8% 12% 12% L. America & Caribbean19% 37% 36% 39%

Other 19% 18% U.S.A. Grand Total 28% 20% 100% 100% 100% 100% Source: Chilean Fruit Exporter's Association Chilean Apple Exports by Destination in million cartons (18 kg) 35 30 25 20 15 Other L. America & Caribbean USA 10 5

Europe 0 92 93 94 95 96 97 98 99 00 01 -9 -9 -9 -9 -9 -9 -9 -0 -0 -0 8 0 1 2 3 4 5 6 7 9 Source: Chilean Fruit Exporter's Estimated European Per Capita

Fresh Apple Consumption kilograms per capita 35 Source: World Apple Review 2002 30 25 20 15 10 France Germany 5 EU- 11 Other Europe 0 91 92 93 94 95 96 97 98 99 00 01 Estimated Per Capita Fresh Apple Consumption: Other Major Producing Countries 18 15 12 9 S.Hemisphere Asia N.America Russia 6 3 0

kilograms per capita Source: World Apple Review 2002 91 92 93 94 95 96 97 98 99 00 01p US and EU: Trend in Grower Selling Prices for Fresh Apples 150 Indexed to 1985 base = 100 Source: World 125 Apple Review 2002 100 75 50 25 U.S. EU 0 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 United States: Annual Average Retail Price of Fresh Red Delicious Apples 1980-2001 - current & deflated

100 cents/lb Source: World Apple Review 2002 90 80 70 60 50 40 30 20 Actual Deflated 10 0 80 82 84 86 88 90 92 94 96 98 00 WHAT a DOLLAR SPENT for FOOD Tr in the USA PAID FOR inL 2000 B P u D a a s ab 19 Farm value 19 or -

A e n ck in Ot d p sp v r In R es he ag or En Pr er ec e in ta er ofi ti ia Reter pa s t r c g ti g t sin tio n es ir ax os on y s g n t t s e t 38 - - 4 - - 4 - - 1s - s8. 0 4. 3.5 .5 4. 3. .0 2.5 .5 3 4 0 0 5 .5 .0 Marketing bill 81 Source: ERS/USDA U.S.: Producer Price Indexes 1991-2001 for Fresh Granny Smith and McIntosh Apples 125 Calendar Years, Base, Dec. 1991 = 100

Source: World Apple Review 2002 100 75 Granny Smith 50 McI ntosh 25 0 91 92 93 94 95 96 97 98 99 00 01 Washington State: Relative FOB Prices of New Varieties - 1990-2001 400 Average price all varieties in each crop year = 100 350 Fuji Gala 300 Braeburn All 250 200 150 100 50 Source: World Apple Review 2002 0 90 91 92 93 94 95 96 97 98 99 00 01p

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 Source: World Apple Review 2002 World Apple Variety Trends, Excluding China Idared keeps growing, especially in Eastern Europe Braeburn follows in 8th place McIntosh, Elstar, Cortland, Coxs Orange and Empire will be stable Pink Lady production will triple between 2000 and 2010, but it wont surpass 1% of production in the principal producing countries Other growth varieties: Cameo, Honeycrisp, Pacific Rose, Fiesta and Sundowner Source: World Apple Review 2002 France: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons UK/ I reland Spain/ Portugal Benelux

Other light = 1998 dark = 2000 Totals: 1998 - 766,207 tons 2000 847,833 tons Scandinavia Germany/ Austria Former USSR 0 50 100 150 200 250 Italy: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons Germany/ Austria Other Scandinavia UK/ I reland light = 1998 dark = 2000 Totals: 1998 - 540,138 tons 2000 - 579,053 tons

Spain/ Portugal Benelux Former USSR France 0 100 200 300 400 Netherlands: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons Germany/ Austria Former USSR Scandinavia UK/ I reland light = 1998 dark = 2000 Totals: 1998 - 376,870 tons 2000 294,356 tons Other Benelux France Spain/ Portugal 0 50

100 150 200 Belgium & Luxembourg: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons Germany/ Austria Former USSR Benelux France light = 1998 dark = 2000 Totals: 1998 - 338,621 tons 2000 - 364,033 tons Other UK/ I reland Spain/ Portugal Scandinavia 0 40 80 120 160

TOP 2001 GLOBAL FOOD RETAILERS rank sales % grocery ($ billion) sales sales company 1 Supercenters U.S. $217.80 40% 2 Carrefour/Promods France $62.29 71% 3 Holland $59.70 92% $50.10 91%

4 U.S. 5 Germany/Switz. $44.37 50% 6 U.S. $38.30 90% $34.62 37% $34.30 92% 7 Kmart 8 Safeway

U.S. U.S. 30 grocery retailers account for 10% of global food retail sales. TOP 2001 GLOBAL FOOD RETAILERS rank 9 10 11 % sales % grocery ($ billion) sales sales company CostCo U.S. U.K. Germany $34.14 41% $34.09 90% $33.66

70% $29.05 84% $28.60 82% 12 ALDI Markt 13 ITM Entreprises 14 J. Sainsbury U.K. $26.64 90% 15 Ito - Yokado Japan $26.53

47% 16 Edeka/AVA Germany $25.13 75% Germany France Source: The Food Institute Report, June 17, 2002 TOP 2001 GLOBAL FOOD RETAILERS rank sales company 17 18 19 20 21 22 23 24 25 Aeon/Jusco Japan Tenelmann Germany Auchan France

IGA (Supervalu) U.S. Daiei Japan Casino France E. Leclerc France Delhaize Le Lion Belgium Schwarz-Group (Lidl) Ger. sales % grocery ($ billion) sales $23.90 $23.01 $22.86 $20.91 $20.60 $19.71 $19.26 $19.18 $16.68 Source: The Food Institute Report, June 17, 2002 44% 75% 70% 76% 40% 85% 52% 92% 84% Building Retail Partnerships Roles and Responsibilities

Retailer/ Wholesaler Effective Tactics Shopper Savvy Loyalty Card Better Systems Results-driven Tracking Focus Dept. Profitability Strategic Approach Grower/Shipper Fact-based Selling Innovative Marketing/ Merchandising Efficient Practices Category vs. Item Perspective Source: Adapted from The Perishables Group Boards/Commissions Category Development Best Practices Store-level Research Purchase Triggers Consumer Drivers Long view

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