March, 1999
by Jim Schupp
University of Maine
Is Red dead? Should we sack the Mac? According to Bruce Barritt, an apple breeder at Washington State University, the answer is yes.
These views were presented at the Washington State Horticultural Association last December and in the February 1999 issue of the Good Fruit Grower. Barritt states that apple varieties have a product life cycle similar to manufactured products. There is an introductory phase, then an emerging phase, when production increases in response to premium prices. This is followed by extensive production and falling prices that lead to product obsolescence. In this line of reasoning, established varieties are no longer valuable to consumers, because something better has come along to replace them.
In this winter of discontent for Red Delicious, there are surely many producers who feel a sense of urgency to change, to diversify, in order to survive. Indeed, there are worried apple growers all around the globe, with whom this call to action must strike a chord, but is this call one that you should heed? Is a rapid change to new apple varieties every few years going to become the new status quo? Should you disregard your production strengths?
Many apple industry observers agree that currently apples are being over-produced on a global scale. The past decade has seen dramatic increases in acreage in China. Dramatic modernization in the form of high-density plantings has increased production in the Pacific Northwest. Consumption of fresh apples has been sluggish in developed countries, while trade spats with Mexico and Asian economic woes have curtailed the growth in exports of fresh apples to those regions. These are challenging times to be an apple grower. Apple varieties may offer opportunities to stimulate consumer demand and to create a competitive edge for segments of the industry. However not all these opportunities are "new" varieties, nor are new varieties a panacea. The problem is production that exceeds the present demand.
Many of us can agree that there is such a thing as an obsolete apple. Ben Davis was an important variety in the east at the turn of the century. It had utility to the consumer because of its extraordinary handling characteristics and long storage life. Here was an apple that you could dump into a barrel, screw the lid down tight, roll onto a cart and transport by horse-drawn wagon over primitive roads to the nearest port or rail siding. Ben Davis could survive the trip in an unrefrigerated boxcar or ship’s hold to a distant market and it provided a fresh apple that otherwise would have been unavailable to the consumer. When practical refrigeration and better transportation became available, Ben Davis became obsolete, because consumers could then be offered much better tasting fruit. The speed of its demise was accelerated by dishonest packing practices and by the failure of the eastern apple industry to adopt a shipping container that was more practical than the barrel. In this story are the seeds that sowed the Western apple industry and a lesson about the need to consider the consumer.
Apples, however, are not hardware. They do not become technologically obsolete. Eating Pink Lady doesn’t get your teeth whiter or make you more attractive to the opposite sex than eating a Red Delicious. Nor do consumers use the same rationale to purchase apples as they do with technology or other manufactured goods. Apple consumers are diverse in their tastes. For most, the decision to buy apples is a minor one, made in haste while shopping for many items. Such decisions are likely to be made based upon habits, traditions or other random thought processes.
As a case in point, new varieties that are technologically superior have a rough time gaining market acceptance. Consider scab-resistant varieties. Some of the new ones taste good. With the public furor over pesticide use and concern about chemical residues, these varieties should be embraced by an enthusiastic and grateful public, yet none are widely accepted. Plant breeders proudly present us with many practical benefits of genetically engineered foods, yet the public remains largely ignorant of this technology and wary of its use.
Most consumers buy apples from a retailer that has no connection to the grower. The apple industry hands over the control of apple marketing to others. Traditionally, apple growers have had little control over how apples were marketed to the consumer. In a saturated wholesale market with ever fewer and more powerful buyers, how much control can the apple industry expect to exert over how varieties are promoted to consumers? The apple industry should improve the marketing of existing varieties before they are abandoned.
The successful introduction of a new apple variety requires a tremendous investment of time and money. As Barritt acknowledged, many new varieties fail to make it beyond this stage of the product life cycle. Unlike automobile plants, changing varieties requires that the old plant is razed and a huge investment is put into a new plant.
Barritt also pointed out that the period when new varieties are highly profitable is growing ever shorter as more and more growers rush to plant them. To have a chance at the premiums, the new variety must be planted at high density and in ignorance. The grower must accept that they will not know all its faults, or how to optimize quality and production. Not everyone is cut out to accept that kind of risk in his or her lives. New varieties are risky investments.
Historically, the United States apple industry has left this phase to others like New Zealand, then hopped on the bandwagon once the parade was underway. Pro-active marketing of new varieties will involve risk and costs that we have never had to bear. Does the United States apple industry, or any regional part of it have the kind of unity it will take to share these burdens?
Growers in northern regions with cool, short growing seasons would be at a distinct disadvantage in competing in the introductory phase. It takes longer to establish the bearing surface in such climates, and the threat of winter injury restricts the liberal use of irrigation and fertilizer to push new trees into early production. Growers in these regions may be better off to stick with niche varieties that warmer regions can’t grow well.
Just a few years ago northeastern apple growers watched the west ship Fuji to Taiwan for unheard of returns. Now with the weakness of the Asian market, those Fuji are being pushed onto the domestic market. Is Fuji flavorful enough for the American consumer? With the approaching juggernaut from China, should anyone plant more? Check the F.O.B. for extra fancy Macs this week; McIntosh is far from dead.
New apple varieties do present a wonderful marketing opportunity. Consumers that wouldn’t choose a McIntosh or a Red Delicious may find in a new variety the eating experience they want. Other apple lovers may simply buy more apples when presented with new choices.
A better model for evaluating apple varieties is to consider them as different financial instruments to consider adding to an investment portfolio. The potential for spectacular gains is roughly proportional to the level of risk. Some widely held investments have low risk and low potential. There will be financial failures at both ends of the spectrum.
Some instruments are being actively traded despite being over-valued. Others may are undervalued at the present time, but poised for solid growth. How much of an individual investment to hold depends upon one’s level of risk tolerance and market savvy. Some investors can do their own research; others depend upon professional advice. For many investors a diversified portfolio with a mix of different instruments is the best way to balance the risks and benefits. While a few investors are willing to risk it all on new and unproven ventures, most should probably adopt a strategy seeking the potential for long-term growth.
The Fruit Growers News