MANSON, Wash. — Chris Anderson is in his 37th year of operating a small apple orchard once owned by his father on the north shore of Lake Chelan.
He’s among more than 50 Washington growers selected in a drawing for this spring’s first planting of the Cosmic Crisp, a new apple variety that industry leaders hope will usher in a new era.
It’s a $275 million to $500 million risk on an apple the industry hopes consumers will love. Plans call for it to replace the Red Delicious as the new Washington state apple and be the foundation for higher and steadier financial returns for decades to come.
Apples are big business in Washington state. They are the top agricultural commodity, grossing $2.4 billion annually. About 65 percent of the apples grown in the U.S. come from Washington orchards.
For three weeks in April and May, Anderson laid out neat rows and hauled trees and fertilizer, helping his three workers plant by hand 2,200 Cosmic Crisp trees on a little over 2 acres. Elsewhere in Central Washington, other growers planted up to 20,000 trees apiece, mostly by machine.
Anderson is optimistic about the new apple.
“It’s something being heavily promoted, sounded like it might be fun. And, yes, I’m looking for better returns,” said Anderson, 64, who with his wife, Sally, runs the orchard.
Anderson tore out Fuji apple trees last fall to make room for his Cosmic Crisp.
“Fuji are very late and I don’t have a long enough growing season. There have been years I picked them in the snow and years they froze on the trees,” Anderson said.
About the apple
Cosmic Crisp, once known only by its breeding name, WA 38, is the result of a cross between Enterprise and Honeycrisp apples made 20 years ago by apple breeder Bruce Barritt and his team at the Washington State University Tree Fruit Research and Extension Center in Wenatchee. The “parent” varieties were chosen for their outstanding flavor, color, storage ease and resistance to disease and disorders, according to Barritt.
His successor, Kate Evans, says Cosmic Crisp rated “statistically significantly” better in consumer tests of its taste and texture. It has a sweet, tangy flavor the industry believes consumers will like better than the popular Honeycrisp — and it’s easier to grow and store.
Carolyn Ross, WSU associate professor of food science, led the naming process in 2014, settling on Cosmic for the apple’s lenticels, tiny skin pores that look like starbursts, and Crisp, referencing its firmness and relationship to the Honeycrisp.
This rapid roll-out marks a first for the industry.
“The 5 million is an extremely high number for any one variety of apple tree to be planted in any given year in the state or nationwide,” said Neal Manly, managing partner of Regal Fruit, an apple breeding and variety management company in Ephrata, Wash.
According to Manly’s survey of the state’s nurseries, 40 percent of the trees planted next year will be Cosmic Crisp. Only Red Delicious and Honeycrisp reached 40 percent of annual plantings in the past and Gala peaked at 25 percent.
Newly planted trees produce few apples in their first two years, so Anderson and other growers will knock them off early so the tree’s energy will go toward growth.
Lynnell Brandt, president of Proprietary Variety Management, a Yakima, Wash., company WSU hired to help manage the commercialization of Cosmic Crisp, estimates that nearly 200,000, 40-pound boxes of Cosmic Crisp apples will debut in U.S. stores from the 2019 crop. That will jump to 1.9 million boxes in 2020, 5 million in 2021 and 9 million in 2022.
At the Washington State Tree Fruit Association meeting last December, Robert Kershaw, president of Domex Superfresh Growers in Yakima, said such an accelerated ramp-up has never before been tried. He called it “insanity” and a “gamble” that could end in reward or failure and said it would take the whole industry pulling together to write the Cosmic Crisp success story.
West Mathison, president of Stemilt Growers in Wenatchee, said the fastest switch in the consumption of varieties will happen over a five-year span that will “blow people’s hair back.” In the last two seasons, prices for Red Delicious and Gala have crashed because of too much volume and loss of consumer popularity.
Brandt anticipates Cosmic Crisp will replace large amounts of Reds and Gala in relatively short order. Older strains of Fuji, Golden Delicious, Braeburn, Cameo and Jonagold and even Honeycrisp numbers will diminish, he said.
The new mix will be Cosmic Crisp and proprietary varieties, along with some Fuji, Gala, Granny Smith and Honeycrisp.
“We are hopeful Cosmic Crisp can be the new flagship of the industry. We have that hope because it’s such a good apple and because the entire industry will be working to promote the brand in a very positive light and the industry has some exclusivity in the North American market, which can enhance the focus,” Brandt said. Washington growers will be the sole source of the new apple in North America for the first decade.
Kershaw heads a committee of most of the state’s major tree fruit companies advising Brandt on marketing.
“It’s not without conflict but conflict is good to sort out all the issues and have a good healthy debate and to make sure we are looking at everything from all angles and perspectives,” Kershaw said.
The committee has reached a consensus on every main decision, including uniform packaging. Grading standards are next and will need to be tightly managed to ensure a successful launch, he said.
Honeycrisp is a big money-maker for the industry, but its margins have begun to narrow as volume has increased. It’s common for Honeycrisp to sell at wholesale in the $50-$70 per box range while most other unmanaged varieties do well to reach $30. Break-even for orchards is typically about $17 a box.
For Cosmic Crisp, “the expectation is Honeycrisp pricing, but the consumer will decide. If they sell well at high prices, prices will stay high. If they don’t, prices will need to come down to generate more momentum,” Kershaw said.
Red Delicious, the volume king for 82 years, peaked at 61.4 million boxes in 1994 but was still at 39.5 million boxes this year, almost one-third of the state’s apple production.
While the volume of Red Delicious has held up, its price hasn’t. It was selling for $11 to $14.90 per box for standard grade, medium size on June 7. In 2014, it bottomed out at $8 per box. At those prices, growers make no money and packer-shipper-marketers, who get their cut first, make little to nothing.
Grower costs and packing, shipping and marketing costs all vary, but Anderson, the Manson grower, said on a $30 box of fruit the grower makes one-third and on a $50 box the grower can make two-thirds.
Even the popular Honeycrisp has not performed well for him.
“I have not done well with Honeycrisp,” he says. “My packouts are poor.”
Cosmic Crisp should provide better returns than Honeycrisp because production costs will be lower and storage and packouts — after cull apples are taken out — will be better, Brandt said. He believes the new apple will top 30 million boxes annually.
If those numbers hold true and the price stays high, the payoff for the industry would be impressive.
In round numbers, just a 10 million-box crop of Cosmic Crisp that sells for $30 per box would gross $300 million; at $50 per box, the crop would gross $500 million.
WSU will get a royalty of 4.75 percent of every box that sells for more than $20. On a $500 million crop, 4.75 percent is $23.7 million. There’s also a $1 royalty on every tree sold for planting. Trees generally cost $9, including the royalty. On 10 million trees sold, the royalty is $10 million.
Of those total royalties, around 20 percent will go for commercialization costs including patenting and Proprietary Variety Management’s fee, said James Moyer, associate dean of research at WSU’s College of Agricultural, Human and Natural Resource Sciences. Neither he nor PVM’s Brandt would disclose the management fee.
Of the remaining royalties, 10 percent will go to the WSU Office of Commercialization; 10 percent will go to the College of Agricultural, Human and Natural Resource Sciences; 30 percent will be shared by the breeders; and 50 percent will go to WSU plant breeding programs with a majority earmarked for apple breeding, Moyer said.
“We’re discussing ways in which we could create an endowment or some other vehicle to keep the apple breeding program secure for many years to come,” Moyer said.
“We are extremely proud of the breeding program and the excitement it has generated in the industry and we are encouraged by how the industry has come together to cooperate and guide us in the licensing, marketing and developing standards,” Moyer said.
Will it work?
While the Washington apple industry is hopeful, the big question remains: Will it work? Most people in the industry are optimistic, but some critics aren’t as sure.
Desmond O’Rourke, retired WSU agricultural economist and an apple industry analyst, says the roll-out of any new variety, even when the supply is limited as a proprietary or club variety, can be challenging.
“Unless demand is built up as rapidly as supplies become available, it can be very difficult to maintain a premium price,” he wrote in the January issue of his “World Apple Report.”
Yields can fluctuate widely in new plantings and problems can arise in handling, storage, transportation, retail displays and consumers’ kitchens, he wrote.
“Des is saying with niche varieties it is a challenge to keep critical mass. That won’t be true with this. We will have critical mass and we will be able to sustain it,” Brandt said.
Market penetration will be much higher than any club variety and demand will be driven by the “wow” factor, he predicted.
“I have yet to meet anyone who doesn’t like this apple,” he said, “and that will drive huge repeat sales.”
The industry needs a new main product, consumers are eager for new varieties and will quickly switch from older ones, Brandt said, adding that chances of success are “very good.”
Byron Phillips, a national crop specialist in Wenatchee at Valent USA, a farm chemical producer in Walnut Creek, Calif., talked about the Cosmic Crisp risk in a March 5 LinkedIn post.
He figured growers will plant 12 million trees in three years on an average of 1,089 per acre on 11,000 acres. Trees, trellises, land preparation and irrigation equipment will cost $25,000 per acre, or $50,000 per acre if the cost of buying land is included, he said.
From that he figures a collective industry investment of $275 million to $550 million over two years.
Brandt countered that growers typically replant various amounts of orchard annually, so it’s not so much additional investment as a shift in investment.
“What makes this investment an even bigger gamble is that it is being made on a variety that the end consumer has never tasted, never seen and never heard of,” wrote Phillips, a tree fruit horticulturalist, fieldman and grower in Wenatchee over 38 years. He’s served on the Northwest Horticultural Council Science Advisory Board for 14 years, been on Washington Tree Fruit Research Commission committees and is past chairman of the state Commission on Pesticide Registration.
Cosmic Crisp appearance is “very inconsistent,” he wrote. Appearance has long been a focus of Washington apple sales so shifting to flavor and crunch could be a challenge, he wrote.
“I was just commenting on the gamble the industry is taking,” he told Capital Press. “I hope it works out. Our industry has big risk-takers, which is a great thing.”
The appearance is as consistent as any apple and maybe more so, said Kershaw, the Domex Superfresh Growers president. Consumers today are about taste, flavor and texture, he said.
“I always tell people that maybe appearance gets a consumer to buy the first time, but flavor is what makes them buy a second time and more,” Kershaw said. “Eating quality is key so we want to focus on eating quality.”
While Kershaw has called the fast ramp-up of Cosmic Crisp a “gamble,” he says he thinks it will succeed with maybe some bumps along the way.
“The best thing for the industry is to not launch any new varieties that are not exceptional,” he said. “If we are always improving, we have a chance of increasing consumption. … It’s really a simple formula. People eat what they like and we need to make sure we are growing what they like to eat.”
Cosmic Crisp is a partially managed variety open to just Washington growers in North America at least for its first 10 years but no limit on the volume they produce.
To keep it managed, limited production and marketing will be licensed in principal growing regions of the world within the first 10 years, Brandt said. “That should provide greater returns to Washington growers and the industry for as long as possible. That’s the goal,” he said.
Manly, the managing partner of Regal Fruit, said without a limit on Washington production, it could be overproduced.
“If supply grows too large it could affect demand, but the bottom line is delivering a higher-quality eating experience. Anytime we can put a better-eating apple in the hands of consumers we benefit producers, and Cosmic Crisp does that,” Manly said.
Apple competitors in other states are watching.
Don Armock, president of Riveridge Produce in Sparta, Mich., one of Michigan’s largest apple producers, called Cosmic Crisp “a bold adventure.”
To ramp up so fast is a “pretty big task,” he said, noting it’s taken Honeycrisp 25 years to reach sales of 12 million boxes.
Consumers are creatures of habit and only have limited time to make shopping choices, Armock said. To convert so many to a new apple so fast will be a challenge, he said.
“I’m not saying it can’t be done. Some very powerful marketing firms in the apple world are behind this and they certainly have the potential to make it work,” Armock said of the Washington companies.
It will “cannibalize” some traditional varieties, but if it fails it will take a level of capital out of the industry that will be felt in all apple-producing states, he said.
“I’m of the opinion it has to work because of the level of capital risk,” he said.
If it’s successful, Michigan and New York growers undoubtedly would like to be allowed to grow it, but it’s a Washington investment and Washington should reap the reward, he said.
Cosmic Crisp is bringing new cooperation among Washington tree fruit companies that are used to competing against each other with small volumes of the latest club varieties from New Zealand, Kershaw has said.
A successful Cosmic Crisp can become a blueprint for a pipeline of successful launches, he said, “helping Washington become the Silicon Valley of apple breeding.”