WENATCHEE, Wash. — The Washington apple industry needs more consumer research as it continues to flood the market with more apple varieties, but even the largest marketers may not be large enough to afford it, an industry analyst says.
Fresh from visiting 20 grocery stores in a swath of California stretching from the Bay Area to San Diego, Desmond O’Rourke, retired Washington State University agricultural economist, said competition among Washington marketers continues to intensify as the companies push more proprietary or branded apple varieties at consumers.
There was an average of 37 SKUs (stock keeping units) of apples in each store compared to 28 a year ago, O’Rourke said. Every variety, fruit size, packaging style and organic versus conventional gets different SKUs. For example, conventional Honeycrisp apples in a 3-pound film bag get a different SKU than a conventional Honeycrisp in a 2-pound pouch bag.
“Retailers want to stock more SKUs but are not prepared to give more space. So that sets up a real challenge for the industry as we add more new varieties,” O’Rourke said. “On top of that, the new Cosmic Crisp apple will be coming in a few years in large volumes into a crowded field. That is why I argue it has to have a major marketing effort behind its launch.”
Changing consumer lifestyles and a desire for more online shopping also fuels retail turmoil and pressures suppliers, he said.
“We need a better picture of who our consumers are, their preferences and where they prefer to shop, if online or in stores,” O’Rourke said. “This raises the issue of scale. Are our marketers big enough to afford the research and field representatives to implement marketing strategy to stay ahead of the game?”
They probably are, said Steve Lutz, senior strategic analyst at Columbia Marketing International in Wenatchee.
“But that doesn’t mean more consolidation isn’t coming because it probably is,” said Lutz, who was the Washington Apple Commission president from 1995 to 2000 and a partner in The Perishables Group, a Chicago category management firm, from 2000 to 2013.
“Size alone isn’t the issue. The issue is a change in philosophy and margin structure to make marketing investments when shifting from selling commodity apples (older mainline varieties) to your branded apple (proprietary variety) over someone else’s,” Lutz said.
Within that is keeping consumers willing to pay more for branded apples, which is a “magnitude switch,” a shift in thinking of what is a marketing investment and a realistic price per box to make branded apples successful, he said.
The industry knows its retail customers well but probably not so much consumers, which is typical of any produce item except for Halo mandarins, he said.
“The Halo guys (part of The Wonderful Co., of Los Angeles) probably know more than anyone. They have a good handle on the consumer, buying patterns and price elasticity,” he said. “But it’s easier to compare a mandarin to an orange than one branded apple to the next that have the same bi-coloring and taste almost the same.”
Consumers can’t tell the difference when they see Euro-packs of six different branded apples that look alike displayed on a slant-back table with signage “the size of a business card,” he said.
Honeycrisp remains the highest-priced apple but fell 14 percent in January compared to a year ago because of larger volume, Lutz said. That pressures branded apple prices downward, he said, and no one really knows if Cosmic Crisp will have the most impact on commodity varieties, Honeycrisp or branded apples.