Great Unanswered Questions

Article:

Great Unanswered Questions
Millions of words are spilled each year talking about the many problems that face the apple industry. However, we have to admit that for some of the biggest questions, most of the talk has produced few viable answers. Here are just some of the major unresolved questions.

The industry is producing too many apples. Most people agree that this is true. While many small, inefficient firms have been leaving the industry, the survivors tend to be larger and more progressive and committed to cutting costs by getting bigger. As a result, total production continues to rise and real prices continue to fall. How does the industry get off this treadmill? We have not found an answer.

Consumers don't want much of what the apple industry is producing. Not alone is the industry producing too much in total, but too often it is producing apples that consumers do not want. However, many growers are stuck. They can maintain their businesses at the current level of prices, but they can't accumulate enough reserves to allow them to upgrade their product mix. So, the mismatch continues between their products and changing consumer tastes. Is there an answer, either within the industry or with government help? We don't know.

Consumer demand for apples is stagnant or declining. Per capita consumption of fresh apples continues to decline in many major markets. In the developed world, population growth is now so slow that it is no longer offsetting per capita declines. In the developing world, population growth remains robust, but economic setbacks have kept per capita apple consumption from rising. How can we reverse the decline in global demand for fresh apples? We need answers.

Apples are getting drowned in a sea of competing products. World production of many competing fruits and vegetables continues to soar. Increasing world trade in fruits means that a great diversity of fruit products is now available to consumers around the world twelve months a year. At the same time, huge consumer products companies continue to roll out a steady stream of new manufactured snacks tailored to every consumer whim. What is the role of the fresh apple in this torrent of products? We really don't know.

We are all supposed to be eating healthier. Why are we not? It has taken decades for societies to develop their current lifestyles that are centered around sedentary work situations, movement by automobile, entertainment without exertion and ever-ready supplies of food designed to meet discretionary wants, not absolute needs. Most of us ingest more energy than we burn. The result is rising obesity. How do we persuade the mass of people to change their lifestyles? And how do we get them to include apples and apple products in those changed lifestyles? We really do not know.

China's headlong expansion of production of apples, apple juice and pears is pulling down world markets. China continues to defy the laws of economics in expanding its production and exports of these products. Among the solutions proposed have been to block the Chinese with legal obstacles, fight them by differentiating our products with quality standards and sophisticated marketing tactics that the Chinese can't emulate, or join them in producing, packing and marketing apples and pears in China. None of these solutions have been effective so far in slowing down the Chinese juggernaut.

Retailers' increasing demands on suppliers are erasing profit margins. Retailers have become fewer and more powerful. That has given them leverage to demand better quality at lower prices. However, under pressure from various interest groups, they have also been shifting their liability for any breaches of health, safety, environmental or social standards back to the producers. Each new demand adds new costs to the producers and reduces thin margins even further. The obvious solution would be to pass those costs on to the interest groups that instigate them in the first place or to the consumers that support them. However, right now, the costs stick at the producer level. What is the solution? We do not know.

Consumer activists continue to snipe at the food industry. Food has become a favorite target of criticism from activist groups. Each criticism comes with expensive demands for change. The apple industry does not know from where, or on what basis, the next attack will come. Previous efforts to stop unwarranted disparagement of apples and other food products have failed. Can the industry continue to be a sitting target while its good name is whittled away? Probably not. But what can be done to turn the tables on the critics.

Shortages of labor, especially for harvest are becoming acute. The labor force that is available and willing to work in the agricultural industry under current pay and conditions is dwindling. Those that are willing come with various strikes against them in the eyes of society (e.g. lack of documentation). Efforts to reduce labor needs have had limited success. The apple industry cannot survive without a reliable supply of labor. What can be done? We don't know.

Is anyone responsible for the good of the apple industry? Decisions are being made at many levels of government and in many forums that have a bearing on the future prosperity of the apple industry. However, the industry can no longer agree in which forums it needs to be represented or who should represent it. The old organizational structures have been weakened or dismantled, but we have not found adequate replacements. There is no agreement on who should be responsible for the broader good of the apple industry. Above all, there is no agreement about who should pay for industry programs.

These are some of the fundamental questions that the apple industry needs to have answered if it is to regain its health in the coming decades. While there may be no obvious, easy answers, it is important to remember that many similar industries in equally difficult circumstances have, in the past, come up with imaginative solutions.

Solutions, when they eventually come, often seem so obvious that we wonder why we never thought of them before. The apple industry's problems are difficult, but no more difficult than some that other industries have conquered.

The first key to finding solutions is to agree on what are the major problems threatening the industry's health. The next step is to focus all the industry's talents and brainpower on each problem in turn to come up with feasible solutions. It can be done.

First published in the World Apple Report, June 2006, pages 1 and 8.

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