WAR June 2009

June 2009, World Apple Report Highlights

It still Pays to Advertise
The apple industry finds itself handicapped in a season of weak consumer demand and large apple supplies because it no longer has generic promotional programs that can be used to stimulate sales. Such programs became unpopular for many reasons. However, many studies on many commodities have shown that generic promotion programs bring numerous benefits. Without such programs, a commodity can easily see its appeal to retailers and consumers eroded. Promotional programs by individual marketers or marketing clubs are just not enough. The apple industry needs to use the present crisis to re-examine industry promotional needs.

U.S. Industry Restructures
Just released data from the U.S. Census of Agriculture for 2007, shows just how traumatic the 2002-2007 period has been for the U.S. apple industry. About 5 percent of apple farms and 14 percent of apple acres were lost. The loss was particularly heavy (a decline of 38 percent) in non-bearing acres, the indicator of how confident growers are to reinvest in their industry. The heaviest losses in farms and acres were among small to medium-sized farms with between 25 and 250 acres. Data for farms and acres in competing fruits suggest that most apple growers did not switch to other fruits such as sweet cherries or wine grapes, but left the fruit industry.

War of Prices in Ireland
While the sectarian war in Ireland has disappeared, a price war has now erupted among grocery chains in the Republic of Ireland. One trigger was the flood of shoppers into the North of Ireland where goods were cheaper because of the sharp decline in the value of the pound sterling against the euro. Market leader Tesco has fought back by cutting prices drastically in its stores near the Northern Ireland border, sourcing more of its product from sterling area sources and promising nationwide price cuts. This has infuriated suppliers in the Republic of Ireland. They are calling for government restraints on retailers. Hard discounters, Aldi and Lidl, have responded with across the board price cuts. Smaller competitors will also be forced to compete. The price war is raising many competing claims among consumers, retailers, suppliers and the government. Similar price wars could easily occur in many other countries if the present global economic slowdown continues.

Special Statistics

U.S. Apple Industry: Changes in Farms and Acreage, by State, 2002 to 2007 (table).
U.S. Apple Industry: Changes in Farms and Acreage, by Farm Size, 2002 to 2007 (table).
U.S. Fruit Industry: Trends in Alternatives to Apples, 2002 to 2007 (table).
Washington State: Percent of Acres Non-bearing, by Size of Orchard, 2002 to 2007 (table).
Rotterdam: Wholesale Prices of Royal Gala from Southern Hemisphere Suppliers,
May 8, 2009 (chart).

The authoritative guide to the world apple business today.

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