November WAR 08

November 2008, World Apple Report Highlights

Capitalism under Siege
The financial crisis of 2008 brought claims that capitalism as we know it is dead. That judgment is a little premature. The fundamentals of the capitalist system are not going to change. Whether projects are in the public or private sectors, accumulation of large amounts of capital will still be required. The price of that capital, namely, the interest rate, will still be determined by the interplay of supply and demand. People's confidence in the system and government assurances and restrictions will affect both the supply and demand for capital. The biggest current impediment to the flow of capital and to the demand for capital is fear. The flow of capital into or out of the fruit industry will continue to be determined by how attractive the industry is relative to other industries.

China's Food Safety Crisis
The reputation of Chinese food products, already under siege from previous incidents, has suffered a severe blow after many children fell seriously ill and some died from drinking milk contaminated with melamine. The scare was made more newsworthy by the apparent corporate and government efforts at a cover-up, the involvement of the New Zealand dairy giant, Fonterra Cooperative Group, and the sanctions imposed by health authorities around the world on imports of products containing Chinese dairy ingredients. The Chinese government has taken drastic steps to correct the systemic problems in the milk collection system and to control the damage to China's food safety reputation around the world, but restoring China's food safety reputation could take years.

Day of the Discounter
For much of the last two decades, consumers in many countries have grown in affluence and retailers have jostled each other for a larger share of the upscale market. However, the creeping economic slowdown, inflation in oil and food prices and the recent collapse of the housing and financial markets have sent more and more consumers hunting for bargains. Discount stores of every kind have benefited most from this reversal in consumer behavior. Companies like Aldi and Walmart have increased their share of the food market and stand to gain even more if the recession is prolonged. This trend to discounters could trigger major changes in the mix of qualities and prices that will be demanded of all food suppliers.

Special Statistics

Big Food Retailers Get Bigger (table)
Europe's Changing Population, 2007 (table).

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