Marketing Products Apple growers know that change is needed Kristin Rowles to remain competitive Department of Applied Economics and Management in today’s worldwide Cornell University, Ithaca, NY market. The processing sector of the apple industry is particularly strained. Low apple cross the country, apple growers trol, product development, and marketing. prices and the recent know that change is needed. Eco- This project is interdisciplinary in its A nomic stress is readily apparent in approach. The project includes faculty and closures of some East- today’s apple industry. At most gatherings staff from six Cornell Departments: Ento- ern apple processors of apple growers, discussion frequently mology, Plant Pathology, Horticulture, turns to marketing issues. Growers are Food Science, Cornell Cooperative Exten- have been cause for a concerned about their future in an indus- sion, and Agricultural, Resource, and negative outlook try characterized by low prices for , Managerial Economics. By involving a competition from low priced foreign broad range of experts, the project aims to among many growers apple concentrate, and the pressures address a number of research questions for in the region. This ar- of industry consolidation throughout the the industry. The goals of the project are: supply chain. • To develop a more environmentally ticle summarizes the The processing sector of the apple in- sound, cost-effective apple production marketing research dustry is particularly strained. Low apple and integrated pest management sys- prices and the recent closures of Eastern tem, aspects of a large apple processors have been cause for a • To stimulate growth of apple processing project being done at negative outlook among many growers in industry with new technologies that the region. Among consumers, apple prod- support commercial production of di- Cornell to help the uct consumption has generally been stag- versified, high value apple products, processing sector meet nant in recent years. and In the Northeast, apple processors pro- • To assess economic impacts, marketing its current challenges. vide an important outlet for the apple in- potential, and consumer reactions to dustry. In New York over half of the an- new products. nual apple harvest is sold in processing Marketing research is just one compo- ticle summarizes the on-going marketing markets. New York apples are processed nent of this research, but an important step research component of this project. This into , , sauce, pie slices, hard in addressing industry concerns. This ar- research will be completed in 2001. Final cider, dried apples, and several other apple products by processors in the state and throughout the eastern U.S. Facing the eco- nomic pressures of a changing market, apple growers and processors need to make strategic adaptations to enhance their competitiveness. A current research project at Cornell University aims to provide di- rect assistance to the processing sector in meeting its current challenges. Two years ago, Cornell University re- ceived an anonymous grant to support a project focused on the Northeastern apple processing industry entitled “Develop- ment of an Environmentally Sound, More Profitable System for Production and Mar- keting of Value Added Processing Apple Products in the Northeastern .” The purpose of this project is to assist growers and processors in the indus- try to face the challenges of the changing market and to take advantage of opportu- nities offered by new information and tech- New apple processed products such as sparklilng cider may offer value added opportunities nologies related to production, pest con- for fruit growers. 10 NEW YORK STATE HORTICULTURAL SOCIETY project reports and related articles that re- uct innovation is infrequent. port results will be available at that time. In a mature industry, marketing strat- yyyyyy yyyzz||yz egies should focus on expanding existing Market Trends markets and developing new markets. Ex- yyyyyy

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Figure 1 shows the average consump- and interests change over time. New prod- y tion levels for apples and apple products ucts can be used to adapt to these chang- in the U.S. in 1997-98. Each year, the aver- ing market conditions. Figure 1.Average annual U.S. apple consumption, per capita (in pounds): 1997-1998 age American consumes 18.82 pounds of The marketing research in this project apples in juice and cider, 5.70 pounds of is focused on market expansion through apples in canned apple products, 1.30 the identification of new markets and the pounds in frozen apple products, 0.97 development of new products. The project consideration of products that are available pounds of apple in dried apple products, has initiated a number of marketing re- for sampling from the Food Science labo- and 0.67 pounds of apples in other apple search activities to collect information ratories. Instead, market research is aimed products. about processed apple products and mar- broadly at identifying market opportuni- Over the past 20 years in the U.S., to- kets that can be useful to the industry in ties by considering product concepts as tal apple consumption has risen by 34% to developing marketing strategies. This re- well as product prototypes. over 46 pounds per person annually (see search aims to provide a first step in ad- The first steps in the marketing re- Figure 2). Most of this increase can be at- vancing innovation and market expansion search process included an industry over- tributed to a 108% increase in the con- in the industry. view, the development of a project advi- sumption of apple juice and cider during sory council, and an apple processor sur- this period (see Figure 3). Consumption of Marketing Research vey. These steps were taken to collect back- frozen apples increased over the same pe- The marketing component of this ground information and to support the de- riod by about 53%. Other processed apple project was designed to analyze process- velopment of a marketing research plan. products did not have discernable con- ing apple markets, to develop new prod- The advisory council was created to sumption trends during this time. Fresh uct concepts, and to identify new market involve a diversity of opinions in discus- apple consumption fluctuated, but in- opportunities for apple products. The ag- sion about the industry and its markets creased overall by about 9% during the 20- ricultural economists on the project work and products. This group meets twice an- year period. closely with the food scientists to consider nually to provide input and guidance on At the current level of consumption, new product ideas from both a marketing research plans. It also serves as a sound- the average American consumes only and a production perspective. However, ing board and idea generator for the about one fresh apple per person each the marketing research is not limited to project. Members of the advisory council week. In 1998, the average American con- sumed about 288 pounds of fruit, both fresh and processed. By weight, about 16% of that fruit were apples and apple prod- ucts. For comparison, con- sumed almost 100 pounds of oranges and processed orange products per person that year. Oranges account for about 35% of all fruit consumed in the U.S. Among fruits, apples rank 3rd in per capita consumption in the U.S., behind oranges and grapes. Despite the increase in apple con- sumption over the past 20 years, U.S. con- sumption of apples and apple products has generally been flat for the past several years. The market for processed apple products shows signs of stagnation. Prod- ucts are generally mature, and consumers have well-established patterns of purchas- ing and using these products. Investment Figuer 2. U.S. apple consumption of fresh and Figuer 3. U.S. consumption trends of processed in consumer advertising is low, and prod- processed apples over the past 20 years. apple products over the last 20 years. NEW YORK FRUIT QUARTERLY • VOLUME 8 NUMBER 4 • 2000 11 TABLE 2 TABLE 1 Consumer Motivators in Today’s Market Apple Product Concepts from New Product Development Workshop • Convenience: Consumers’ need for more time drives the purchase of on-the-go foods, meal solutions, and functional packaging. • Applesauce in Squeeze-Tube Package for Kids • Wellness: Fears about aging, declining health, and medical costs drive consumers to prevent and self-treat health problems with food and beverage products that offer health benefits. • Pre-Sliced Apples for • Food quality and safety: Consumers are drawn to products that offer quality assurance and • Snack Pack with Pre-Sliced Apples, reliable food safety. Cheese, and Crackers • Gratification: Disposable income levels have been rising in the current strong economy, and • Waldorf Kit with Pre-Sliced Apples consumers are seeking indulgence for themselves and their kids. They are drawn to buy gratifying products that good and offer the feeling, “I’m worth it.” • Ready-to-Microwave Baked Apples

• Apple Spritzer with Sparkling Cider and Mineral Water ing plan was developed. The objectives consumer motivators (see Table 1). The • Stir-fry Sauce with Apple Chunks and of the plan are to: workshop discussion was focused devel- Savory Spices • Conduct forward-looking research: oping concepts for products that are rel- • Fresh Pressed Chilled Apple Juice Focus on opportunity identification evant to today’s consumer motivators. • for Pancakes and rather than assessment of current mar- The final product of the meeting was a list Desserts ket conditions and trends. of apple product ideas for further consid- • Explore how to make apple products eration. A sampling of these ideas is listed • Apple Cider Salad Dressing relevant in today’s market: Identify the in Table 2. • Apple Cider Fortified with Vitamins or motivators that are driving consumers Herbs and how to make apple products rel- 2. National Consumer Survey • Pourable Chunky Apple Topping evant in that context. A national survey of apple product • Identify new product and new market- consumers was conducted in September • Apple Juice and Spring Water Beverage ing opportunities: Use the research to 2000. The survey had two main objectives. for Young Children assess consumer reactions to new prod- First, the survey sought to identify demo- • Microwaveable Apple and Cheese uct ideas and to identify new demo- graphic trends in apple and apple prod- Turnover graphic markets that are possible areas uct consumption. This information was • Apple Slaw for market expansion. collected in order to identify potential op- • Identify foodservice opportunities: portunities for market expansion to new • Apple and Green Tea Beverage Explore how to adapt apple products demographic targets. Second, the survey • Fresh Apple Cobbler or for greater use in foodservice markets, was used to assess several of the new Baking Kits which are experiencing rapid growth as product concepts discussed at the work- American consumers increase their con- shop and presented in Table 2. Results • Apple Cider sumption of meals away from home. from the survey are currently being tabu- The research plan includes several lated and analyzed. represent growers and processors, but activities. The purpose and status of each also an agricultural financial institution, activity is presented below. 3. Consumer Focus Groups a retail grocery chain, and industry asso- Following the survey, six focus group ciations. 1. New Product Development Workshop meetings were held with consumers in the The survey of regional apple proces- New York processing apple industry metropolitan area in Oc- sors was completed in 1999. The purpose leaders attended a workshop in June 2000 tober 2000. All of the groups were held of the survey was to assess processor out- focused on new product development. with women that shop for their house- look for the industry and to identify mar- The workshop was facilitated by market- holds. Two groups were held with each keting challenges and opportunities. In ing consultants with extensive experience of three demographic targets: women this survey, 21 apple processors in New in new product development, and the with children under 6, women between York, , Pennsylvania, and meeting was held at a facility that serves 50 and 69 years old, and women between Virginia were interviewed. The as a new products showcase. The facility 25 and 49 that consume wine. The last interviewees represented processors that houses a library of 65,000 consumer prod- group was used in part to evaluate mar- purchase almost 35 million bushels of ucts collected over the past 30 years. The kets for hard cider and apple wine. Over- apples annually, including about 12.5 mil- products in the collection offered many all, the purpose of the focus groups was lion bushels from New York State. The stories of market successes and failures, to explore how these consumer groups processors interviewed in the survey pro- and these surroundings provided a rich use and view apples and apple products. duce a wide range of apple products in- environment for stimulating creative The participants discussed what qualities cluding juice, cider, applesauce, frozen thoughts about apple products. they like and dislike in apples and apple apples, pie filling, dried apples, cider vin- The workshop emphasized the im- products, how they would change apples egar, hard cider, and baby food. portance of innovation as a key to success. and apple products, if they could. Partici- Using the information collected from New products must stimulate a consumer pants also sampled and evaluated some the industry overview, the advisory coun- to take the risk of purchasing them. To do prototype apple products. The discus- cil, and the processor survey, a market- so, new products must appeal to basic sions were facilitated by a professional 12 NEW YORK STATE HORTICULTURAL SOCIETY moderator who is currently preparing a New York school foodservice programs, mercial partners in the research project summary of the discussions. Preliminary to examine the important factors in pur- • Case studies of successful marketing findings indicate broad support for fresh chasing decisions, and to assess the rel- strategies from other food and beverage apple slices as a retail food product and evance of apple products in today’s school industries interest in baked apple chips as a snack foodservice market. The survey will be • Review of eco-labeling literature and product. distributed in early November. programs • Publication of short “how-to” market- 4.School Foodservice Survey 5. Foodservice Managers Focus Groups ing articles The New York State School Recently, much attention has been Final project reports are expected to Foodservice Association has a task force given to the growing role of foodservice be available in 2001, and interim project committed to increasing the use of New in food and beverage distribution in the reports are available now. York State agricultural products in the U.S. With U.S. consumers currently While this marketing research can state’s school foodservice programs. This spending almost half of their income on help, it alone will not improve markets for committee has estimated that New York meals away from home, the foodservice processing apples and apple products. schools buy the equivalent of six million sector is an important market. In Novem- This information gathering effort is only bushels worth of apples in the form of ber, four focus groups will be held with a preliminary step that can provide sup- apple juice each year. This estimate reflects foodservice managers from family restau- port and resources for future innovation the importance of this market to the apple rants and institutional foodservice opera- and strategy development. Stepping be- industry. tions. These groups will examine the use yond this information requires risk-taking School foodservice has traditionally of apples and apple products in and investment on which the future of in- been an important market for apple prod- foodservice and explore opportunities to dustry hinges. ucts, including apple juice, applesauce, develop and improve apple products for and canned apple products. Like other the foodservice sector. Participants will markets for apple products, this market is also sample and evaluate some apple Kristin Rowles is a Research Associate in changing. A survey of school foodservice product prototypes. the Dept. of Applied Economics and Manage- directors has been developed with the as- In addition to these major research ment who is heading the marketing research sistance of members of the task force men- activities, the project will includes several project on processed apple products. tioned above. The purpose of the survey other related initiatives, including: is to explore the use of apple products in • Marketing research assistance to com-

NEW YORK FRUIT QUARTERLY • VOLUME 8 NUMBER 4 • 2000 13