Washington state’s apple production will continue to expand, with a fresh crop of 200 million boxes possible in the future, two top marketers predicted during the Washington State Horticultural Association’s annual meeting in December.

Robert Kershaw, president of Kershaw Fruit Company in Yakima, said when he predicted a decade ago that Washington would some day produce 120 million boxes, he was laughed out of the room.

But production has surpassed that volume. The 2014 Washington apple crop is estimated at an unprecedented 155 million boxes, up from 115 million boxes last year—a 35 percent increase.
Washington is one of the few apple growing regions of the world that has increased both apple acreage and production per acre, Kershaw said. “We will continue to grow and produce larger and larger crops.”

Mike Taylor, marketing director at Stemilt Growers in Wenatchee, also believes the industry will grow in leaps and bounds.

“The rate of change is going to blow your mind,” he said. “I think this industry is going to move 200 million boxes of fresh apples—not in the next five years, but in the future for sure.”

Discussion moderator Bruce Grim, retiring executive director of the Hort Association, recalled the tough years of the 1990s when the industry suffered low prices that were attributed to record crops.

For example, in 1993, when the industry produced a record 83 million boxes of apples, the average f.o.b. price for all varieties and sizes of apples was only $12.88 a box, well below the breakeven price. The average price in 1994, which brought another record crop of 91 million boxes, was $12.96.

In comparison, the industry sold a record 129-million-box crop in 2012 at a record average price of more than $24 a box.

Grim asked the two marketers what’s different today from the 1990s.
“Everything is different now,” Taylor said.

There’s more vertical integration, and the industry has plenty of capital after several good marketing years. The mix of varieties has changed, and the harvest season has lengthened.

Marketers are using category management to analyze performance of apples at retail. There are new preharvest tools and postharvest treatments, which have raised the quality of apples tremendously over the past 10 to 15 years, Taylor said.

“I think we’ve just scratched the surface,” he added. “And I think we’ll see incredible acceleration in the rate of change. It’s not like in the 1990s. We still sell apples through a similar supply chain and grow apples in the same locations, but it’s a different ball game.”

New varieties

Kershaw said apples have been able to compete successfully against other year-round fruits, such as strawberries and blueberries, because of the introduction of new varieties with different flavors and tastes. “If we were just a one- or two-variety industry that would not be the case.”

Taylor agreed that managed varieties will play an increasingly important role. Consumers today have high expectations in terms of flavor and quality and different apple varieties will fit different market segments. However, the industry has to consider retailers as well as consumers.

“One of the key things we have to think about as producers is what are we going to do to remain viable going forward,” he said. “We have to be aware that our primary customer, the retailer, is focused on what’s good for them and their bottom line.”

Retailers would rather earn a 40 percent markup on an apple that costs $1.99 a pound than 40 percent on an apple retailing at 88 cents a pound, he said, and that will stimulate change in the industry.

There’s going to be a massive struggle for shelf space and it will come down to the marketer’s ability to serve retailers and create programs that boost retail sales and ultimately move the needle on consumption, Taylor added.

Also, it’s important that growers understand what the retail market wants, he emphasized.

“Don’t put your head in the sand. Be willing to talk to your packer and marketer and find out what they can actively sell and what they can’t,” he said.

The industry has moved into an era when it will not be able to sell all the apples grown, Taylor said. Marketers will sell what they can, but the less desirable fruit will be left behind. He encouraged growers not to send low-quality fruit to the packing house.

“Understand the strengths and weaknesses of your marketers,” he urged. “Start to think about how we’re all going to change and at what level we can be successful.”

Taylor said future success will demand that growers purge themselves of inefficient orchard blocks. Vertically integrated companies make margins on three fronts—growing, packing, and marketing—but those who are exclusively growers will have to find a niche to succeed. They’ll need to grow club varieties and focus on efficient production.

Kershaw said the industry has a bright future, but when growers receive their returns this year, it will be clear which blocks need to be taken out. •