What is driving the growth in organic apple production in WA state?
First and foremost, consumer demand.
Over the last five years or so, most of the fruit buyers for major supermarkets, food companies, restaurants, and exporters have been pushed by their customers to expand the diversity and quality of organic apple offerings.
Since Washington State accounts for over 90% of the fresh organic apples produced in the U.S. (according to USDA data), buyers have naturally focused their efforts to secure new supply from WA State producers and suppliers.
Buyers know from experience and internal research that the customers in their stores or restaurants that seek out organic food tend to spend more money per person and visit than other customers, because they value food nutritional quality, safety, and taste. This is why retaining these customers is mission critical.
If customers cannot find the organic products they want in their go-to grocery store or restaurant, such as organic apples for their kids, they may go elsewhere.
Over the years as demand for organic apples has grown, buyers have sought organic apples from their current WA State suppliers, many of whom previously only grew and marketed conventional apples.
Some grower-shippers had limited supplies of a few organic varieties, but clearly, most players in the industry came to realize year-round demand for organic apples was expanding at a pace far in excess of production and supply.
In addition, many of the primo-quality organic apples grown in WA State are headed abroad into markets with markedly higher price points. At this point in the evolution of the market, domestic buyers generally do not compete for the highest-quality organic apples exported to Pacific Rim Countries, Europe, and the Middle East.
The Costco Effect
Costco represents another unique marketing dynamic. For starters, they generally do not offer conventional and organic versions of the same fruit or vegetable side by side.
When Costco secures an ample supply of high-quality organic produce at a price they can work with, such as Gala apples, they may carry just these organic Galas for several months, and no conventionally grown Galas.
This Costco strategy has greatly increased organic apple sales. In fact, it is working so well that the company is exploring with select WA State grower-shippers a switch to year-round organic apples for two or three varieties.
This switch might indeed happen in the near future, if conditions are right (i.e. month-to-month supply, quality, and price). This will, of course, further expand sales of organic apples, and investments in the conversion of additional acreage to organic production.
Long-term players on the marketing side of the fruit business know that job #1 is keeping your current customers happy. As demand for organic apples has risen, so have buyer requests for new supplies from grower-shippers and packers, including many with limited or no dedicated supply of organic apples.
So, they faced a choice.
Build an in-house, reliable organic supply, or risk a customer establishing a relationship with a competitor that can meet rising demand for organic apples, but also might capture some sales of conventional apples.
For most grower-shippers and packers, the preferred course of action entailed building their own organic supply. They did this by encouraging their current, conventional growers to transition some orchards to organic, and/or by transitioning some company-owned orchards to organic (often new, high density plantings).
As a result, in WA State, the distinction “conventional grower” vs. “organic grower” is no longer very meaningful, since most growers have substantial acreage producing both organic and conventional apples, and the movement of acreage from one production system to the other is driven primarily by demand, relative prices, and changes in expected production costs.
Experience and Success Lowers Transition Anxiety
While consumer demand is the major driver behind the expansion of organic apple production in Washington, there is more to the state’s organic apple success story.
Organic apple acreage reached 10% of the state’s total apple acreage several years ago.
Once organic production of a fruit or vegetable crop hits about 10% of total production in a region, formerly steep hurdles at various points along supply chains tend to become less formidable.
Economies of scale are realized, lowering production, packing, storage, shipping, and marketing costs, while generally also improving product quality as the volume of the pack out increases.
Another critical change has been the emergence of a cadre of experienced consultants and service companies. These individuals and companies are helping lifelong conventional growers, as well as newbie organic farmers, work their way through the transition to organic production, while sidestepping many of the mistakes and costly lessons learned by those who first took the plunge.
For example, organic apple growers in WA State are supported by companies making and selling compost that is higher quality, more consistent, and less expensive than commercial compost was five years ago.
And, a decade ago there were only a few dozen crop protection and fertility products available in the state for organic tree-fruit producers, but now there are hundreds, with many, many more in R+D pipelines.
European farm equipment manufacturers have invested heavily in machines designed for mechanical weed control, more effective and efficient pruning, and in irrigation system technology. A growing number of WA State equipment dealers are offering everything from imported tractors to mowers, microbes, and rootstock, as well as other essential apple production inputs and tools that have been consciously developed to meet the needs of organic growers.
One mechanical weeder, the WonderWeeder®, was invented by an organic orchardist in the state, and is helping turn one of every organic farmer’s most challenging task into a tough, but manageable one.
Last, as the organic fruit business in WA State grows, some storage facilities and packing sheds will be dedicated to 100% organic produce, year round. This will lower both packing and marketing costs.
Storage, packing, and shipping supply chains dedicated to 100% organic fruit will also completely eliminate fungicide residues and some other prohibited materials that sometimes find their way onto organic fruit. This can occur when organic fruit is packed in facilities that run conventional fruit five days a week, and organic fruit one day per week.
The development of new, long-term storage technology, such as ultra-low oxygen systems, has enabled the storage of organic apples for several more months, without any of the conventional chemical materials routinely used in the storage of conventional fruit.
By adding 2-4 months to the marketing season, enhanced storage technology instantly grows the market by making it possible, for example, for Costco to offer price-competitive, organic Gala apples from WA State for 6 months instead of 3, and only organic Galas as long as the supply lasts.
Moving the Much Bigger 2018 Crop
Given the huge growth expected in the 2018 organic apple harvest in Washington, there is considerable anxiety over where the crop will go, and whether supplies for some varieties well in excess of demand will drive prices lower.
It is predictable that this will happen, unless the industry has also invested new energy and resources on the marketing side, so that new buyers will be drawn into the market next fall and through the winter, in step with the flow of new fruit onto the market.
The best way to attract new buyers to Wenatchee and Yakima later this year, and in the years ahead as more acreage is transitioned, is to first, produce a quality crop, store and handle it well, and offer it at competitive prices.
The second critical component is educating more consumers – and buyers – both in the U.S. and abroad about the nutritional, food safety, environmental, and worker-health benefits of organic apple production and consumption.
This is a tricky challenge for many fruit companies as they are selling both conventional and organic fruit, and are reticent to promote one type at the expense of the other.
Most major food companies that have recently invested serious capital in buying up iconic organic companies and brands are facing the same challenge.
Think about our choices, and the marketing of cars, computers, cell phones, perfume, mattresses, headphones, vacuum cleaners, and just about every other product, and indeed most services.
For all of them, there is a quality and price gradient, and one of the goals shared by most players in each industry is nudging people up along that gradient. This is done by creating product improvements, and by educating consumers about what they will get if they move up the quality gradient.
Progress in moving consumers to higher-quality products is generally regarded as a good thing, and is an accepted market dynamic.
But not so much in the food industry. After all, “Milk is milk,” right? Wrong.
There are enormous nutritional differences between whole milk, 2% and skim milk. Milk-based beverages with and without added sugar are different, as is milk from farms on which cows are fed about equal amounts of grain and forage-based feeds, compared to milk from cows fed an essentially 100% forage-based diet.
BTW, the truly remarkable nutritional-quality differences between most of the conventional milk sold in America and organic grassmilk are quantified for the first time in a 2018 peer-reviewed paper highlighted elsewhere on Hygeia Analytics.
Ditto, big differences in conventional apples vs. organic apples. These are not the same products in several dimensions that consumers care about.
The apple industry in WA State needs to find a way to embrace the goal of moving people up the apple-quality gradient, and can do so only by openly acknowledging qualitative differences and promoting their inherent advantages, for consumers, farmers and farm-workers, the state’s soils and water resources, fish and wildlife, and birds and bees.
That is also how the much bigger, 2018 WA State organic apple harvest can be marketed. It is how some grower-shippers in the state have tapped, and will continue to expand exports into high-value markets abroad. It is also how the U.S. food industry can bury the hatchet holding back the growth of organic, and how both food companies and farmers can expand their profit margins.
Across the whole food system, the missing ingredient needed to more rapidly grow the demand for organic food is credible, accepted information about quality differentials that exist along the price-quality gradient. Such technical, science and testing-based information is missing, in large part, because of government policies and priorities, and politics, which will be the focus of Part III.