Agribusiness has two major market themes to work with: low-volume, high-margin niches and the high-volume, low-margin (and unfortunately sometimes negative margin) commodity channels. Tree fruits fit this pattern, with recent history marked by flat sales and market share slipping away to the USA, New Zealand and the rapidly expanding Chinese sector. Despite the much touted local food movement of recent years, conventional domestic orchard offerings do not gain a price premium in the fresh fruit market and are being undercut by much cheaper imported juice concentrate in the processed market. I think many Canadians would be shocked to learn that prominent apple juice brands “made in Canada” are in fact primarily blended from Chinese concentrate.
Niche Strategy - Club Varieties
The latest producer strategy to carve out a profitable niche is a new spin on supply management that comes in the form of “club” varieties. Club varieties are patent-protected fruit varieties with restricted production. Prospective growers must negotiate the right to produce and market them with the patent holder, in essence, joining a “club” of licensed growers. Club set-ups allow for control over the quality and quantity of unique fruit varieties to get better retail pricing, but also have higher base costs: royalty fees to the patent holders at planting, recurring fee towards marketing the brand, and fees for each bin of apples sold.
Two club apple varieties coming to a grocers’ shelf near you are ‘SweeTango™’ and ‘Red Prince’.
SweeTango, a registered trademark of the University of Minnesota for fruit of the Minneiska cultivar, is a cross of the popular ‘Honey Crisp’ with ‘Zestar’. It is expected to be on sale at the retail level in fall of this year. The Scotian Gold Cooperative in Nova Scotia and Quebec’s Stevenson Orchards, in a club cooperative with over forty American growers under the “Next Big Thing” banner, plans to grow and market a series of managed apple varieties, beginning with SweeTango.
This February marked the official introduction to the Canadian market of ‘Red Prince’ apples. Red Prince is a Dutch, patent-protected variety derived from an unplanned cross of ‘Jonathen and ‘Golden Delicious’ varieties (much as the first MacIntosh apple was found from a chance cross in a farmers’ orchard). In Canada it is being produced exclusively by a single family in Ontario, Irma and Marius Botden, who have been planting high-density orchards over the past decade to build up enough production to supply large grocery chains with sufficient volume. The Botdens are partnering with Global Fruit, a regional packing enterprise that has designs on transforming Canada’s apple business to specialize in club varieties.
Both of these club varieties have the quality and unique attributes to succeed as niche offerings. Red Prince stores well and its flavour is reported to improve after a couple of months of storage, giving it the timing to stand out well against other mid-winter offerings. Likewise, focus groups have rated SweeTango a winner with its “complex flavour” as a key factor differentiating it from conventional apple varieties.
The Botdens are supporting the launch of Red Prince with a high profile marketing campaign, unseen for individual fruit varieties in this country. Similarly, the Scotian Gold Cooperative took the unusual step of a press release to announce the arrival of SweeTango in Canada and we can probably expect a major marketing push this fall when it hits the grocers’ bins.
No Gains Without Marketing
Both the unique quality attributes and the added marketing efforts are needed if the ‘club’ variety approach is going to succeed. Consumers need to be convinced that a premium price is justified. Consistent, high quality and the added allure of some exclusivity will keep a certain market segment coming back. There also has to be a consistent level of consumer demand to convince retailers to provide shelf space for unproven varieties. Grocers survive on razor-thin margins in the highly competitive food retailing business and they need to see the sales and / or higher margins to justify dedicating shelf space away from consumer favourites such as the old standby MacIntosh.
What also remains to be seen is if this model will work in the long run. With one or two club varieties competing against a sea of MacIntosh, Delicious and Royal Galas you can probably safely carve out a nice piece of market share with no fear other producers will jump on your protected variety and flood the market with volume. But what will happen when there are dozens of club varieties in addition to local heritage and certified organic product to choose from? It could create a new level of competition for the club growers – that is, competition for shelf space. If that become the situation, supply restrictions will keep competition between growers of a particular variety in check, but competition between rival niche varieties for the sometimes fickle and ephemeral foodie market may have a price-depressing effect.
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