1. Marketing Apples in a Global Environment: Challenges and Opportunities by Dr. Roberta Cook University of California Davis March 2003

2. Overview of Presentation US apple situation –Area and Production –Trade –Consumption Global apple production Emphasis on China Global apple trade patterns Global consumption patterns Marketing issues

3. US Apple Acreage and Change in 90- 92 and 00-02 State Shares Source: USDA/NASS Jan. 03 and ERS 7% 40% 31% =168,785 hectares Down 8% Down 11%

4. Apple Acreage in Washington 2001 Fruit Survey * Current Estimate** Reds82,00066,709 Goldens27,00025,324 Granny Smith17,60016,669 Fuji24,40022,537 Gala25,50023,775 Other15,50013,227 Total192,000168,241 * Washington Agricultural Statistics Service;**Tom Shotzko Area peaked in ’99 at 210,000

5. Total Acres by Size of Apple Orchard - Washington 198719921997 Acres  25 AC 25-50 AC 50-100 AC >100 AC TOTAL Less than 25 AC Over 100 AC 28,249 27,716 33,126 73,519 162,610 % 17.4 45.2 23,664 25,216 30,382 89,846 169,108 % 14.0 53.1 20,518 22,233 34,690 127,234 204,675 % 10.0 62.2 Source: Census of Agriculture, as reported by Tom Shotzko

6. Apple Acreage, by Variety in California and Washington, 2002 California Fresh * Current WA Estimate** RedsNA66,709 GoldensNA25,324 Granny Smith6,20016,669 Fuji5,14622,537 Gala Pink Lady 3,788 1,267 23,775 NA Other2,30213,227 Total18,703168,241 *CAC and **Tom Shotzko Likely 22,000 total acres in Ca. including processing, and fresh area of 20,250 in 2000, CAC

7. Apple Production, U.S. and Selected States, 1990-2002, in million metric tons Source: USDA

8. U.S. Apple Production and Selected State Shares, 1990-2002 WA2,428,14256%46%17% NY408,4609%11%-16% MI344,9278%9%-16% CA252,6306%8%-31% PA204,5395%5%-5% Other States690,87216%21%-29% US 4,329,569100%100%-4% Source: ERS and NASS, Jan/03 00-02 State Shares........ State Avg Metric Tons 00-0290-92% Change

9. California Fresh Apple Production, by Variety, 42 lb. Cartons 2002/03 2001/02 Granny Smith2,235,9932,437,835 Fuji649,1201,060,491 Gala Pink Lady 1,015,111 266,877 1,102,086 239,581 Other96,660111,462 Total4,263,7614,951,455 Source: California Apple Commission, as of Dec. 1, 2002 WA Fujis down to 9 million boxes in 02/03 and Pink Ladies down to 500,000; WAC

10. Western U.S. Fuji Production in 1000 42-lb units Source: U.S. Apple Association, Aug.2003 update

11. Western U.S. Fuji Production in metric tons Forecast prior to frost 2002 Revised Wa. and Ca. Source: US Apples and 2002 revision from the WAC

12. US Utilization of Apples 1977-2002 FRESH PROCESSED In Million Metric Tons ‘77 ‘80 ‘85 ‘90 ‘95 ’02* Update: 4,237,100 total Short tons in 2002; 2002 fresh/ proc. shares estimated Sources: thru 01 ERS/USDA, 10-02; NASS Jan. 03 for 2002

13. Ave. Item Number in the Ave. US Fresh Produce Department 173 345 0 50 100 150 200 250 300 350 400 Number of items 19871998 Source: Supermarket Business, Oct. 1999 Pma study: 574 SKU’s in 2001

14. U.S. Per Capita Consumption of Fresh Apples and Pears 12 10 8 6 4 2 0 77/78........................92/93......97/98..01/02 Source: ERS, USDA kg 87/88 97/98 APPLES PEARS 1.4 7.2

15. US Per Capita Utilization of Apples in pounds Source: USDA/ERS

16. US P ER C APITA F RUIT C ONSUMPTION, P OUNDS 1977-2001 Source: USDA/ERS, Oct. 2002 Pounds per capita 273 90 85 24 74 269 54 26 71 118 Total for 2001 reaches 279 including some berries and olives.

17. US P ER C APITA V EGETABLE C ONSUMPTION, P OUNDS, 1976-2001 Source: USDA/ERS, Vegetables and Specialties Yearbook, July 2002 Pounds per capita 178 47 93 123 441 359 115 147 125 77 50

18. Fresh Apples: U.S. Imports & Exports by Key Country 1000 metric tons 1992 1997 IMP EXP IMP EXP 2002 Source: ERS, USDA 2001

19. US Fresh Apple Imports, by Country, 1990-2002 In Thousand Metric Tons Source: Census Bureau, US Dept. of Commerce

20. Indonesia Source: Bureau of the Census, US Dept. of Commerce US Fresh Apple Exports, by Country, 1990-2002 In Thousand Metric Tons Other Mexico Taiwan Canada Hong Kong

21. Monthly US Imports of Fresh Apples by Country of Origin in 2002 Source: US DOC Thousand Metric Tons Months

22. Monthly US Imports of Fresh Apples by Country of Origin in 2001 Source: US DOC Thousand Metric Tons Months

23. Monthly US Imports of Fresh Apples by Country of Origin in 2000 Source: US DOC Thousand Metric Tons Months

24. Monthly US Exports of Fresh Apples by Country of Destination in 2002 Source: US DOC Thousand Metric Tons

25. World Apple Production: Key Trends China can now provide over 1/3 of all world apple production vs. 11% in 89/91, but area has stabilized. The shares of production coming from N.A., Former Soviet Union, Other Asia and Europe shrank in the 90s, but Europe increased in absolute volume. The share of S. American suppliers slipped only slightly in the 90s as production grew about 1 million metric tons to 3.4 million; share changed to 5.6% in 2001 from 6.1% in 89/91. Recent adjustments downward in US, European, and possibly Chinese production for 2002/03 will likely boost Southern Hemisphere exports in 2003.

26. World Apple Production by Region (% total) Source: World Apple Report 2002 Europe (exc FSU) 38.733.023.9 North America 13.013.610.2 South America 4.26.15.4 Africa 1.52.32.6 Oceania 1.51.71.5 F.S.U. 18.213.75.8 China 8.0 11.134.8 Other Asia (exc FSU) 14.9 18.616.5 World 100.0100.0100.0 Avg Avg Avg Region 79-8189-9198-00

27. Global Pear and Apple Production, Million Metric Tons CountryApples (2002)Pears (2000) China 208.5 USA4.877 Chile 1.333 New Zealand.462.42 Argentina 1.5 Australia.328.156 Europe 14 3.9 World 60 16.9 Sources : FAO and FAS

28. World Per Capita Fresh Apple Supplies 1990-2001, kilograms per person Production grew by 50% vs. 15% growth in world population. Source: World Apple Review 2002

29. Source: FAS, USDA Apples: Total Production & Net Fresh Production, in million metric tons, Key Selected Countries 99/00... 00/01... 2002... Fresh Total

30. Chinese Apples – Total Production, Net Fresh Production, Fresh Imports & Exports, in million metric tons Source: FAS, USDA 25 20 15 10 5 0 99/0000/0101/0202/03 f

31. China's Fresh Apple Imports, By Country of Origin, MY 2001 (July-June), Metric Tons Source: FAS

32. N. Hemisphere Net Fresh Apple Production, Key Countries Excluding China,in million metric tons 18 15 12 9 6 3 0 99/00 00/01 01/02 02/03 f Source: FAS, USDA

33. Southern Hemisphere Big Six: Long-term Upward Trend Broken metric tons Source: World Apple Review 2002 and FAS for 2001 and 2002, updated in 2003

34. Yantai North Andre Juice Co.,Ltd Apple Production in China, 1997-03, Metric Tons Area in 2000 of 2,254,100 hectares vs. 2,986,900 in 1996. 50% are Fujis, 12-15% are Red Delicious.

35. Yantai North Andre Juice Co.,Ltd Guo Guang Fuji APPLE PRICES IN CHINA

36. Yantai North Andre Juice Co.,Ltd Chinese Apple Production, Distribution by Province, 1997- 03, metric tons Projection of 27,605,000 to 31,000,000 Metric tons by 2010; Desmond O’Rourke

37. Yantai North Andre Juice Co.,Ltd OTHER APPLES CITRUS PEARS Banana GRAPES Chinese Fruit Production, % of Total by Type

38. Yantai North Andre Juice Co.,Ltd 1.Close Belt Pressing System for Hygienic Application 2.5-Effect Evaporator 3.Storage in Apple Silo 4.Ultra Filtration system 5.R&D/Quality Assurance Center 2.Evaporator 3.Apple Silo 4.UF 5.Lab 1.Belt Press

39. 1997 – 2001 Chinese AJC Export, by Country Unit : kg Yantai North Andre Juice Co.,Ltd Projection of 400,000,000 kg by 2010; Desmond O’Rourke

40. US Apple Juice Imports, by Country, 1997-2001 In 1,000 KL Source: Census Bureau, US Dept. of Commerce Tariff code: 200970

41. World Fresh Apple Trade by Key Selected Country Source: FAS, USDA 99/0000/012002 in million metric tons IMP EXP

42. Chilean Apple Exports: Changes in Market Share by Destination Europe46%35%32%32% U.S.A.7%8%12%12% L. America & Caribbean19%37%36%39% Other28%20%19%18% Grand Total100%100%100%100% Source: Chilean Fruit Exporter's Association Country 92-9397-9800-0101-02

43. Chilean Apple Exports by Destination in million cartons (18 kg) Europe Other L. America & Caribbean USA Source: Chilean Fruit Exporter's Association

44. Estimated European Per Capita Fresh Apple Consumption kilograms per capita Source: World Apple Review 2002

45. Estimated Per Capita Fresh Apple Consumption: Other Major Producing Countries kilograms per capita Source: World Apple Review 2002

46. US and EU: Trend in Grower Selling Prices for Fresh Apples Source: World Apple Review 2002 Indexed to 1985 base = 100

47. United States: Annual Average Retail Price of Fresh Red Delicious Apples 1980-2001 cents/lb - current & deflated Source: World Apple Review 2002

48. Farm value 19¢ Marketing bill 81¢ 19¢ Other costs - 4.0¢ Business taxes - 3.5¢ Repairs - 1.5¢ Interest - 2.5¢ Rent - 4.0¢ Depreciation – 3.5¢ Advertising - 4.0¢ Profits - 4.5¢ Energy - 3.5¢ Transportation - 4.0¢ Packaging - 8.0¢ Source: ERS/USDA Labor - 38¢ W HAT a D OLLAR S PENT for F OOD P AID F OR in 2000 in the USA

49. U.S.: Producer Price Indexes 1991-2001 for Fresh Granny Smith and McIntosh Apples Calendar Years, Base, Dec. 1991 = 100 Source: World Apple Review 2002

50. Washington State: Relative FOB Prices of New Varieties - 1990-2001 Average price all varieties in each crop year = 100 Source: World Apple Review 2002

51. World Apple Variety Trends, Excluding China Red Delicious and Golden Delicious will lose market share but remain in first and second place Gala/Royal Gala will be the principal winners, growing by 50% over the next decade, reaching third place Fuji will knock Granny Smith out of fourth place Combined volume of Jonagold and Jonagored will approach that of Granny Smith Source: World Apple Review 2002

52. World Apple Variety Trends, Excluding China Idared keeps growing, especially in Eastern Europe Braeburn follows in 8 th place McIntosh, Elstar, Cortland, Cox’s Orange and Empire will be stable Pink Lady production will triple between 2000 and 2010, but it won’t surpass 1% of production in the principal producing countries Other growth varieties: Cameo, Honeycrisp, Pacific Rose, Fiesta and Sundowner Source: World Apple Review 2002

53. France: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons light = 1998 dark = 2000 Totals: 1998 - 766,207 tons 2000 – 847,833 tons

54. Italy: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons light = 1998 dark = 2000 Totals: 1998 - 540,138 tons 2000 - 579,053 tons

55. Netherlands: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons light = 1998 dark = 2000 Totals: 1998 - 376,870 tons 2000 – 294,356 tons

56. Belgium & Luxembourg: Apple export destinations & volumes, 1998 & 2000, 1000 metric tons light = 1998 dark = 2000 Totals: 1998 - 338,621 tons 2000 - 364,033 tons

57. 1 Supercenters U.S. $217.8040% 2 Carrefour/Promodès France $62.2971% 3 Holland $59.7092% 4 U.S. $50.1091% 5 Germany/Switz. $44.3750% 6 U.S. $38.3090% 7Kmart U.S. $34.6237% 8Safeway U.S. $34.3092% T OP 2001 G LOBAL F OOD R ETAILERS sales % grocery ranksales company ($ billion)sales 30 grocery retailers account for 10% of global food retail sales.

58. 9CostCo U.S. $34.1441% 10 U.K. $34.0990% 11 Germany $33.6670% 12ALDI Markt Germany $29.0584% 13ITM Entreprises France $28.6082% 14J. Sainsbury U.K. $26.6490% 15Ito - Yokado Japan $26.5347% 16Edeka/AVA Germany $25.1375% % T OP 2001 G LOBAL F OOD R ETAILERS sales % grocery ranksales company ($ billion)sales Source: The Food Institute Report, June 17, 2002

59. 17Aeon/Jusco Japan $23.9044% 18 Tenelmann Germany $23.0175% 19Auchan France $22.8670% 20 IGA (Supervalu) U.S. $20.9176% 21Daiei Japan $20.6040% 22Casino France $19.7185% 23E. Leclerc France $19.2652% 24Delhaize “ Le Lion ” Belgium $19.1892% 25Schwarz-Group (Lidl) Ger. $16.6884% T OP 2001 G LOBAL F OOD R ETAILERS sales % grocery ranksales company ($ billion)sales Source: The Food Institute Report, June 17, 2002

60. Building Retail Partnerships uEffective Tactics uShopper Savvy Loyalty Card Better Systems uResults-driven Tracking Focus uDept. Profitability uStrategic Approach uCategory Development uBest Practices uStore-level Research uPurchase Triggers uConsumer Drivers uLong view uFact-based Selling uInnovative Marketing/ Merchandising uEfficient Practices u“Category” vs. “Item” Perspective Retailer/ Wholesaler Grower/Shipper Boards/Commissions Roles and Responsibilities Source: Adapted from The Perishables Group