Keyfunctions

Most of the key functions involved in marketing fruit are also relatively self-explanatory. They include assembly, packing, processing, storage, transportation, exporting, importing, wholesaling, retailing, promotion, and category management. Assembly, packing, and processing normally occur in the producing district. There has been constant pressure in recent decades to increase the efficiency of these operations by increasing their size without compromising quality. Storage is crucial at every step of the marketing system for perishable products. There have been major advances in the speed of domestic and international transportation and in quality control of perishables while in transit, but workers and consumers still poorly understand how to keep fruit in optimal condition.

Exporting, importing, wholesaling, and retailing involve changes in the responsibilities of moving the product nearer to the consumer.

These entities evolved to fit past modes of transportation, price setting, and location of consumers. As society has changed, chain retailers have tended to become larger and have encroached more on the traditional business of the other traders. Since a large supermarket may carry 60,000 items, including 500 produce items, retailers are increasingly using supplier corporations, such as Dole or Chiquita, or industry associations, such as the Washington Apple Commission, as category managers. The category manager is given responsibility for stocking, display, and pricing of its specialty product in one or more retail divisions. Although retailers are willing to use local suppliers in retail outlets in their producing district, the competition for the retailer's business is increasingly global.

For most of the twentieth century, the marketing system for temperate zone tree fruit permitted the same product to pass through the hands of many independent actors of various sizes carrying out many overlapping functions. The system provided the producer and the consumer with many options. Product was always available on the open (spot) market. Transactions were numerous, and both price and volume reports were readily available. However, the system also led to excess costs, price volatility, and variable quality.

In the last two decades of the twentieth century, discount retail chains, such as Wal-Mart in the United States, Metro in Germany, and Marks and Spencer in Britain, attempted to reduce procurement costs by rationalizing the links in the supply chain for nonfood products. They used their purchasing power and global information systems to acquire large volumes of product, designed to their exacting specifications, and at low prices. This approach was so successful that it eventually was applied to prepared foods and, in the early twenty-first century, to perishables. Discounters grabbed a growing share of the global food market and forced traditional food chains to adapt similar methods in order to survive. Most large food retailers are now concentrating their purchases with fewer, larger suppliers. In many cases, relationships with suppliers are based on legal alliances and short- to medium-term contracts. Retailers are also increasingly requiring assurances on sustainable farm practices, food-handling methods, treatment of workers, etc.

The concentration of greater power at the retail level is having dramatic impacts on all other actors in the supply chain. The spot market has been considerably weakened. Processors, packers, and shippers have been consolidating to get large enough to compete for the giant retailer's business. They have been reexamining their relationship with producers in terms of how it affects their efficiency and cost. The consensus is that in order to remain a preferred supplier to the major retailers, their supplying growers will have to be able to produce greater volumes of better-quality products at lower costs. Fruit growers, too, must adapt to the market imperative. Entire producing districts could disappear in the shakeout.

While the mainstream marketing system for tree fruit is becoming more concentrated, there are still numerous niche opportunities for unconventional marketing. In most major cities, small, local retail chains survive alongside their giant competitors by utilizing their superior knowledge of local consumers' needs. On-farm or roadside direct marketers of fruit continue to thrive near major cities and highways by offering consumers a combination of quality fresh products with a rural experience. The demand for organic products was once confined to small specialty food stores but is now employed by health food chains, such as Whole Foods Markets, and in the produce section of conventional supermarkets. Upscale restaurants have also become major buyers of organic products. Community-driven marketing, where consumers contract with farmers for regular baskets of produce, are popular in some areas. A number of different models of electronic trading in produce are competing for participant suppliers and customers.

By its nature, marketing is dynamic. Competitors must constantly seek to stay ahead of their rivals by offering consumers improvements in price, quality, ambiance, or other psychic satisfactions. Throughout the supply chain, marketing agents constantly seek that innovation which will give them a temporary advantage. In such an environment, the most effective strategy for producers and suppliers of temperate zone tree fruit is to offer their own innovations in marketing. At the very least, they need to be aware of the market changes and take defensive measures to adapt to the new situations.

Related Topics: PACKING; PROCESSING; STORING AND HANDLING FRUIT

SELECTED BIBLIOGRAPHY

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Sexton, R.J. (2000). Industrialization and consolidation in the U.S. food sector: Implications for competition and welfare. Amer. J. Agric. Econ. 82:1087-1104.

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