Managed apple varieties gain popularity as marketers and growers seek to reduce risks

By Renee Stern

Contributing Editor

The current model for apple variety development and introduction no longer holds up to market realities, according to proponents of a system more common in Europe and other apple-growing regions worldwide.

Club or managed variety organizations are popping up with increasing frequency here as well—Jazz, Pacific Rose, Cameo, Piñata, Tentation and others—and have fueled an industry debate about haves and have-nots.

"We've been trained to create an oversupply," says Bob Mathison, co-owner and apple variety coordinator at Stemilt Growers Inc. of Wenatchee, Wash. From nurseries to packers, everyone's profits are based on volume production.

"We've created a system so we all go broke together. We're like lemmings going over a cliff," Mathison says.

Managed systems such as the one Stemilt has created to handle U.S. production and sales of the European variety Piñata are part of an effort to build a new model that reduces grower risk and provides a win for everyone, he says. Piñata plantings will be limited to 500 acres.

It's a potential win for club members, but everyone else is "out in the cold," says Wanda Heuser Gale, vice president of International Plant Management Inc. of Lawrence, Mich.

"The small, retail-based guys are going to be caught in the crunch," she says.

Consumers may not support too broad an expansion of apple choices, and some management organizations may not succeed, Gale says.

However, "Anything we can do to bring home good money to our growers is worth a try," she says. "If we can do it with clubs, great."

Managed varieties as a business

Dennis Courtier, chief executive officer at Pepin Heights Orchards Inc. of Lake City, Minn., takes issue with the term "club variety." Courtier was a leader in introducing Honeycrisp, which many say would have benefited from a management organization, and he now has the license to a still-unnamed University of Minnesota release known as MN 1914.

"A club is a secret handshake and a funny hat," he says. "It implies a certain casualness."

A managed variety, by contrast, is a business venture with rules aimed at raising both fruit quality and prices, he says.

The new 1914 apple's organization spans five time zones with growers committed to producing fruit that consistently meets the group's high quality standards.

"You're bringing the two ends of the chain—growing and marketing—much closer together. Marketing is where the profit is," Courtier says. "A managed variety offers a way to put some margin back in the business."

Breeding programs benefit, too

It's also a survival tool for cash-strapped breeding programs, says Susan Brown, head of Cornell University's apple breeding program at the New York State Agricultural Experiment Station in Geneva, N.Y. Without additional funding sources, breeders may have to shut down their work on new varieties.

Honeycrisp resulted from a 30-year University of Minnesota breeding program, says David Bedford, fruit breeder at the university's Horticultural Research Center in Excelsior.

"Then we dumped it on the market and hoped for the best," he says.

Patent-holders for an open release receive a royalty for each tree sold—until the patent runs out. A management organization, on the other hand, provides long-term income from a share of the royalty on fruit sold.

"As long as the fruit is commercially viable, we get a small but steady income, a share in the profit," Bedford says.

The university has tried to work around concerns about a publicly funded breeding program benefiting selected commercial interests by building an exemption for Minnesota growers into the MN 1914 licensing agreement.

Strength in numbers

Introducing a new variety is a difficult and expensive prospect for an individual grower, says David Nelley, director of The Oppenheimer Group's pipfruit category in Vancouver, British Columbia.

Banding together not only produces a bigger splash, but it also allows growers to focus on producing high-quality fruit without having to run a sales desk.

And a single point of sale prevents price erosion from bidding wars, Nelley says.

Oppenheimer markets both Jazz and Pacific Rose. Member growers, packers and marketers meet annually to set a strategic plan for their variety. Membership shouldn't be limited by state or national boundaries, but by where growers can produce quality fruit, Nelley says.

But such arrangements may not suit all growers.

"They have to be comfortable with marketing strategies, and they have to be comfortable with risk," Courtier says. "Any given variety may not pan out. The approach does work, but a lot of new products fail."

Open releases won’t disappear

Growers already face risk in the current system, which forces them to gamble on new varieties with little support, Stemilt’s Mathison says, adding that it is expensive if no one wants the fruit.

Large-scale promotions to introduce a new open release won't happen without some degree of ownership, Bedford says. At the same time, the lack of control over production means a new variety that shows some popularity or commands a profitable price typically is planted heavily, glutting the market and eroding quality.

Despite the advantages that management structures offer, the industry will continue to see some open releases of new varieties.

"We don't plan to release all our varieties this way, but only when we see one with national superstar potential," Bedford says.

"People won't pay premium money for an apple that's no different from what they can buy in a bag," Gale says.

Success requires an apple with "outstanding" taste that also holds up in storage and on the shelf, and demonstrates its qualities through consistent production, Nelley says.

"You can't just take an average variety and throw it into a club and expect success," he says.

And, Mathison says, the variety should be grower-friendly as well as consumer-friendly.

"We'll still all grow reds and goldens, but having niche markets creates excitement," he says.

Adding more apple choices risks stealing sales from older varieties, or even driving some former mainstay varieties out of the market entirely.

"But if we can get consumers to be happy when they bite into an apple, that's our goal," Mathison says. "We'll get them to eat more apples because the experience is good, and everyone benefits."