Generic promotion works for fruits and vegetables, at least according to recent Federal Register proposed rules that seek to increase assessment for blueberries and potatoes.

The July 27 blueberry rule seeks to amend the Blueberry Promotion, Research, and Information Order to increase the assessment rate on producers and importers who produce or import more than 2,000 pounds of highbush blueberries annually from $12 per ton to $24 per ton.

Meanwhile, the proposed assessment increase for potatoes is less dramatic, seeking a hike from 2.5 cents per hundredweight to 3 cents per hundredweight to sustain and expand promotional, research, advertising and communications programs.

For blueberries, the summary of the proposed rule states the action was taken to expand promotional activities and add an “advertising component” to fill the potential gap between demand and growing supply. Here is a nugget about coming blueberry supply:

Given worldwide acreage estimates, projections show that given optimal conditions with no crop losses or disruptions, total worldwide highbush blueberry production has the potential to increase from an estimated 606 million pounds in 2008 to an estimated 1.5 billion pounds by the year 2015, more than two times the current level of production in the next seven years.

TK: Also, the council indicated it wants to use the additional revenue to strengthen existing programs, fund additional research and help develop and define food safety practices at home and abroad.The interesting element to the proposed rule – beyond fascinating statistics on the growth of blueberry – was this section about the track record of generic promotion for blueberries:

Section 1218.55 of the Order requires the Council to conduct an independent evaluation of the effectiveness of the program conducted by the Council pursuant to the Act every five years. The Council submits the independent evaluation to the Department which is available to the public.

An econometric evaluation titled ``An Economic Analysis of Domestic Market Impacts of the U.S. Highbush Blueberry Council'' was conducted by Dr. Harry Kaiser of Cornell University in 2005. The study evaluated the Council's progress based on data from 2001 to 2004. The estimated demand equation used in the study was simulated to determine the market impacts of the Council's promotion activities for the period of 2001 to 2004.

In the baseline scenario, promotion expenditures were set equal to actual levels from 2001 to 2004. In another scenario without the Council's marketing activities, promotion expenditures were set equal to zero for the same period. The difference between the two scenarios gives the total impact of the Council promotion programs on domestic highbush blueberry commercial disappearance. The simulation results indicated that the Council had a major impact on annual highbush blueberry demand in the United States.

From 2001 to 2004, the Council's promotion activities increased total highbush blueberry commercial disappearance by 36 million pounds, or 9 million pounds per year. This represents an annual increase in highbush blueberry commercial disappearance of almost three percent during this period. The study concluded that the promotional spending by the Council clearly had a positive effect on domestic highbush blueberry demand.

The evaluation also indicated that generic highbush blueberry promotion by the Council had a positive impact on the highbush blueberry growers' price over this period. The average increase in price ranged from 2.3 cents per pound in the case of the least elastic supply response, to 0.8 cents per pound in the case of the most elastic supply response. The average impact over all supply responses was 1.4 cents per pound. According to the evaluation, had there not been generic highbush blueberry promotion by the Council, the average growers' price would have been 1.4 cents per pound, or 1.8 percent, lower from 2001 to 2004.

The benefits of the Council program were highlighted using a Benefit Cost Ratio (BCR) analysis. An average BCR was computed for the generic promotion activities of the Council, and the BCR exceeded 1.0 for every supply response considered in the simulation.

For the least elastic supply response, the average BCR was 13.22. This implies that, on average over the period 2001-2004, the benefits of the Council promotion programs have been over 13 times greater than the costs. At the opposite end of the spectrum in supply response, the average BCR was computed to be 4.46, implying that the benefits of the Council were over four times greater than the costs.

Given the wide range of supply responses considered in the analysis, and the fact that the BCR was above 1.0 in all cases, there is significant evidence that the Council's promotion programs have been profitable for the domestic highbush blueberry industry. According to the Council, such findings give added confidence that an expanded market promotion program will help the industry to work toward a supply and demand balance in the coming years as highbush blueberry production expands at an increasing rate.

TK: The blueberry industry sees rising blueberry production both in the recent past and foreseeable future, and responds with a commitment to increase generic promotion. It could be argued that the generic promotion boost should have come even earlier, with expanding surplus inventories of processed blueberries recently prompting a USDA commodity purchase.

The salient point is that numerous studies have found that generic promotion of fruits and vegetables is cost effective.

Indeed, it may be instructive to more carefully review the econometric evaluations of federal promotion orders as the industry considers a generic promotion board for the entire fruit and vegetable sector.