Are you Smitten with the Ambrosia in your apple category?
Does it have enough Pazazz?
Is your music style more of a SweeTango, Jazz or Rave?
Do you Envy the Red Prince down the street with the Opal and Ruby Frost shining on displays?
Do you fly your Rockit to pick some Cosmic Crisp?
Should Lady Alice send her SnapDragon to fight the Green Dragon for Autumn Glory?
Enough with the apple puns. It’s time to talk strategy.
Honeycrisp, which celebrated its 20th anniversary in the market in 2017, paved the way for the explosion of premium apples. Its exceptional flavor, texture — and let’s not forget the price point — made believers out of consumers who found themselves willing to pay double or more for something as “simple” as an apple.
But Honeycrisp has a few fatal flaws.
“The hottest variety in the marketplace is Honeycrisp,” says Don Roper, vice president of sales and marketing for Honeybear Brands LLC, Elgin, Minn.
The problem, Roper says, is that everyone’s got it.
“Each retailer up and down the street have it and are on ad with it, so at this point Honeycrisp really offers no true point of differentiation for the retailer,” he says. “This has been happening all fall, and will continue to get worse each year.”
Honeycrisp’s margins aren’t there anymore, either.
“For the last 10 years, Honeycrisp priced at $2.99 a pound was making, in some cases, 40% gross margin for our retail partners,” Roper says. “As the price has been cut in half, so has their gross margin, and unfortunately they are not doubling their sales to offset this price decrease. You can only put so many apples in your cart. This is where the high-end varieties can help the retailer.”
And, Honeycrisp also has a consistency problem.
Enter premium apple heavy hitters like Jazz and Envy, which have closed in on year-round availability.
“Envy and Jazz were bred for flavor first, and then storage,” says David Nelley, vice president of the apple, pear, cherry and global export categories for The Oppenheimer Group, Vancouver, British Columbia. Nelley, a New Zealand native, has been working with the country’s apple industry since 1993. “We had to get them all the way here from New Zealand, tasting great.”
Excluding Honeycrisp, premium apples were about 9% of total category sales last year, says Steve Lutz, senior strategist for Wenatchee, Wash.-based Columbia Marketing International, up from roughly 7.5% the previous year.
“We fully expect that premium apples will exceed 10% of category sales in the coming season,” Lutz says.
Lutz says three key factors are contributing to the premium category’s growth:
- Production is quickly increasing.
- There’s more significant retail penetration of multiple varietals.
- Consumer demand and satisfaction is growing.
“Consumers have discovered and continue to discover that there is something new and unique going on in the apple category,” he says. “As a result, we are generating consumer interest, driving additional sales, and hopefully creating more consumer satisfaction.”
So many suitors
With so many new varieties to choose from, how does a retailer decide what deserves shelf space?
“First, it’s important to start out with the proven varietal apple winners,” Lutz says.
Not all varietals are created equally, he says. Some have proven strong consumer acceptance or an established following from having been in the market longer.
Of the $252 million in national retail sales dollars spent on premium apple varieties last year not including Honeycrisp, half of those sales came from just two varieties: Ambrosia and Jazz, Lutz says.
“Yet, it is amazing to me to visit a retail store and see a display with 8 or 10 new varieties with zero Ambrosia or Jazz on the shelf,” he says. “That is just a pure missed opportunity. Start with the winners.”
Branded apples also need a good shelf position, he says.
“Retailers have to be aware that their branded apple sales will flounder if they bury these new items at the rear of the apple category,” he says. “A consumer is not likely to buy branded apples if they already picked through a display of galas or reds to make a purchase selection.”
For Pazazz, partnering with retailers who are willing to go all out has been a winning strategy.
“A true key to effective promotions is having very strong retailer support and buy-in to promote the product,” Roper says. Pazazz has worked with retailers like West Des Moines-based Hy-Vee to build huge displays and in-store events to promote its apples. “The goal is to create great excitement and get the product into the consumers’ basket. Once we do that, we know we win as we have a superb-tasting apple.”
Getting out of the main line is essential for premium apples, Lutz says. You have to build a display that “absolutely demands attention” from the consumer. Once they’ve tried them, consumers are more likely to come back for more, and will seek them out in the in-line display.
Lutz says he’s also seen retailers have success with a destination for a rotating “Apple of the Month” type display. There are ample supplies and varieties to keep this a recurring theme in stores.
It’s no surprise pouch bags are popular in the apple category. Pioneered by Wenatchee, Wash.-based Stemilt Growers and its Lil Snappers small-size apples, shippers and retailers alike found the colorful premium packaging a good match for high-end apples.
“The 2-pound pouch has been an absolute winner,” Lutz says. “One of the primary benefits of packaging is it creates an in-home billboard for telling the product story. This opportunity is completely missing with bulk apple sales.”
Pouch bags aren’t a “value” poly bag, he says. They’re designed to appeal to a discerning segment of the population that buys packaged product almost exclusively.
Lutz says retailers should expect sales to be up again this year. There should be large increases in top branded apples, including Ambrosia (+20%), Kanzi (+120%), Kiku (+49%), Smitten (+152%) and Envy (+56%).
It’s a great time to be talking premium apples, Nelley says. Oppy represents Jazz, Envy, and Pacific Rose from New Zealand-based T&G Global, as well as Ambrosia from BC Treefruit.
“We feel like these four varieties are what retailers want to talk about,” he says. “The bar is lifted now. Consumers know they don’t have to suffer average flavor.”
You can bet your Sweet Cheeks on that, SugarBee.