Rethinking Price On Table For California Grapes

Market is ripe for consumers to enjoy plenty of choice.

There has never been a better time than now to gorge on grapes. Bold call? Perhaps, but higher yields, fewer market gaps and a plethora of new varieties catering to all tastes give consumers greater choice and availability than ever before.

This is not just the case in North America but across most of the developed world, and the breeders and growers of California have been at the forefront of forging this new market reality.

Randy Giumarra, vice president of sales at Giumarra Vineyards Corp. in Bakersfield, CA, says the state’s growers have a lot of factors working in their favor: great growing conditions, strict regulations, a controlled cool chain and the ability to deliver the freshest product possible to retail with minimal transport.

“Plus, there is no protocol required that might impact the grapes such as fumigation or cold treatment,” says Giumarra. “Because of California’s early adoption of newer varieties, with U.S. breeding companies being the most prolific, there has been a greater rate of planting and conversion of new varieties, each filling a different window.”

Ray England, vice president of marketing at DJ Forry, in Reedley, CA, explains what this means from a volume perspective.

“While overall acreage dedicated to grapes has been somewhat steady for the past several years, the shift from varieties that produce 800-1,000 cartons per acre to new varieties that produce 1,200-1,800 cartons per acre has seen a dramatic increase,” he says.

Last season, the state produced 115.5 million 19-pound boxes. In its April forecast the California Table Grape Commission estimated this would rise marginally to 116.2 million boxes in 2019-20. This figure will be updated in late July.

Freshness, taste and value have been major drivers for the California industry, staying competitive even though the rise of counter-seasonal growing regions has undoubtedly been a boon for the consumer and created some overlap.

“When one looks at the average cost of fruit from Chile — and to some extent Mexico and Peru — you’re looking at pricing that gets well into the mid-$30 range – pretty much twice what the average FOB for California grapes brought in 2018,” says England. “No other growing region comes remotely close to the quality and value proposition of California table grapes.”

Rob Spinelli, vice president marketing at Anthony Vineyards of Bakersfield, CA, says the season should be good if retail pricing can be set without dramatic fluctuation. “If you have consistent retail throughout the weeks, it looks a little bit better with consistent movement,” he says.

Jim Beagle, chief executive and partner at The Grapery in Shafter, CA, says California has a high-quality crop this year in a high-cost environment, and although retailers are facing pressures to lower prices, the sector needs to stay focused on consistently delivering the very best grapes possible.

“We’re in this for the long haul, and

we’re prepared to ride out the more difficult times,” says Beagle. “I truly believe that California grows the highest-quality table grapes in the world.”

NEW VARIETY ROLLOUT

Although The Grapery is known as the exclusive U.S. producer of the popular Cotton Candy grape, it has others in its stable that have shown early success in recent introductions.

Novel flavors and forms have come about by not just cross breeding within the Mediterranean family of grapes from which the majority of varieties on the market belong, but also by drawing on species originating from the Eastern United States and the Middle East that are completely different.

“We’ve got some things that we’re very excited about that retailers are having a lot of success with, and that’s besides the Cotton Candy,” he says. “That’s our Moon Drops grapes and Tear Drops grapes, both of which have unique shapes and great flavors.”

“We have our Gum Drops,” he adds, mentioning a fruit that in consumer testing was described as tasting like gummy bears. “Those are newer than Cotton Candy, so it’s still in that phase where we’re introducing it to the market because the volumes haven’t been large enough to have a broad commercial presence yet. It’s been well-received everywhere and we continue to expand that program.”

Nonetheless, it is certainly Cotton Candy that has turned heads, not to mention perceptions about what consumers are actually looking for in a grape cultivar.

“It’s only been on the market for five years , and it takes a few years to develop a vineyard, so I don’t think any of us could foresee the level of demand there would be for it when we started planting,” says Beagle. “There’s a natural life cycle for the variety, where the production has lagged the demand in recent years.”

He adds a caveat to this statement, emphasizing if Cotton Candy “doesn’t deliver on everything it needs to deliver on, then it really disappoints.”

“It’s important that those of us around the world who do grow it have been mindful to expand it at a pace that we can all manage — that delivers on what the consumer expects, because if we got ahead of ourselves on this one we could ruin that market pretty fast.”

Beagle says the company only grows Cotton Candy in the San Joaquin Valley in California,  with a season running for roughly eight weeks. But lessons learned are helping extend production out to 10 weeks.

“It starts right around the first week of August and goes mostly until toward the latter half of September,” he says.

The company that bred Cotton Candy is International Fruit Genetics (IFG) of Bakersfield, CA, and its chief executive, Andy Higgins, is optimistic about other varieties coming out of the pipeline.

“We’ve got a handful that we’re working with today – one of them is Sweet Nectar, which has a lovely floral flavor,” says Higgins. “It is one of our mildly flavored grapes, although we don’t put them in the candy series per se, and it is one that’s attracting more and more attention.”

Another IFG prospect is Candy Hearts, which Higgins describes as a “flavor bomb” with an ability to be harvested at 25-27° Brix.

“You have to prepare the consumer because it’s not your average black grape,” he says. “If they’re wanting traditional black grapes and walk home and don’t know what they’ve just purchased, they could be surprised, elated or disappointed.”

“It’s a matter of setting the expectation and building programs so everyone knows what they’re dealing with.”

Another variety that sparks enthusiasm at IFG is Candy Snaps, a strawberry-flavored grape.

“It’s bright and packs a punch right at the beginning of the eating experience, and it’s got some acidity to it,” says Higgins.

STORAGE FRUIT A THING OF THE PAST

On the variety discussion, Giumarra says the most noticeable change has been in white grapes, where the consumer response to varietal introductions can clearly be seen.

“As of a few years ago, reds were outselling whites 2-to-1 or 3-to-1 because the only varieties available were Perlettes, Sugraones, Thompsons and Princess,” he says. “As the industry has introduced more varieties that are better eating, have better aesthetics and fill shorter timeframes, shoppers have started gravitating back toward white grapes to the point that they are selling evenly with reds again in many situations.”

“We have tailored our program to have more varieties, and the best varieties in the market during their optimum harvest time, so we pack and ship the best in that window and then move on to the next variety.”

With ranches extending from San Joaquin Valley to 70 miles north in Ducor, Giumarra is able to manipulate the front and back end of production for each variety.

“We have two of the earliest proprietary green varieties — Early Sweet and Sugar Drop — which eat exceptionally well and are helping to dispel the reputation that early equals immature or sour fruit,” he says. “Enough new varieties have come into the pipeline to fill many of the supply windows that storage fruit has become a thing of the past.”

He explains “amazing” new varieties continue to come out of the ARRA breeding program in Israel, which Giumarra will continue to evaluate and plant for commercial production.

“We offer our most popular ARRA varieties in very eye-catching, high-graphic bags with their own unique PLU that can help the retailer really track the pricing and performance of each variety, even if they are not scanning or merchandizing in alternative packaging such as pundits or top-seal trays,” he says. “This can be a savings on the new varieties, as we do not have to pass along the higher cost of more expensive packaging.”

Spinelli says the growth of niche varieties such as Candy Hearts, Candy Dreams, Sweet Hearts and Sweet Sapphire are changing the industry dynamic.

“Those are specialty grapes that are very limited in certain areas and at certain times of the year, so it’s just another item to put out there to increase sales,” he says.

Spinelli says many of these niche varieties are also grown in other parts of the Americas such as Chile, Peru and Mexico, with gaps between each growing district.

“Then they come to California, and we have it in August. Consumers didn’t have the Candy Hearts for at least a month and a half so they’re looking for it,” he says. “It brings an excitement to the category.”

There are two global schools of thought about retailing table grapes, as described by Beagle of The Grapery.

“One is to maximize demand you ought to always have the product available, and the other is the mindset that embraces the seasonality of things and creates events out of them,” he says. “In Cotton Candy, we’re just not at a point yet as a global supply where we can fill those gaps or even come close to it.

PROMOTING AND MARKETING

For the traditional heavy volume periods in August and September, Giumarra says back-to-school ads help move product. Spinelli of Anthony Vineyards agrees, and also notes the benefits of promoting sales throughout July.

“The magic to increasing carton volume and sales revenue in my opinion lies in merchandising,” says England of DJ Forry. “Wraparound waterfall endcap displays, freestanding displays and inline spill-over displays all work to increase volume that a mere reduction in retail with no display calling card can match.”

Spinelli says organic table grapes have seen strong demand as well, with Anthony Vineyards as one of the major players producing them from May through to early December.

“We see growth in our sales for organics and we keep on growing our production due to the demand,” he says. “We have them in some of the older varieties but we’re also making a big transition into the newer varieties. Supply and quality have increased over the years. That gives retailers an opportunity to be confident in moving product through the system and now you can do some features on the organics as well because there is now volume.”

When it comes to broader marketing campaigns and consumer outreach, the California Table Grape Commission’s plan this season incorporates three main pillars: healthy snacking, promoting the state’s unique penchant for growing the fruit, and informing the public about the health benefits of grapes.

Brain, colon and heart health will be the focus of magazine print ads through November, including special cover wraps with health messaging on People magazine distributed to doctor’s offices around the country.

Jeff Cardinale, the commission’s vice president of communications, notes usage advertisements will focus on the portability and ease of eating the fruit, featuring beautiful images of red, green, and black grapes with the “well-tested and well-liked wood crate background” as well as silhouettes of various activities like yoga and biking.

“Shoppers headed to select locations also will receive healthy snacking messaging with California grapes on their mobile devices via mobile geolocation-targeting,” he says.

In addition to radio spots, the commission also has two new commercials to promote California grapes, one that will start globally on the Food Network and Cooking Channel.

Exports will continue to be a vital element of the industry’s approach. Last year, 42 million boxes were exported, representing a 9.8 percent year-on-year increase, with Canada receiving more than a quarter of that volume followed by Mexico, South Korea, the Philippines and Japan.     

ADAPTING TO INDUSTRY HEADWINDS

Despite the enthusiasm around new varieties, are California’s grape growers becoming the victims of their own success? In 2018, a combination of factors conspired against producers, many of whom had to sell boxes below cost despite having an excellent crop.

“Last year was a perfect textbook example of supply and demand,” says Giumarra. “Great weather, a huge crop, competition from substitute products and limited demand from one of the industry’s largest export markets all spelled trouble for the California grape crop.”

He adds prior to the 2018 season a potentially devastating tropical storm narrowly missed Caborca in Mexico, which supplies the market before the Californian campaign.

“Everyone predicted that the area would be wiped out, so no ad deals were in place. This resulted in a huge carryover of grapes into the California retail season,” he says.

Ray England, vice president at DJ Forry, Reedley, CA, says the tariff situation in China redirected a great deal of Washington cherries earmarked for export onto the domestic market, causing additional competitive pressure.

“This incremental cherry volume gave retailers an option other than grapes for promotional sales,” says England. “What was unknown at the time was the magnitude of the impending volume of California grapes that would be produced during the 2018 season.”

He claims the industry was left playing catch-up for the entire season.

“In my opinion, these instances really served to highlight the fact that the volume of grapes produced in California has outpaced consumption,” he says.

“We are realizing an increase in domestic consumption, and we expect a similar trend in emerging markets, but do not know how fast this will occur,” says Randy Giumarra, vice president of sales at Giumarra Vineyards Corp, Bakersfield, CA. “Retail prices must rise.” He says the biggest pitfall retailers could fall into is continuing to sell the category as generic red, green and black varieties. “Segmentation on price will help educate the consumer about variations in taste and quality, and to help the retailer collect the data on how the grapes are really performing, when they have a value tier and a specialty tier,” he says.