With retail sales of fresh-cut apples slice rising and demand from quick-service restaurants growing, processors and marketers of apple slices are bracing for a smaller national apple crop and the expectation of higher prices.
Total U.S. apple output for 2012-13 was forecast at 190 million bushels in a June industry estimate, below the five-year average of 224.5 million bushels. What’s more, apple crops in important Midwest and Eastern producing regions — home to several large fresh-cut apple processors — are disproportionately hurt.
“The biggest concern is that higher prices for finished product could slow consumer demand at retail,” said Tony Freytag, senior vice president of sales and marketing for Cashmere, Wash.-based sliced apple processor Crunch Pak.
Stresses in the fresh-cut supply pipeline also could boost prices of lower grade and smaller apples this year, as fresh and processing interests compete for available supply in the Northwest, industry sources said.
Foodservice marketers of fresh sliced apple hope to hold on to their hard-won demand, and McDonald’s may have the most say if it can keep that demand in place.
While several quick-service restaurants have increased use of fresh-cut apples, the leading foodservice user of apple slices is the fast food giant McDonald’s Corp, with 14,000 U.S. restaurants. McDonald’s last year announced it was including fresh-cut apple slices in every McDonald’s Happy Meal by the first quarter of 2012. Previous to that, fresh-cut apple slice were an option, and the restaurant said only 11% of customers ordered the sliced apples.
Happy Meal servings of fresh-cut apples slices now equal a quarter of a cup, according to the company. Accounting for about 10% of McDonald’s sales, about 220 million Happy Meals were sold in the U.S. in 2010, according to a Reuters estimate.
A spokesperson for McDonald’s did not immediately respond to a request for information.
Fresh-cut processors use close to 1.5% of the total U.S. apple crop, according to Mark Seetin, Vienna, Va.-based U.S. Apple Association’s director of regulatory and industry affairs. The USDA estimates that fresh-cut apple processors used about 3.1 million bushels in 2010-11 and 3.3 million bushels in 2011-12, Seetin said. Value of apples used for fresh-cut slices was more than $26 million in 2011-12, he said.
Shorter crops in Michigan and New York will likely cause some fresh packers and fresh-cut slice processors in those states to look to Washington to fill in their needs, Freytag said.