Karst chat with Armock: To look inside the apple

04/07/2011 04:04:26 PM
Tom Karst

I had the chance to chat on April 6 with Don Armock, president of Sparta, Mich.-based Riveridge Produce Marketing Inc.

10:00 a.m. Tom Karst: What are you working on this week?

10:01 a.m. Don Armock: Well, for the first time (at this time of year) since I've been in this end of the business, we're done shipping and selling for the season, with some slight exceptions. So I'm working on cleanup things and we have new farms so I'm working on that sort of thing too.

10:02 a.m. Karst: Is there any way you typically wind up the year after your season? Do you take a vacation after all the apples are sold?

10:03 a.m. Armock: Usually I work right into the next season. A few years back we had a really short crop and I sat down with my staff and told them to take all their vacation and then take another month and told them I’d see them back here (after that). So then I looked in the mirror and told myself I can do that too, so I got together with some of my buddies and took a motorcycle trip, 9,500 miles all over the continental U.S. This year, I have had this South Africa trip in mind where I want to hit five countries over the course of the month. I would very much like to that if my cohort doesn’t back out. Otherwise I own a house on Lake Michigan. I may just disappear out there and do a lot of thinking.

10:04 a.m. Karst: This was an unusual year, with the shorter crop here in Michigan but a larger crop in Washington. How do you feel like the season went overall for Michigan apple marketers?

10:04 a.m. Armock: Given that we had a very short crop, (the season) all worked really well. We had unprecedented demand early on for the size of crop. We literally finished up the old crop and started packing the new crop at the same time and at the same kind of pace or even a stronger pace, so it went great. We got reasonable money for the product that we were able to pack. We had reduced packouts but it could have been a lot worse.

10:05 a.m. Karst: What do trends do you see in the Michigan apple industry? Are growers expanding their acreage?

10:05 a.m. Armock: I think these are pretty exciting times in the Michigan industry and the apple business in general. Basically a lot of growers are in an expansion mode, and that's driven by a number of things. One of the keys had been that we went through some tough times at the turn of the century and during that period of time, we became a lot more consumer oriented in terms of our variety mix by virtue of the fact that we had to change what we were growing to match with what the consumer was wanting to buy. We changed a lot of our production systems and we flat out got better because the times forced us to. We are right on the cusp of the expansion that has taken place in the last five years and we are starting to generate a lot more volume.

 This season is just a reflection of Mother Nature giving us a very short crop. The industry in general and the industry in Michigan will have bigger crops to market as times go along. I say these are exciting times. I think part of the reason I'm excited is that we have gotten more attuned with the customer needs in an industry that has a tendency to be slow moving because you make decisions on planting an orchard or building a facility, those are 20-year horizon type decisions. We move a bit slower than say the vegetable industry does. But we've made those wholesale changes, transition from the mix of fresh and processed to a mix of a much bigger percentage going to the fresh side, at least the plantings are oriented that way.

So now what is happening is that new planting are improved strains of proven varieties or there are more recent introductions of existing regional varieties. These regional varieties are experiencing a resurgence of this desire on the part of consumers to support local food production. So these are all positive things that are happening.

10:07 a.m. Karst: You are fairly close to a lot of population centers. Do you see more of your product stay in nearby markets now compared with a few years ago because of the demand for “local” fruit?

10:07 a.m. Armock: I think what has happened is that you get more promotional opportunities. First of all, the definition of local is different for everyone. We tend to think in terms of regional because in this area of the country, we serve several states that we are probably the local deal for. Certainly in the state of Michigan, we get a lot of support, and major retailers have been supportive for a number of years.

That part of it is growing, but outside of the immediate area, we get a lot more promotional opportunities and that has basically long term effects on our business because we tend to pick up a little more market share and people see regional varieties that they may not have had exposure to before and suddenly they change their purchase habits a bit and they occasionally try something that they have never had the opportunity to try before until it was put in front of them in terms of ad promotions or part of a harvest time push on the part of the retailer.

10:11 a.m. Karst: In terms of apple grower-packer-shippers making those 20-year horizon type of decisions and investments, what types of things are important to the future of the deal?

10:12 a.m. Armock: One of the things we are excited about in the last five years is that we have been able to turn the corner on being able to give the consumer product that we can be much more confident that their expectations are going to be met. One of those key factors is the customer going to go in and get a better eating sensation consistently. As an industry, we weren't that good at it a number of years ago.

There were literally people who bought apples in the fall time of the year and they tended to become much less likely to buy apples during the late winter and summer months. Today with the advent of SmartFresh, we deliver a better eating experience than we ever did constantly throughout the season. We think that is real positive and our business has grown because of it. And the other side of all this is the fresh cut segment of the food industry has started to grow with apple fries at Burger King and fresh apple slices at McDonalds and the causal eating restaurant industry has started to put apple slices into sandwiches and salads. So that's a segment of the business that didn't exist for us before and is starting to eat up some of our production increases.

 We see real positive things coming along, so how do we capitalize on all of this and enhance it? One thing is we can now look inside that apple and find anything that might be a storage disorder, any internal problem that may be in a very limited amount of the fruit that were packing and shipping that the consumer might buy, but it takes away the possibility of disappointing them.

This is the early (development) stage of this near infrared technology. We found a couple of (capabilities) that the people who sell this who have brought to market this technology, they didn't know existed and we managed to use it to help our customers from getting exposed to (bad apples). This is all evolving and now we are able to test for brix. That is big, very big. We are going to be able to segment brix levels as we move along here. We're going to get better at it and better at taking it to market.

We really aren't quite there on pressure, but when the consumer buys apples, they have certain expectations of what that experience will be like. The number one complaint is so often a mushy apple. There is always going to be mixed maturity in these pome fruit crops, we are going to be able to separate that out and not deliver that (mushy apple) eating experience to someone. We are not far away from having that and having this whole industry adapting that. It will allow us to be that much more competitive against the citrus industry, the banana industry.

10:13 a.m. Karst: What is your sense of the labor situation in Michigan? Will the H2A program be leaned on more in the future to supply workers?

10:14 a.m. Armock: We are reliant on a mobile work force, and there is a segment of it that - they are documented workers but they may not be legal workers. That's very problematic. The H2A program hasn't been very widely adopted in Michigan but I suspect if our elected officials don't have the courage to do something about providing a stable work force as we go forward, then we may be moving toward that end, which is less than ideal. We have a strong workforce now that every effectively harvest crops, whether it is vegetables, blueberries, peaches or apples. When you go to H2A, they aren't t necessarily be the same people we are enjoying now.

10:15 a.m. Karst: So some H2A worker might have less skill or experience with harvesting produce than current workers?

10:16 a.m. Armock: Instead of having a mobile work force, you have certain contractual obligations in terms of length of time; you have the cost of transporting workers here and back. It changes the cost dynamics of operators.

10:17 a.m. Karst: Five or ten years out, what would like to see the industry look like compared with now? How would you like to see it evolve?

10:18 a.m. Armock: For the industry in total. If I could make wishes for the industry, it is ultimately what we can do for the consumer and what the consumer wants. If the industry can better understand what the consumer wants and spend our research dollars and spend our collective efforts to deliver it, we would have an even more dynamic industry than we have now.

It is all about filling consumer needs. Everything is changing faster and faster. We've gone from planting orchards and not getting any production off of them for seven or eight years and not being profitable for half a generation to now being able to plant orchards and recovering our year on year growing costs in the third or fourth season. So we can realize the fruit of our endeavor in a much quicker time frame than what we used to. That will make us become much more quickly adaptable to whatever the market place brings to us.



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