Charles Safley Department of Agricultural & Resource EconomicsNorth Carolina State University

Forces that Move the Worldwide Market for

Berries

Presented at the Fruit Processor Meeting of the

Chilean Food Industry Association

(Chilealimentos)Linares, Chile

July, 2007

Forces that Move the Worldwide Market for

Berries

Worldwide Production of Strawberries (Metric Tons)

Country 2000 2005 % Change

% of World

USA 862,828 1,053,280 22.1% 29.1%

Spain 344,865 308,000 -10.7% 8.5%

Russia 160,000 217,000 35.6% 6.0%

Korea 180,501 200,000 10.8% 5.5%

Japan 205,300 200,000 -2.6% 5.5%

Poland 171,314 180,000 5.1% 5.0%

Turkey 130,000 160,000 23.1% 4.4%

Mexico 141,130 150,261 6.5% 4.2%

Italy 195,661 147,049 -24.8% 4.1%

Germany 104,276 146,500 40.5% 4.1%

Chile 21,000 25,600 21.9% 0.7%

World 3,299,287 3,615,723 9.6% 77.1%Source: FAS, USDA

Frozen Strawberry Production (Metric Tons )

Country 01/02 02/03 03/04 04/05 05/06% Change(01/02 to

05/06)

USA 216,908 229,209 230,950 232,048 240,000 +10.6%

China -------- 67,500 72,000 90,720 82,500 +22.2%*

Poland 125,800 90,000 130,500 80,000 75,000 -40.1%

Mexico 51,000 53,200 50,320 52,000 52,200 + 2.4%

Spain 35,250 30,400 25,036 38,000 40,000 +13.5%

Italy 10,000 10,000 10,000 10,000 10,000 0.0%

Canada 2,600 2,700 2,700 2,900 2,800 + 7.8%

Japan 870 1,100 700 700 700 -19.5%

Source: FAS, USDA * China: 02/03 to 05/06

Frozen Strawberry Exports (Metric Tons)

Country 01/02 02/03 03/04 04/05 05/06% Change(01/02 to

05/06)

Poland 127,300 84,200 90,093 119,646 91,824 -27.9%

China -------- 34,968 75,967 94,960 86,330 +146.9%*

Mexico 40,204 43,357 40,076 43,000 43,000 + 7.0%

Spain 25,271 33,126 34,890 21,998 20,600 -18.5%

USA 20,581 10,397 9,971 9,941 10,530 -48.8%

Canada 1,095 901 454 657 800 -26.9%

Italy 2,398 1,513 912 442 300 -87.5%

Japan 0 0 0 0 0 0.0%

Source: FAS, USDA * China: 02/03 to 05/06

Strawberry Production, 2007

Canada:Area planted decreased due to low profitabilityIncreased fresh consumption primarily supplied by U.S.

Poland:Area planted has decreased due to low profits caused

by increased frozen imports from ChinaEffects of this decrease should show up in 2007/08

Japan:Big investment in China strawberry industryChina has a big cost advantage Demand for frozen berries is decreasing as China

exports more readymade jams

China Strawberry Production, 2007

Increased acreage in 2007: 70,800 A (+25%)

Yields expected to increase due to increase use of labor, fertilizer and water.

Industry wants to increase use of summer varieties to fill gaps in July and October

Frozen Strawberry Production and Distribution in China (Metric Tons)

2005 Revised

2006 Estimate

2007 Forecast

% Change 2006-2007

Deliver to Processors 94,400 99,300 103,000 3.7%

Beginning Stocks 0 0 0 ------

Production 85,000 89,300 93,000 4.1%

Imports 7,966 7,200 7,500 4.2%

Total Supply 92,966 96,500 100,500 4.1%

Exports 70,206 68,000 70,000 2.9%

Domestic Consumption 22,760 28,500 30,500 7.0%

Ending Stocks 0 0 0 ------

Total Distribution 92,966 96,500 100,500 4.1%Source: FAS, Annual GAIN Report

China Frozen Strawberry Industry, 2007

Frozen imports are expected to decreased as domestic production increases

EU anti-dumping tax: 34.2%Potential Impacts: Increase domestic consumptionUse a third country as a “bridge” to the EUIncreased competition in Japan

However the EU is not enforcing the tax in 2007 due to decreased production in Poland

Frozen Strawberry Production and Distribution in Spain (Metric Tons)

2005 Revised

2006 Estimate

2007 Forecast

% Change 2006-2007

Deliver to Processors 44,480 88,500 55,600 -37.2%

Beginning Stocks 0 0 15,400 -------

Production `35,520 70,583 44,324 -37.2%

Imports 15,114 15,230 15,500 1.8%

Total Supply 50,634 85,813 75,224 -12.3%

Exports 22,869 21,875 24,009 9.8%

Domestic Consumption 27,765 48,538 51,224 5.5%

Ending Stocks 0 15,400 0 ------

Total Distribution 50,634 85,813 75,224 -12.3%

Source: FAS, Annual GAIN Report

Spain Strawberry Industry, 2007

Environmental Activists claim strawberry growers are:Over using water from Donana Park (marshes

harbor migratory birds)90% of Spain’s domestic production surrounds

Donana ParkWater level has dropped 50% in recent years

Use of harmful pesticidesHerbicides and PesticidesMethyl Bromide

Improper disposal of plastics used to cover tunnels and greenhouses

Spain Strawberry Industry, 2007

Worldwide Wildlife Fund is attempting to use “Economic Persuasion” to get growers to change their practices.

Asking Consumers to boycott Spanish strawberries from the Donana Park region

One Netherlands supermarket chain is cooperating and encouraging British supermarkets to also cooperate

Strawberry Demand

United Kingdom Demand for strawberries has increased the last two years

Strawberry sales increased 34%Suppliers struggled to keep up with demand

Consumers are beginning to demand berries year-round

Strawberry Demand

GermanyDemand for strawberries keeps increasingIncludes conventional and organic berries

Organic food sector is “ripe” for development

Consumption per household doubled in March 2007 compared to March 2006

The domestic industry cannot supply enough berries

Strawberry Demand

ChinaDomestic Consumption increasingIncreasing purchasing power and quality

of life, especially among the Middle Class in urban areas

Middle Class consumers are looking for more products on grocery store shelves

Urban consumers are unsure about food safety

Opportunities for Chile?

Frozen StrawberriesChina: Growing middle class consumersFAS, USDA Report (2007): Chile, Morocco and Argentina are

expected to seriously threaten US exports to ChinaEurope:UK and Germany?Organics – Organic food sales continue to strengthen

Europe has a very large and sophisticated organic marketWhat will happen in China and Spain?

World Production of Raspberries: (Tons)

Country 2000 2004 % Change % of World

Russia 130,000 170,000 +30.8% 36.8%

Serbia 56,059 90,000 +60.5% 19.5%

Chile 51,256 50,000 - 2.4% 10.8%

Poland 39,727 42,000 + 5.7% 9.1%

Germany 33,700 20,500 -39.2% 4.4%

Ukraine 19,723 20,000 +1.4% 4.3%

Canada 16,247 13,828 -14.9% 3.0%

Hungary 19,804 10,000 -49.5% 2.2%

France 8,743 8,545 + 2.3% 1.8%

Great Britain 9,500 8,000 +15.8% 1.7%

Total Production: 408,115 461,685 +13.1% 93.6%Source: International Raspberry Association

U.S. Imported Fresh Raspberries*

(US$1000)

Country Calendar Year January – April Comparisons

2005 2006 2006 2007 % Change

Mexico 20,468 34,861 16,485 26,200 58.9%Chile 10,074 10,256 7,390 9,135 23.6%Canada 1,533 1,521 561 563 0.4%Switzerland 0 0 0 5 ------Peru 0 0 0 3 ------Total 32,078 46,645 24,436 35,906 46.9%

Source: DOC, US Census Bureau, Trade Statistics

* Raspberries imported from 9/1 to 6/30 the following year.

U.S. Imported Frozen Raspberries

(US$1000)

Country Calendar Year January – April Comparisons

2005 2006 2006 2007 % ChangeChile 31,030 37,435 22,645 22,161 - 2.4%Canada 8,775 7,372 1,148 2,004 74.6%Mexico 1,971 2,606 812 1,009 24.3%Serbia 0 0 0 510 -------China 2,321 2,626 172 436 153.5%Argentina 130 390 198 391 82.3%ROW 6,635 3,990 1,232 786 - 36.2%Total 50,862 54,419 26,207 27,297 4.2%

Source: DOC, US Census Bureau, Trade Statistics

2007 Raspberry ProductionSpain

Area planted has increased 41.2%Estimated area planted is 1,200 hectares, or

350 hectares more than in 2006SerbiaTotal area planted is around 15,000

hectaresHungry:Production is increasing

2007 Raspberry Production

EuropeSupply of berries to the processing

industry increased from 2002 to 2004But volume of imports decreased

China: Domestic production increasingNo domestic market, so production will

be exported to Europe

2007 Raspberry Production

Oregon and Washington, USASome growers are switching to fresh

market raspberries due to:Increased consumer demand for fresh

raspberriesIncreased competition in the processed

marketRest of the WorldRelatively stable production

Raspberry Demand, 2007United States

Raspberry demand increasingRanked as the third most popular fruit behind

strawberries and blueberriesUnited Kingdom

Increased demand for berries & berry flavors has created a new market for raspberries

Raspberry sales increased 62% in last two years & suppliers struggled to keep up with demand

Source: DOC, US Census Bureau, Trade Statistics

Opportunities for Chile?US

Continued growth in fresh consumption and IQFFresh shipments in the off production seasonCaution: Mexico deal is projected to increase( start in

October and provide good volume into December)

Europe - Organic market Frozen berries United KingdomGermany

Worldwide Area Planted and Production of Blackberries, 2005

Region Area Planted(Acres)

Production(Tons)

Europe 19,007 47,386North America 17,690 65,154Central America 4,053 1,752South America 3,946 7,031Asia 3,830 29,038Oceania 734 4,022Africa 247 220World Total 49,507 154,603Source: Bernadine Strik, Dept. of Horticulture, OSU

Projected Growth in Blackberry Area Planted

Potential of 66,797 acres of Blackberries planted worldwide by 2015Potential 35% increase over the 2005 level

Does not include harvested wild plantings

Countries with the Greatest Projected Increase in Blackberry Area Planted by 2015

Country Percentage Increase

2005 Area Planted(Acres)

Projected Increase(Acres)

Projected Area in 2015

(Acres)

Romania 900 % 250 2,250 2,500

Poland 200 % 250 500 750

Mexico 117 % 5,683 6,649 12,332

Chile 76 % 1,111 844 1,955

Hungry 50 % 3,950 1,975 5,925

China 42 % 3,830 1,609 5,439

USA 20 % 11,905 2,381 14,286

Source: Bernadine Strik, Dept. of Horticulture, OSU

U.S. BlackberriesEast CoastProduction is primarily for the fresh market

North CarolinaSunny Ridge Farms, Inc.Goal is for 600 acresCurrently about 120 acres

Dole FoodsExpressed interest in blackberriesNot certain if interested in fresh or frozen

berries

Demand for Blackberries

United KingdomBlackberry sales broke all sales records in

2006. Suppliers struggled to keep up with demand

Consumers are beginning to demand berries year-round

Demand for BlackberriesUnited StatesSome industry experts believe that

fresh blackberry consumption could equal or surpass raspberriesIncreased taste for blackberriesGrowing recognition of their

healthful benefits

Opportunities for ChileUS

Continued growth in fresh consumptionFresh shipments in the off production seasonCaution: Mexico is gaining strength in the U.S.

market Now estimated to have about 10,000 acres plantedCould seriously damage Chile’s fresh market in the U.S.

Europe:Organic market Frozen berries?

Market Trends – Why has Demand Increased?

1. Health 2. Convenience: Year-round availability More supermarkets carrying berries

3. Globalization4. “Fast” and reliable Refrigerated

Transport5. Forgiving Customers?

HealthBaby Boomers are aging

In 2011, the oldest will turn 65, and, on average, can expect to live to 83.

Many will continue well into their 90s.Obesity has reached epidemic proportions globally

(World Health Organization)

Estimated 65.8% of the adult population is obeseMajor concern for children

Berries have profited from better health consciousness Reduce fat and increase vitamin & nutrient intakeLow in calories and high in antioxidants

Health – Recent Studies Cancer research

Berries may help cut risk of pancreatic cancer (American Association for Cancer Research, March 2007)

Black raspberries show promise in preventing cancer of the esophagus and colon

(American Cancer Society, March 2007 )

2006: oral, prostrate, breast and colon cancer.

Antioxidant content per serving (American Journal of Clinical Nutrition, July 2006)

Blackberries: 1st

Strawberries: 3rd

Raspberries: 7th

Blueberries: 9th

Market TrendsConvenienceYear-round availability

No longer a seasonal itemConsumer look for and plan on using

themDemand increased in both retail and

foodserviceHigh quality, reasonability priced berries

More supermarkets now carrying berries

Market TrendsGlobalization

More sources of fruit in the world marketChile, Mexico, China

Fast and Reliable TransportationImproved infrastructure to maintain the

cold chainResult: Firm Berries for the consumerNot soft, runny fruit

Market Trends“A lost in taste does not seem to matter as long as

the fruit looks good.”Are the customers really this forgiving?

Industry experts:Raspberries There is evidence that consumption

is decreasing due to poor, or decreasing, flavor (i.e. low sugar content) relative to blueberries.

Blackberries One reason blackberry consumption has been increasing is because the newer varieties are sweeter. In some cases the Brix has increased 50%.

Industry Challenges1.Food Safety 2.Labor3.Transportation4. Increasing consumption

U.S. Confidence in Food Safety DownSafety concerns prompted 38 percent of consumers to

stop purchasing certain foods in previous 12 months, +9% in 2006 survey.

The items most often mentioned were Spinach: 71 %Lettuce: 16 %Bagged salad: 9%

Survey was conducted in January 2007, when the outbreak linked to spinach was still in the news and illnesses associated with other foods were starting to make headlines.

Source: FMI Consumer Trends 2007

Negative Impacts of Pesticides Products in Europe

Pesticides in fruit, vegetables and grain is a major concern for European consumers(Cited by 63%of the consumers surveyed.)

Survey of consumer opinion on pesticides in GermanySurvey made on behalf of GreenpeaceInterviews in February and April, 2007

Highest priority for consumers is no/low pesticide residuesProducts listed as frequently exceeding limits and showing

multiple residues:StrawberriesBerries(red/blackberries, raspberries, gooseberries)

Food Safety: ChinaReports of Tainted foods

Pesticide misuse Lack of inspections

“The Growing Dangers of the China Trade” (Time, July 7, 2007)

Farmers are using more chemical fertilizers and pesticides to increase quantity, not quality.

The government says the worst pesticides are banned, but farmers can actually still buy them and so they use them.

“…food contamination problems will likely get worse before getting better as more get-rich-quick entrepreneurs move into food and agricultural products” (NY Times, 6 June 2007) Regulatory philosophy – Its OK “if no one is getting sick

or dying”

Food Safety Is it a “potential time bomb”?E. Coli scares have also led to concerns about

Water QualitySanitationTraceabilityGood Agricultural Practices (GAP) certificationsGood Manufacture Practices (GMP)

Nearly 69% of the U.S. Manufacturers either have or will implement stronger safety practices and are employing superior safety protocols

(2007 Annual Food Manufacturing Survey)

Industry Challenges Labor – Concerns about illegal labor in the

U.S. Grower have concerns about production and harvesting Fresh Del Monte Produce processing plant in Portland,

Oregon Immigration raid on 12 June 2007 170 employees were taken into custody

Transportation Increased costs of air freight makes it harder to compete

with ground transportation - especially in the fresh market

Increasing Consumption “There’s room for growth!”

U.S. Data by Commodity

Consumption(% of Consumers

trying fruit in last 12 months, 2007)

Expenditures(% of Consumer

dollar spent of fruit, 2006)

Per Capita Consumption

(2005)

Strawberries 69% 21.7% 1.84

Raspberries 26% 3.8% 0.29

Blackberries 18% <2.0% 0.11

Source: USDA and The Packer Consumer Surveys

International Food Information CouncilConsumers want to embrace the latest trends related to

improving their nutrition .... ,BUT they are inundated with information that falls short of clearing confusion.”

Focus on information tailored to boost consumer knowledge and support targeted behavior modification.

Suggested tips:1) Use plain talk about food and health2) Cite study specifics3) Affirm scientific research is continual and rarely final4) Carefully create meaningful communications5) Examine all the relevant facts – be objective

Cooperative Market Development in the Red Raspberry Industry

A generic Research and Promotion (R&P) Program The intended purpose of the R&P Program

Balance supply and demandGrow the market in aggregate for all suppliersIncrease the value of processed raspberries

Steps:1)Analyze existing information and conduct new research on the

benefits of raspberries2)Convey the message to consumers, food processors, and the food

industry3)Increase the number of new products and the use of existing

products

New Processed Products

Food Processing: 2007 TrendsTeens and Baby boomers remain two major

consumer groups for specialized marketing effortsTeens: Snack foodsBoomers: Products combining specific needs

together with easy-to-handle packagingSnacks are believed to be the most innovative

category in the healthy food and drink groupInput prices continue to be a critical issue!

New Process Products

Numerous companies are looking for ways to incorporate berries in order to market them as a health platformIce Cream Fruit SmoothiesLow-Fat YogurtsBaked ProductsSnack ProductsJuices

Organic beverages are a hot category

Organic beverages continue to make their way into the mainstream as a consumer desire for healthier beverage options fuels double-digit growth for the segment.

R&D professionals report that beverage manufacturers increasingly are requesting tropical and so-called "super fruit" flavors in organic form.

Snack Foods

Frito-Lay’s goal “create convenient, great-tasting snack crisps made with real fruits and vegetables.”

Frito-Lay North America introduces Flat Earth fruit crisps and veggie crisps

Kellogg Co. adds Rice Krispies with Real

Strawberries

Kellogg’s research shows that “Moms are demanding more real fruit in their children's foods, while today's kids want more taste. So adding real, delicious fruit to a cereal mom has loved since she was a child was a natural fit."

Muscadine Grape Products“Thinking Outside the Box”

Independent laboratory tests show that Muscadine grape seeds contain the highest levels of natural antioxidants. Muscadine grape seeds and byproducts from juice and wine production are very high in antioxidants.

Used to make Dietary Supplements

Thank you for your attention!

Back-up and Additional Slides

Fresh Strawberries Exports (Metric Tons)

Country 2001 2006 % Change

Spain 225,119 207,974 -7.6%US 58,108 103,910 78.8%Mexico 30,910 70,970 129.6%Belgium 33,682 38,781 15.1%France 18,725 34,220 82.8%Netherlands 16,057 29,525 83.9%Poland 20,945 24,071 14.9%Italy 33,308 22,917 -31.2%Germany 10,086 15,968 58.3%Turkey 23 11,319 > 1,000%

The Top 10 Countries accounted for 96.1% of the world exports in 2004

Source: Global Trade Atlas

Strawberries: Fresh Imports (Metric Tons)

Country 2001 2006 % Change

Germany 149367 90835 -39.2 % France 82506 117219 42.1% Canada 45514 84713 86.1% US 32081 69592 116.9% UK 26667 47823 79.3% Belgium 26105 28770 10.2% Italy 22830 38396 68.2% Austria 22173 20354 -8.2% Netherlands 15710 20617 31.2% Mexico 9630 18992 97.2%

Top 10 Countries accounted for 85.2% of the world imports in 2004

Source: Global Trade Atlas

Worldwide Area Harvested of Strawberries

(Hectares)

Country 2000 2005 % Change % of World

Poland 61,967 53,700 -13.3% 21.3%Russia 22,000 36,000 63.6% 14.3%USA 19,283 21,120 9.5% 8.4%Germany 9,619 12,254 27.4% 4.9%Turkey 9,465 10,500 10.9% 4.2%Serbia 8,686 10,000 15.1% 4.0%Ukraine 7,500 8,000 6.7% 3.2%Spain 11,055 7,600 -31.3% 3.0%Japan 7,450 7,300 -2.0% 2.9%Korea 7,090 7,000 -1.3% 2.8%Chile 777 1,020 31.3% 0.4%World 248,321 251,718 1.4% 69.4%

Source: FAS, USDA

Strawberry Production and Distribution in Spain (Metric Tons)

2005 Revised

2006 Estimate

2007 Forecast

% Change 2006-2007

Area Planted 7,611 7,400 7,100 4.0

Area Harvested 7,611 7,400 7,100 4.0

Production 308,000 335,500 275,600 17.8

Imports, Fresh 6,014 4,735 5,000 5.6

Total Supply 314,014 338,235 280,600 17.0

Exports, Fresh 237,534 207,974 185,000 11.0Fresh Domestic Consumption 32,000 41,761 40,000 -4.2

Processing 44,480 88,500 55,600 37.2

Total Distribution 314,014 338,235 280,600 17.0

Source: FAS, Annual GAIN Report

U.S. Red Raspberry Cold Storage Holdings

MONTH 2005-06 2006-07 %

August 76,319 78,993 3.5%

September 78,147 64,459 -17.5%

October 72,809 60,312 -17.2%

November 66,007 56,176 -14.9%

December 55,801 52,208 -6.4%

January 50,820 46,381 -8.7% February 46,122 39,593 -14.2% March 39,472 34,686 -12.1%

April 34,752 33,569 -3.4% May 30,989 31,323 1.1%

Source: USDA Cold Storage Reports

U.S. Imported Frozen Berries*(Values in US$1000)

Country Calendar Year January – April Comparisons

2005 2006 2006 2007 % ChangeChile 1,661 6,035 3,970 5,583 40.6%China 1,788 2,197 102 312 205.9%Serbia 1,269 812 155 0 ------Columbia 346 373 120 46 - 61.7%Canada 152 151 63 45 - 28.6%Denmark 0 0 0 348 ------ROW 425 700 198 547 176.3%Total 5,641 10,268 4,608 6,881 49.3%

Source: DOC, US Census Bureau, Trade Statistics, 6-Digit Imports

* Berries = Blackberries, Mulberries and Loganberries

U.S. Blackberry Cold Storage Holdings

MONTH 2005-06 2006-07 %

August 33,669 32,164 -4.5%September 32,441 31,326 -3.4%October 31,371 30,528 -2.7%November 27,874 28,310 1.6%December 25,677 26,743 4.2%January 25,367 25,604 0.9%February 23,097 24,726 7.1%March 19,575 22,748 16.2%April 18,023 20,937 16.2%May 15,825 18,442 16.5%Source: USDA Cold Storage Reports