Marketing Produce To Consumers, New Varieties And GMOs Wrapped Into One Seminar By Cornell’s Brad Rickard At The Foundational Excellence Program
Jim Prevor’s Perishable Pundit, November 22, 2015
Brad Rickard is a superstar, and his research is always interesting and carefully done. He has presented in both New York and London and provided scintillating talks, including those we have featured in these pieces:
Will Reducing Food Waste Be Sufficient Reason To Embrace GMO Produce? Cornell Professor Brad Rickard To Guide A Controversial Session At The London Produce Show And Conference
Cornell’s Brad Rickard Returns To The New York Produce Show And Conference: Will 'GMO Free' Be The New Organic?
What’s In A Name? Professor Brad Rickard Of Cornell Produces New Research That Indicates Shakespeare May Have Been In Error… On Apples At Least
Cornell’s Brad Rickard To Unveil Generic Produce Promotion Research Done By Cornell And Arizona State University At New York Produce Show And Conference
Now that he is part of the Foundational Excellence faculty, he has a specific role to play in bringing out the best in the attendees.
We announced the Foundational Excellence program here and had an incredible interview with Professor Ed McLaughlin to not only lay out the program but discuss the state of the industry, which you can read here.
We asked Keith Loria, Contributing Editor at Pundit sister publication PRODUCE BUSINESS, to get the low-down on Brad’s involvement:
Associate Professor of Applied Economics and Management
Charles H. Dyson, School of Applied Economics and Management
Ithaca, New York
Q: Let’s talk about your presentation topic for the Foundational Excellence program. It sounds like you are really covering the waterfront with a few different areas that are interconnected and certainly should pose a lot of interest for attendees. Would you give us a synopsis?
A: I’ve been talking to Rod Hawkes, who is going to present in the first time slot. His plan is to give an even wider snapshot of several different issues that these folks might be thinking about, or the colleagues they work with might be thinking about. A lot of them are trends and issues in supermarkets and retail with a focus on fruits and vegetable products.
The idea is for me to follow him and spend a little more time focusing on three different issues where I’ve done some research and then present the results. And then follow up and strengthen or help support some of the things that Rod introduced in the first session. We’re hoping there is some nice flow and that there might be some questions from the audience as I present results — once they’ve had some time to think about the particular issues.
Rod will introduce more issues that I can cover in-depth. My main areas of focus are 1) the effectiveness of fruit and vegetable advertising; 2) consumer response to new fruit and vegetable varieties; and 3) consumer response to GMOs in fruit and vegetable markets (given the recent deregulation and the ongoing R&D efforts happening in that space and then some of the controversies.)
Q: I’d like to go through each of those and focus on some of the highlights to whet people’s appetites. With regard to the advertising of new varieties, you’ve talked about commodity-specific advertising and broad-based advertising. Would you differentiate between the two for us?
A: That’s a good question. This is an ongoing debate in the United States, but it’s also an issue in western European countries, Canada and Australia. How do you most effectively promote fruits and vegetables? One way this has evolved is specific fruits or vegetables, and occasionally very similar fruits and vegetables, will partner up and do some form of generic advertising for, say, Washington apples or California strawberries or peaches, plums and nectarines, and there will be some promotion efforts usually to highlight the taste qualities.
It happens more often with fruits than with vegetables. Occasionally, they will also promote the health benefits of fruits and vegetables, but largely, they are trying to promote the taste of these products.
They can do it alone or they do it with one or two very similar products that are very close to them in product space. These efforts sometimes are funded by the people who grow these products. Sometimes, they are funded in a matching program where a state or a federal government will kick in some money because they see this as healthy-eating advertising.
That’s the rationale where there might be public money spent and then it is matched with some money from the people who grow the crop. We think of those as commodities because they are fruit- and vegetable-specific promotion programs.
The other type of program we’ve seen ebbs and flows in this country, and seems to be more prevalent in other countries, is an across-the-board promotion of all fruits and vegetables collectively. “Eat 5-A-Day,” “eat more fruits and vegetables.” They come in different names, but generally, the idea is they are trying to promote all fruits and all vegetables. They are trying to raise sales or raise demand in that category more generally.
We did some research with consumers in a laboratory setting, and we exposed them to different types of advertising as compared to no advertising, and we watched what happens to their demand for various fruits and vegetables. I’ve done a few different research projects in this general area.
What we find is that the broad-based, or the eat 5-A-Day, actually does sell more produce collectively; it increases demand for produce as a category, whereas those individual efforts seem to just compete with each other. If there is advertising for apples, it increases apple sales, but then it will dampen banana or orange sales, whereas 5-A-Day or “Fruits & Veggies—More Matters” tends to raise demand for the category.
That’s one finding, but the other finding is it is very difficult to figure out or understand how to fund one of these generic programs. That’s really the thing that’s holding back these programs; that it’s not clear to people who should be paying for it and in what capacity.
Even though it has these benefits of increasing the category, part of the problem is some of the producers of certain fruits or certain vegetables are thought to benefit more than others. Then, there are questions about fairness and equity and who should pay for it, and who free-rides based on clever advertising.
It’s much easier in milk or some market like that where the product is more homogeneous. In fruits and vegetables, you get up to 200 or 300 different crops that could be potentially benefitted by this program. It’s hard. In other countries, governments have stepped up. They’ve seen this as a public health initiative and they’ve funded a lot of the 5-A-Day-type programs in Canada, Australia, England, Italy, Spain. That’s the point of struggle. Is it worth it, and if it’s worth it, who is going to pay for it?
Q: Would you give us an example of a commodity-specific program that was particularly successful or noteworthy?
A: There are lots of examples. Many of the major fruit and vegetable — especially fruit — categories have some type of mechanism where they collect money from growers. I live in New York State and there’s a pretty impressive promotion program for New York State apples. You’ll see ads on television. You’ll see celebrities. We recently had the soccer player, Abby Wambach, promoting New York State apples. You go to New York City and you’ll see banners and billboards promoting New York State apples. That’s even more specific than a commodity. That’s a state-level program for apples. Washington State has a similar one for their apples, though following a lawsuit, now it is a program only for outside the United States.
Q: Let’s talk about broad-based advertising. 5-A-Day was introduced in 1991. That was replaced with Fruits & Veggies—More Matters in 2007 in order to align more closely with the U.S. recommended daily allowances. Have those proven successful? It sounds like neither type of promotion beats out the other. Does the answer lie in combining the two?
A: I guess that’s where we are right now. We are doing a combination of the two. These programs that do exist in the United States -- the 5-A-Day that switched to More Matters — they are programs in name, but they just have so little funding, they don’t have a budget to really do anything.
Whereas in other countries, there are bigger budgets, so you see television and magazine advertisements that promote this idea of 5-A-Day or More Matters. In the United States, it depends on volunteer contributions from firms, and it’s a pretty small program. Our idea is if this program is made bigger — and how much bigger is a good question — people will respond to the general idea. But right now, it’s small because it doesn’t have funding to be a big program.
In general, those 5-A-Day programs have been effective at promoting fruits and vegetables. Some people have shown that on the margin, they have increased fruit and vegetable consumption, but other people wonder if it could happen on a larger scale if the programs were ramped up. Most people seem to think it would, but then the question is how do you ramp these up because that costs a lot of money and how do you fund it?
Is this something the government should be interested in or is it something that producers of fruits and vegetables should take on? If it is something the producers of fruits and vegetables are going to fund, then there’s this question of how do you do it? That’s where it becomes difficult. It’s an open-ended question. But our research does show that it’s an effective way to increase demand for the category. People do respond to this type of advertising.
I’ve been talking to some colleagues in the southern states and they have a particular interest because there’s even less per capita consumption of fruits and vegetables. They have access to one of these functional MRI (fMRI) machines where they monitor a consumer’s cognitive and emotional responses to advertising. This could be a really neat opportunity to collect that information and see if people are thinking and processing these things, or if it’s more of an emotional response to advertising.
That’s something we are just starting to think about. We know that people do respond to advertising, but is it done in a more cognitive or a more emotional way? That helps us to better understand the long-term implications of advertising and promotions.
Q: You are also going to be talking about new fruit and vegetable varieties.
A: This is interesting to a lot of people. It’s interesting to people at a university like Cornell because Cornell has these breeding programs and is coming up with new rice varieties, vegetable varieties, fruit varieties. There’s this entrepreneurial spirit on university campuses because if you come up with a new crop, a new rice variety or a wheat variety or an apple variety, then you put a patent on it and the researcher nowadays is able to collect some royalty stream from that new invention, so it created a bit of a buzz.
This wasn’t the way the world worked several years ago, but there was a change in federal legislation such that university researchers working on federally-funded programs could put a patent on innovations they come up with in their lab. For someone who runs a supermarket, this is very exciting because there is a certain sub-set of consumers who are very keen on new things and especially with new fruit and vegetable varieties. I’ve been doing quite a bit of research in this general area.
One of the things I talked about before — and I’ve done some follow-up work that the audience seemed to be interested in — was looking specifically at new varieties in the apple market. There are several institutions in Europe and in the United States, including Cornell University and the University of Minnesota and Washington State University, the University of California, that are all very engaged in breeding programs.
They are coming up with new varieties that will sell for a premium because they will be patented varieties, and they will be marketed in a ‘niche-y’ sort of way. The price point will be higher than the other varieties. For instance, these apples varieties sell in the $2.99 per pound range. They have some really impressive characteristics. They often have the right coloring. They have high brix, so they are sweet apples. Some of them have that sweet and tangy profile. A lot of them have been specifically chosen because they have really high density.
There’s consumer research showing that the apple of the future is moving towards these bi-colored apples that are very crunchy and quite sweet, so these programs are trying to come up with the perfect apple that fits this profile.
There are some really exciting varieties that are coming. Apple people are familiar with Honey Crisp. It’s often used as a parent for breeding new varieties. The University of Minnesota has a new variety called Sweet Tango for which Honey Crisp is one of the parents. Sweet Tango has got a huge following. It’s a beautiful apple, but it’s a patented variety, and only a handful of producers have access to this variety.
It’s interesting from an agricultural perspective: Who gets access to these varieties? How are they chosen? How do they decide how these farmers are going to pay to have access to these apples? I’ve done quite a bit of work trying to understand whether, as a farmer, should you pay for this new variety by paying an extra tax or an extra royalty to get the actual tree to your farm or should you pay a royalty every time you sell a box of fruit?
These royalties would then go back to the university. There’s an interesting question about how universities should charge farmers to have access to the varieties. Then there’s this other question about how producers and fruit marketers should market these within supermarkets and how should they find the consumers that are most interested or most willing to seek out and pay for these new varieties. With apples, in particular, apples are often introduced to consumers using a varietal name. That’s less true with a lot of other fruits and vegetables.
For apples, the name is quite an important way to attract new consumers or at least to get them to try the apple in the first place. This is an ongoing interest of mine, both how the fruit is managed with the farmer and then how the fruit is sold and marketed to consumers. Apples, in particular…. but this is true with strawberries and various citrus products and table grapes, but apples are closer to home and we’ve done quite a bit of research. It seems to be on the minds of people.
I’ll talk a little bit about this background story and then talk about how the people who market these apples decide its name and what promotional materials they will use to introduce these apples to society. There have been some mistakes or some cases where a firm has introduced a variety under one name, but it wasn’t really working, so the next year, they reintroduced it using a different name.
Pinata is marketed under Pinata now, but it had been marketed as Pinova and Sonata in previous iterations as a fruit. We do some laboratory experiments with consumers, and we introduce them to one of these new patented varieties and we introduce it to different groups of people using different names.
Apples typically are marketed to consumers in different ways. Sometimes, they are introduced to people and the varietal name is something that reminds people of a person or a place, like the Fuji apple or the Empire apple or the McIntosh apple or the Granny Smith apple. Some fruits are introduced to society through an appearance kind of name, such as Golden Delicious or Ruby Red. There is often some color description. And then some apples are introduced using more of a sensory, like a Honey Crisp. You’ve got the sweet and the crunchy.
It’s a very clever name because it talks about both the sweetness and the crunch. What we’re finding is apples are gravitating away from those namesake names towards these appearance and more sensory names.
Our question was to try to understand — given the exact same apple that people were introduced to and were allowed to taste and think about — how did their perception of that apple or their demand or their willingness to pay for that apple change, based on the name that it was given?
We found that it mattered in a non-trivial way. If you gave people the same apple and you controlled for the differences in these people, when you gave people a name that had more of a sensory type of a name, their demand and their willingness to pay for that apple was much more than if you gave them a namesake name. And if you used an appearance name, it was somewhere in between, but it was closer to the willingness to pay and the demand that you would see if the apple was presented with some type of sensory name.
This is being borne out with a lot of these new varieties. Some of them are still using namesake names, but many of the ones, especially the ones being released by these universities, tend to be shifting toward names that often have sensory and appearance properties in the varietal name.
Q: What are the industry implications?
A: Not always, but in many cases, it’s surprising how much the name matters. There are so many new products, and there are so many different products. There are some of these habitual shoppers in the grocery store, and there are others who are more variety-seeking. They have so many options to choose from, it’s surprising how much this name can matter and, in particular, when there are traditional apple varieties, and then there are some new patented or managed apple varieties that are entering, and there are more and more of them entering in the grocery store every year.
Consumers are confronted with a lot of choices, and it’s surprising how much that name really matters. I might finish my presentation by saying Washington State has just released a new apple variety and the name they chose for it is Cosmic Crisp. They also adopt this crisp as a texture or sensory kind of property, but then they chose Cosmic Crisp.
There are some people who are concerned that Cosmic Crisp is a little bit suggestive of a genetically modified apple. There is news about genetically modified apples being deregulated and possibly entering the market. They haven’t but they might, if it becomes commercialized. You are using “cosmic” to try to appeal to the younger generation, but an older generation who makes a lot of the decisions might associate cosmic with this issue of genetically modified (GM) products entering the apple space, which also serves as a bridge to my third topic about consumer response to genetically modified organisms (GMOs) more generally and particularly in the fruit and vegetable market.
Q: GMOs are a subject you’ve talked about numerous times in the past. Where do things stand at this point?
A: It’s an ongoing debate. It’s something that has been in discussion for 10 or 20 years. I draw people’s attention to the volume of research that is happening in this space. When you look at the scientific journal articles about trials and experiments and the benefits and costs associated with GM products for fruits and vegetables, it’s substantial, so there’s a lot of scientific interest in this area.
The main hurdle still seems to be consumer acceptance of these products. In the United States, there seems to be widespread consumer acceptance for GM-processed products that use GM corn and soybean ingredients. There is some resistance, but those products are quite widely available in the United States.
We also see GM versions of papaya and sweet corn. There’s a GM squash variety that’s been deregulated and been commercialized. It’s not widely distributed, but these products do exist. The reason this is particularly newsy is because in the past year or so, there’s been the deregulation of a GM potato, the N8 potato from Simplot, and the deregulation of the Arctic Apple, which was an innovation that came out of British Columbia. Both of these innovations applied for deregulation or approval status by the FDA, and they both received that.
Neither of those products has been commercialized, has become a grocery store product yet, but that path has been opened now that they’ve been deregulated. There still are these questions about consumer acceptance.
Q: Why are consumers more willing to accept GM in processed foods than in fresh fruit and vegetables?
A: That’s a really good question. We’ve done a bit of work where we tried to ask consumers the general acceptability of GM fresh products. I don’t know if it’s related specifically to GM. Some people have an aversion to technologies. That includes GM, but it also includes other food technologies that are used, like irradiating food or the use of materials in long-term storage of apples. Once people learn about these technologies, there is often some aversion to these technologies.
We have some evidence from research that it is true that people are less likely to demand or to be willing to pay for or even to be willing to try a GM version of something that is fresh or less processed. Having that stage of processing sort of dampens the potential effect, if they feel there might be some negative effect associated with GM.
It seems like the general willingness to demand or try GM products goes up the further the product is processed. Intuitively, that makes sense to me at some level. It could also mean that if it’s processed, then it is a smaller component of the final product, and they feel like it’s watered-down, so to speak, in the final product.
GM soybeans and corn have been around a lot longer, so maybe people start to feel more comfortable the longer these products have been in the marketplace. We looked at GM acceptability in grain markets, fruit markets and meat markets, and there is definitely much more aversion to GM meat products. There is some aversion to fruit products, but the least aversion was to grain and meat products, and it was even less so for the processed grain products, which are the products that are most commonly sold and seen in grocery store shelves.
It’s an interesting question, and I am particularly intrigued by the promotional materials that Arctic Apple and N8 Potato are showing to promote the technology as part of their PR campaign or communications strategies to firms and procurement types and even final consumers.
A major focus of the promotional materials is that these GM apples and potatoes will reduce food waste. Food waste is another one of these hot button societal issues related to food. Now, you’ve got the deregulation of GM fruits and vegetables, which some consumers are pushing back on and then you have that tied to this debate about food waste.
People are looking for ways to reduce food waste. You have a genetically modified apple that doesn’t turn brown as quickly so it could be more effective in the fresh sliced industry. And there’s a lot of evidence that children are much more likely to eat apples if they are not brown and they are more likely to eat apples if they are sliced.
You’ve got this potential decrease in food waste, potential increase in fruit and vegetable consumption by children. On the other hand, you have this pushback about this general idea about GM being introduced into the apple market.
The same story is true for the N8 potato. A main part of their promotion program is these potatoes can handle transportation and storage much better than conventionally bred potatoes. There is less of the potato that needs to be cut away as a result of bruising, so there’s 30 percent less waste or whatever number they present. Part of the promotion of these is really tying itself to its potential effect on food waste. This is evolving right now.
I’m planning to do some additional work on it. It’s one of these things where consumers are given multiple packages of information. Some of it could work in a cognitive or an emotional way differently for the consumer. It’s a trade-off the consumer ultimately has to make. I’m curious how this is all going to shake out, and it seems like people who are new to the fruit and vegetable retail category, this is something that will already be on their minds and I can help them think about a little bit more and share some of the research findings that we have.
Q: The bruise-resistant and the anti-browning certainly ties into the produce waste. Will those kinds of innovations help move the needle, lead to further deregulation and consumer acceptance?
A: There are some consumers who don’t care and some consumers who will never buy GM products and there’s this big group in the middle, these swing voters if you will. The question is still out there for that group. There are some people in that group who might value a reduction in food waste as a more important societal issue. They might see the benefit of the GM products.
The food waste might be more important to them than whatever downside risk they perceive might be associated with GM fruits and vegetables. I think that’s why it’s such a big part of promotion programs. Because these firms also think there’s a subset of people out there who would make this trade-off and might be convinced this is a reason to purchase these products. But it’s not everyone, and it’s trying to figure out who those people are and the size of that subset of consumers.
Many of these issues are very complex, and in the Foundational Excellence program one of the goals is not merely to present information but to help people learn how to apply critical thinking skills to these issues.
After all, these are the people who will decide issues such as branding, advertising, product positioning and so much more.
The subject of GMOs is a great place to start because, with the Arctic apple, Simplot’s N8 potato, also called Innate, which we wrote about here and non-produce items such as Salmon, these are going to be top of mind.
Yet how a produce company or an individual company should address the issue is not clear. For example, it is said that there is a lot of consumer concern around GMOs and, for example, the organic community has defined them as forbidden from receiving organic certification.
Yet the hard evidence that consumers will reject GMO produce doesn’t exist. The Hawaiian papaya shippers don’t seem to have a big problem selling their papaya — what they have had a problem with is vigilantes coming to destroy their crop.
It is well worth noting that there was widespread prediction of similar rejection of irradiated meat. Yet when Wegmans started carrying irradiated hamburger meat as an option or when Omaha Beef started irradiating all its ground beef, it is fair to say that nothing happened.
GMO technology was really introduced to consumers as something that provided consumers only theoretical benefits — farmers using Round Up could have higher yields. How consumers would have reacted had the first products had tangible benefits, such as Golden Rice, which can prevent blindness, is completely unknown.
Then an important part of the issue may be to look at it not just from a consumer standpoint but from the standpoint of a retail CEO.
One new variety of apple is unlikely to account for even a tenth of one percent of total store sales. So if there is a small minority that would be likely to picket and make trouble or do anything that would make consumers decide to go to another store, think about the retail calculation:
Upside: selling one new apple variety that boosts sales inconsequentially
Downside: lose big business as a percentage of customers stay away from the store… and some of them may learn they like another store better and so never come back!
On the other hand, if GMOs are going to be important, a store is hesitant to not offer these new items.
Learning how to think like other members of the supply chain – retailers like grower/shippers and grower/shippers like retailers, and wholesalers like everyone else — is an important part of gaining the toolset to do business effectively.
So we will showcase the issue, then showcase the decision tree that needs to be considered. Then we will point the way to success.
Come to the Foundational Excellence program or send someone on your staff. Just send an e-mail here telling us of your interest.
You can register for The New York Produce Show and Conference right here.
We can still get you into the headquarters hotel here
And we have lots of travel discounts available here