VALUE-ADDED CORNER
Adversity to Advantage
Pacific Coast Producers uses USDA grant to develop single-serve fruit bowl
market
By Karen Spatz, Co-op Development Specialist
USDA Rural Development, California
hese are not your mother’s canned peaches
anymore! A canned peach is not just a canned
peach, it’s a fun, tasty food that fits today’s
lifestyles, thanks to innovative processors
such as the Pacific Coast Producers (PCP)
cooperative in Lodi, Calif. One of the cooperative’s newest
products is a single-serve fruit bowl which has the potential
to provide a significant boost to the long-stagnant
processed fruit industry here.
How important is this new product? “It’s the life saver for
the industry,” says PCP President Larry Clay. PCP sees the
potential for 20 percent annual growth after its first year
marketing the product. Clay credits the cooperative’s receipt
of a USDA Producer Value-Added
Grant for helping PCP pursue this
new market several years ahead of
the timetable it could have
achieved on its own.
Finding success as a
private-label packer
PCP is a processing and marketing
cooperative formed in 1971,
when there were few processors
and lots of fruit in the state looking
for a home. This imbalance
drove down fruit prices for California
growers, who responded by
forming PCP.
Justin Micheli, a first-generation
co-op member, says the market situation
in California today is similar to
that of the 1970s. “We really had no
other choices but to join a cooperative,
as no independent canners
would buy our peaches. It is the
same today,” he says. Justin says that
“the most important reason farmers
join a cooperative is to secure a
home for their product. I would
never plant a tree if I did not have a home for my product.” The
Micheli family farm in Yuba City is headed by John Micheli,
Justin’s son and vice chair of the PCP board of directors.
PCP’s operations have always differed markedly from
those of most other canning cooperatives in that rather than
developing its own brand, the cooperative is focused on
producing for the private-label market. It began as a copacker
for Stokely Foods after purchasing three canning
plants in California.
Until 1984, the co-op packed exclusively for Stokely,
but then began packing 50 percent for private labels and
50 percent as a co-packer. A decision was then made to
move toward 100 percent private-label packing, meaning
the cooperative puts its fruit in cans that bear the store
brand of various retailers. Today, it still packs all its fruit
for the private-label market. In the early 1980s, PCP
expanded production of tomato
products.
Today, PCP has 183 members
who supply the cooperative with
peaches, tomatoes, pears, grapes
and apricots. The cooperative still
operates three plants, the newest
of which is a tomato-canning plant
in Woodland. Plants in Oroville
and Lodi process the co-op’s fruit.
PCP added plastic-packaging
capacity in 1989.
USDA grant boosts
fruit bowl plan
PCP was awarded a $450,000
Value-Added Market Development
Grant in 2002 by the Rural Business-Cooperative Service of USDA
Rural Development. Grant funds
were used to pay for production
and marketing of single-serve fruit
bowls under the private labels of
U.S. retailers.
The fruit bowls are 4 oz., singleserve
plastic bowls manufactured
by a patented machine. It forms the
bowls, fills them with fruit and juice and then seals them.
PCP’s fruit bowl packing line uses member-grown peaches
and pears, which are mixed with juice, syrup or gel products.
As a private-label food processor and marketer, PCP does
not have its own brand. In most cases, PCP follows market
trends, introducing new products to retailers after a branded
company has made inroads with a new product line.
PCP initially produced single-serve fruit bowls for Dole
Food Co. under the Dole brand. But Dole cancelled its contract
with PCP and began purchasing fruit bowls from a foreign
company.
Single-serve fruit bowls are fairly new in the canned
fruit aisle. Store
brands currently have
at least an equal
market share with
“brand-name” products.
So this is a
major potential market
for a private-label
packer, such as PCP.
Turning adversity
into advantage
Finding opportunity
in adversity, PCP
saw this lost contract
as an opportunity to
capture the emerging
market in private-label
fruit bowls. It completed
a comprehensive marketing and feasibility study,
which showed that there was an opportunity for the co-op in
this sector. A business plan was developed which defined how
PCP could successfully compete against low-cost foreign
producers.
The PCP retail sales team made presentations to 51 retail
store chains, retail wholesalers and food service wholesalers. It
originally offered customers a line of six fruit bowl products,
which has now been expanded to 14 products.
Among the customers PCP is packing fruit bowls for are:
Albertson’s, Aldi, Unified Western Grocers, Fleming, Stop
& Shop, Tops, Bilo, Giant, Brunos, Shaw’s, Hannaford
Brothers, Stater Bros., Western Family, Kroger, Fred Meyer,
Ralph’s, QFC, Food 4 Less and Smith’s. Also: Fry’s,
King Soopers, Schnucks, K-VAT, Meijer, Shurefine International,
White Rose, Nash Finch, Spartan Stores, The
Suter Co., Roundy’s, HEB Grocery Co., Publix, Fareway
Foods and Amway. The co-op’s customer list also includes:
Winn Dixie, Food Lion, Piggly Wiggly, Roche Brothers,
Wegman’s, Great A&P, Weis Markets, Goya Foods, Nugget
Distributing and Midland Foods.
PCP has shipped fruit bowls to 40 customers under 32
different store brands. Those 40 customers have ordered 2
million cases using over 70 tons of fruit. PCP hopes it will
add at least 10 more retail chains to its customer list in the
next year.
PCP leaders are positive about the long-term prospect of
the fruit bowl market. External factors, however, could
have significant impact upon it. In the initial introduction
of the private-label fruit bowl product, two branded fruit
leaders began discounting prices below those on which
PCP based its projections. This caused returns to drop
below expectations.
Additionally, imported product from Thailand and
China caused U.S. prices to drop. Production costs in foreign
countries, due primarily to low-cost labor or large
government subsidies, pose a threat to undercut the price
PCP needs if it is to turn a profit for its members.
But all factors considered, PCP leaders believe the strong
acceptance of the fruit bowl products by customers in the
initial marketing phase bodes well for the future. They
anticipate growth rates of 20 percent per year. Consumer
acceptance of the single-serve fruit product has been so
encouraging that PCP believes this product will invigorate
the processed fruit market.
PCP’s grower-members will benefit from the increased
fruit demand to produce this new product, and they will realize
the benefit not only through increased deliveries to the
cooperative, but also through increased returns and patronage
payments for this value-added effort.
“There was the grower demand to sell more of their
crops and, thanks to the grant, we had the resources and
capacity to provide the public with the finished product,”
Andy Russick, vice president of retail sales for PCP,
recently told the Oroville Mercury Register. “We couldn’t
have done it without the USDA grant program.”
For more information about PCP, visit its Web site:
http://www.pcoastp.com/. For more information on USDA
Rural Development’s Producer Value-Added Grant Program,
visit www.rurdev.usda.gov/ rbs/coops/vadg.htm or call Gail
Thuner at (202) 690-2426.
