Record Of Apple And Pear Board Examined

Press, Volume XCIX, Issue 29398, 28 December 1960, Page 12

Record Of Apple And Pear Board Examined

< IBy

P. H. JONES)

Not long ago a clever contestant won a huge quiz prize for naming three mythological stories about apples: the Garden of the Hesperides, the Judgment of Paris, and the Race of Atalanta. Unfortunately there are few modern stories of interest about apples, but there is one which vitally concerns everyone, resulting as it does in an annual golden reward of £sm. It might well be called the Struggle for Markets.

Our production of apples is about equal to our population—one a person a day. We seem to be unable to use all our crop, so it is necessary to export half of it. Until now this has been easy and profitable, as apples are universally welcome, but we have reached a stage where every case exported involves us in a loss of 6s, that is 5s a head of our population.

Disposal is becoming difficult. European crops are steadily increasing: Italy is doubling its crop, West Germany is planting widely, and ours is increasing by 200,000 cases a year. The European Common Market is a grave threat to us. Even though our crop reaches the market in the off-season we face greater competition from Australia, Argentine and South Africa. Who could have believed, at the passjng of the Fruit Control Act of 1924, that our exports would increase 17 times during 35 years. Control was arranged for the purpose of orderly marketing of fruit for export, but not for the domestic field. In 1909 only 400 cases were exported. In 1924 all districts except Otago approved export control and all districts rejected domestic control. The average price was Us over an export of 212,500 cases. The idea of a guaranteed price goes back to 1911 when it was 3s 4d a case. In 1927 it became 10s 6d, and in 1935 it was reduced to 8s plus some freight allowance for finding new markets. At that date 944,770 cases were sold at an average of 10s a case. From then on the growers helped the guaranteed price with a levy of lid a case. Functions of Board

The industry is managed by a board consisting of growers and Government-appointed nominees representing consumers. The functions of the board are to acquire and market apples and pears grown in New Zealand or imported, to determine costs and prices, grades of fruit. Although growers in many districts can dispose of all their crop on the local market, they are really tied to the marketing authority, because it has been made unlawful (with a few minor exceptions) to sell other than to th. board or to some properly constituted municipal market. This latter provision came about in an interesting way. Many still remember the furore in August, 1955, when a Hawke’s Bay orchardist carried his own fruit to Wellington where he opened a market for direct sale to the consumer, at 8d a pound as against the current Is a pound. He deliberately defied the marketing authority and all the processes of law, was watched and followed by inspectors, and prosecuted.

Following strong public ap proval of the innovation, the Cab

inet intervened to amend the regulations. Growers in Hastings and Auckland supported the board, but Nelson orchardists suggested a very drastic step, namely that the board should by-pass fruit retailers and sell direct to consumers.

Finally a conference between the Minister, the board, the Housewives’ Association and the Fruitgrowers’ Federation reached agreement to allow direct supply to properly constituted municipal markets.

Newspapers reported that the board and the federation agreed that fruit handled by the board reached the consumer at too high a- price. They considered that there was a flaw somewhere in the marketing of fruit. The chairman of the board said that both board and grower would have to correct weaknesses, take stock of the position, and thoroughly overhaul the whole marketing system. The Federation of Labour commented that thanks to the enterprise of one public-spirited producer the consumer could see how far he had been exploited. The press commented that the board should be able to manage its business with a minimum of control. But what has been done about all this? Where are these properly constituted municipal markets? Cool Store Costs Nearly all fruit goes into cool stores. These exist for two purposes; to extend domestic marketing over a longer consuming period by slowing down the maturing process; and for relieving pressure on the growers’ holding capacity for both export and home markets.

Before apples can be sold they must be inspected. There are only a few inspectors, a large number of growers, and millions of cases. One would think that the economical way would be for inspectors to see the fruit before it is moved. This is not so. Only in places where there are no stores, such as Timaru, is the fruit inspected at the orchard. Elsewhere it is carried to the cool store, inspected, and sometimes taken back to growers’ sheds. An odd feature is that the inspectors are not on the staff of the apple board but belong to the Department of Agriculture. Is inspection done in this way because it is feared that growers will ring-in uninspected fruit?

The cost a case in cool store averages over a farthing a day. It can be seen from the board’s weekly receipts and sales that average storage time is 70 days. The largest storage is about one million cases around July 1. Some must be stored privately because ;he board has capacity for only some 800,000 cases. About 120,000 cases going into cool store could be held by growers right up to Tune and thereby save Is 8d a case in storage fees. This would represent to the consumer a saving of 2s 4d. Prices are usually based on costs; all costs, are borne by the consumer. At one time apples went straight from producer to consumer without these costs for Storage and two extra costs of distribution (grower to store, store to market and market to retailer). According to the present system all these are justifiable costs. The question is: can the system be improved?

When the marketing authority, now known as the Apple and Pear Marketing Board, was created, the hope was expressed that we should never have to import apples again. But in 1959 the board, after 10 years of marketing experience, so underestimated local consumption that Canadian apples were imported to supply a bare market. It seems senseless that towards the end of the season our own apples at Is 3d a pound are expected to compete with bananas at Is a pound. Lack of Flexibility

Marketing of fruit suffers from one disability—lack of flexibility. Overproduction in industry can be countered by reduction of production, but that cannot be done with fruit, for trees keep producing and must be attended to. One solution may lie in processing into products such as apple sauce, apple pie-filler, apple-orange juice, and straight apple juice both clear and opalescent. The board is at present conducting sales trials in Palmerston North. Another solution suggested is what was done during the war apples to school children, in place of milk. To stimulate sales some £40,000 was spent last year in advertising apples. However, the old way, and usually the most effective way, is reduction of prices. Better bear any loss in this- country than pay foreigners to eat our fruit.

Perhaps, though, there are some unnecessary, avoidable, costs built into the price structure. Maybe Parkinson’s Law applies to apples! Our loss on exports was £583,006 on about two million cases. Oddly enough this is the first time that domestic sales showed a profit and export sales a loss. It would thus seem that the home market is best; what then really stops a larger sale on the domestic market?

Only one thing—price. It is as simple as that. Jonathans at Us a case to the board and 35s to the fruiterer, and with the allowable 40 per cent, mark-up, lid a pound to the consumer. Delicious at 15s 2d were at least 30s and Is respectively. These figures were given, without contradiction, in November, 1960, by the president of the Fruiterers’ Federation. Yet five years ago both distributors and consumers were in agreement about s one thing—that fruit handled by the board reached the

consumer at too high a price. What has been done about it since?

It would seem that the board has difficulty in enforcing its requirements. Otherwise how can one explain its complaint that many growers sell their good fruit and send to the board the poorer grades and unwanted varieties, very often in poor condition? “BLick Market" Some growers themselves do not all play the game, in that some black market by selling direct to the retailer and consumer, by-passing the board’s store and the produce market. That procedure was the one recommended by the Canterbury growers in 1928. Black-marketing flourishes because of the large saving made possible in this way. Average costs a case amount to 8s 6d made up of administration, 10.72 d; assembly, 5.29 d; cool storage, 20.37 d; distribution, 39.11 d; commission, 26.68 d. Not all of this can be saved, because some charges must always be due for' a certain amount of inspection, administration and distribution. Fairly accurate end-costs to consumers can be compiled for the various channels: direct to consumer; direct to retailer; direct to produce market; through the board. In addition to the costs just mentioned there are profits to board and retail mark-up. Through board, produce market and retailer, 335; through produce market and retailer, 25s 8d; through retailer only, 22s 8d; direct to consumer, 16s Bd. The most recent development in this sales drive has caused quite a storm in several quarters: the proposed plan of the board to sell apples at a discount to chain stores and bulk purchasing organisation; discount not stated.

The retailers objected to and condemned this highly irregular and unethical proposal to give preferential treatment. Some critics branded the board as the costliest middleman of all, that the board’s record has left a trail of dissatisfaction, and that consumers would be better off if the board left apples and pears in this country alone. Selling Policies

The board said it would not allow its selling policies to be dictated by the vested interests of wholesalers and retailers, but must keep growers’ and consumers’ interests paramount. The chairman said that the board had nothing to hide as its accounts are audited by the Government. He added that if the merchants, buyers and retailers would do the same the public would know the facts. Does this mean that the board believes the middlemen are making undue profits?

The fruiterers fear, rightly or wrongly, that the board will use it monopoly powers to supply the powerful chain stores with the pick of the fruit and get rid of unpopular sizes to the wholesale markets at a fixed price. Rather odd this want of faith all round: the retailers fear that the board will do what the board has been complaining that some growers are doing.

This proposed policy is discrimination. When it was done, in 1955, by a grower, with his own fruit, the first to object was the board, which said it would make or break the board.

This discrimination is being done at the expense of the wholesale merchants; who lose their 10 per cent, commission, and favours the large and powerful multiple stores which should, even without any discount, be able, because of their greater turnover, to make more profit. Apart from the wisdom of this policy is it right that a lawfully established monopoly should discriminate between its customers? Is it in the process of destroying its own system? Is it in the process of destroying itself?