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12 CapitalPress.com July 28, 2017 ‘It’s all about price … and health consciousness’ CANNED from Page 1 Other changes include the consolidation of processing companies, the introduction of private labels and the ex- pansion into new products and more efficient facilities. While the changes appear to be beneficial overall for the industry, processors must also keep adapting to the changing field. Recent changes NORPAC, a grow- er-owned cooperative based in Salem, Ore., stepped away from the canning business this year. It sold its canning opera- tion to Seneca Foods Corp. on June 30 to focus more “ener- gy on growth and innovation in the frozen category,” Amy Wood, NORPAC spokes- woman, told Capital Press. Canning represented 6 per- cent of NORPAC’s business. Its other products include chili and soups, frozen fruits and vegetables and ready-to- eat meals such as pasta. “The transition away from our canning business will help us drive efficiencies and reduce operational complexi- ties as we invest in continued growth and innovation in our frozen product lines,” Shawn Campbell, president and CEO of NORPAC, said at the time. This change is not lost on Loughmiller. “We’re a fruit cannery. If people are eating more fresh fruit and less canned fruit it certainly affects us. I see it in my own life and we own a cannery; we eat more fresh fruit because it’s available,” he said. Fruits and vegetables are more popular than ever among consumers. Since 2008, the consumption of fresh veg- etables has increased 20.6 percent and fresh fruit has in- creased 16.2 percent, accord- ing to a report by Eugenio J. Alemán, a senior economist at Wells Fargo Securities. At the same time, processed fruit and vegetable consumption has only increased 9.9 per- cent. Alemán equates this change to the stabilization of fresh fruit and vegetable pric- es since the recession. The recession has also had the op- posite effect on the processed fruit and vegetable market, causing prices to surge and making them “higher than what they were at any time before the Great Recession,” he said. “It’s all about price … and health consciousness,” Alemán said. As the operator of a niche cannery, Loughmiller sells directly to customers on his company website, muirhead- canning.com. Apricot sales have declined, while peach sales have climbed; today al- most half of what the compa- ny sells is peaches. “Local” is also a factor among many consumers. A 2016 study by Duff and Phelps, global corporate fi- nancial adviser, found that 53 percent of consumers seek out locally grown or processed food. Muirhead Canning caters to that niche — offering local fruit packed with only fruit, Aliya Hall/Capital Press Muirhead Canning Co. was founded in 1946. The cannery is one of 1,016 food and beverage processing plants in Oregon. by the trends we’ve seen; it’s a good forecast. We think it’s positive, but that doesn’t mean there’s no risk.” Consolidation Aliya Hall/Capital Press Russell Loughmiller, 42, bought Muirhead Canning Co. in 2006. It mostly cans peaches, cherries and pears. water and sugar. “Even as (consumers) eat more fresh fruit or get away from canned fruit, there are more opportunities for us as a smaller player to say that this is a local product and lo- cal fruit that can be consumed in the winter without being shipped across the country,” Loughmiller said. “There are opportunities there for us.” Jobs grow With the changes in the processing industry has also come growth. Employment in food processing continues to grow “briskly,” said Josh Lehner, an economist at the Oregon Office of Economic Analysis. “(Jobs) have grown quite quickly for the last decade. We’ve outpaced some of our neighbors from Washington and Idaho, even though they have larger corporations,” Lehner said. “We’re having slower growth now than what we’ve seen in the last five years because it’s so strong; we’ve had 4 percent growth in the last four years — that’s tremendously fast.” Those percentages include the growth in the number of breweries and other beverage producers such as cider mak- ers and distilleries. Economists say the pro- cessing job market growth will shrink to 1 percent in the next year, but only because it is expected to “taper off at some point,” said Lehner. Overall, food processors employ more than 100,000 people in the West. Oregon food manufacturing compa- nies employ 11,550 workers. Processors in Idaho employ 4,710 workers, Washington state processors employ 4,030 workers and California, with its massive food production and processing infrastructure, employs 91,950 workers. “Jobs are growing and wages are growing, so it’s all good news,” Lehner said. “The future is looking bright Since NAFTA was enacted, U.S. exports to Canada and Mexico have grown from less than $9 Billion to more than $38 billion NAFTA from Page 1 Under the Trump ad- ministration, the U.S. Com- merce Department also re- cently imposed tariffs of roughly 4.6 to 7.7 percent on Canadian softwood lum- ber shipments that the agen- cy determined were sold at less-than-fair-market value. MacAulay was tight- lipped on the role that agri- cultural goods will play in the upcoming negotiations, saying it would be inappro- priate to guess about poten- tial points of contention be- fore the talks are underway. “We have to see what is put forward before we dis- cuss it,” he said. However, MacAulay said the supply management sys- tem for farm products — which has stirred trouble with the U.S. dairy industry — continues to be favored by Canadian farmers and the nation’s government. “Supply management has been in place for many years and it’s working well,” he said. Growers in the U.S. and Canada have prospered from free trade and both countries are keen on technological progress, MacAulay said. “Farmers were always innovators from the day it started,” he said. Since NAFTA was en- acted, U.S. exports of agri- cultural products to Canada and Mexico have grown from less than $9 billion to more than $38 billion last year. Meanwhile, farm ex- ports from those trading partners into the U.S. in- creased from $7.4 billion to $44.5 billion. Trade between the U.S. and Canada works best when regulations are based on science, which should be emulated by other coun- tries in the world, MacAulay said. Before entering politics nearly 30 years ago, McAu- lay himself raised seed pota- toes and dairy cows in Prince Edward Island, a province northeast of Maine. Though he’s sold off the dairy herd and leased his acreage to other growers, McAulay still lives in the same house in which he was born. During the past two years, the industry has been go- ing through a period of con- solidation, in which nation- al companies have been pur- David chasing smaller McGiverin regional busi- nesses, said David McGiverin, president of the Northwest Food Pro- cessors Association. Overall, “I’d call it a neu- tral effect. It helps in build- ing brands and capacity that people want or need, and that they couldn’t do on their own,” McGiverin said. This has been seen locally with the Seneca Foods’ pur- chase of NORPAC’s canning business and the Truitt Bros. operation in Salem — it al- ready owned half of the busi- ness — and at the national level with Campbell Soup paying $700 million for Pa- cific Foods, an Oregon-based producer of organic soups, broths, beverages, dips and sauces. The USDA Economic Re- search Service also attributes consolidation to changes in processing technologies and the emergence of new scales of economy. Private labels More grocers have also started carrying their own private labels, which have in- creased in popularity among cost-conscious consumers. In a 2014 study by the Nielsen company, 81 percent of North American consumers said they purchase private-label prod- ucts to save money. “It’s huge, especially for groceries and big chains; the products are premium,” Mc- Giverin said. The competition from pri- vate labels isn’t there for Muir- head Canning Co. Loughmill- er, the owner, said he doesn’t compete with store brands, but rather with home canning. Even though his price is higher than store brands, he says the difference in fruit quality is enough that it hasn’t impacted his business. “Private orders keep the company going. When com- peting in stores the consumers find the price more important,” he said. Expansions, upgrades One major concern for pro- cessors is aging facilities and complying with the new food safety regulations on the state and national levels, including the federal Food Safety Mod- ernization Act. McGiverin said processors have to make these “key decisions” on whether they need to upgrade to meet the massive new standards that cover everything from on- farm production to how food is processed. “They’re spending a lot of time and investment to make sure that they have the right management in place to com- ply with the Food Safety Mod- ernization Act,” he said. “They are privately investing to get the right folks and educating them.” As companies consider up- grades, they are also looking into product expansion and how brands and consumer tastes have changed, McGiv- erin said. Boise, Idaho-based J.R. Simplot is among the largest processors in the world, with operations in the U.S., China, Japan, Australia and several other countries. The compa- ny has invested in technology over the past decade that has allowed it to highly automate production of its vast array of vegetable, fruit and grain prod- ucts. “Technology has always been a big driver of change in food production. Histori- cally, advances in technology have driven positive changes in all aspects of the industry, from production methods and capacity to storage, packag- ing and transportation,” Josh Jordan, a Simplot spokes- man, said in an email. “Not necessarily to reduce labor, but to increase quality and consistency within our prod- ucts.” Looking ahead In the future, U.S. proces- sors are expecting more com- petition, both domestic and foreign. Simplot is expecting to see global competition grow, as consumer demand for spe- cialty products and variety in products has increased, driv- ing other countries to match the U.S., Jordan said. “There’s been an increase in production out of Europe, China and other areas of the world that means the U.S. food producers aren’t just competing with themselves, but in a global marketplace,” he said. Jordan also said the suc- cess of companies will de- pend on which ones can pro- vide the “highest quality and best variety of products in the most efficient manner.” “Quality and consumer choice are more important now than ever before,” Jor- dan said. Loughmiller, the niche cannery operator, also be- lieves the industry will be even more segmented and have more artisan players. Especially with the millen- nial generation of 20- to 30-year-olds, he said, there’s more demand for uniqueness and local food. “How do we make this, and what do we want to do with that?” he said. “Some of these are smaller and don’t have a huge impact, but we’re trying a bunch of things.” He has begun to expand Muirhead’s operations to include such items as fruit spreads, maple syrup and ap- ple sauce. “We have to find ways to be different and set our prod- ucts significantly apart,” he said. “Everyone has organic, so if it comes from a large company, why buy local? If you can, you meet the person that carries weight for. People who come here are excited; they are practically dancing around to see where it’s being made.” Season may exceed 25 million boxes CHERRIES from Page 1 $2.99 per pound. Prices this year have been $1.88 per pound and lower. “It’s been tough the last two to three weeks. Prices are not where we like them to be but where they had to be to move the volume. Retailers for the most part reciprocated to move the crop. Movement has been good,” said Tom Riggan, general manager of Chelan Fresh Marketing. Fruit has been smaller throughout the season and small fruit doesn’t sell as well as larger, he said. “Quite a few packers in- cluding ourselves are not packing 11.5-row cherries and smaller. They go to the briner,” Riggan said. As of July 20, 18.5 million, 20-pound boxes of cherries had shipped from Northwest packers. Of that, 10.6 mil- lion boxes were shipped in July, according to B.J. Thurl- by, president of Northwest Cherry Growers in Yakima, Wash. Shipments averaged 536,392 per day for the first 20 days of July, a record for that period, Thurlby wrote in a July 21 industry memo. There’s a chance the sea- son will exceed 25 million boxes, he wrote. The record is 23.4 million in 2014. North- west cherries have been the No. 1 advertised item in pro- duce, slightly ahead of table grapes, he wrote. Harvest has also begun in Montana. Riggan said Northwest Cherry Growers, the industry promotional arm, promoted heavily in July. “They’ve done a good job communicating well with re- tailers to be very aggressive in July because there’s a lot of opportunity for increased sales,” Riggan said. Sales will be heaviest in July and may set a record in August and run into Septem- ber, he said. There are 6 million to 7 million boxes left to go and prices may increase at the end, he said. That likely will be too late for Orchard View, which will finish its season Aug. 5, Thomas said. Roger Pepperl, marketing director at Stemilt Growers LLC in Wenatchee, a large cherry shipper, said the com- pany has stayed caught up on shipments, which helps with returns. There have been chal- lenges and benefits with larger fruit getting good prices and smaller fruit selling for less, he said. “It was a good Rainier sea- son and we’re starting up the hill now (Stemilt Hill south of Wenatchee). We’re optimistic about the last five weeks,” he said. Higher elevation, later fruit usually sells for higher prices.
