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.