U.S. Apples Gain Toehold In Japan American Producers Off To Fast Start But Long-Term Potential Still Unsure

The international attention on Washington apples’ arrival in Japan stopped almost before it started.

A killer earthquake hit central Japan last month while a group from the Washington Apple Commission was still in the country promoting U.S. apples.

The earthquake prematurely ended the Japanese media’s focus on American apples, but in many other respects Washington apples are entering Japan at the right time.

In the midst of a three-year-long economic slump, Japanese consumers are turning to discount products as never before. And U.S. apple growers are marketing their fruit as a bargain alternative to Japanese grown Fuji apples, which sell for as much as $4.50 each.

Two primary questions loom as the apple commission tries to expand the Japanese market:

Will Japanese consumers change their eating habits and embrace U.S. apples as a snack item?

And, given the high production and shipping costs, can the Japanese market become lucrative enough to entice more than the handful of Washington growers who currently export apples there?

The answers to those questions will determine whether Japan is merely a symbolic breakthrough for U.S. apple growers or a financial foundation for the future.

Early results suggest that Japan is a promising market, as U.S. growers had hoped. But a minor controversy erupted last week over a trace amount of fungicide found on a random sampling of American apples in Tokyo, illustrating the close scrutiny that U.S. apples must withstand to gain long-term acceptance.

A total of 398,000 boxes of Washington apples have been shipped to Japan so far, said Jim Thomas, a spokesman for the apple commission. That’s well over half the 700,000 boxes expected to be shipped there this year.

Washington-grown red and golden Delicious apples hit Japan’s store shelves for the first time on Jan. 10.

“Consumer acceptance has been rather good,” Thomas said. “We’re seeing repeat business.”

Apple growers have been waiting 24 years for a crack in the door to Japan.

But only a fraction of Washington apple growers were certified to export to Japan.

“A lot of them have been investing and qualifying (to sell to Japan) for years only to be rejected,” Thomas said. “It’s going to take a while to recoup their investment.”

While apple industry officials are excited about their breakthrough in Japan, they temper their expectations with reality.

Fruit consumption has increased in recent years, but apples are far from a staple food item in Japan. Now that U.S. farmers have access to the market, they must find a way to expand it.

“It’s still too early to tell where the long-range level of demand will be in Japan for Washington apples,” said Doug Pauly, plant manager at Northern Fruit in Wenatchee. “We’re very hopeful that it will be one of the largest markets.”

Although Japan had technically opened the market to apple imports in 1971, the government kept stalling, claiming it needed more information on various diseases before the ban could be lifted. The apples must meet stringent pest control requirements.

For this year, growers of about 2,000 acres originally registered to qualify to ship to Japan. Only 1,211 acres were approved.

Future bilateral trade talks could lead to easing of restrictions, allowing more than just red and golden Delicious. Washington growers hope to export Granny Smith, Gala and Japan’s own Fuji varieties.

But ultimately, whether growers want to export to Japan comes down to the bottom line, Thomas said.

“Is the price per box worth not only covering extra costs, but is it going to be worth going through all that if he can make a profit?”

That remains to be seen. Growers can make good profits on boxes sold to Japan, Thomas said, but the time and effort it takes to meet rigid standards are also high.

“The goal is to impress the Japanese consumer and use that steppingstone to bigger and better sales,” he said.

But Washington growers still have a few hurdles to overcome before their apples are widely accepted.

Trace amounts of a fungicide were found on two golden Delicious apples from Washington earlier this month.

Several Tokyo stores reportedly recalled apples although health officials said the amount of the fungicide was not harmful.

And during the first week of the apples’ debut in Tokyo, a Japanese apple farmer discovered a U.S. red Delicious with a rotten center.

“Why is it like this?” he asked. He showed the apple to growers Doug Pauly and Mike Scott, the apple commission’s chairman, who were touring the Ohta wholesale market.

Scott explained that it was a very rare case in which the apple blossom closed with a bit of dirt inside that made the fruit moldy.

Scott later said he wasn’t worried that the image of a rotten American apple would spoil their chances.

“It’s bound to happen when you’re dealing with nature,” Scott said.

“It would be real unfortunate to characterize all our apples by one rotten one.”

Still, with the initial publicity fading, the apple commission must develop an effective marketing program for selling apples in Japan.

Thomas said that the commission will thoroughly evaluate Japanese consumers’ habits and reaction to Washington apples. The group hopes to find answers to key questions such as:

Will Japanese consumers peel and/ or slice U.S. apples before eating them?

Will they eat apples as snacks and pack them into lunch boxes?

If the answers to these questions are `yes,’ that will mean the commission has been successful in establishing a bargain image for the U.S. fruit.

“The key to continuing success is maintaining a good price differential,” Thomas said.

That’s because more Japanese consumers are beginning to consider value, not just top quality, an important factor in purchasing decisions.

“There’s a lot going on that makes the timing of going into Japan very good,” said Brent Evans, Asia marketing director for the apple commission.

“Japan enjoyed a tremendous boom in the ‘80s,” he said.

Japanese consumers used to buy top name brands, Evans said, such as the best European suits.

But for the past three or four years, he said, the country has been on the downside of its economy.

“One of the manifestations of that has been - from a Western standpoint - a more rational interest in value.”

Now, Evans said, “Store-brand suits are outselling others 5 to 1.”

And Washington apples, which sell for about 20 to 30 percent less than the cheapest Japanese apples, are the fruit equivalent of a store brand.

Evans, who has spent several years living and working in Japan, said traditionally fruit has been a highclass, name-brand market in Japan.

“Production costs are very high. As a result, growers have focused on growing the biggest, value-added product.”

“Almost all fruit is eaten in the evening,” he said, “like a confectionery.”

“It’s seen as a luxury and competes with cakes and candies,” Evans said. “Our apples are none of those things.”

To demonstrate that to consumers, the apple commission has used Japanese-style promotions, with the help of a major Japanese public relations firm.

A Washington Apple Center set up in Tokyo has published a brochure touting the health benefits of apples: high fiber, no cholesterol, low sodium and 81 calories.

The pamphlet answers questions about the safety of the natural wax used to coat apples, post-harvest chemicals and eating unpeeled apples.

Even if these promotions are successful, Japan probably won’t become the apple industry’s biggest customer.

Eight million boxes are expected to be shipped to Mexico this year, and Thomas estimates Japan’s potential at about 3 million boxes. That’s not enough to even dent the trade gap between the two countries.

Still, the opening of the Japanese market was critical, Thomas said.

“There are not a lot of markets like Japan in the world,” he noted.

One Graphics: Trade with Japan

MEMO: Editor’s note: Emi Endo covered the introduction of U.S. apples in Japan as part of a press tour arranged by the Washington Apple Commission. Air fare was provided by American Airlines.