Cut to the Core

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Cut to the Core - at the Yakima Herald-Republic

November 3, 2003
1,233 words
Yakima Herald-Republic
Page 1A

Cut to the Core — Stemilt Makes Its Own Way

By DORI HARRELL
YAKIMA HERALD-REPUBLIC

WENATCHEE — Stemilt Growers markets more than 10 million boxes of apples annually — more than the entire state of New York. The company has become a marketing powerhouse by blazing its own trails, from the orchard all the way to the produce sections of the largest supermarket giants.

And it has done so by shunning some industry conventions, such as the generic Washington Apple Commission logo, and breaking free of others.

Years ago, for example, Stemilt shocked the industry by deciding it would no longer use middlemen fruit brokers; the company wanted to deal directly with its own customers. It went on to become "1999 supplier of the year" to one of the most important customers there is: Wal-Mart.

Innovative and competitive, Stemilt has positioned itself to be nothing less than the market leader in the post-Apple Commission era.

While the company played no official role in the demise of the Apple Commission's advertising program, it is now free to aggressively pursue its own marketing strategy.

"We don't want to diminish the whole commission issue," said marketing director Roger Pepperl. "They worked hard. But generic advertising had a bigger place in the industry when there were a bunch of small players."

And in a consolidating industry, size counts.

Stemilt operates more than 5,000 acres of orchards, packs millions of boxes of fruit annually for some 350 growers, and generates $75 million in annual revenues.

This past year, Stemilt teamed with other companies to market even more apples and other fruits. It has spent $1.8 million to renovate a recently purchased Chelan plant to pack only organic products. It also hired several marketing specialists formerly with the Washington Apple Commission.

It owns six facilities in Washington and California, which employ 1,000 people full time and a work force of 2,000 during the peak season.

Stemilt bills itself as the largest apple and cherry shipper in the United States.

"I don't think anyone's bigger than us," Pepperl said.

Thomas Mathison founded the company in 1962; he now serves as president.

While other shippers hardly admit to importing foreign fruit, Stemilt proudly announces it.

In order to keep a seamless supply of varieties for retailers, the company for three years has been importing from Southern Hemisphere countries such as Chile.

"A retailer wants to buy all apples from one supplier," Pepperl said.

And retailers buying from Stemilt, which include giants Wal-Mart and Albertsons, purchase directly from the shipper and not through a broker.

In a controversial move, the company split from brokers nearly a decade ago to handle marketing itself.

Tom Hale, the Washington Apple Commission president from 1984 to 1994, called Stemilt's broker divorce "gutsy" because most in the industry used middlemen.

"They saw the need to deal directly with the retailer," said Hale, now with Financial Management in Yakima.

Grocery chains responded positively to Stemilt's in-house marketing, Pepperl said.

"Retailers want to talk to people growing their crop," he said. "We can link promoting the crop to what we're growing in our orchards."

At that time, the company also sought to distinguish itself. It dropped the generic Washington apple logo and placed its own label on apples, a lady bug sticker to represent what it calls its Responsible Choice program. The company formed Responsible Choice in the late 1980s after the Alar crisis, in which studies showed the chemical might cause cancer. Alar was a growth regulator that kept apples from falling off trees prematurely.

As an example of the program, Pepperl said if a pest attacks a particular orchard block, pesticide would be applied only to the affected acres rather than the entire orchard.

In addition, the company also experimented with organic systems, and now incorporates traditional and organic methods throughout much of its orchards.

"After the Alar scare," he said, "Tom (Mathison) realized we should take a stab at organic methods, to know there's alternative production so if something happened again, we wouldn't be standing alone with no choice."

Now, 10 percent of the company's fruit is marketed as organic, he said.

Most shippers statewide still stick the distinctive Washington Apple Commission logo on their apples, a familiar label to both stores and consumers. Stemilt will only paste on the generic sticker when requested by a retailer.

Pepperl points out that the lady bug isn't directed at the consumer as much as the retailer, which he calls "trade" branding.

"Generic advertising is horrible," Pepperl said. "Our industry is bizarre. Where else do you see all the products advertised under one label?"

Vegetable companies, he said, market under their own names.

"If you put more money and technology into a product, you better advertise who you are," he said.

Another way to do that is to help grocery chains plan and organize promotions and analyze sales, functions carried out for many shippers by the Washington Apple Commission.

But a federal judge ruled in March that collecting mandatory fees for the commission's far-flung promotions was unconstitutional.

The commission immediately halted marketing efforts.

Stemilt promptly hired former Apple Commission marketing analyst Amy Smith to dissect retailers' fruit sales in relation to other products.

For example, Smith will examine a grocery chain's sales from September through December, using cash register data. She will compare how many pounds of apples it sold in those months compared to other retailers in a county or region, and which varieties were strong or weak in sales.

She will also compare how the company fared in apple sales compared to the same months the previous year.

For some chains, it means they need to push more local apples during those months. For others, they need to buy more Galas, or Fujis, in certain markets.

And yes, sometimes it requires telling Stemilt customers they need to buy more oranges than apples.

"It shows where they excel and where they're missing the boat," Pepperl said. "And if you don't show them the whole picture, you lose their faith."

Now, the company performs the service for about a dozen retailers, which Pepperl declined to name, for Stemilt's sole benefit.

In addition, Stemilt automatically refills orders. It'll help decide when to run ads and how to package products. The company will even help design signs.

Agricultural economist Desmond O'Rourke says it's vital for apple shippers to increase marketing strength in order to survive.

"One thing Stemilt has always done is introduce new services or features," he said. "They're willing to show they'll go the extra mile for their customers."

But many are competing for Stemilt's business, and they're willing to go to the same lengths, said O'Rourke, who owns Pullman-based Belrose, a company that tracks the apple market worldwide.

"It's a tightrope," he said. "Market share is only on loan. You never own a market."

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