Adversity to advantage: Pacific Coast producers uses USDA grant to develop single-serve fruit bowl market - Value-Added Corner

Rural Cooperatives, Sept-Oct, 2003 by Karen Spatz

These are not your mother's canned peaches anymore! A canned peach is not just a canned peach, it's a fun, tasty food that fits today's lifestyles, thanks to innovative processors such as the Pacific Coast Producers (PCP) cooperative in Lodi, Calif. One of the cooperative's newest products is a single-serve fruit bowl which has the potential to provide a significant boost to the long-stagnant processed fruit industry here.

How important is this new product? "It's the life saver for the industry," says PCP President Larry Clay. PCP sees the potential for 20 percent annual growth after its first year marketing the product. Clay credits the cooperative's receipt of a USDA Producer Value-Added Grant for helping PCP pursue this new market several years ahead of the timetable it could have achieved on its own.

Finding success as a private-label packer

PCP is a processing and marketing cooperative formed in 1971, when there were few processors and lots of fruit in the state looking for a home. This imbalance drove down fruit prices for California growers, who responded by forming PCP.

Justin Micheli, a first-generation co-op member, says the market situation in California today is similar to that of the 1970s. "We really had no other choices but to join a cooperative, as no independent canners would buy our peaches. It is the same today," he says. Justin says that "the most important reason farmers join a cooperative is to secure a home for their product. I would never plant a tree if I did not have a home for my product." The Micheli family farm in Yuba City is headed by John Micheli, Justin's son and vice chair of the PCP board of directors.

PCP's operations have always differed markedly from those of most other canning cooperatives in that rather than developing its own brand, the cooperative is focused on producing for the private-label market. It began as a co-packer for Stokely Foods after purchasing three canning plants in California.

Until 1984, the co-op packed exclusively for Stokely, but then began packing 50 percent for private labels and 50 percent as a co-packer. A decision was then made to move toward 100 percent private-label packing, meaning the cooperative puts its fruit in cans that bear the store brand of various retailers. Today, it still packs all its fruit for the private-label market. In the early 1980s, PCP expanded production of tomato products.

Today, PCP has 183 members who supply the cooperative with peaches, tomatoes, pears, grapes and apricots. The cooperative still operates three plants, the newest of which is a tomato-canning plant in Woodland. Plants in Oroville and Lodi process the co-op's fruit. PCP added plastic-packaging capacity in 1989.

USDA grant boosts fruit bowl plan

PCP was awarded a $450,000 Value-Added Market Development Grant in 2002 by the Rural Business-Cooperative Service of USDA Rural Development. Grant funds were used to pay for production and marketing of single-serve fruit bowls under the private labels of U.S. retailers.

The fruit bowls are 4 oz., single-serve plastic bowls manufactured by a patented machine. It forms the bowls, fills them with fruit and juice and then seals them. PCP's fruit bowl packing line uses member-grown peaches and pears, which are mixed with juice, syrup or gel products.

As a private-label food processor and marketer, PCP does not have its own brand. In most cases, PCP follows market trends, introducing new products to retailers after a branded company has made inroads with a new product line.

PCP initially produced single-serve fruit bowls for Dole Food Co. under the Dole brand. But Dole cancelled its contract with PCP and began purchasing fruit bowls from a foreign company.

Single-serve fruit bowls are fairly new in the canned fruit aisle. Store brands currently have at least an equal market share with "brand-name" products. So this is a major potential market for a private-label packer, such as PCP.

Turning adversity into advantage

Finding opportunity in adversity, PCP saw this lost contract as an opportunity to capture the emerging market in private-label fruit bowls. It completed a comprehensive marketing and feasibility study, which showed that there was an opportunity for the co-op in this sector. A business plan was developed which defined how PCP could successfully compete against low-cost foreign producers.

The PCP retail sales team made presentations to 51 retail store chains, retail wholesalers and food service wholesalers. It originally offered customers a line of six fruit bowl products, which has now been expanded to 14 products.

Among the customers PCP is packing fruit bowls for are: Albertson's, Aldi, Unified Western Grocers, Fleming, Stop & Shop, Tops, Bilo, Giant, Brunos, Shaw's, Hannaford Brothers, Stater Bros., Western Family, Kroger, Fred Meyer, Ralph's, QFC, Food 4 Less and Smith's. Also: Fry's, King Soopers, Schnucks, K-VAT, Meijer, Shurefine International, White Rose, Nash Finch, Spartan Stores, The Suter Co., Roundy's, HEB Grocery Co., Publix, Fareway Foods and Amway. The co-op's customer list also includes: Winn Dixie, Food Lion, Piggly Wiggly, Roche Brothers, Wegman's, Great A&P, Weis Markets, Goya Foods, Nugget Distributing and Midland Foods.