/izb.wisi UNITED STATIC DEPARTMENT OF AGRICULTURE Bureau of Agricultural Economics Washington Report F.S. 52 Ser> temper 1930 KETING AMERICAN DRIED FRUIT IN EUROFE Ey Milton J. Newhouse Specialist in Dried Fruit Marketing CONTENTS Page Introduction and suur.iary 1 Importance of Europe in American dried fruit trade.. I Factors affecting demand for American dried fruit... 5 Sales practices and marketing developments 18 Prune packing industry in Europe 31 Washington, D.C. M^mNCr -<-3^ic:j-t beied fe uit in ete:o?e By Milton J. Nowhouso Specialist in Dried Fruit Marketing 1/ Introduction and Summary European markets on the average are now taking over three-fourths of our annual exports of dried fruits. Prunes and raisins constitute the bulk of such exports and shipments in recent years have been far above the pre-war average. The most important European dried fruit con- suming areas arc Greet Britain , Germany, France, the Netherlands, Belgium, and the Scandinavian countries, practically all of which are highly in- dustrialized and depend to a large extent upon imports for their food re- quirements. All of these countries arc deficit producing areas as far as fruit is concerned and as a result imported dried fruit has become popular in the diet of the people. There are indications of increasing consumption of dried fruit in Europe but, at the same time, competition is becoming keener. The main competitors of the United States for the European dried fruit market are Yugoslavia, Spain, Greece, Smyrna, Australia and South Africa. Of these only Yugoslavia has shown a downward tendency in production in recent years. In most countries the production trend is upward. The relatively low price and excellent quality of American dried fruits in recent years have been important factors in the increasing demand for American dried fruits in Europe. Another factor of importance in the expanding European market for these products since the war has been the wider appreciation of relative food values in dried fruits. Mhny of the European buyers of Jimerican dried fruit purchase the bulk of their requirements in June, July and August for delivery during October, November cziC, December. As prices early in the season arc frequently out of line with the actual supply and demand situation, it frequently happens that those who have made carl;/ purchases at high prices for the Christmas trade are confronted with a sudden decline in values as soon as the transac- tions have been completed. Steps should be taken to bring prices into line with supply and demand, conditions. Direct buying by cooperative socictijs and by chain store organizations are tending to absorb the functions of the long established agent-broker and distributor-wholesaler, and developments along these lines must be carefully watched by the American trade. 1/ Eesed en investigations in Europe by Mr. Nowhouso during 1928-29 while attached to the Division of Cooperative Marketing, which has since been transferred to the Federal Farm Board; supplemented by information supplied by the Foreign Agricultural Service of the Bureau of Agricultural Economics. Tho practice of buying unprocessed prunes for repacking in certain European centers has made. rapiks maintain that mixtures cannot be made up into satisfactory dishes, since each fruit requires special treatment. Mixed dried fruits on the other hani are very popular in Germany, and retailers there report greater sales of prunes in this. form than separately. Prunes used in such mixtures in Germany are usually of the small sizes, and the prices of the mixtures as a rule increase as the prune percentage declines, - 16 - Mixed dried fruits- are also quite popular in Denmark. These are brought in direct from California ,. n • mixing "being, done in Denmark. The demand for dried fruit mixtures in K-»raay is increasing steadily. The Norwegians, are ' especially fond, .of apricots and they have found that this fruit can be obtained at lower prices in mixtures than when sold separately. Mixtures for eastern Norway should not contain prunes but for western Norway prunes should oe included without fail. The 50/60 size is generally preferred for this purpose. Mixed dried fruit are very popular in Sweden, particularly in the lumber camps of North Sweden. Such mixtures are im- ported into Sweden direct, from California, but it is believed that increased mixing may be djne locally in the future, because of the fact that prunes can be imported free or duty, while the other dried fruits are dutiable. Approximately 50 per cent of. the prunes, in/ported int j Finland are- sold to consumers in the form of mixtures with other- 'dried fruit. These mix- tures consist mostly of prunes, raisins and apples with smaller quantities of apricots and pears. Peaches may occasionally replace pears if prices are low. Owing to a lower duty on prunes, the mixing of dried fruits for the Finland trade is dyne mainly by local importers. Unprocessed bag prunes from California are used for this purpose; but if prices are high the smaller sizes from the Pacific Northwest are used. Fruit Advertising in Europe. Consumers in all parts of Europe buy mainly on the strength of indivi- dual judgment as to the quality of the fruit. In other words-, the actual sight of the goods is the strongest sales factor rather than any printed statement as t o its excellence. Under the prevailing characteristics of consumer buying in Evir ope, it is evident that dried fruits must be prominently displayed. In the better and medium class stores these displays are often very effective. The newer department stores in the larger cities, with their separate department devoted to dried fruit, usually present an appetiz- ing display of these products. The fruit is du_jed out .on counters in neatly arranged piles and always. with prominently displayed price tags. This in itself is effective advertising. : Continual national advertising, however would undoubtedly have favorable results in stimulating the demand for dried fruits in cartons. A great deal of publicity in behalf .of .fresh fruits is being carried on in European markets. Europe has been extremely health-minded since the war and propaganda. for increasing the consumption of fresh fruit has had an important part in this movement. In Germany six distinct fresh fruit advertising campaigns have been under way in recent years. This work is being sponsored by such private concerns as the banana interests, by com- bined efforts of auction houses or trade factors, or through more or less direct Government aid and direction. The German trade is -unanimous in the opinion that publicity and education have greatly stimulated interest in fresh. fruits. Similar campaigns have been inaugurated in the Scandinavian countries. ■• ..•■..,. - 17 - The British "Fat More Fruit" campaign is said by authorities to have increased fresh fruit demand in that country oy 25 per cent during the past three years, This campaign is supported jointly 'by shippers and brokers who in turn have won the support of thousands of retailers. Empire dried fruits are being extensively advertised in jreat Britain through the Empire Marketing Board not only to increase cjnsumption but to create a preference for Empire products. The Greek Currant Syndicate, a semi- Government and semi- industry organization, is doing effective publicity work in behalf of Greek currants. Trade circles in Europe generally favor similar advertising campaigns on dried fruits. Such efforts must oe educational in character, with parti- cular* emphasis on the health. and relative food value features. One large Pacific Coast cooperative has done very effective trade promotion work in raisins in several of the European markets particularly England and the Scandinavian countries. While this. was branc advertising, the results have been most gratifying and are conclusive evidence of the possibilities in expanding the demand for American dried fruits. The trade in general is of -the opinion that any dried fruit advertising campaign ' should be an industry rather than a "brand" affair and in order to be successful it must command the united action- on the part of the industry on the Pacific Coast. Small independent factors would make little progress in the face of the united action on the part of our competitors. Sales Practices and Marketing Developments Fixing Opening Price s American quotations on dried fruits in recent years have shown a tenden- cy to decline seriously as soon as European buyers have made' their early purchases. This practice has caused material losses to those who pur- chased early. Many dealers in the European market are positive that our early price quotations are often made without regard to the world factors that bear upon a proper price' level. Pronounced objection is made to the practice of naming opening prices on dried fruits so high as to be completely out of line with later developments. Individual losses subsequently in- curred antagonize the trade and discourage volume buying. This practice is especially reprehensible in years of heavy dried fruit crops when the cooperation of every factor in the trade is necessary to move large tonnages into consumotion. Specifically, the European trade charges that the Pacific Coast operators either have little knowledge of world factors which detemine a proper price level, or that facts as to production and carry- overs are deliberately mis-stated. Unfortunately the latter belief is very pronounced and is responsible for much of the present irritation towards the Pacific Coast uniform dried fruit contract. While there is wide, objection in the European dried fruit trade to price cutting the trade, does not favor a "strictly uniform price policy". It is felt that such a policy would deaden individual initiative and pur- chasing aoility and would probably eliminate allanterest on the. part of the trade. For that reason the trade favors price variations - within -.18 - reasonable limits. It is the general opinion that opening prices should always be such as to allow for gradual advances as the season progresses. European buyers realize that the factors affecting price range on fruits change quickly but they insist that under ordinary conditions American shiopers could quote opening prices that are n^t materially out of line with the world sup :ly and demand situation. This may necessitate the naming of prices s £& ewhat later in the season when .world conditions bear- ing ^n prices are better known. Opening prices that allow of some prfifit on 'early purchases lead to volume buying and present an opportunity for the speedy clearance of the season's supplies. Heavy losses or. early purchases on the other hand lead to indifference which is highly detrimental to volume buying. To the American industry this means price cutting in order to renew lost interest. Such sharply declining markets however, retard the movement of supplies into consumption and result in vexing carryovers which adversely affect prices on future props, European dealers feel that there is a proper price range f jv every year's crop and that the best results generally would be secured if opening prices were in line or slightly 'below that level so that impetus in buying, fostered by reasonable profits would enable the entire crop to oe consumed and the market a.> close at well above the open- ing level. While such an opening price level might or might not be profitable in the last analysis it would be justified by world conditions. It is possible, of course, to name prices -unjustifiably low as was the case in 1928. While California that year was faced with a large crop of both fresh and dried fruits when early prices were named, no consider- ation was given t > the prune crop situation in Oregon, nor to the results of insect ravages in the Yugoslav orchards, which reduced that country's crop oy fully fifty per cent, The European packing centers were the first to realize the full significance of prospects for a very light crop of local fruits in Europe that year. The cr jp year 1926 again illustrates a situation- when our opening prices were far out of line with actual condi- tions. All fruit production that year was at a maximum, and the enormous aggregate total coull not oe consumed except at relatively low prices. The dried fruit industry that year received a severe blow and large quanti- ties were carried o er into 1927. More reliable and comprehensive crop and market information is urgently needed in order to give growers and shippers a reasonably accurate basis for determining opening prices. Such information must be available to American Shippers throughout the entire season in order that prices can be maintained at levels consistent with the world supply ani demand situation. Export Procedure in Handling Dried Fruits Sales of dried fruits from the Pacific Coast are controlled by voluntary action of the California anl Pacific Northwest Dried Fruit Associations. These trade associations are made up of actual packers in the industry. A comparatively recent development is the organization of the California and Pacific Northwest Dried Fruit Export Associations which admit to mem- bership the dried fruit exporter as well as the packer. Organized under - 19 - the Webb Act, which -exempts ex„ort operation froLi the restrictions of the Sherman Anti-Trust law, these organizations have the powex' to combine in- terests for various purposes including export price stabilization. So far, their efforts have been confined mainly to the adoption of more uniform contract regulations' and placing a' definite check on consignments. The primary object and;- function of these trade associations is to establish a uniform trading oasis as it affects contractual relationship between buyer and seller; to impose rules and regulation appertaining to standards and quality, and to maintain an- inspection service for the enactment of such standards as have been established. Practices of competing areas The. Balkan countries sell their prunes on the oasis of payment on presentation of documents but inspection and arbitration, if any, are at points of destination. The Australian Dried Fruit Control Board has an agency in London that regulates the marketing of Australian dried fruits in the British market. Dried fruits from several of the Mediterranean countries are consigned to a selected and restricted group of importers located in the principal ports. Sales of currants from Greece are directed by the Greek Currant Office, a semi-Government, aemi- industry organization with the main office in Athens and a branch off ice in London. In some countries on the Continent, Smyrna raisins are sold on sample. Russia sells her fruit s ..through resident representatives of the Soviet Government, who in turn often employ a selected group of agents. The prune packing centers in Europe are not restricted by quality or selling regulations and may offer credit terms far out of the ordinary. ■ • American driei fruit associations develop uniform sales contract Uniform extracts covering the sale of American dried fruifcsfor export have been developed by the American dried fruit associations in cooperation with the organized dried fruit trade located in the principal importing countries. While these contracts differ in detail for the various types of dried fruit, the important features are uniform. Under its terms, the matter of inspection of. the fruit before shipment is of great importance as the certificate issued covering soundness general quality and count, as in the. case of prunes is final and is accepted oy the buyer as such. Under the American contract arbitration is in the country of origin. The seller is thus protected- should unavoidable conditions seriously interfere with the exoected tonnage or quality. of tne .shipments. It is in these particulars mainly that the the Pacific Coast contract differs from that used by competing countries. American payment terms are usually three days' sight upon arrival of documents. These documents include Ocean Bill of Lading, '"eight, Insurance and Quality certificate Draft Invoices and Consular certificates if required. Where payments are in dollars, as on the Continent, no discounts are allowed. In the case of England, where payments are in English money, the discount is one per cent. Dried fruit operators on the Pacific Coast are cautioned not to sup- plement the present ontract with special terms and conditions. In case of - 20 - dispute the "buyer will ign-ore the terms of ■ the contract and rely for protection upon the special tenr.s imposed. Any demand for special terns may be an indication of the undesirability of the buyer or agent in the first place. ' This tendency is most pronounced in countries which have only recently been developed as itried fruit outlets. Dried fruit inspection service a/ Practically all of the California dried fruits entering into the ex- port trade are sold on contracts providing that the inspection certificate of the Dried Fruit Association of California ahall be final and conclusive as to the quality, jra.de, and condition of the fruits sold. A similar inspection service is operated by the Northwest Dried Fruit Association, with offices in Portland, Oregon, which serves the producers and shippers of dried fruits in the States of Oregon and Washington. In the whole field of commerce there is no better example of the value of a ri-^id and impartial commodity inspection. Practically the entire American export commerce in dried fruit passes through this inspection and tens of millions of dollars of fruits are certified annually. 'This inspection service is operated under the jurisdiction of the Dried Fruit Associations mentioned. These Associa- tions are n^n-profit associations, having in their membership all packers whether they be private commercial enterprises, or grower-owned cooperatives. The American dried fruit inspection service has been built upon the philosophy that it represents a protection to the buyer and that the buyers' interests are the main responsibility of the service. The syetem is carried out by means of crews with a thoroughly qualified inspector heading each crew. The crews consist of specialized laborers who open, recoop, and re- strap all inspected parcels. Goods are not inspected until thay have passed from the packer or seller into the hands of the transportation companies and are, therefore on neutral ground. No effort is spared to preserve the impartiality and efficiency of the inspection. The personnel of the inspec- tion force is very carefully chosen and trained so that only individuals of demonstrated competence and integrity are permitted to serve on the staff. A rigid system of discipline is employed to prevent error. . These inspec- tion services have operated for many years and there is probably no other single factor, aside from the excellent quality of the product, that has done more to stabilize and develop the present large export trade in American dried fruits. Attitude of European trade toward uniform dried fruit contract There has been and still is some feeling in Europe that our uniform dried fruit contract is too severe and that it has been a deterring factor in demand. It is pointed out that documents arrive fr.ojrAhree to four weeks in advance of goods and that the buyer must pay interest oharges from the time the documents are received until goods arrive. It is contended that a/ Based on a statement supplied by Mr. Dwight K. Grady, Secretary of the California Dried Fruit Association. - 21 - with inspection at source held as final, there is no' protection in case dete- rioration takes place during transit, - 'Many of the European "buyers suggest that either the inspection certificate should not be final as to quality, or that arbitration be held in the country of destination. Occasionally the idea is advanced that the use of the sixty day letter of credit should be more universally adopted. It is claimed that such action would not increase credit charges to shippers and that it would lead to larger sales, particu- larly if the additional safety on large purchases would justify a slight reduction in price. While objections to our uniform contract 'are heard quite generally, it is doubtful if the contract as at present applied is a deterrent to sales. On the contrary there are good grounds for believing that it has been one of the greatest of the factors in building up confidence and a consequent de- sire to purchase our fruits. One reason for this is that the contract has replaced haphazard methods of buying by something which is uniform, businesslike and reliable. The contract in practice has justified itself because of the uniformly good quality of the fruit shipped under it. With- out exception, the quality of our prunes is considered excellent through- out Europe. A majority of the more responsible buyers in Europe believe that this contract in itself is their greatest safeguard as it places the full responsibility upon the Pacific Coast. They realize that such a con- tract could not be maintained except as it justified itself in results. The Pacific Coast dried fruit industry from grower to packer and the inspection service must cooperate in maintaining our^present high standards of quality. All matters pertaining to shipping and storage must be given con- sideration, particularly in shipments to the Mediterranean areas and in shipments going forward during the warmer season. Educational efforts to acquaint the trade in Europe with American methods and thoroughness of inspection would have good results. Much cjnfusi-n now arises due to the fact that the crops are not 'of uniform quality from year to year while our contract definitely states that the quality shall be "better than ar average for the season". If leading buyers or their representatives could personally visit inspection points, much of this confusion and consequent objection to. our uniform contract would disappear. When we consider that practically every competing nation is trying to arrive at uniform quality and uniform sales practices and not always with complete success, even with Government aid, it is to the great credit of the Pacific Coast dried fruit industry that through voluntary, self-imposed action, both quality and practices have been brought to such a high standard. Cooperation between leading steamship companies and trade associations has reduced the stowage and ventilation of dried fruits to a fine art, so that they can now be delivered throughout the year in generally good condition in .spite of the extremes of. temperature encountered. - 22 - American methods of calculating c.i.f. quotations a/ Contrary to a general impression, the procedure in selling dried fruit for export is not particularly complicated. The sales are generally handled by cable in well recognized trade .codes. Some agents have developed private cedes in order to reduce costs' to a minimum. In general the trade practicas are . of long standing and the contracts are definite and uniform. Continental European countries pay in dollars and use the metric system of weight, the unit of sale being 50 kilos or 110 pounds. Sales to the British market are made on the basis of. the hundred weight of 112 pounds and in shillings and pence. It is necessary, therefore, in making quotations on dried fruits to convert the American' terms of weight to the terms used in foreign countries. Dried fruits' are generally sold c.i.f. , which means that all costs up to the time the fruit is delivered in the European base ports are included in the price quoted to' that port. For the ports of continental Europe The handling costs on prunes from the packing plants the Willamette Valley Oregon, to European base ports amount to $1.03 per 100 pounds gross weight. In making c.i.f. quotations on dried fruit to continental European base ports, these costs are merely converted to their gross weight " equivalent in kilos. The result is then added t :> the original price f . o.b, packing plant. For example, on two bundles of prunes weighing 124 pounds gross (i.e. four bjxes strapped two boxes to a bundle with each box contain- ing 12^ kilos or 27,5 pounds net) the handling charges would amount to $1.28, With prunes valued at 6 cents per pound f . j.b. packing plant the c.i.f. quotation w^uld amount/to $6.60 plus the "sales differential" of $1.28, making a total of $7.88. The steps in figuring the above c.i.f. quotations on various packs of American prunes are given in the following tabulations. While the price listed for the fruit is ah arbitrary one and the charges given apply only to shipments from Portland . Oregon, the dataAill serve to illustrate and explain the procedure followed. a/ 3ased on information supplied by Mr. C. A. C. Hansen, Traffic Manager for the North Pacific Cooperative Prone Exchange, Portland, Oregon. - 23 - PRUNES: Handling costs from packing plants located in the Willamette Valley Oregon, to European base port. Expense item's Charges per 100 pounds g ross weight :?runes in Boxes Prunes in Ba^s Inland freight (from plant to dock in Portland, Oregon). Dock charge (wharfage arid unloading)., Ocean freight (common stowage) Strapping (3 cents per bundle) Marine insurance' (average)' Inspection at dock Miscellaneous expense's .'.,', Total... , Dollars 0.125 0.035 0.750 &.050 0.045 0.020 0.005 1.030 Dollars 0.125 0.035 0.750 0.045 0.022 0.008 0.985 PRIMES: Net and- gross weight equivalents of various packs and handling charges. Description of Pack Net Weight Per box Bundle Gross Weight Per box Bundle Handling char- ges at $1.03 per 100 lbs. gross for boxed and $0,985 per 100 lbs. gross for bag orunes BOXED PRUNE S When packei 12^ kilos (27.5 lbs) net to the box (four boxes strapped two boxes to a bundle) When packed 25 kilos (55 lbs.) net to the box (two boxes single strapped with two wires) Pounds Pounds Pounds Pounds 27.5 55.0 110 110 31 61 124 122 BAG PRUNES Bags containing 50 kilos (110 lbs.) gross 110 pounds gross for net Dollars 1.2772 1.2566 1.0835 - 24 - PRUNES: Examples of quotation- from points in the Willamette Galley Oregon, c.i.f. Europe base ports. . . Price f.o.b, plant in Portland plus "handling charges. t j Euro-Tseaa-u-or-t Quo tat i m c. i.f . European base port In boxe_s con tain in": 12jr kilos (27,,5„, .lbs. ), net: Price of 4 boxes (110 lbs. net) f. o,D, packing plant at 5 cents per pound ...... .-.. Plus c.i.f. differential , (at ,$.1..Q 3 per .100 lbs. .gross) on 124 lbs. -=rross : In bo^es containing 25 kilos (55 lbs...) net;. , : Price of 2 boxes (110 lbs, net.), f ,.-..b.. pa.cki.ng plant : at 5 cents per pounds... .............................. .: Plus' c.i.f. differential (at $1.03 per 100 lbs. gross) on 122 lb s . gr o s s : Total c.i.f. European port per 122 pounds. -gross:. . J.'.' In ba-zs containing 50 kilos .(1.10. .lbs.) gross f >r y.et'. u l Price in export bags '110 lbs. gross for net) at : £0.0575 per pound. .... .... .... .j... . . . .„ ...... . . : Plus c.i.f'. differential (at $0,985 per 100 lbs. gross) on 110 lbs. gross : Total c.i.f. European port per 110.23 pounds gross: Dollars 6.60 1.23 7.88 6.60 1J36 7.86 6.32 1.08 7.40 For the ports of the Unite! Kingdom Quotations to 3ritish ports are figured on the basis of the English hundredweight of i.12 pounds instead of on the metric weight unit. The handling costs from the packing plant to British ports amounts to $1.03 per 100 pounds gross weight. Thus in the case of prunes packed, in boxes con- taining 112 pounds net but weighing 125.44 pounds gross the c^st f.o.b. plant at 5 cents per pound would be $6.72, which. --plus the handling charges, at the rate of $1.03 per 100 pounds gross would brin? the c.i.f, quotation up to $3.01 for a pack of 125.44 pounds gross or 112 pounds net. This is equivalent to 33/0 per 112 pounds net, c.i.f. United Kingdom base ports with Sterling at $4.66. ' - 25 - PRUNES: Handling .costs from packing plants in the Willamette Valley, Oregon, to British ports Expense items : Charges per 100 :pounds gross weight : Dollars. Inland freight (from plant to dock in Portland, Oregon).: 0.125 Dock charges (unloading and wharfage).. ; : .035 Ocean freight (common stowage) : .750 Strapping (3 cents per bundle).,.. : .055 Marine insurance (average) , : .038 Inspection at dock : .020 Miscellaneous expenses : .007 Total : 1.030 PRUNES: Example of quotation from points in the Willamette Valley, Oregon, c.i.f. British ports. Price f.o.b. Packing Plant plus handling charges to British ports. Dollars Cost f.o.b. Willamette Valley plant in 25 pound boxes (for 112 lbs.: net) at 6 cents per pound .: 6.72 Plus c.i.f. differential (at $1.03 per 100 lbs. gross) on 125.44 : pounds gross weight J 1.29 Total c.i.f. British ports per 125.44 pounds gross : 8.01 Other quotations The c.i.f. quotations for all other ports are figured along similar lines. When refrigerator space is used instead of common stowage the handling charges (c.i.f. differentials) are higher. Thus in the case of shipments to the United Kingdom under refrigeration the ocean freight rate is 95 cents per 100 pounds instead of 75 cents as in common stowage. This would make the c.i.f. differential $1.23 per 100 pounds gross instead of $1.03 and would raise the handling charges on shipments to British base ports from $1.29 to $1.54 on a shipment of 125.44 pounds gross weight. Among the c.i.f. charges listed above, the inland freight will vary greatly. Where plants are located on tidewater and growers deliver to such a plant this item would be small. The ocean freight of 75 cents per 100 pounds gross weight is for common stowage by Panama Canal to certain base ports in Europe. To points other than base ports certain additional costs are added. As already mentioned, twenty cents per 100 pounds are added where fruit goes under refrigeration. In case out-ports have no refrigerator - 25 - service, the regular charge is made to base-ports under refrigeration plus an additional charge for common stowage to the ultimate destination. In case of overland shipments fcr trans-shipment on the Atlantic Coast the freight charges will include rail -rate from coast to coast and ocean freight to destination, Strauoing and labeling Strapping is common for all shipments to Europe. Either two wires for a bundle of two 12^ kilos(27.5 lbs.) net boxes or one strap for one box is used, Europe rather favors the one strap box as the lighter weight causes less.dropoin : and breakage. The larger docks on the Pacific Coast are now supplied with electric strapping machines. Dried fruit destined fur I:i -land is packed in 25 pound boxes net, 2