PROBLEMS IN MARKETING PECANSPecan Research
JOE T. ORCHARD Texarkana, Texas You may have heard the definition of an expert as “any ordinary guy fifty miles from home." If you think of my home as being Texarkana, or rather New York, where I formerly was in the advertising business, you have 1800 miles worth of expert before you. I would prefer that you think of me as a marketing man who knows something about pecans, rather than a pecan man who knows something about marketing. Today we want to look at the marketing problem that the pecan industry faces and what can be done about it. From the marketing point of view, pecan growers are faced with two basic marketing problems. One is distribution, or the placing of our product before the buyer, and the other is the tremendous price fluctuation of pecans from year to year. These two are somewhat interrelated, but we will discuss them separately. Regarding distribution of the in-shell pecan, 12% of all pecans in the years 1950 through 1952 (three "average" years) were sold to the consumer in a straight pack in the shell, while in the same period, 42% of walnuts were sold in-shell. The reason so few of our pecans are sold in-shell is that we do not get good distribution through the major outlets of the North, where people are more numerous, and where they have more money. If we could get good pecans into all the grocery stores in the United States during the fall and pre-Christmas season, then we would have more buyers for our product. The more buyers, the larger the demand and the higher the price. To understand why we do not have this distribution, it is necessary to go back: During the past fifty years a vast change has come about in the marketing of American merchandise, mostly to do with the introduction of the brand name. Manufacturers of most goods now sell their products directly to the consumer through advertising, using the channels of trade, the retailer, the wholesaler, merely to warehouse and distribute goods, and to handle money and credit. Nowadays you seldom see cracker barrels and flour barrels; now the crackers are neatly boxed and labelled “Sunshine" and the flour is in a bag on the shelf labelled “Gold Medal" or "Pillsbury.” This technique of advertising to the consumer to sell merchandise has also been discovered by the agricultural processor. Del Monte of California, for example, puts their name on every can, invests tremendous amounts in advertising the Del Monte name to the public, and collects the dividends of multimillion dollar sales and profits. Another ingredient necessary in this combination of brand name sales and advertising is the need for adequate representation in the markets and areas where the advertising occurs, in order that the merchandise be distributed and on the shelves when the advertising starts. This is done through the retaining of food brokers, who work on a percentage commission of merchandise sold, and see that actual distribution occurs in their territories. After the national manufacturers and agricultural processors learned how to use brand name and national advertising, certain enterprising growers realized the futility of competing among themselves, organized, put a brand name on their product, and marketed it directly to the consumer in attractive packages, distributing through brokerage representation and advertising agencies to tell their story to the public. One of the most successful of these has been the Avocado industry. By setting up standards, uniting, advertising, the California avocado industry has greatly increased the price they were getting for their product. (At this point, we should make certain distinctions among agricultural products. Broadly speaking, there are two classes of agricultural crops---commodities and specialty crops. Among commodities, the co-operative efforts of growers have not improved their lot greatly. Growers cannot perform the marketing functions any more cheaply than can private industry. But among the specialty crops---small sized industries whose product reaches the consumer in greatly the same form in which it grows---the association and pooling of resources of growers has worked absolute wonders in increasing the grower returns. Some of the industries which have achieved this kind of cooperation are the California Walnut Growers, the California Almond Growers, and the raisin, sardine, and cranberry industries.) By establishing a brand name, by telling the public about their product, and by securing representation for distribution in all the large markets, these specialty crop industries were able to greatly increase returns to growers. To say just a word about advertising---you all know that advertising can make one brand sell better than another, but what makes advertising so significant for the agricultural specialty item is its ability to create markets, to change habits. The fact that most of the nation drinks orange juice for breakfast, or that bananas hang in every grocery in the country is not accidental. And neither is America's habit of brushing its teeth twice daily. It is advertising that is responsible for the fact that more liquid is sprayed on underarm hair than on pecan trees, and it was the creation of markets, the expansion of sales and distribution through advertising that has increased the money in the pockets of growers of avocados, of walnuts, of almonds. The only way, however, for these advertising campaigns to be paid for, for the merchandising methods to be developed and reliable sales representation for distribution in the large eastern markets provided, was through the pooled resources of hundreds of growers. Cash buyers in the local markets, unorganized brokers or commission houses in whole sale centers would not have been able to carry out any important form of demand-creation through advertising. It was only by banding together that growers were able to control, merchandise and advertise their crops effectively to gain top prices. But now let's look at the pecan industry. Compared with the walnut or avocado industries, or raisins or sardines, it is a model-T Ford at the '57 auto show. We all know that the price we get for our pecans is determined by the number of buyers to whom the product is avail- able as compared to the amount we have to sell. Back in 1925 growers got 50₵ to $1.00 for a pound of Stuarts. There were only a few pecans. But today there are a great many more pecans. There are also a great many more potential buyers. The main reason we don't get those prices any more is that we have not expanded distribution and promotion into the heavily populated richer markets of the North, where more buyers would drive our prices up. Let's stop for a moment to see how big those markets really are. The population in the seventeen Southern states is about 51 million. The ten largest Northern markets (cities and surrounding counties) are 45 million. In just ten northern cities we have almost as much population as the entire Southern part of the country. Further, it is well known that the consumption of semi-luxury items (in which class we may easily put the pecan) is directly related to the amount of income per family. The seventeen Southern states have a total income of 68 billion dollars, while the same ten Northern markets have a family income of 95 billion dollars. In other words, gentlemen, these ten northern markets are capable of consuming, based on family income, over one-quarter more pecans than all of the southern states combined. I know of no figures which would tell us what percentage of our in-shell pecans are consumed in the markets. But having lived in the north, I know that the pecan is little known and appreciated in that area. I have a mail order pecan business and can tell you of the complaints of those people---that they can't find good pecans up there. People coming down from up north often want to know what a pecan is! It should now be clear what we mean when we say we hold down our price by not making our product available to all the buyers. What happens in these northern markets during the heavy pre-Christmas season, when most nuts are moved? 1. In the first place the honest pecan distributor, trying to put up good pecans in a one-pound cellophane pack, meets strong buyer resistance from the large supermarket chains of the north. He says, “Why should I buy pecans from you that I will have to sell for 47 cents a pound, when the independent supermarket down the street will buy from a trucker and sell for 39 cents." (The trucker will have bought a load of blended pops on a back haul.)" But the quality . . .” the salesman will protest. “Quality, schmolity!" the buyer will say, and wave the salesman away. I had several truckers call on me last year to buy pecans for a back haul north, as I am on Highway 67 going north. My pecans were too good for them. One of them, a trucker from Joplin, Missouri, said to me, “I've made a lot more money out of bad pecans than I ever have out of good ones.” You gentlemen know better than I that the traditional dumping ground for bad pecans has been the north. Several big chains have given up handling pecans rather than handle good ones at a non-competitive price, or cheap poor ones that customers will complain about. How can they win? 2. Still talking about what happens in these northern markets many buyers do not buy from the legitimate brokers' salesman hoping a truck will come by. If the truck does not come, then he does not have pecans for his customers. 3. The way a product is displayed has a great influence on its sale. Pecans bought from truckers are not cellophane wrapped, and they are dumped into a bin next to the apples and oranges. But the walnuts (which are in every store) will occupy a huge end display, with appropriate signs. 4. When a store buys from a trucker, there is no way to replenish the supply when the pecans run out. More sales are left to the walnuts and almonds. The greatest battle, however, is being fought in the mind of the consumer. During this pre-Christmas season thousands of advertisers are competing for the consumer’s attention. By radio, television, and newspaper, the housewife is being begged and cajoled to buy this, try that, bake this. The direct competitors of the pecan are telling their story---the walnuts and the almonds. But also telling their story are the raisin growers, the apple growers. An apple pie uses no pecans. A raisin cake uses no pecans. Cheese and crackers with cocktails mean fewer salted pecans eaten. No one is telling the pecan story. Suppose with me that we have organized the growers into an association, selling their pecans through the association, receiving a cash advance. The pecans are graded, packed in cellophane bags with the Association's own brand name stamped on them. A reputable advertising agency has been retained, who through consumer advertising campaigns have established the Association's brand name in the consumer's mind. The chain store buyer is happy to see the food broker's salesman who handles co-op pecans. He gives him a large order at a high price because: a. He knows he will sell out his pecans, because the consumer will buy co-op brand with confidence, having learned through advertising and through experience that co-op brand pecans are always good. b. Consumers are buying more pecans than ever. Pecan advertising has told the consumer dozens of ways to use pecans in cooking and baking. (And not advertising alone has done this. Properly done, it is possible to get heavy, continued support from women's page editors in telling about pecans. This is free advertising.) c. Further, the chain store buyer knows that his competitor down the street will be selling co-op pecans and at the same price. Once the consumer shows a brand preference, few supermarkets dare stock off-brand merchandise. Since the association can get a higher price from co-op pecans, it can pay the grower more than if he sold his pecans through other channels that do not have an established brand. This same condition will be repeated in hundreds of cities throughout the country. Using scientific methods the association will be able to set up nation-wide sales representation, enabling us to put our pecans before millions more of buyers who now are unable to buy pecans. This in turn will enable us to charge a price for our pecans which we will set, just as the walnut growers do, in terms of what the consumer will pay for them. And the American consumer will pay a lot for good pecans. My mail order customers paid last year$2.00 a pound for shelled pecan halves. They paid 85₵ a pound for in-shell Stuarts. If these people in northern markets could get decent pecans they would not send that much money to me. We said at the beginning that the problem was two-fold. We have discussed the general problem of distribution, and shown that other specialty industries have discovered that the local buyer, the independent accumulators, were unable to put across the kind of marketing program needed to bring adequate distribution and promotion of their crop. The other very great problem facing the pecan industry is lack of stability in price and supply. We have great fluctuations in the size of annual crop, and consequent fluctuations in price, especially in meats. We have always accepted the phenomenon of wild fluctuation in price and supply as rooted in nature-like drought and insect plagues. We shrug, accept it philosophically. The variance of pecan production may be rooted in nature. But as long as it is possible to preserve pecans in cold storage in excellent condition, the variations in availability can be smoothed out. This is only a problem in human organization, not of changing the ways of nature. Back in the golden days of youth, my favorite summer treat was a butter pecan ice cream cone. Or maybe it was a vanilla soda with butter pecan ice cream. The ice cream I liked best was made by the Breyer Ice Cream Company, a firm with tremendous sales throughout the northeast. Today if you tried to buy Breyer's Butter Pecan ice cream, you would be offered butter almond. Formerly, this company probably bought a quarter to half a million pounds of shelled pecans per year. Now the money that went into pecan growers' pockets goes into almond growers' pockets. We all know that the pecan is a delicious thing to eat. There are several candy-bar manufacturers who would like to put out a pecan bar. But putting out a nationally advertised candy bar involves tremendous investment and expense. How the Hershey Company could for example, put out a pecan bar, spend thousands developing a package, an advertising campaign, without being able, in advance, to determine the approximate price of its principal ingredient? The reason manufacturers cannot make greater use of pecans is that they cannot rely on the price or supply. At most they can make a 12-month contract with a sheller. It is also true that the wide fluctuation in supply interferes with the distribution of in-shell pecans. Many buyers will not stock pecans if they cannot get them every year. How are we going to straighten out this curve? It is not the high price that is the obstacle, it is the wide fluctuation. The industrial consumer needs to plan ahead. There are only two possible organizations which would straighten out that line. One is the government, and most of us don't want that. The other organization would be the growers themselves. We need an agency which could buy up pecan (or hold back) when they are in heavy supply and feed back in the short years. I believe only a growers' organization could do that. The summary then, the two greatest obstacles to higher prices for pecans are: 1. Poor distribution and promotion on the major markets. 2. A wildly fluctuating price level which makes it very difficult for major manufacturers to use pecans. Only the pooled resources of many growers would enable pecans to be advertised and promoted and introduced into the national market in the way in which modern marketing demands. Only an organization of growers could smooth out the price curve by holding back pecans in bumper years. Why hasn't this type of organization been formed in the past? Actually it has been tried more than once, but that failed. Here are the reasons: 1. Most pecan growers are primarily something else---cotton or cattle farmers. The result is little interest in organization. 2. Pecans are grown through a large geographic belt, unlike almonds and walnuts, with concentrated areas of production. 3. There is a large production of dooryard, wild and seedling pecans which can't be easily included in organized effort. 4. The wide yearly fluctuations in pecan production create problems which only the most sophisticated and well organized association could solve. These factors convince me that effective organization of the pecan industry must come from outside of the industry---outside money. This effort is now being made on the part of a large eastern agricultural cooperative. I believe we can't organize this industry ourselves, and we need the help of an organization such as this. If our marketing techniques are right, we should be able to get more for our pecans, therefore be able to pay more for them. In this way we can attract growers on the basis of their own immediate self-interest. Conclusion: I am most unwilling to stand up here and tell anyone what to do. I remember what the grammar school boy wrote about Socrates. "Socrates was a very wise man. He was a Greek He lived a long time ago. He went around telling people what to do. They poisoned him. However, the evidence is pretty plain that there isn't any was out of the woods for the pecan grower but the formation of a growers organization. For the present, all we can recommend for the individual grower is that if he has the opportunity to sell his pecans through a legitimate pecan cooperative, and he can get the same price for his pecans as any other market, he will probably be doing himself and his neighbor a favor if he sells through his cooperative.