Lexicographers concern

Wiikano Orchards

Introduction On a beautiful morning in September 2017, Dena Yazzie—president of Wiikano (pronounced we-

kah-no) Orchards—sat in her office, which overlooked an apple orchard that her family had owned and run since 1928. Wiikano had produced and sold fresh-pressed apple juice in the midwestern United States under the brand name Tuwa for decades. Yazzie had been reviewing a proposal to address the company’s ongoing losses by rebranding Wiikano’s apple juice, raising its prices, and promoting the brand. If the proposal succeeded, wholesalers and retailers would be more likely to distribute and pay more for Wiikano’s juice. Although Yazzie was still unsure about what to do, she had only four days to make her final recommendations to her Board of Directors.

Fruit Farming and Juice Production

The fruit and nut farming industry in the United States included farmers who grew and sold non- citrus fruit and nut crops. In 2016, estimated sales were $28.7 billion ($6.1 billion in profit) with projected annual growth of 2.7%.1 Exhibit 1 contains revenue information for major varieties of fruits and nuts.

The juice industry included producers of citrus fruit, non-citrus fruit, and vegetable juices. In 2016, juice production in the United States yielded $12 billion in revenue ($695 million in profit). Analysts projected no growth through 2022.2 Citrus juices dominated the market. See Exhibit 2 for data on market share.

Demand for conventional juices was expected to decline, but demand for blended fruit and vegetable juice with exotic flavors and nutritional enhancements was expected to increase.3 Juice was distributed primarily through supermarkets. Exhibit 3 contains information on market share for the major distribution channels for juice.

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HBS Professor Emeritus Benson P. Shapiro and Ohio University Professor Katherine B. Hartman prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Although based on real events and despite occasional reference to actual companies, this case is fictitious and any resemblance to actual persons or entities is coincidental.

Copyright © 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

For the exclusive use of R. BENDU, 2018.

This document is authorized for use only by RAMU BENDU in Marketing Management Summer IIG 18 taught by Stephanie Thacker, University of the Cumberlands from Jun 2018 to Dec 2018.

918-517 | Wiikano Orchards

2 BRIEFCASES | HARVARD BUSINESS SCHOOL

The Apple Industry in the United States

In 2016, the United States produced more than 5.4 million tons of apples. The 7,500 apple producers grew more than 100 varieties of apples across 32 states. Approximately two-thirds of the U.S. apple crop were sold as fresh apples.4 The industry comprised several key groups:

• Commercial apple growers grew and picked apples from trees arranged in orchards designed for maximum food production.

• Packers graded, sorted, classified, and stored apples for sale to processors, wholesalers, and retailers.

• Processors used apples to make apple products such as apple juice, canned apples, apple sauce, and apple cider.

• Shippers transported apples to and from channel intermediaries.

• Food brokers (independent commissioned sales agents who represented noncompeting suppliers) helped food producers market and sell their goods.

Growers shipped to packers for storage, packing, and sales or to processors for juicing, canning, or saucing. Packers and processors then distributed to retailers indirectly through wholesalers and exporters, or directly to supermarket chain warehouses. A small percentage of the market was sold directly to consumers through roadside stands, farmers markets, and onsite retail stores.5 Through food brokers, growers negotiated contracts with buyers for current or expected production.

Buyers’ willingness to pay fluctuated multiple times per day based on current and expected supplies. Prices differed by apple variety, quality, origin, and intended use. For example, juice-grade McIntosh apples from Appalachia might net only one-tenth the value of fresh-grade Honeycrisp apples grown in Washington State. Exhibit 4 provides season-average grower prices (in 2005–2015) for processing apples.

In the early 2000s, the industry was consolidating due to low prices and the purchasing preferences of large grocers.6 Many packers merged their operations, while other companies integrated vertically by combining growing, packing, and processing operations to create large-scale operations. Major retailers tended to purchase directly from large-scale operations that provided consistent supplies throughout the year.

Apple Juice Production and Distribution

Processors could use fresh apples to produce either apple juice or apple cider. Typically, apple cider denoted a raw, unfiltered, ready-to-drink liquid. Apple juice was filtered, pasteurized, and vacuum sealed.7 Apple cider was usually refrigerated, with a 10-day shelf life. Through processing, apple juice could be made shelf-stable with a three-month shelf life. Most apple juice was made by adding water and sugar to apple concentrate, which was a frozen or powdered apple essence product, but some premium or “natural” apple juices were made from fresh-pressed apples. Decreased demand, lack of brand loyalty, and imports had increased price competition. Approximately 85% of the apple juice consumed in the United States was imported from abroad, with 70% originating from China.