During the 1980s, interest in the production of new crops has been intense. The financial stress in agriculture has been partly responsible for this heightened level of interest. Farmers have expanded their search for more profitable enterprises and they view new crops as one means to diversify and presumably reduce risk (Weimar and Hallam 1988). The possibilities for growing new crops seems unlimited. We can grow most of the world's 20,000 known edible plants in the U.S. and farmers are not reluctant to experiment with new or exotic enterprises including such things as garbanzo beans, elephant garlic, shiitake mushrooms and tamarind. There are numerous problems related to the production of new crops, but these are minor in comparison to marketing problems. Farmers frequently do not know who will buy these commodities, how much they will buy or what they will pay (Babb and Long 1987).
A second reason for interest in new crops arises from the growing number of new and part-time farmers who do not have a history of producing traditional crops. These farmers, recognizing that they have difficulty, being competitive with large, specialized farmers who produce food and feed grains, seek niches where they, might be more competitive. In addition, many part-time farmers are located close to consumers who provide a market for their production.
A final reason for interest in new crops, and the most important one from a marketing standpoint, is the increased demand by consumers for new foods (Learn 1987). More affluent consumers and larger numbers of persons from varied ethnic and cultural backgrounds are expanding the demand for new and exotic foods. More families now purchase foods that are different in order to add variety to meals and to enhance status among peers. We are thus presented with an opportunity to introduce new products and to expand sales of some minor crops simply by adding new cultivars.
There are many problems and obstacles associated with production of new crops which relate to information, entrepreneurship, human capital, infrastructure for handling new commodities, and venture capital (Babb and Long 1988). In this paper, some of the problems and opportunities are described by focusing on forces which are impacting the industry and firms in it and by suggesting s to these forces. The paper is thus organized in two sections, one dealing with macro or industry level forces and responses and a second dealing with micro or firm level forces and responses. As will be evident, this division is somewhat arbitrary, because many of the forces simultaneously impact the industry and its firms.
Projections of fruit and vegetable consumption provide some guidelines for sales potential of new crops since many of the new crops will be in these categories. Consumption of fruits and vegetables in the U.S. has been projected to increase in the range of 1.5 to 1.8% per year over the next 20 years (Blaylock and Smallwood 1986). These increases in consumption are the result of 0.9% per year increase in population, a 1% increase per year in real income and a growing number of persons over 45 who consume substantially more fruits and vegetables than do younger persons. Since many of the new crops may not compete directly with traditional crops and because many of the new crops will be novel and start from a small base, consumption may expand by 2 to 4% annually. The effectiveness of market development will greatly influence the extent to which new crops reach their full potential.
Important trends in consumption may be masked by aggregate figures which are published. Consumption of vegetables has increased about 2% per year, but consumption of some vegetables such as broccoli and cauliflower has increased as much as 10 to 15% per year (Smallwood and Blaylock 1984). The number of cultivars and types of food available to satisfy the diversity of consumer taste and preferences has been rapidly expanding. For example, consumers no longer purchase just iceberg lettuce, but choose among many types and varieties of lettuce. Diversity of food preferences will favorably influence new crop potentials.
Consumers seek more than nutrition from the food they purchase. The decision process used to purchase new foods may be quite complex and reflects a search for variety, good taste, convenience, status, self-esteem and many other attributes. This provides the basis for new product introductions and support for the diversity, of products. Many consumers prefer and are willing to pay for quality and variety.
Studies of consumer purchase patterns may quantify the effects of specific factors on consumption and be used in the design of marketing programs. A recent study of tropical fruits found that the following conditions may be expected to result in increased tropical fruit expenditure: residing in the Western region, living in a central city area, having a college education, being of Spanish origin, having both spouses involved in meal planning, having higher income, and having a higher proportion of household members over 15 years of age (Acon 1988). Tropical fruit expenditures increased about 6% for each 10% increase in income. About 85% of the increase in consumption of tropicals associated with increases in income was the result of market entry by nonconsuming households as opposed to higher levels of consumption by households already, purchasing tropicals. As discussed later, this suggests that marketing programs targeted on households not consuming tropicals may be more effective.
The use of distribution outlets varies among food categories and those used by tropical fruits may, be typical for many new crops. Terminal markets, brokers and jobbers, and grower/shippers each distribute about one-third of tropical fruits (Lim and McLaughlin 1986). Final sales to consumers are made as follows: supermarkets 60%, away-from-home eating establishments 23%, specially produce markets 8% and others 9%.
The numerous countries that have low production costs may have comparative advantage for some new crops which are native to them. Many less developed countries (LDC) are shifting from traditional to nontraditional crops with the hope that exports can be expanded. For example, Guatemala exports have changed from 10% to 35% nontraditional crops in the past ten years. LDC's are also getting better market information and becoming more sophisticated in serving U.S. customers. The International Trade Center of the United Nations now provides market news on 150 commodities to about 30 LCDs. Most of these commodities are nontraditional; tropical vegetables and fruits, spices, cut flowers, leather goods and the like. Large food companies are obtaining more raw products off-shore or processing finished products there (Moulton 1987). Therefore, U.S. competitiveness in new crops must be carefully analyzed.
Product Diversification. By definition, new crops are expected to result in the introduction of new food products. New products must be developed and existing products modified because most food products have a life cycle. Sales increase after introduction or modification, but reach a plateau and then decline. This seems to be the pattern for many tropical fruits and might be expected. While some consumption may have an ethnic basis, a large part may be the result of the consumers' search for products which add diversity and variety. Potential sales which satisfy diversity needs may be far greater than those associated with purchasers who are accustomed to the product. In this situation, sustained sales expansion in the industry may depend on the introduction of new tropicals and modifications of existing fruits. Plant breeding and genetic engineering may be used to create desired attributes in products such as low caloric value, seedlessness, sweetness, or firmness. The development of new fruits and new cultivars with different attributes may also be the most important source of remaining competitive with off-shore producers. If the U.S. is in a leadership position in research and development, producers and marketers here may be able to enter the product life cycle during the growth period, rather than at the point of maturity or decline. An aggressive development effort may be one of the most effective strategies to realize new crop potentials and to enhance competitiveness.
Geographic Diversification. The current trade imbalances and concerns about U.S. competitiveness have focused attention on imports. We must be careful not to overlook export opportunities for new crops. There are some good track records for export of specially/minor crops, such as grapefruit, oranges, almonds and rice. Many crops that are new in the U.S. originated in other countries. It may be easier to sell these products which are already in the diet of persons in those countries than to sell our surplus agricultural products which are not part of the diet. Success in exporting food products requires considerable information about eating habits, trade channels and the array of food products available in the target country. Just as a firm would develop a marketing plan for introducing a new product or entering a new trade channel, a marketing plan should be developed for each country where entry is contemplated.
Consumer Information. The introduction of a new crop is, in principle, like the introduction of a new product by a food manufacturer. The food manufacturer obtains information on consumer motivations, needs, desires and attitudes that can be used to identify voids in existing product mixes which a new or modified product might fill. Product development and testing then proceeds. Unfortunately, the path for most new crops involves developing the crop first and then figuring out how to sell it.
A marketing plan for a branded product includes advertising, promotion, pricing, packaging and merchandising, all targeted to some segment of the market. The marketing plan is the blue print for establishing a consumer franchise which in turn is the basis for favorable treatment by food retailers regarding shelf space and location. While such a plan would be most helpful for new crops, there is often not an organization which can act collectively in the development and implementation of such a plan.
In the tropical fruit industry, marketing problems have been identified relating to lack of promotional support and handler training, erratic supply and lack of information about how to use the product (Lim and McLaughlin 1986). There are 24 major and 38 minor cultivars of Florida avocados having distinctly different characteristics, but being sold together. Even an avocado connoisseur may have difficulty in selecting the cultivar with the desired attributes. Most consumers cannot tell whether they purchased a sweet or sour carambola before taking a bite. While an industry marketing plan for a new crop may not be as sophisticated as that for a branded product, it should be possible to provide information to consumers that will enhance industry sales. Almost by definition, consumers will need much information about a new crop. Consumer information lends itself to collective action by those in the industry.
Coordination. There are several forms of collective action which provide industry planning and coordination including marketing orders, cooperatives and trade associations. Providing consumer information as discussed above is only one area where industry coordination can make a difference. Other areas include maintenance of standards for identity, quality and food safety, product development and modification including new varieties, demand expansion programs including information on export market potential, and market intelligence. New crops will be more bountiful in an industry where coordination is cultivated.
If a new crop proves profitable, there is a high probability that production will expand to the point that profitability disappears. Many producers enter or expand production near the height of the growth segment of the product cycle, just in time to experience the plateau or decline in sales. One then hears calls for industry to manage supply, coordinate production and erect entry barriers. This is one area where industry coordination efforts have been mediocre to dismal. One of the best documented principles of economics is that firms will enter and expand production as long as there is an incentive to do so.
Goals. New crops, in the context used in this paper, will not solve the farm problem or the financial crisis facing agriculture today (Babb and Long 1988). The farm problem is the consequence of excess productive capacity. Withdrawal of resources from old crops to produce new crops will not have much effect on old crop production (Weimar and Hallam 1988). For example, only about six million of the 336 million acres in crops are used to produce fruits and vegetables. If this six million acres were doubled as a result of new crop planting, it would have little effect on the production of old crops, especially when the effects of new technology are considered. New crops are important because they may improve the well being of those in production and of consumers who can enjoy a greater variety of foods. Unless people understand what contributions can and cannot be made by new crops, there will be disappointments and frustration.
Assessment of Business Opportunity. Marketing strategies are chosen to position the firm with respect to products and market segments that will be most profitable. This selection relies on considerable information and analysis of customer needs, motivations and preferences, the array of products available, the marketing strategies of rivals, and the firms own endowment of resources, capabilities and skills. There is no mass market for new crops, but market segments to be developed. Firms must have the right products, in the right market segment, at the right time.
Sales Expansion. Available evidence and logic suggests that households not purchasing new products are prime targets for efforts to expand demand. Increased purchases by consuming households will be modest. The growth portion of the new crop life cycle can be increased and extended by attracting new customers in regions where exposure to the product has not been great, in market channels where use has been light, e.g., food service, in consumer segments where consumption is low, e.g., young persons, high income families, and by new uses of the product. Available advertising, promotional and other sales support should be used to introduce people to the new crop.
The favorable effect of new cultivars on sales was earlier discussed. Private firms can and do develop new crops and new cultivars. This may generate more benefits to the firm than use of publicly developed varieties, but the costs of development are high.
Firms can enter export markets in several ways. They can acquire firms in other countries, license production of their products in other countries, or export finished products directly. Other governments may provide incentives which make one option more attractive than another. U.S. firms frequently establish some type of relationship with firms in the other country, or operate subsidiaries there.
Risk Management. There are risks for both new and old crops which can be measured by the variance in returns resulting from natural (weather) and market causes. Using a mean-variance criterion, growers would require a higher average return to produce new crops if the variance in returns were greater than for old crops. Risk may be reduced and transferred by such devices as crop insurance, government programs, futures markets, contracts, joint ventures, cooperatives and diversification. The first three methods of reducing risk are generally not available for new crops. It should be pointed out that diversification would not reduce risk if returns on crops added were perfectly, positively correlated. To minimize risk, one would select crops whose returns were perfectly, negatively correlated. Contracting appears to be the most important mechanism to reduce or share risk for new crops.
Entrepreneurship. The rewards from new crops will be greater, as is the case for old crops, for those with superior managerial skills and business acumen. These skills can be improved in a variety of ways. New crops may require more entrepreneurial skills and these are more difficult to acquire. These skills relate to a searching for new opportunities, assessing the risk-reward balances, and willingness to enter uncharted waters if the incentives appear to be favorable. If you want to find a real entrepreneur, there are many growing and marketing new crops.
Scope of market, competitive advantage, high failure rates for new firms, and market saturation are factors which influence the performance of firms growing and marketing new crops. Strategic responses to these forces include assessment of business opportunities and identification of market niches, selection of trade channels and customer segments which will best respond to merchandising and promotional activities, management of risks through such devices as contracts, joint ventures, cooperatives and diversification, and adoption of entrepreneurial approaches to business.
New crops will not solve the farm problem which is a consequence of excess productive capacity in agriculture. They can, however, improve the income of growers and marketers and provide consumers with an ever greater variety of food.