The U S Market for Passion Fruit Juice International Marketing

The U.S. Market for Passion Fruit Juice International Marketing Plan Case Study Project SICA Final Report C. Parr Rosson, III, Project Consultant Flynn J. Adcock, Project Expert Department of Agricultural Economics Texas A&M University May 5, 2000 The U.S. Market for Passion Fruit Juice International Marketing Plan Case Study Executive Summary Ø The United States is a large, diverse market for food and beverage products. U.S. consumers spent $848.6 billion on food and beverages in 1998. Consumer expenditures on food at home 53% of consumer food expenditure, while expenditures on food away from home accounted for 47% of the total. Ø The U.S. beverage market is a $187.35 billion industry, with retail sales of soft drinks reported at $54.3 billion, fruit beverages at $17.5 billion, and bottled water at $5.2 billion. The U.S. market is characterized by a high degree of price competition, especially for non-specialty juices and fruit drinks. Ø Fruit juices represent the major form of U.S. per capita fruit consumption, accounting for 44 percent of commercially marketed fruit products. Ø U.S. per capita fruit juice consumption has increased 11 percent since 1990, from 7.91 gallons to 8.77 gallons. Citrus juice accounted for 71 percent of total per capita consumption in 1998, followed by apple, grape, pineapple, cranberry, and prune. Ø New age beverages, which include nutrient-enhanced drinks, fresh packaged juice, smoothies, and vegetable/fruit juice blends, experienced a volume increase of 15 percent during 1999, with sales reaching $620 million. Ø U.S. sales of shelf-stable, frozen, and refrigerated juices and drinks were a $10 billion market in 1998. Shelf-stable fruit juices accounted for $4.8 billion in sales, followed by refrigerated sales of $4.1 billion and frozen juice sales of $1.1 billion. Ø Imports play a major role in meeting the increasing consumer demand for foods and beverages. Total U.S. fruit juice imports have risen 48 percent since 1995. Imports of passion fruit juice represent no more than 1.7 percent of total U.S. fruit juice imports and quite possibly only about one percent. Ø Coordination of promotional activities throughout the wholesale/retail chain was emphasized by importers, distributors, and grocery store representatives. In-store demonstrations, product preparation, and product use and samples were most important. It was noted that these activities would be especially important in attracting new consumers to passion fruit juices. Ø Wholesale/retail trade information could include production processes, International Standards Organization certification, and food safety considerations. Product types, health, nutrition, and other attributes, and blending or mixing characteristics should be emphasized. Ø The need for retail point-of-purchase display materials to support promotion and in-store demonstrations was emphasized. New product development was noted as important, given the competitive nature of the beverage market. Ø It is likely going to be important for firms to form alliances with quick serve and smoothie restaurants in order to get additional product into that market segment. Many of these outlets do not presently use or have access to passion fruit juices, but alliances could result in availability of product. Ø Most market promotion activities will require some out of pocket expenses on the part of the industry. These expenses can be borne by individual firms, coalitions of firms, industry/government partnering, or strategic alliances across countries, but non-participating competitors may also benefit from these promotional activities. Ø Market opportunities for passion fruit juices appear greatest in the specialty juices and other new age juices. Passion fruit juice and other passion fruit products, such as jams, were prevalent in all four markets surveyed. These products appeared most prevalent in retail groceries and specialty stores. Ø Food importers, wholesalers, HRI trade, and retail groceries surveyed believed that it will be difficult to increase the size of the U.S. market for passion fruit juice without solid promotional efforts. Influencing consumer tastes and preferences will be crucial to the success of market promotion efforts. Table of Contents Section 1. U.S. Food and Beverage Market Characteristics .......................................................... 1 Section 2. U.S. Beverage Market ................................................................................................... 4 Section 3. U.S. Market for Passion Fruit........................................................................................ 6 U.S. Fruit Juice and Beverage Imports ............................................................................... 7 Section 4. Survey of Potential U.S. Markets for Passion Fruit Juice............................................. 9 Methodology for Selection of U.S. Markets for Primary Market Research ....................... 9 Interviews with Chain Store Representatives......................................................... 11 Interviews with Wholesaler, Importer and Distributor Representatives ................ 12 Visits to Grocery Store Locations .......................................................................... 13 Use of Scanner Data ............................................................................................... 14 Notes on Use of GTE Business Listings ................................................................ 15 Market Survey Results ...................................................................................................... 16 Houston Market..................................................................................................... 17 Los Angeles Market .............................................................................................. 20 Miami Market........................................................................................................ 22 New York Market.................................................................................................. 25 Section 5. Options and Strategies for the Industry....................................................................... 27 A. Coordination................................................................................................................. 27 B. Promotion ..................................................................................................................... 27 C. Point-of-Purchase Display Materials............................................................................ 28 D. Strategic Alliances and New Products ......................................................................... 28 E. Cost and Benefit of Promotion ..................................................................................... 28 F. Free Rider Problem ....................................................................................................... 28 Section 6. Conclusions and Implications ..................................................................................... 29 Appendix 1. Export Cost Analysis............................................................................................... 31 Appendix 2. Chain Store Contact Information............................................................................. 35 Appendix 3. Chain Store and Wholesaler Representatives Questionnaire .................................. 37 Appendix 4. Proposal from Information Resource, Inc. for Purchase of Scanner Data .............. 38 Appendix 5. U.S. Passion Fruit Importer/Distributors................................................................. 43 List of Figures Figure 1. Figure 2. Figure 3. Figure 4. Figure 5. Figure 6. Figure 7. Figure 8. Figure 9. Figure 10. Figure 11. Figure 12. Figure 13. Figure 14. Figure 15. Figure 16. Figure 17. Figure 18. Figure 19. Figure 20. Figure 21. Figure 22. Figure 23. Figure 24. Figure 25. Figure 26. Figure 27. Figure 28. Figure 29. Figure 30. Figure 31. Figure 32. Figure 33. Figure 34. Figure 35. Figure 36. Figure 37. Figure 38. Figure 39. Figure 40. Figure 41. Figure 42. U.S. Population and Real Household Incomes, 1980 - 2000 U.S. Consumer Expenditures on Food & Beverages, 1994 - 98 U.S. Food and Beverage Retail Sales by Market Outlet, 1998 Share of At Home Food & Beverage Sales by Type of Outlet, 1990 & 1998 Number & Size of US Grocery Stores U.S. Grocery Sales Takeout Food Market Share, 1998 Share of Away from Home Food & Beverage Sales by Type of Outlet 1990 & 1998 Away from Home Food & Beverage Sales, Forecast 2000 Away from Home Meals & Income, 1996 Average Number of Meals Away From Home Per Week, 1996 Share of Away from Home Meals by Gender, 1996 Consumption of Away from Home Meals per Week by Age Group Share of Six to Seven Away from Home Meals Eaten Per Week, 1998 U.S. Retail Beverage Sales, 1998 U.S. Per Capita Beverage Consumption, 1980 - 1999 U.S. Beverage Market Share, 1998 Beverage Category Shares, 1998 U.S. Beverage Consumption Growth, 1998 U.S. Beverage Sales Growth, 1999 U.S. ‘New Age’ Beverage Market Share, 1998 U.S. ‘New Age’ Beverage Consumption Growth, 1998 Share of Beverage Consumption, Northeast U.S., 1998 Share of Beverage Consumption, Southern U.S., 1998 Share of Beverage Consumption, East Central U.S., 1998 Share of Beverage Consumption, West Central U.S., 1998 Share of Beverage Consumption, Western U.S., 1998 Share of Beverage Consumption, Southwest U.S., 1998 Share of Beverage Consumption, Pacific U.S., 1998 Media Spending by Firm, U.S. Market, 1991 - 97 Share of U.S. Per Capita Fruit Consumption, 1998 U.S. Fruit Consumption, 1992 - 98 Change in U.S. Fruit Consumption, 1992 - 98 Share of U.S. Fruit Juice Consumption, 1998/99 Change in U.S. Fruit Juice Use, 1992 - 98 U.S. Shelf-Stable Juice Sales, 1998 U.S. Bottled Juice Sales, 1998 U.S. Aseptic Juice Sales, 1998 U.S. Canned Juice Sales, 1998 U.S. Frozen Juice Sales, 1998 U.S. Refrigerated Juice Sales, 1998 U.S. Shelf-Stable Liquid Concentrate Sales, 1998 List of Figures (continued) Figure 43. Figure 44. Figure 45. Figure 46. Figure 47. Figure 48. Figure 49. Figure 50. Figure 51. Figure 52. Figure 53. U.S. Beverage Imports, 1990 - 1998 U.S. Beverage Unit Import Value, 1991 - 1998 U.S. Beverage Imports, 1991 - 1998 U.S. Fruit Juice Imports by Source, 1990 - 1999 U.S. Single Fruit Juice Imports, 1999 Share of U.S. Single Fruit Juice Import, 1995 Share of U.S. Single Fruit Juice Imports, 1999 U.S. Blended Fruit Juice Imports, 1999 Share of U.S. Blended Fruit Juice Imports, 1995 Share of U.S. Blended Fruit Juice Imports, 1999 U.S. Fruit Juice Imports by Type, 1995 - 99 The U.S. Market for Passion Fruit Juice International Marketing Plan Case Study This case study is designed to acquaint exporters in Ecuador with the demographics, major market characteristics, market potential, and estimated costs of shipping passion fruit juice to the United States. The report has six main sections: U.S. Food and Beverage Market Characteristics, the U.S. Beverage Market, the U.S. Market for Passion Fruit, Survey of Potential U.S. Markets for Passion Fruit, Options and Strategies for the Industry, and Conclusions and Implications. Supporting documentation and data are contained in the appendices, including an appendix on Export Marketing and Cost Analysis. Section 1. U.S. Food and Beverage Market Characteristics The United States is are large, diverse market for food and beverage products. Although the U.S. population is growing at only 0.7 percent per year, real incomes have risen an average of 2-2.5 percent per year since the early 1980s (figure 1). Because of this increase in purchasing power of consumers, the U.S. market offers numerous opportunities for new products. Because of intense competition, however, market segmentation, promotion, and education of food distributors and consumers are crucial for effective market development. U.S. consumers spent $848.6 billion on food and beverages in 1998 (USDA, Economic Research Service-figure 2). Consumer expenditures have increased an average of 3.7 percent annually since 1990, 16.5 percent since 1994, and are forecast to reach $873 billion in 1999. The U.S. market is divided into the at home (AH) and the away from home (AFH) food/beverage market, with most consumers participating in both. The AH market is dominant, but the AFH market is growing in importance. In 1998 consumer expenditures on food at home were $401.7 billion, while expenditures on food away from home were $354.4 billion. While 1 total consumer expenditures on food and beverages rose 2.6 percent from 1997 to 1998, consumer expenditures on food away from home rose 4.6 percent compared to 2.8 percent for expenditures in the at home market. The away from home food market now represents 47 percent of total consumer expenditure on food and has been the fastest growing component of the U.S. food market for nearly a decade. It is estimated that 24-25 percent of all meals were consumed away from home in 1998 (Texas A&M University). More than 240,000 different food and beverage products were produced in the U.S. market in 1998, including the introduction of 17,000 new food items. New food product introductions were down substantially from previous years, however, due to food firm merger and competition for the consumer dollar. Supermarkets and other grocery stores represent about 72 percent of total U.S. food and beverage sales for the AH market (figures 3 and 4). Mass merchandisers, home delivery, and other stores, such as drugstores, represent 20 percent of the AH market, but mass merchandiser and supercenter sales have increased 350 percent in the last five years. Although the number of grocery stores in the U.S. market has been stable, store size has increased from an industry average of 31,000 square feet in 1990 to 40,000 square feet in 1998 (figure 5). Concurrently, average sales per store have increased to $11.2 million, while sales per square foot of shelf space have declined to $277 reflecting the increasing cost of retailing and greater competition among food and beverage products for retail shelf space (figure 6). While chain grocery stores may represent a varying proportion of the number of outlets for food and beverages, chains are quite important in terms of total sales. In 1994, U.S. chain stores accounted for 65 percent of total grocery sales in the United States, up from about 60 percent in the mid-1980s (USDA, Economic Research Service). 2 AFH food and beverage sales represent an important component of the total U.S. food and beverage market. The National Restaurant Association has estimated that in 1998 46 percent of all U.S. adults ate at least one meal in a restaurant each day representing daily expenditures of $1.0 billion. Twenty two million U.S. households used some form of daily takeout food service, while travelers represented about 50 percent of all U.S. restaurant sales. U.S. AFH food sales are forecast to reach $376 billion in 2000, with 80 million households expected to buy carryout or delivery once each month (figure 7). For many U.S. consumers, AFH food and beverages are no longer a luxury, but a necessity. This is especially true for the young, busy professionals who spend much of their time commuting to and from work each day and who place a high premium on convenience in food consumption. About 51 percent of all takeout occasions are accounted for by adults who purchase AFH food and beverages on a daily basis. The rest of the AFH market is represented by those who make AFH food purchases every other day (29 percent) and those who are moderate or light AFH consumers (20 percent). About 67 percent of all AFH food and beverage sales are accounted for by eating places (figures 8 and 9). AFH meal consumption rises with income (figure 10). On average, lunch is the meal most often consumed away from home (figure 11). Males tend to consume 2.4 lunch meals away from home per week, compared to 2 for females. Dinner is next most important followed by breakfast. Younger persons tend to be the most frequent consumers for the AFH market (figure 13). The 18-24 year age group consumes 5-6 meals away from home each week, followed by the 25-54 age group. The over 65 age group consumes only 2.3-2.5 meals away from home each week. The typical AFH meal consumer tends to be young, relatively affluent, busy, male or female, single or married. In addition, this consumer will purchase 3.5-6 meals 3 away from home each week. Blacks, Hispanics, southerners, and employed female heads of households tend to consume more than the average number of meals in the AFH market. The United States is the world’s largest trader of processed foods, with total food imports valued at $32 billion in 1998 (USDA, Economic Research Service). Fish, meats, beverages, canned fruits and vegetables, vegetable oils, and sugar account for about 80 percent of all processed U.S. food imports. Canada, Mexico, Thailand, the European Union, Australia, New Zealand, and the Philippines supply about 60 percent of all processed foods imported by the United States. Canada is the largest supplier to the U.S. market with a share of 21 percent, followed by the European Union at 15.9 percent, Mexico at 7.4 percent, Thailand at 5.7 percent, and Australia at 3.2 percent. Supplier shares were fairly stable during the 1990s. U.S. food and other agricultural imports from Ecuador were $1217 million in 1998. Fish, $697 million, and bananas, $324 million, account for 84 percent of all U.S. food imports from Ecuador. Other major imports from Ecuador are coffee, $42 million, sugar, $11 million, tobacco, $6.2 million, fruit juice, $5.8 million, and prepared/preserved vegetables, $2.3 million. Section 2. U.S. Beverage Market The U.S. beverage market was a $187.35 billion industry in 1998, with retail sales of soft drinks reported at $54.3 billion, fruit beverages at $17.5 billion, and bottled water at $5.2 billion (figure 15). Fruit juices represent the major form of U.S. per capita fruit consumption, accounting for 44 percent of commercially marketed fruit products in 1998 (USDA, ERS, Fruit and Tree Nut Situation and Outlook). Fresh fruits accounted for 35 percent of total U.S. fruit consumption, while canned, dried, and frozen fruit represented 21 percent (figure 4). U.S. per capita consumption of fruit juice has grown at an average rate of 3.2 percent each year since 1992. Fresh consumption has been sluggish, exhibiting almost no growth, while use of canned 4 fruits has declined 3.5 percent annually during the same period. Dried fruit consumption has increased 2.8 percent annually, but has reached relatively low levels of use at 12.9 pounds per capita, while frozen fruit consumption has increased at 3.6 percent annually to reach 5.0 pounds in 1998. U.S. per capita fruit juice consumption has increased 11 percent since 1990, from 7.91 gallons to 8.77 gallons (figure 16). Citrus juice accounted for 71 percent of total per capita consumption in 1998, followed by apple, grape, pineapple, cranberry, and prune. Fruit juice consumption declined 4.4 percent over the last year (figure 19). New age beverages (NAB) represent the fastest growing juice industry segment. Product retail sales were estimated by Beverage World at $560 million in 1998. New age beverages, which include nutrient-enhanced drinks, fresh packaged juice, smoothies, and vegetable/fruit juice blends, experienced a volume increase of150 percent in 1998 (figure 21). Polyethylene teraphtalate (PET) water use rose 28 percent, while ready-to-drink (RTD) coffee consumption was up 83 percent (figure 22). Consumption of premium sodas, RTD teas, and sports drinks rose about 9.5 percent, while sparkling water use declined three percent. Single-serving fruit drink use rose only 1.9 percent. The major source of competition for NABs is the traditional soft drink, with retail sales of $54.3 billion. PET water represents about one-third of total new age drink use (figure 21). Singlestrength fruit drinks are 20 percent, followed by sports drinks at 17.7 percent, RTD teas 16 percent, sparkling water, premium sodas, RTD coffee, and all others. Although the ‘other’ category has the smallest share of the drink market, it is the most rapidly growing segment and includes nutrient enhanced drinks, fresh packaged juices, smoothies, and vegetable/fruit juice blends. Fruit beverages are most popular in the Northeast, West Central, and West United States 5 (figures 23-29). They are least popular in the Southwest and Pacific regions of the country. Because of the competitive nature of beverage sales in the U.S. market and the response of consumers to advertising, media expenditures by drink companies are an important component of their business (figure 30). Since 1990, media spending by U.S. firms to advertise beverages has increased from $437 million to $630 million in 1997. Coca-Cola and Pepsi lead in spending, followed by Dr. Pepper/7 Up, Cadbury, and Triarc. Section 3. The U.S. Market for Passion Fruit Juice Fruit juices are the main form of U.S. fruit per capita consumption and 1998 was the highest year on record since 1983 (figures 31 and 32). Orange juice accounts for nearly twothirds of all U.S. juice consumption. Since 1992, cranberry, apple, and citrus juices have exhibited the strongest growth in use, with cranberry consumption up 24 percent (figure 35). Grape, pineapple, and all other noncitrus juices declined in use over this same period. U.S. sales of shelf-stable, frozen, and refrigerated juices and drinks were a $10 billion market in 1998 (figures 36-42). Shelf-stable accounted for $4.8 billion in sales, followed by refrigerated sales of $4.1 billion and frozen juice sales of $1.1 billion. Bottled juices represent the majority of shelf-stable juice sales, accounting for 70 percent of sales. Fruit drinks, cranberry drinks, and apple juice represented the majority of sales (figure 37). For 1998, sales were about the same as 1997. Cranberry juice sales were up 135 percent, while apple juice rose 8.0 percent. Cranberry cocktail/drink sales were off 7.5 percent, with growth in tomato/vegetable juices and cocktail sales more than doubling over 1997. Aseptic and canned sales had about equal shares of the shelf-stable market (figures 38 and 39). Refrigerated fruit juice and drink sales were $4.1 billion in 1998 (figure 40). Orange juice accounted for 61 percent of all sales for this category. Fruit drinks, grape juice, and 6 blended fruit juices represented the majority of the reminder. This category of sales declined 5.7 percent from 1997, with grape juice sales off 90 percent and fruit drinks down 1.9 percent. Blended juice sales were up 17.7 percent, followed by an increase in orange juice sales of 6.8 percent. Frozen fruit juice and drink sales were down 10.9 percent from 1997, with the largest declines in apple juice (16.2 percent) and fruit drink/cocktails (14.7 percent). Moderate declines were experienced by blended juices and lemonade/limeade sales. U.S. Fruit Juice and Beverage Imports As noted earlier, imports play a key role in meeting the increasing consumer demand for foods and beverages (figures 43-45). Non-alcoholic, non-juice imports have doubled since 1990. Apple and grape juice imports have been relatively stable, while orange juice imports have grown to make up shortfalls in domestic production. Total fruit juice imports have risen 48 percent since 1995. Brazil is the dominant import supplier, but shipments have fallen 30 percent since the peak in the early 1990s (figure 46). Argentina was a major supplier during the latter part of the 1990s, while traditional suppliers Chile and Mexico have become somewhat more stable. China has emerged as an import supplier of juices in recent years. Single fruit juices and blended juices represent the major supply of passion fruit juice to the U.S. market. Although it was not possible to identify passion fruit, or maracuya, as a separate juice category, some inferences may be made a about the relative importance of passion fruit juice and its use as a blended juice. U.S. single fruit juice imports reached 12.3 million gallons in 1999. Chile, Brazil, Ecuador, Egypt, French Polynesia, Thailand, and Mexico were the top suppliers (figure 47). Ecuador’s share of single fruit juice imports has fallen, however, from 18.5 percent in 1995 to 11.2 percent in 1999 (figures 48-49). The total supply of single 7 fruit juice imports has increased 120 percent since 1995 or by 6.7 million gallons. The volume exported by Ecuador has actually increased 33 percent, reaching 1.38 million gallons in 1999, due to total import market growth. Ecuador has captured five percent of the increased volume of single fruit juice imports. Brazil, Egypt, French Polynesia, and Belgium have all experienced increases in market share over this same period. U.S. blended fruit juice imports have fallen 31 percent since 1995 (figures 50 and 52). Canada accounts for 50 percent of all blended juice imports, followed by Thailand, Germany, Poland, and the Dominican Republic. Ecuador’s share of the blended fruit juice market has increased from nil in 1995 to 3.6 percent in 1999. Volume shipped by Ecuador during this period increased by 3000 percent to 88,000 gallons. Total U.S. fruit juice imports have increased 48 percent since 1995, reaching 860 million gallons in 1999 (figure 53). Other single fruit juices represent the most important and fastest growing portion of the fruit juice import market. It appears likely that potential imports of passion fruit juice represent no more than 1.7 percent of total U.S. fruit juice imports and quite possibly only about one percent. Several U.S. companies are the main users and manufactures of juice products using passion fruit juice. Snapple fruit drinks and Hydroline are major outlets. Smucker’s, Campbell’s Food Service, and Shasta/Everfresh have some products containing various amounts of passion fruit juice. Smoothie and other retail juice outlets are also important or potentially important sources of demand for passion fruit juice. Insert Figures Following This Page 8 Section 4. Survey of Potential U.S. Markets for Passion Fruit Juice Methodology for Selection of U.S. Markets for Primary Market Research The following section provides the details of the methodology used to determine the specific U.S. market areas in which to conduct market surveys of the potential users of passion fruit juice. The objective was to determine which markets in the United States would have the best potential, given time and budgetary constraints of the project. Once the market areas were determined, it was necessary to compile listings for retail store outlets, food wholesalers, food distributors, and importers who handle passion fruit juice and passion fruit juice products. Sources of data, including secondary data, primary data, and World Wide Web addresses are included. Step 1: U.S. Census Bureau population data for the 50 largest metropolitan areas (MA) of the United States were obtained to identify potential markets for passion fruit juice. The initial information considered was the number of people in each MA and the respective population growth rates. Data for 1998 were used. Source: U.S. Department of Commerce, U.S. Census Bureau, Metropolitan Area Population Estimates. http://www.census.gov/population/www/estimates/metropolitan.html Step 2: A review of 1997 income data was conducted for the top 100 per capita income MAs. Those MAs in the top 100 per capita income and the top 50 most populous MAs were selected for additional analysis. This resulted in the selection of 39 MAs selected for further study, including Miami, which was selected due to its high incidence of Central 9 and South American consumers. Source: U.S. Department of Commerce, U.S. Bureau of Economic Analysis, Regional Accounts Data: http://www.bea.doc.gov/bea/regional/data.htm Step 3: A review of 1988 - 97 income growth data was conducted for the 39 MAs selected in Step 2. Those MAs which had an eight year per capita income growth rate of at least 50 percent were selected for further analysis. This resulted in 20 MAs selected for further consideration, including Miami and Los Angeles due to high incidence of Central and South America consumers, even though income growth rates in both of these cities was less than 50 percent. Source: U.S. Bureau of Economic Analysis, Regional Accounts Data; http://www.bea.doc.gov/bea/regional/data.htm Step 4: Ethnic composition and age distribution of each city’s population was used to narrow the list of potential MAs for further research to seven MAs. This was done to ensure that the survey areas had a customer base which would include, large segments of the population designated as “baby-boomers” (age 30 - 55) with above average incomes and/or high concentration of Central American, South American, and Asian population groups. Sources: U.S. Department of Commerce, U.S. Census Bureau, 1990 Census Lookup; http://venus.census.gov/cdrom/lookup U.S. Census Bureau, State and Metropolitan Area Data Book - 5th Edition; http://www.census.gov/statab/www/smadb.html The following seven MAs were selected as potential sites for primary market research: 10 Chicago, Houston, Los Angeles, Miami, New York, Philadelphia, and San Francisco/San Jose. Step 5: Due to limited budget and time, the seven potential best markets were narrowed to four MA markets and chosen for primary market research to determine the presence of the product and similar products, visits with wholesalers which serve the market, and consumers. The selection of the MAs was based in part on a desire to obtain broad geographic representation in different parts of the U.S. market. The final four MAs were Houston, Los Angeles, Miami, and New York. NOTE: Chicago, Philadelphia, and San Francisco/San Jose are likely strong potential markets. Based upon the criteria used to select markets for primary market research, these three markets would be the next markets chosen for further investigation. Interviews with Chain Store Representatives Contact information was collected for chain grocery store headquarters located in the Houston, Los Angeles and Miami markets from the publication entitled Chain Store Guide: Supermarket, Grocery & Convenience Store Chains, 1999. The 2000 edition of this publication is now available for a cost of $300 at http:/www.csgis.com. Following the collection of chain store contact information for 13 chains (see Appendix 2), one or more calls were placed to all contacts in each market in efforts to arrange personal interviews to be conducted by Rosson and Adcock during visits to each of the markets. As a result of approximately fifty calls, personal interviews were arranged in Houston (Kroger and Fiesta), Miami (Winn Dixie and Sedano’s), and Los Angeles (Albertson’s). Typically, six to eight phone calls had to be placed in order to secure an interview, whether it was to locate the 11 appropriate person or to make initial contact with that person. Reasons for non-participation included refusal, inability to make contact, schedule conflicts, desire for us to speak with an individual not in the market we were visiting, and misinformation about whether the chain carried the products in question. Regardless of whether or not a chain representative was interviewed, one or more visits were made to retail grocery stores in the area. Interviews with chain store representatives lasted between 25 minutes and one hour and were free flowing exchanges of information regarding hearts of palm and passion fruit juice. For consistency, a list of open ended questions was used to guide the conversation (see Appendix 3). However, the list of questions was not used as a survey questionnaire, but as a tool to stimulate conversation and record results. While the conversation would skip from one topic area to another, all topics were covered in most interviews. Results of these interviews are integrated into the report findings and serve as an important basis for marketing strategies, options and recommendations. Interviews with Wholesaler, Importer and Distributor Representatives Information on wholesalers, importers and distributors Houston, Los Angeles, Miami and New York were collected in three ways. First, in the Chain Store Guide referenced above, each major supplier was listed, providing a ready made sampling list. Second, using the Internetbased GTE business listings, http://www.superpages.com, food wholesalers and distributors were found for each market. Finally, information on importers and distributors found on cans and jars containing passion fruit was collected, and some of these firms were contacted for participation. Also, CORPEI staff in Miami arranged interviews with two firms for whom there was no prior secondary contact information. 12 Following the collection of contact information, one or more calls were placed to numerous firms in each market area to arrange personal interviews to be conducted by Rosson and Adcock during visits to each of the markets. As a result of approximately twenty calls, personal interviews were arranged in Houston (Sysco), Miami (Hellman’s and L&J), and Los Angeles (Sysco and Melissa’s-World Variety Produce). Typically, four to five phone calls had to be placed in order to secure an interview. Reasons for non-participation included refusal due to lack of interest, refusal due to the firm’s position as an “order-taker” which simply responded to customers’ requests, inability to make contact, and schedule conflicts. Further, several randomly selected wholesale establishments were called in both the Houston market and the Miami market and asked whether they carried passion fruit juice. None indicated that they carried these products, and most did not even know what the products were. Interviews with wholesalers/importers lasted between 20 minutes and two hours and were free flowing exchanges of information regarding hearts of palm and passion fruit juice. For consistency, a list of topical questions was used to guide the conversation (see Appendix 3). As with the interviews of chain store representatives, the list of questions was not used as a survey questionnaire, but as a tool to stimulate conversation and record results, and conversations would skip from on topic area to another. Further, for five firms which were unable to participate, the list of topical questions was sent electronically (fax or e-mail), most with assurances of response. None responded. Visits to Grocery Store Locations Using the Internet-based GTE business listings, http://www.superpages.com, independent and chain grocery stores in Houston, Los Angeles, Miami and New York were identified. The 13 list of chain grocery store outlets and local maps were reviewed so as to plan an efficient round of market visits. Independent grocery stores identified as being near chain store outlets were included in the visitation route. Further, both independent and retail grocery stores which were discovered while in a market were also visited as time permitted. Once in a grocery store, several types of information were collected. First, a tour of the grocery store, typically beginning in the can food aisle, was taken to determine the presence of passion fruit. Special attention was paid to the type of store and its clientele, interesting and unique product types, and different approaches to display, advertising and placement. In all, 57 retail store locations were visited in the four primary markets, 74 in all when visits in Bryan-College Station, Texas and Washington, DC are included, which were visited for verification and consistency purposes. Of the 57 stores visited in the four target markets, 37 were parts of chains, 20 were independent. Use of Scanner Data The use of Universal Product Code (UPC) data was considered for this study. During the process of reviewing secondary and primary market data, one source which possesses sales, price and product type data was Information Resources, Inc. (http://www.infores.com). UPC scanner sales data are available on a weekly, monthly or quarterly basis for any specified market or groups of markets requested. For the four markets studied for this report, Information Resources could have provided one year of weekly sales data for each market for up to 25 products including passion fruit juice products and products associated with the heart of palm study. The cost of these data was $9,000.00 (see Appendix 4). However, these data for the heart of palm study alone would have cost $6,500.00, so the passion fruit juice data would cost at least $2,500.00. These data were not purchased due to project resource availability. 14 Notes on Use of GTE Business Listings GTE Business Listings, located on the Internet at http://www.superpages.com, is a nationwide directory of business listings by category. The phone listings for these businesses are in categories as classified by the businesses themselves. This directory was used to identify number and types of grocery stores, restaurants, wholesalers, and other businesses pertinent to the market research. While the web site is up-to-date in most cases, there are situations whereby the information was obsolete or mis-categorized. Further, some businesses, particularly restaurants, could be listed in more than one category, such as “restaurants” and “ethnic restaurants.” However, there is an additional charge for each category listed and firms may be reluctant to pay these additional charges. Therefore, an ethnic theme restaurant may be listed only in the “restaurant” category and not in the “ethnic restaurant” category. Finally, when discussing the number and types of grocery stores, stores which were obviously convenience stores were excluded. When discussing number and types of restaurants, restaurants which were obviously fast food, with the exception of pizza, were excluded. 15 Market Survey Results Before discussing the specific results for each of the four market areas, some general observations should be made. A significant share of the passion fruit juice sold in the U.S. market is sold as tropical juice blends. Single serve passion fruit juices appear to be most popular in New York/New Jersey and Miami. California and Houston market consumers prefer blended juices to single serve juices or juice drinks. There appears to be intense wholesale and retail competition for beverage and fruit juice sales. It is unlikely that passion fruit juices will experience any substantial increase in per capita consumption without market development and product promotion from importer to consumer in all four market areas. Two key facts should be noted about the U.S. consumer. First, about 95 percent of all U.S. households use recipes on a frequent basis. Second, on any given day at 4 p.m. about 80 percent of all U.S. consumers do not know what they will have for dinner that same day. These observations have important implications for product use, consumption, and promotional activities. Products must be convenient, relatively easy and quick to prepare, recipes must be explained clearly and thoroughly, and consumer time spent preparing a meal and its components is at a premium. Due consideration should be given to these factors when deciding to promote passion fruit juice and educate the trade on its potential uses. 16 Houston Market Houston is a potential market of 4.0 million people, growing at an annual average rate 1.6 percent. Per capita incomes average $29,000 per year and have grown at seven percent annually since 1988 making it the fastest growing income area of the four markets surveyed. The population of consumers aged 10-35 is estimated to be 1.6 million and represents about 40 percent of the total. There are approximately 200,000 Asians and 25,000 South Americans in the Houston market area. Houston has 1,250 grocery stores, 181 of which are chain stores1. Retail grocery stores tend to be clustered together in Houston due to competition and high population density in some areas of the city and surrounding areas. Kroger has 54 stores, followed by Randalls with 30, Fiesta Mart with 29, H.E.B. with 19, Albertson’s and Gerland’s with 13 each, Rice and Seller Brothers with 10 each, and Whole Foods with three. Fifteen Houston area grocery stores were surveyed to determine uses and prevalence of passion fruit juice in products. Albertson’s, Fiesta, Randalls, Kroger, Gerland’s, H.E.B., and two independents were surveyed. Based upon discussions with store managers and observation of product presence it appears that mango is the number one selling juice. Guava and coconut follow in sales. There was a high presence of tropical juice blends in most stores. 1 Chain stores are defined as a group of 11 or more affiliated retail grocery outlets. 17 Passion fruit juices were found in Fiesta, Kroger, and Albertson’s stores. There was a diversity of display, with juices being kept in the frozen/chilled concentrates, blends, and single serve products. In addition, some juices were located in the soft drink area, separate juice area, and with an international foods display section. Houston also has 3,093 restaurants, with 42 being smoothie or juice restaurants, 34 Smoothie King outlets, and only two Jamba Juice outlets. There are about 175 delicatessens and 152 ethnic restaurants. It was observed that the Smoothie King juice outlets did not have a passion fruit drink, while the Jamba Juice outlets did. Further, it is believed that some of the ethnic and carry out restaurants are potentially good markets for passion fruit juice and passion fruit flavored drinks. Two chain store representatives and one hotel-restaurant-institutional (HRI) food purveyor were interviewed. All believed that it would be important to have recipes and recipe cards indicating how to prepare drinks using passion fruit juices, especially for first time buyers. It also is important to promote the juice with the wholesale and retail trade representatives. Participation in trade shows and news features were mentioned as key ways to increase wholesale/retail trade and consumer awareness of the product and its uses. It was also noted that food features in the Houston Chronicle, the only major daily newspaper, and television food features might be used to attract consumer attention to new passion fruit juice products as well as 18 demonstrate ways to prepare and serve the juice. Concerning in store promotion, the following considerations were mentioned. First, discount coupons may work in some stores, but not in others. It will be important to determine the most effective method of using coupons. Second, product demonstrations will be important to acquaint store personnel and consumers about the product, its use, and its preparation. Third, consider promotion through chef’s associations and other trade outlets to highlight the product, its origin, and its uses. Finally, it will be important to distribute through both chain stores and independents, as well as wholesalers in order to conduct the most effective promotion and to penetrate the market. 19 Los Angeles Market Los Angeles was the largest market surveyed, with a population of 9.7 million people growing at less than one percent per annum. The average per capita income was $25,700 which has increased at an annual average rate of 3.7 percent since 1988. About 40 percent of the population is between the ages of 10 and 35 resulting in a potential market of 3.9 million consumers. There are 130,000 South Americans and 1.2 million Asians in the area. There are more than 500 groceries in Los Angeles with chain stores representing about one-fifth of the total, or 96 stores. Ralphs has 25 chain outlets, Albertson’s 18, Von’s 14, Smart & Final 11, Jon’s 9, Food-4 Less 8, Pavilions and Pay Less 4 each, Trader Joe’s and Whole Foods 2 each. Thirteen stores represented by Albertson’s, Ralphs, Smart & Final, Pavilions, Trade Joe’s, Whole Foods, and three independents were surveyed. Most stores carried some type of juice containing passion fruit juices, many with ‘Passion’ in the name. Kerns and Hansens brands were in most stores. In this area, fresh juices are used in high end health drinks to emphasize the nutrition and health attributes of the products. Passion fruit juices were displayed in frozen/chilled concentrate, blends, and single serve forms. Most were in one and often two or three of the following sections of the stores: soft drink, juice area, international display, and refrigerated areas. Most products were integrated into other drink displays and there was no evidence of an area of any store emphasizing or featuring passion fruit juice. 20 Los Angeles has 4,100 restaurants, with 55 smoothie or juice restaurants being identified. There are 40 Jamba Juice outlets in the area, along with 149 delicatessens and 307 carry-out restaurants. There are also 372 ethnic restaurants. Trade perceptions for promoting passion fruit juice were determined by interviewing one chain store representative, one HRI wholesaler, and one food importer. There was consensus that the Los Angeles market for fresh/chilled juices and blends was increasing and that there may be limited potential for concentrates and canned juice drinks. In store demonstrations using recipe cards and emphasizing the health and nutritional benefits of the juice were mentioned as important to increase consumer awareness and consumption of the product. The food importer believed it important to contract with a public relations firm to coordinate promotional activities from wholesale to retail to consumer. It was also emphasized that taste tests and product preparation and use demonstrations would be important, especially for first time buyers of passion fruit juice. The competitive nature of the juice business was mentioned as important in influencing product development. Organic juice, flavoring is salad dressings, syrup to flavor other fruits or mixed fruit products, and jams, preserves, or jellies were mentioned as possibilities for new product development and consumer taste and use testing. It was also suggested that getting a product endorsement from a celebrity would help consumers identify with the product and would boost sales. 21 Miami Market Although Miami was the smallest market surveyed, its population is growing at 1.2 percent per year and incomes are rising at 3.7 percent per year. It has a large South American population, 170,000, and 40,000 Asians. There are also large concentrations of peoples from Central America, Mexico, and the Caribbean. About 35 percent of the population, or 770,000 people are between the ages of 10 and 35. Miami is characterized by a high incidence of independent grocery stores (88 percent), with more than 700 total stores in the area. Distribution through both chains and a wholesaler or importer who services independents will be important in the Miami market area. There are also 49 stores in the Ft. Lauderdale area which is rapidly becoming part of the greater Miami area. Chain stores in Miami are Winn Dixie with 33 outlets, Sedano’s with 22, Food Spot 18, Hyde Park 8, Albertson’s 2, and Publix 1. Ft. Lauderdale has Winn Dixie with 25 stores, Publix 21, and Albertson’s 3. Chain store distribution will be more feasible in the Ft. Lauderdale area due to the higher incidence of chains in this market area. Ten stores were surveyed in Miami and Ft. Lauderdale. Sedano’s, Publix, Winn Dixie, and five independents were included in the survey. Mango juice was the number one selling juice, followed by guava, with passion fruit estimated to be number ten. Consumer tastes are favor the other flavors over passion fruit. A diverse mix of juices were present in all stores, with 22 most being displayed in as frozen concentrate, chilled, and blended juices. There are 2,803 restaurants in the Miami area, with about 24 smoothie or juice outlets, 10 Smoothie Kings, 69 delicatessens, 161 carry-outs, and 23 ethnic restaurants. Three chain store representatives, one freight forwarder/customs broker, and one imported foods distributor were interviewed regarding trends in the industry and promotional considerations for passion fruit juices. Chain store outlets are highly dispersed in Miami, emphasizing the need to distribute through wholesalers and distributors. The suburban consumer is becoming more important, especially in the western and northwestern parts of the greater Miami area where growth and expansion of shopping centers is occurring. New products such as Capri Sun, Earth, Wind, and Fire, Tropicana Twister, and Splash are leading sales. Goya Foods, Iberia, and Libby’s are supplying some of the tropical juices and tropical juice blends. Traditional juices are lagging in sales, especially frozen concentrates. In Miami, new age sales appear saturated, with drinks such as Snapple, Arizona Teas, and Frutopia leading the decline. Cubans and other Caribbeans are not major consumers of most fruit juices, even the tropical types. It was emphasized that promotion among distributors and chain stores would be required to boost fruit juice sales. Other considerations included the use of health attributes, such as passion fruit being noted as a blood pressure regulator. This type of health information should be verified and used 23 to promote consumer awareness of the product and its attributes. There was also mention that confusion about product names may exist and that education and promotion could help clarify the products in the minds of consumers. L&J food importer of the El Sembrador brand believes that passion fruit is a fast seller, especially in frozen pulp and pulp blends, but this was contrary to information provided by most other distributors and grocery stores. 24 New York Market New York is a large, relatively affluent metropolitan area with 8.6 million people and 0.5 percent growth. Per capita incomes average $34,000, the highest of the four markets, and have grown 6.1 percent annually since 1988. About 36 percent of the population, or 3.1 million consumers, are between the ages of 10 and 35. There are 720,000 Asians and 430,000 South Americans in New York. There are 713 grocery stores in New York and another 110 stores in suburban New Jersey, which was also included in the survey area. The incidence of chain stores is about 18 percent, with Gristedes having 34 stores, D’Agostino’s 21, Associated 18, Pioneer 15, and Food Emporium 14. In addition, New York has 6,322 restaurants with only 12 smoothie type outlets. There are 655 delicatessens, 113 carry-out restaurants, and 560 ethnic restaurants. Nineteen grocery stores were surveyed, nine chains and ten independents. Five of these stores were in Manhattan, eight in the Latin/Asian area of Queens, and six were in suburban New Jersey (East Rutherford and vicinity). There was a wide variety of passion fruit juices and products in Queens. Ceres brand sells a passion fruit blend with apple or grape juices, while at least three stores carried Goya brand passion fruit jam. Of the restaurants surveyed, many in Queens had passion fruit juice products on menus. Passion fruit juice products were highly visible and widely dispersed in most stores in all three areas surveyed in the greater New York area. Most were found in the frozen or chilled 25 sections, the juice aisle, or on the international products aisle. One stores in Queens had dedicated one entire aisle to Goya products. Passion fruit juices and jam were displayed on this aisle. Promotional considerations for New York include the importance of distribution through independent grocers and wholesalers to reach the ethnic markets. Small stores are common, many specializing in Asian or Hispanic foods only. Passion fruit juices and other products were readily available in many stores. Costs and benefits of a major promotional effort in this area should be calculated before any activities are conducted. 26 Section 5. Options and Strategies for the Industry A. Coordination Coordination of promotional activities throughout the wholesale/retail chain was emphasized by importers, distributors, and grocery store representatives. The primary objective of most promotional activities is to increase product use and repeat buying, thereby expanding the size of the market. Promotion may also be an effective way to establish firm or product image in another market. Promotion may include but is not limited to advertising, personal sales, catalogs, in-store demonstrations and product samples, brochures, point-of-purchase display materials, and participation in trade fairs by providing product exhibits and samples. B. Promotion Among the most important promotional methods mentioned by the trade in each market was the use of in-store demonstrations, product preparation, and product use and samples. It was noted that these activities would be especially important in attracting new consumers to passion fruit juices. Features in the food section of newspapers and magazines was also deemed important, along with a presence on the World Wide Web. The development of wholesale and retail trade brochures was noted, along with the need for consumer information. Wholesale/retail trade information could include production processes, International Standards Organization certification, and food safety considerations. Product types, health, nutrition, and other attributes, and blending or mixing characteristics should be emphasized. For consumers, information related to any special health and nutritional benefits should be emphasized, along with product use and preparation, including recipes for drinks and other products. C. Point-of-Purchase Display Materials The need for retail point-of-purchase display materials to support promotion and in-store 27 demonstrations was emphasized. New product development was noted as important, given the competitive nature of the beverage market. In addition, it will be important to contact passion fruit juice importers and distributors in order implement any effective promotional activity. While all chain stores have internal distribution networks, it is important to note that it will be necessary to use brokers and importers to facilitate the distribution of specialty products such as passion fruit juices. D. Strategic Alliances and New Products It is likely going to be important for firms to form alliances with quick serve and smoothie restaurants in order to get additional product into that market segment. Many of these outlets do not presently use or have access to passion fruit, but alliances could result in availability of product. Alliance formation also could lead to buying commitments from the outlets and a more steady use of passion fruit juices in a variety of existing and new products. E. Costs and Benefits of Promotion Most market promotion activities will require some out of pockets expenses on the part of the industry. These expenses can be borne by individual firms, coalitions of firms, industry/ government partnering, or strategic alliances across countries. Each of these alternatives should be examined to determine the costs of promotion and the benefits accruing to the industry in Ecuador. One major benefit of an alliance or coalition of firms is the aspect of promotion cost sharing, thereby reducing the financial burden for any one firm. One drawback is the difficulty in coordinating the promotional and product delivery activities among firms. Independence of operations would be sacrificed in order to stimulate industry sales. F. Free Rider Problem Regardless of the promotional activities undertaken, it is almost certain that any activity 28 which increases demand and results in higher market prices will attract unwanted competition. In many cases this competition may be from firms that did not pay for nor participate in the promotion, and are therefore, ‘free riders.’ While this is a common problem in the promotion of non-differentiated products, it need not thwart the industry from promoting the increased use of passion fruit juices in the U.S. market. Section 6. Conclusions and Implications The U.S. market for beverages and fruit juices is large and diverse, characterized by intense competition and a wide variety available products. U.S. consumers spend $17.5 billion on fruit juice and fruit drinks each year, with $620 million spent on new age beverages. An additional $54 billion is spent on soft drinks. The U.S. market is also characterized by a high degree of price competition, especially for non-specialty juices and fruit drinks. Since the mid1990s sales of shelf-stable juices, drinks, and concentrates have expanded. At the same time, sales of frozen and refrigerated juices and drinks have fallen. Market opportunities for passion fruit juices appear greatest in the specialty juices and other new age juices. Passion fruit juice and other passion fruit products, such as jams, were prevalent in all four markets surveyed. These products appeared most prevalent in retail groceries and specialty stores. Of the four markets studied, a subjective assessment of the results indicates that Los Angeles and New York likely have the best prospects for growth given a coordinated promotional effort. Prospects for market expansion in Houston and Miami also have significant potential; however, a substantial, broad-based promotional effort would be required Promotion of passion fruit through the wholesale and retail distribution system is crucial for market expansion and increased sales. Promotion should be coordinated, focusing on the major handlers and users of the juice, as well as distributors and importers who do not currently 29 handle the product, but have an interest in doing so. Point-of-purchase display materials will be necessary to attract consumers and aid the retail grocers during in-store demonstrations, product tasting, and product preparation demonstrations. Education of new users, handlers, and consumers about the product, its forms, and its uses will be necessary to expand consumption and sales. It may also be important to consider ways to differentiate passion fruit from other fruit juices and fruit drinks to facilitate market development and product identification by consumers and the trade. Formation of alliances with juice blenders, importers, distributors, and possibly some grocery outlets and juice retail stores should be considered in order to introduce passion fruit to those who are currently not familiar with it and its many uses. New product development and consumer taste testing should be considered. The highly competitive nature of the U.S. fruit and beverage market will likely necessitate the examination of new products and new uses for passion fruit. Suggestions from market surveys include new drinks and blended juices, salad dressing flavorings, syrups for other prepared and preserved fruits, and varied cocktails and other drinks. Coalitions of firms within the industry would facilitate coordinated market promotion and education, and result in shared costs of market development activities. Consideration should be given to industry participation in trade shows in the United States, such as the Fancy Foods Show, which promotes the display and sampling of specialty foods for the wholesale and retail trade. Finally, it is important to note that all food importers, wholesalers, HRI trade, and retail groceries surveyed believed that it will be difficult to increase the size of the U.S. market for passion fruit juice without solid promotional efforts. Influencing consumer tastes and preferences will be crucial to the success of market promotion efforts. 30 Appendix 1 Export Cost Analysis In July and October 1999, project researchers met with several participants in the Ecuadorian passion fruit juice export industry. In those meetings, a conceptual framework for export cost analysis and costs associated with the export of passion fruit juice to the U.S. and other markets were discussed and collected. The following export cost worksheet summarizes the results of those discussions, based in part on the following assumptions: 1. 2. 3. 4. The product: 500 Brix maracuyá juice in 240 kg (200 liter) drums. Quantity: 105 drums per 40 foot reefer container kept at -180 C to -200 C. Various costs as discussed in conversations with maracuyá juice industry representatives, other industry representatives, and shipping lines. An average per drum FOB price of $362.86 as derived from Central Bank of Ecuador (http://www.bce.fin.ec) export data from January to February 2000 for exports of the product from Ecuador to the United States. Price declined from an average of $728.10 in the 1998 export year. The research team realizes that export costs may have changed significantly since October 1999; however, it is also believed that the exporting industry is well aware of the current cost structures and has adjusted or is in the process of adjusting to price changes. This section to designed to provide guidelines and profitability analysis of shipping to the United States market. It should be noted that the charges in the worksheet are based on industry consensus and may not be representative of any individual operation. These charges also change frequently and should be verified before they are used in any financial analysis. For FAS and FOB (see price quote descriptions following spreadsheet) there is no cost difference between the East Coast and West Coast of the United States. When exporting CFR, however, it is about $500 less to ship to the West Coast. This represents about $4.76 per drum of passion fruit juice. Most of this difference is due to the locational advantage of the West Coast and possibly higher tonnage, although the latter was not independently verified. 31 Reference Number: Product Information: Product No. of Units Net weight (tons) Dimensions Cubic Measure Product Cost H.S. No. 277.93 Export Cost Worksheet Maracuya Juice Customer Reference No. 240 KG Drum of Maracuya Juice Customer Information: (500 Brix) 105 Name 25.2 40 foot Container (Reefer -180 C) Address Cable Address Telex No. Fax No. E-mail All Cost Amounts in U.S. $ Destination: West Coast U.S. Per Container Cost of Goods Sold Profit (or markup) Sales Commissions Packing (Drum cost) Verification Quality Analysis Financing Costs – L/C Confirmation Financing Costs Transaction Charge Sanitary Certificate Product Labeling Certificate of Origin Export Form Modernization Charge Misc. Handling Other (identify) EXW Factory Price: $37495.31 $347.37 $37495.31 $347.37 $29182.65 10% 3.5% 3675 100 124 55 325 35 0 4 5 10 40 35.000 0.952 1.181 0.524 3.095 0.333 0.000 0.038 0.048 0.095 0.381 Per Drum $277.93 27.793 Destination: East Coast U.S. Per Container $29182.65 10% 3.5% 3675 100 124 55 325 35 0 4 5 10 40 35.000 0.952 1.181 0.524 3.095 0.333 0.000 0.038 0.048 0.095 0.381 Per Drum $277.93 27.793 32 Reference Number: Export Cost Worksheet (continued All Cost Amounts in U.S. $ Destination: West Coast U.S. Per Container Inland Freight – including insurance Wharfage - included in freight DEA Inspection Other (identify) FAS Vessel Price: Terminal Handling Charges Loading - included in freight Bunker Charge Other (identify) FOB Port Price: Stowage & Trimming (in freight) Weight measure (from above) Ocean Freight Rate Other (identify) CFR Destination Price: $41600.31 $396.19 $42100.31 $400.96 $38110.31 $362.86 $38110.31 $362.86 $37945.31 35.00 0.00 120.00 400.00 0.00 50.00 Per Drum 3.810 0.000 0.476 0.000 $361.384 0.333 0.000 1.143 $37945.31 35.00 0.00 120.00 Destination: East Coast U.S. Per Container 400.00 0.00 50.00 Per Drum 3.810 0.000 0.476 0.000 $361.384 0.333 0.000 1.143 25.2 tons 3500 33.333 25.2 tons 4000 38.095 Price Quote Summary Destination: West Coast U.S. Summary - Per Unit Charges EXW FAS FOB CFR Per Container $37,495.308 $37,945.308 $38,100.308 $41,600.308 Per Drum $347.371 $361.384 $362.860 $396.193 Destination: East Coast U.S. Per Container $37,495.308 $37,945.308 $38,100.308 $42,100.308 Per Drum $347.371 $361.384 $362.860 $400.955 33 Export Price Quote Descriptions (Incoterms) EXW (Ex Works at a named place): EXW means the seller’s only responsibility is to make the goods available at the seller’s premises. The seller is not responsible is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed. The buyer bears the full costs and risk involved in bringing the goods from there to a desired destination. EXW represents the minimum obligation of the seller. FAS (Free Alongside Ship at a named port of shipment): FAS requires the seller to deliver the goods alongside the ship on the quay. From that point on, the buyer bears all costs and risks of loss and damage to the foods. FAS requires the buyer to clear the foods for export and pay the cost of loading the goods. FOB (Free On Board at a named port of shipment): Under FOB, the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement. The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods pass the ship’s rail upon loading. The seller pays the cost of loading the goods. Most common pricing term used when exporting from Ecuador. CFR (Cost and Freight at a named port of destination, formerly C&F): CFR requires the seller to pay the costs and freight necessary to bring the goods to the named port of destination, but the risk of loss and damage to the goods, as well as any cost increases, are transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. Insurance is the responsibility of the buyer. There are nine other Incoterms available. These nine terms can be found at the website of the World Cargo Alliance (see source below). Source: World Cargo Alliance, http://www.worldcargoalliance.com. 34 Appendix 2 Chain Store Contact Information Market Houston: Store Information Stores in Region Fiesta Mart, 5235 Katy Freeway, 77007 41 stores (713) 869-5060; Fax: 865-5546 John Nagle, Merchandising Manager, Grocery Category Managers: Carrie Campion and Peggy Mann Located at Fiesta #19 - 1005 Blalock, Houston, TX (713) 722-1324 Gerlands Food Fair, 3131 Pawnee Street, 77054 (713) 746-3600; Fax: 746-3621 Alex Secherwald, Merchandising Manager, Grocery 14 stores 180 stores Kroger SW Division, 16770 Imperial Valley Dr., #200, 77060 (713) 507-4800; Fax: 507-4804 John Tribo, Merchandising Manager, Grocery Jonathon Wall, Specialty Products Buyer, Grocery (713) 507-6324 Rice Food Markets, 5333 Gulfton, 77081 (713) 662-7700; Fax: 662-7757 Scott Silverman, V.P., Grocery Phil Cohen, Buyer, Grocery Albertson’s, 23623 Colonial Pkwy, #200, Katy, 77493 (281) 347-5900; Fax: 347-5933 Curt Gore, Manager, Grocery Sales Mike Latona, Buyer Los Angeles: Ralph’s Grocery, 1100 W. Artesia, Compton, 90220 (310) 884-9000; Fax: 884-2606 Alan Stock, Specialty Products Buyer Bob McKee, Group V.P., Non-Perishables, Food-4-Less Whole Foods, 15315 Magnolia Blvd, Sherm. Oaks, Ste 320 91403 (818) 501-8484; Fax: 990-7089 Mike Vandiwier, Regional Buyer, Grocery Smart and Final, Inc., 600 Citadel Dr, City of Commerce, 90040 (323) 869-7500; Fax: 869-7858 Ron Jenson, Grocery Buyer Julia Bischoff, Specialty Products Buyer (323) 869-7549 22 stores 53 stores 412 stores 15 stores 215 stores 35 Market Los Angeles (continued) Store Information Albertson’s, 6565 Knott Ave., Buena Park, CA 90620 (714) 671-6100; Fax: 671-6169 Paul Edwards, Manager, Grocery Sales Henry Wong, Coordinator, Grocery Greg Pappas, Specialty Products Buyer Sedano’s Supermarket, 3925 Palm Ave., Hialeah, 33012 (305) 824-1034; Fax: 556-6981 Jose Herran, General Manager, Grocery Buyer Publix Supermarkets, 100 NE 183rd St, 33179 (305) 652-2411; Fax: 770-3364 Mike Meridith, Regional Directors, Store Operations Pete Moett, Director of Merchandising Donna Foy, Purchasing Department (941) 688-7407 X5359 Pueblo Intl, 1300 NW 22nd Street, Pompano Beach, 33069 (954) 977-2500; Fax: 979-5770 Cecelia Diaz, Directors, Grocery Buyers (787) 757-3131 Stores Located in Puerto Rico and the Virgin Islands Winn Dixie, 1141 SW 12th St, Pompano Beach, 33069 (954) 783-2700; Fax: 783-2892 P. R. Picard, Merchandising Manager, Grocery Charlie Hummel, Specialty Products Buyer Stores in Region 312 stores Miami: 23 stores 172 stores 50 stores 125 stores 36 Appendix 3 Chain Store and Wholesaler Representatives Questionnaire 1. Product areas include: a) palm hearts and similar products such as artichoke, asparagus, and water chestnut; and b) new age beverages such as fruit drinks (containing or not containing passion fruit juice) and “smoothie” type drinks. 2. Product performance of a) and b) compared within area and with other areas such as processed vegetables for a); and all soft drinks, including blended fruit drinks for b). This would include historical/recent sales trends. Perceived prospects for the growth of a) and b). Are there any problems with these types of products or attributes which can be improved? Ideas for the promotion of these products, specifically palmito and products with passion fruit juice. Information on types and source for their palmito and passion fruit juice products. Any perceived differences regarding the origin of these products - Ecuador vs. Costa Rica vs. Brazil vs. Other. Customer profiles and perceptions: who’s buying, substitutes, income levels. Any other information they think would be helpful in expanding the market for these types of products. 3. 4. 5. 6. 7. 8. 9. 37 Appendix 4 Proposal from Information Resource, Inc. for Purchase of Scanner Data 150 north clinton street l chicago, il 60661-1416 l (312) 627-4260 (Direct) l (312) 474-8530 (Fax) 27 March 2000 Mr. Flynn Adcock Department of Agricultural Economics Texas A & M University TAMU-S-2124 College Station, TX 77843-2124 RE: Dear Flynn: On behalf of Information Resources, Inc. (“IRI” or the “Company”), I am pleased to make the following proposal to provide the InfoScan Services outlined on Attachment 1 to this letter (the “InfoScan Services”) to Texas A & M University (referred to herein as “you” or “Client”) in accordance with the following terms: 1. IRI will provide the InfoScan Services to you for the term described in Attachment 1 to this letter agreement. Unless otherwise agreed in writing, additional extra cost InfoScan-related services subscribed to by you during the term of this Agreement will be subject to the same terms and conditions as the InfoScan Services provided hereunder. 2. If you accept this proposal, you agree to pay the following price for the InfoScan Services in accordance with the following payment terms: Price: $9,000 for one-time delivery including Passion Fruit items (See Attachment I) $6,500 for one-time delivery without Passion Fruit items (See Attachment II) Payment must be received before any work is begun. The prices in this proposal are valid only if you sign and return this agreement within 30 days. You agree promptly to reimburse IRI (or pay directly if so requested by IRI) all taxes, charges and fees imposed by any governmental body or agency upon or in connection with the transaction contemplated by this Agreement excluding all taxes measured by net income. Upon request, you agree to provide IRI with proof of such payment. 3. (a) You will take all reasonable precautions not to disclose or allow to be disclosed any of the data, Proposal and Agreement for InfoScan® Services 38 analysis, reports, operating procedures, software, software documentation or any other material deemed by IRI to be confidential, to any other person, firm or other entity (including in connection with any legal proceedings) without the prior written consent of IRI except that you may disclose data, analysis and reports received from IRI hereunder, without IRI's prior consent, to your brokers, retailers (subject to Paragraph 3(c) below), advertising agencies and distributors solely for your own business purposes and only on the condition that such third parties are made aware of and agree to be bound by these non-disclosure provisions. (b) Further, you may disclose data, analysis and reports received from IRI hereunder, without the prior written consent of IRI, to your consultants solely for the purpose of having such consultants review and consult with you regarding such information (but not for any purposes which would permit your consultants to manipulate such information and/or perform computer modeling using such information and provide such information back to you for additional consideration of any type) and only on the condition that such consultants are made aware of and agree to be bound by these non-disclosure provisions. In the event you desire to disclose disclose data, analysis and reports received from IRI hereunder to your consultants for any other purposes, you may do so with IRI’s prior written consent which shall not be unreasonably withheld, provided such third party consultants first enter into IRI’s standard third party nondisclosure agreement and pay to IRI a single-use application royalty for the use of such data, analysis and/or reports. (This single-use application royalty does not include any fees for software products/services or consulting services that may be required from IRI, which IRI shall provide at its prevailing rates for such products/services). (c) In addition to the foregoing, you acknowledge and agree that IRI-supplied retailer specific InfoScan Data (e.g., Key Account, RMA, RAP and InfoScan Census information), if any, are provided to you on a confidential basis to be used by you solely for (a) your own internal use; and (b) for use in making sales presentations to the specific retailer from whom such data was derived. You further agree that no other retailer/wholesaler nor any other third party (except for your brokers, advertising agencies, distributors and consultants who are bound by the terms of this Agreement as set forth in this Section 3) shall have access to these data. 4. The data to which you are provided access hereunder shall belong to IRI. IRI reserves the right to resell the data in any form to third parties. You may not resell data, reports or portions of reports in any form. 5. IRI will maintain reasonable standards to insure that data collected by it and provided to you hereunder are correct and accurate. In the event of incorrect data being provided to you, IRI’s liability shall be limited to correction and/or replacement of the data. IRI MAKES NO REPRESENTATION OR WARRANTY AS TO THE VALUE, MERCHANTABILITY, DESIGN OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE DATA TO BE PROVIDED HEREUNDER. In the event that IRI is unable to perform hereunder for any reason, IRI’s liability shall be limited to a refund or credit of the amount paid for that portion of this Agreement that IRI has not fulfilled and in no event shall IRI be liable for lost profits, good will or other special or consequential damages of any kind. 6. Neither party shall be liable to the other party for any loss, injury, delay, damages or casualty suffered by the other party due to strikes, governmental action, unusually severe weather, acts of God or public enemy, or any other cause which is beyond the reasonable control of either party, and any failure or delay by either party in the performance of its obligations under this Agreement due to one or more of the foregoing causes will not be considered a breach of this Agreement. 7. No waiver, alteration or modification of any provision herein shall be binding upon either party unless made in writing and agreed to by a duly authorized officer of the party sought to be bound. This Agreement may not be assigned by you. Waiver by either party of any default hereunder shall 39 not be deemed a waiver by such party of any default by either party which may thereafter occur. This Agreement shall be governed by and construed under the laws of the State of Illinois. Please acknowledge your acceptance of these proposal terms and your agreement to the foregoing by signing below. Sincerely, INFORMATION RESOURCES, INC. Dawn Mehrens ACCEPTED AND AGREED TO BY: Texas A & M University Please Circle Applicable Option: Option I: $9,000 for one-time delivery including Passion Fruit items Option II: $6,500 for one-time delivery without Passion Fruit items Signature: ___________________________ Title: Date: ___________________________ ___________________________ 40 ATTACHMENT 1 INFOSCAN SERVICES 1. InfoScan Services: Categories: Canned Vegetables Shelf Stable Marinated Vegetables Refrigerated Marinated Vegetables Refrigerated Juices/Beverages Canned Shelf Stable Juices Bottled Shelf Stable Juices Aseptic Shelf Stable Juices Frozen Juices and Cocktail Mixes Level of detail: “Category” plus all UPC’s of the following products only: Mushrooms Artichokes Hearts of Palm Passion Fruit Juice (ONLY those juices with Passion Fruit in their descriptions) Outlets: Food Markets/Geographies: The following InfoScan markets: Miami Houston New York Los Angeles Measures: Dollar Sales, Unit Sales, Average Price per Unit Time Periods: 52 weeks ending 2/27/00 vs. Year Ago 2. 3. 4. 5. 6. Term: IRI will provide the InfoScan Services on a one-time basis. Mode of Delivery: IRI shall deliver the data via Excel spreadsheet. Frequency of Delivery: The data will be delivered within two weeks of signed approval. Client Service: Client service will be provided to respond to questions regarding the data and services provided. Price: $9,000 41 ATTACHMENT II INFOSCAN SERVICES 1. InfoScan Services: Categories: Canned Vegetables Shelf Stable Marinated Vegetables Refrigerated Marinated Vegetables Level of detail: “Category” plus all UPC’s of the following products only: Mushrooms Artichokes Hearts of Palm Outlets: Food Markets/Geographies: The following InfoScan markets: Miami Houston New York Los Angeles Measures: Dollar Sales, Unit Sales, Average Price per Unit Time Periods: 52 weeks ending 2/27/00 vs. Year Ago 2. 3. 6. 7. 6. Term: IRI will provide the InfoScan Services on a one-time basis. Mode of Delivery: IRI shall deliver the data via Excel spreadsheet. Frequency of Delivery: The data will be delivered within two weeks of signed approval. Client Service: Client service will be provided to respond to questions regarding the data and services provided. Price: $6,500 42 Appendix 5 List of Potential Importers Potential U.S. Passion Fruit Juice Importer/Distributors DECO Cargo, Inc. 8175 Northwest 74th Avenue Miami, FL 33166 (305) 888-7002; Fax: (305) 888-3223 Gourmet Awards Foods Southeast 4006 Airport Road Plant City, FL 33567 (813) 752-8558 Gourmet Award Foods 5101 Highland Place Drive Dallas, TX 75236 (972) 298-2957 Gourmet America 350 Lincoln Street, Suite 217 Hingham, MA 02043 (781) 749-3140 Goya Foods, Inc. 100 Seaview Drive Suite 1 Secaucus, NJ 07094 (201) 348-4900 Grace, Kennedy & Company 73 Harbor Street Kingston, Jamaica W.I. (876) 922-3440 H&J Trading Co. 15 Crow Canyon Court San Ramon, CA 94583 (925) 552- 0220 Hansen Beverage Company 2380 Railroad Street Corona, CA 92880 (909) 739-6200 or 739-6400 L&J General International (El Sembrador) 4525 NW 25th Avenue Miami, FL 33142 (305) 638-5161 Melissa’s-World Variety Produce, Inc. 5325 South Soto Street Los Angeles, CA 90058 (323) 588-0151 Nestle USA (Kern’s) 800 North Brand Blvd. Glendale, CA 91203 (818) 549-6000 or 549-6288 or 545-9141 Omega Imports, Inc. 1227 Northwest 93rd Court Miami, FL 33172 (305) 592-1918 Perrone & Sons, Inc. 4512 Zenith Street Metairie, LA 70001 (504) 455-3663 Unimark Foods 124 McMakin Road Argyle, TX 76226 (817) 491-2992 or 491-3290 or 430-1956 Welch’s 2 South Portage Street Westfield, NY 14787-1492 (716) 326-5252 43