Study on generic Hass promotion has implications beyond avocados
Study on generic Hass promotion has implications beyond avocados
In the winter 2006 edition of Review of Agricultural Economics, Hoy F. Carman, a professor in the Department of Agricultural & Resource Economics at the University of California-Davis, published a study regarding the effectiveness of generic advertising being done by the Hass Avocado Promotion & Research Order.
"The California avocado industry provides a case study of the economic pressures from increased imports and ongoing efforts to expand the demand for all avocados using government-mandated marketing programs," wrote Mr. Carman.
The study concluded that "new advertising and promotion funded by the 2.5 cents-per-pound assessment on all Hass avocados sold in the U.S. can offset a portion of the price impact of increased imports."
The Produce News recently interviewed Mr. Carman's colleague, Roberta Cook, a marketing specialist in the department, regarding the implications of Mr. Carman's findings on commodities other than avocados.
The study shows "the importance of the players in an industry all coming together for the common purpose of stimulating demand," said Dr. Cook, who holds a doctorate in agricultural economics from Michigan State University.
"I think that too often in the past, players have tried to combat each other for competitive purposes, and when they do that, that does nothing to build total demand," she said. "All players benefit by growth in demand. To me, I think [the Hass promotion program] is just a wonderful example of an industry recognizing" the benefits not only of generic promotion but having importers as well as domestic producers contribute to those programs.
From around 1961 up through about 2003, the California avocado industry had spent a total of some $182 million promoting avocados, Dr. Cook said. "Clearly, having made that investment, they would be concerned about growing imports free-riding on their investment."
California producers, therefore, felt that it was important to have a national Hass avocado promotion order "to ensure that all of the players in the industry would be contributing to the promotion."
The mandatory assessment program, which assesses both domestic production and imports, and is known in agricultural marketing circles as a national checkoff program, "allows all the avocados that are exported to the United States to also be contributing a certain amount per pound for the generic promotion program," said Dr. Cook. That has resulted in a larger amount of funds being raised for generic promotion "than just what would be raised by the California industry."
The Carman study shows that the additional funds raised by assessing imported Hass avocados and spent on generic Hass avocado promotion have helped to stimulate demand sufficiently to "offset the potential decline in prices that you might have expected with the rise in imports," said Dr. Cook. Consequently, as Hass avocado consumption in the United States has doubled over the last few years, with most of the increase coming from imported product, Hass prices have remained "attractive for [domestic] growers," she said.
"So the point of all of this to me is instead of fighting competition, what players in an industry can do is come together and focus on expanding demand," she said.
That finding has "significance beyond avocados," Dr. Cook said. The approach taken by the Hass industry demonstrates that "if the players in an industry, the foreign players and the domestic players, come together and utilize their resources to stimulate demand, they can both benefit."
Money that they might have spent "fighting each other" -- through anti- dumping suits and other trade disputes, for example -- is more effectively used to build demand, she said.
"It doesn't matter where the borders are. If you have players participating in the same market, it doesn't matter where the products originate," she continued. "And consumers don't care where the products originate. The point is, if you are all participating in a given market, you should try to expand that market, and the government allows you to do that -- to come together and have mandatory generic promotions."
"The California avocado industry provides a case study of the economic pressures from increased imports and ongoing efforts to expand the demand for all avocados using government-mandated marketing programs," wrote Mr. Carman.
The study concluded that "new advertising and promotion funded by the 2.5 cents-per-pound assessment on all Hass avocados sold in the U.S. can offset a portion of the price impact of increased imports."
The Produce News recently interviewed Mr. Carman's colleague, Roberta Cook, a marketing specialist in the department, regarding the implications of Mr. Carman's findings on commodities other than avocados.
The study shows "the importance of the players in an industry all coming together for the common purpose of stimulating demand," said Dr. Cook, who holds a doctorate in agricultural economics from Michigan State University.
"I think that too often in the past, players have tried to combat each other for competitive purposes, and when they do that, that does nothing to build total demand," she said. "All players benefit by growth in demand. To me, I think [the Hass promotion program] is just a wonderful example of an industry recognizing" the benefits not only of generic promotion but having importers as well as domestic producers contribute to those programs.
From around 1961 up through about 2003, the California avocado industry had spent a total of some $182 million promoting avocados, Dr. Cook said. "Clearly, having made that investment, they would be concerned about growing imports free-riding on their investment."
California producers, therefore, felt that it was important to have a national Hass avocado promotion order "to ensure that all of the players in the industry would be contributing to the promotion."
The mandatory assessment program, which assesses both domestic production and imports, and is known in agricultural marketing circles as a national checkoff program, "allows all the avocados that are exported to the United States to also be contributing a certain amount per pound for the generic promotion program," said Dr. Cook. That has resulted in a larger amount of funds being raised for generic promotion "than just what would be raised by the California industry."
The Carman study shows that the additional funds raised by assessing imported Hass avocados and spent on generic Hass avocado promotion have helped to stimulate demand sufficiently to "offset the potential decline in prices that you might have expected with the rise in imports," said Dr. Cook. Consequently, as Hass avocado consumption in the United States has doubled over the last few years, with most of the increase coming from imported product, Hass prices have remained "attractive for [domestic] growers," she said.
"So the point of all of this to me is instead of fighting competition, what players in an industry can do is come together and focus on expanding demand," she said.
That finding has "significance beyond avocados," Dr. Cook said. The approach taken by the Hass industry demonstrates that "if the players in an industry, the foreign players and the domestic players, come together and utilize their resources to stimulate demand, they can both benefit."
Money that they might have spent "fighting each other" -- through anti- dumping suits and other trade disputes, for example -- is more effectively used to build demand, she said.
"It doesn't matter where the borders are. If you have players participating in the same market, it doesn't matter where the products originate," she continued. "And consumers don't care where the products originate. The point is, if you are all participating in a given market, you should try to expand that market, and the government allows you to do that -- to come together and have mandatory generic promotions."
