UBC Theses and Dissertations
The efficiency of the B.C. apple marketing system : a structure, conduct and performance evaluation Stuible, Shirley L.
The cooperative structure of the B.C. apple marketing system has been in danger of collapse several times over its 70 year history. The most recent upheaval occurred in the early 1980s, when accusations of cost inefficiencies led to several changes in the system. The objective of this study is to provide a structure, conduct and performance evaluation of efficiency of the apple marketing system. This will entail an historical review, a description of the apple industry and an evaluation of its performance with respect to cost efficiency and revenue maximization using the Washington State apple industry as the benchmark. Apple production in Washington State is about ten times production in B.C., and their typical orchard is about 40 acres versus about 14 acres in B.C. The average Washington packinghouse organization serves about 30 growers to B.C.'s 300, yet their average volume is about 40% larger than the average B.C. packinghouse. Approximately one half of all the Washington packinghouses are cooperatives, whereas nearly all the B.C. packinghouses are cooperatives. Also, the B.C. growers collectively own the central marketing agency and a major processor. The Washington State packinghouses tend to market their own fruit. The performance of the apple marketing industry is evaluated in terms of revenues, costs and return to growers. The data available from Washington State precludes direct comparisons of prices (and hence revenues). Total and average costs curves are derived for both the packing and marketing functions in the B.C. industry, and these all exhibit the expected shapes. Variable and fixed costs are also broken out and examined, although it appears the fixed cost data includes some variable costs. But the most interesting finding occurs when B.C. and Washington State per unit costs are compared - it appears the postulated size advantages for Washington State do not exist on average, since B.C. costs are lower. Roughly speaking, it costs about $5/box to pack a box in B.C. versus about $6/box in Washington. Marketing costs in both regions are under $1/box. Returns to the grower, however, are about $3/box in B.C. versus about $5/box in Washington State. This suggests that price or revenue obtained in B.C. is much lower. This could be due to two diferent factors. First, the marketers in B.C. may be too volume oriented at the expense of obtaining the maximum price possible. This study makes no attempt to test this possibility. The second reason for B.C.'s lower prices is that the average B.C. product is deemed inferior to Washington State apples. Sensitivity tests are performed to evaluate the effect on grower returns of improving the average apple. When Washington State's average apple quality is imposed on the B.C. cost and price structure, grower returns increase by 63% and 9% for the two years tested. This suggests that if B.C. could match the Washington State performance, its growers would benefit significantly. When the B.C. product mix is varied to include ten percent more long storage fruit, less small sized fruit, and more high grade fruit, the grower returns increase by under 1%, 5 to 12%, and 2 to 3%, respectively. In other words, improving the fruit size of B.C. apples appears to be the most effective means of improving grower returns in B.C.
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