Agribusiness Review - Vol. 6 - 1998

Paper 15
ISSN 1442-6951

The Importance of Labels on Apples: Who Really Benefits?

Peter J. Batt and Cara Sadler
Muresk Institute of Agriculture, Western Australia

Abstract.

Retailers, in particular the large supermarket chains, appear to be the driving force behind growers labelling apples. By labelling apples with the variety name, check-out staff can more readily identify the variety and thus minimise the errors made in correctly pricing fruit at the check-out. However, the majority of participants throughout the fresh fruit marketing chain do not use the labels on fruit to assist in the selection of apples. Furthermore, the majority of growers, agents, retailers and consumers, do not believe that labelled apples are any indication of superior quality.

• Introduction.
• Method.
• Results and Discussion.
• Conclusions and Market Implications
• References

Introduction.

Yabsley and Wright (1994) suggest that there has been an increase in Australia in the number of growers and grower cooperatives who attach adhesive labels to individual pieces of fruit. Such labels identify the brand name and in many cases, the variety of the fruit.

Branding makes it easier for consumers to identify goods and services and helps to reassure consumers that they are receiving comparable quality goods when they repurchase (Stanton, Miller and Layton 1994) . However, Radice (1987) demonstrates that fruit quality varies between each individual piece of fruit, between individual growers and often between retail stores. Furthermore, the manner in which fruit has been handled throughout the distribution chain and the method and length of time the fruit has been stored, can result in substantial differences in quality.

Yabsley and Wright (1994) and Stewert-Dawkins (1995) suggest that branded apples indicate superior quality. However, with most major retailers demanding labels on apples as a means of identifying varieties for consumers and their check-out staff, there is some doubt as to whether branded apples still continue to deliver the consistency of product quality sought by consumers. Growers pay for the cost of labelling, apparently without receiving any increased return. Furthermore, there is also a strong belief among many growers that consumers dislike labels on apples.

While several studies have been undertaken relating to the value of labelling fruit from the consumers perspective, there appears to be little research directed towards growers, wholesale market agents and retailers and their attitudes towards the benefits of labelled fruit. A cross-institutional study of the Western Australian apple industry sought to identify whether labelled apples provided the consistency of quality demanded by the consumer, the retailer and the wholesale market agent and the value that each placed on the label as a means of selecting fruit.

Method

Four groups of respondents were selected for this study. From the grower list provided by the WA Fruitgrowers Association, 290 apple growers received a mail questionnaire. While there are 326 members of the WA Fruitgrowers Association, 36 growers were excluded from the survey as they were hobby farmers or growers with apple trees less than three years old. The questionnaire was designed to determine whether; (1) growers only labelled apples of the highest quality; (2) growers thought labelled apples sold any better than non labelled apples; (3) labelled apples achieved a higher price; and, (4) to identify why growers labelled apples.

Of the 24 agents who operate at the Perth Metropolitan Markets, 15 agents sell apples. Here data was collected by means of a personal interview. The questionnaire was developed from previous studies reported by the AHC (1990), the HRDC (1990) , Yuen et al (1994) and Stewert-Dawkins (1995) . The questionnaire sought to determine whether; (1) agents noticed any difference in the quality of labelled and non labelled apples; (2) agents thought labelled apples sold any better than non labelled apples; (3) agents sold labelled apples at a higher price than non labelled apples; (4) why agents thought growers labelled apples; and, (5) to identify the selection criteria agents used in their decision to purchase apples from a grower.

Personal interviews were also used to obtain information from 40 fresh fruit and vegetable retailers in the Perth metropolitan area including 15 green grocers, 15 growers markets and 10 supermarkets. The respondents were randomly selected from the 1997 Perth Yellow Pages (every fifth outlet). Two buyers from the largest supermarket chains were analyzed independently. However, during data analysis, it become apparent that there was significant variation in the data. Subsequently, it was decided to exclude the 8 fruit and vegetable managers interviewed from the supermarkets on the basis that they had not made the decision to purchase; rather the decision to purchase apples had been made for the supermarket chain by a central buyer.

A sample of 260 consumers were randomly selected from 13 shopping centres in the Perth metropolitan area. The shopping centres were selected from the 1997 Perth Yellow Pages on the basis that they had a supermarket and either a green grocer or growers market. Twenty consumers were selected from each shopping centre by random sampling (every 5th person).

Measures of central location, frequency distributions and univariate analysis were performed using the SPSS statistics package. Scheffes Test was used to identify any significant differences in the rank order of importance and factor analysis was undertaken to identify any underlying constructs.

Results and Discussion

Of the 71 growers who responded to the survey, 54 growers (76%) labelled their fruit. However, whereas 30 growers labelled first grade fruit only, 24 growers labelled both first grade and second grade fruit. Of those growers who did label both first grade and second grade apples, 18 (75%) did not use different labels to differentiate between the grades. However, 73% of growers used different packaging to differentiate between the different grades, most opting to pack first grade apples in cartons and to pack second grade fruit in returnable plastic crates.

The majority of growers (76%) indicated that they labelled apples because retailers demanded it. While labelling apples made selling easier, labelled apples did not sell for a higher price, nor did they indicate superior quality.

Thirteen agents (87%) responded to the survey conducted at the Perth Metropolitan Markets. While two agents sold only labelled apples, seven agents estimated that at least 50% of the apples that they sold were labelled. Most agents (62%) felt that the quality of labelled apples were only sometimes better than non labelled fruit, whereas 30% of agents suggested that labelled apples were never any better than labelled fruit. Only one agent (8%) suggested that labelled apples were always of better quality.

There was some agreement that labelled apples were easier to sell because, when labels were attached to the fruit, agents could sell the fruit to a greater number of buyers, including the supermarkets. Some 38% of agents indicated that they sometimes sold labelled apples at a higher price than non labelled apples and while 23% of agents indicated that they often sold labelled apples at a higher price, 38% of agents never sold labelled apples at a higher price.

The majority of agents (62%) believed growers labelled fruit to assist consumers in identifying the variety, although a further 23% suggested that growers labelled fruit because retailers demanded it.

In assessing the quality of fruit delivered by the growers, the two most important criterion agents used were consistent quality and freedom from blemishes (Table 1)

Table 1. Importance of Selection Criteria for Agents.

WA Apple Industry Survey. 1998.

where 1 is least important and 5 is most important

where a-f indicates a significant difference at 0.05

Continuity of supply, firmness and colour were the second most important selection criterion. Packaging, the brand (label), brix (maturity) and price were the least important selection criterion agents used in assessing the fruit offered for sale from a grower.

However, and not unexpectedly, consistent quality, price, continuity of supply and quantity, collectively comprised the most important factor influencing a market agent's decision to purchase apples from a grower (Table 2).

Table 2. Factor Analysis of Selection Criteria for Agents.

WA Apple Industry Survey. 1998.

NOTE: factors unable to account for more than 10% of the variation have been excluded.

It is generally accepted that the most important attributes used by organisational buyers in the selection of potential suppliers is the ability to deliver product in the quantities required, consistently and reliably, at a mutually acceptable price and desired standard of quality (Cunningham and White 1973; Dempsey 1978). In this regard, firmness would appear to be the most important indicator of fruit quality.

Factor Two was found to be comprised of two attributes; brix level (maturity) and brand (label). While both attributes in isolation were considered to be among the least important selection criterion, collectively we propose that this factor captures the agents prior experience with the growers fruit or the growers reputation in the market. It is highly probable that where growers have delivered fruit of good eating quality to the agent in the past, that agent will actively seek to acquire more of that fruit, knowing, in turn, that their customers and consumers were satisfied. However, where the grower has delivered poor quality, immature fruit that has resulted in customer dissatisfaction, agents may select against that brand.

Factors Three and Four suggest that agents avoid selecting fruit which is blemished or considered too small for their intended market.

All of the retailers surveyed in the Perth metropolitan area sold labelled apples. For the majority of retailers surveyed (78%) labelled apples comprised more than 50% of sales.

Most retailers (66%) believed that the quality of labelled apples were only sometimes better than unlabelled apples, whereas 31% of retailers suggested that labelled apples were never any better than non labelled fruit. Only one retailer (3%) suggested that labelled apples were always of better quality.

There was some agreement (39%) that labelled apples were easier to sell, although 26% of retailers suggested that labelled apples were not any easier to sell. However, 63% of retailers indicated that they never sold labelled apples at a higher price than non labelled fruit. Only two retailers (6%) indicated that they always sold labelled apples at a higher price.

Most retailers (53%), believed growers labelled apples because it assisted them to market their fruit. A further 22% of retailers suggested that growers labelled fruit because retailers demanded it. However, only 1 retailer suggested that growers labelled fruit to assist consumers in choosing their preferred variety.

The most important selection criteria used by retailers in purchasing fresh fruit from growers and agents was firmness (Table 3).

Table 3. Importance of Selection Criteria for Retailers.

WA Apple Industry Survey. 1998.

where 1 is least important and 5 is most important

where a-f indicates a significant difference at 0.05

Consistent quality, freedom from blemishes and the variety comprised the second most important criterion. Because few apple growers in WA are large enough to meet the needs of a large retail chain, retailers often source produce from a number of growers. Sufficient quantities of the same variety of fruit and fruit which is visually appealing (free of blemishes) must be provided to maintain the consistency of product quality on the shelf, irrespective of the source. Brand name (label) was one of the least important selection criterion for the retailers. Unfortunately, such provides little opportunity for small individual growers to establish any brand equity.

Factor analysis revealed the importance of both growers and wholesale agents in maintaining the continuity of supply and consistency of quality demanded by the retailers (Table 4).

Table 4. Factor Analysis of Selection Criteria for Retailers.

WA Apple Industry Survey. 1998.

NOTE: factors unable to account for more than 10% of the variation have been excluded.

Factor Two suggests that there is some recognition among retailers that the quality of fruit (firmness) packed in cartons, differs from the quality of fruit packed in returnable plastic crates. With 73% of growers using packaging to differentiate between grades, such is not unexpected.

Factor Three (price) is of only moderate importance. Such would suggest that quality criteria are more important, however, once these criteria have been satisfied, retailers will then choose the least expensive option.

Factor Four would suggest that retailers also avoid purchasing fruit which they consider too small to satisfy their customers needs.

Of the 260 consumers interviewed, the majority were female (73%). Most consumers purchased fruit one time per week (53%), primarily from supermarkets (52%). Apples were purchased on every occasion when the consumer purchased fresh fruit by 78% of respondents.

While 29% of consumers believed that growers labelled apples as an indication of superior quality, over 54% of consumers suggested that the quality of labelled apples were never any better than the quality of non-labelled fruit. A further 45% suggested that the quality of labelled fruit was only sometimes better. Just 1% of consumers believed that the quality of labelled apples were consistently better than non labelled fruit. This represented a significant departure from the previous results achieved by Yabsley and Wright (1994) and Stewert-Dawkins (1995), who suggested that labels on apples implied a higher quality product.

Consequently, in the absence of reliable brands, consumers with limited product knowledge were forced to rely on the physical attributes of the fruit to make their choice. Firmness was the most important selection criterion used by consumers in their decision to purchase apples from a retail store (Table 5).

Table 5. Importance of Selection Criteria for Consumers.

WA Apple Industry Survey. 1997.

where 1 is least important and 5 is most important

where a-e indicates a significant difference at 0.05

The visual appearance of the fruit in terms of its freedom from blemishes and bruises, its colour and the variety, were considered the next most important selection criteria. Yuen et al (1994) found that the most important attributes consumers sought were medium size, red colour, blemish free, crisp yet juicy and sweet tasting apples. However, the external appearance of the fruit is seldom related to the eating quality (Stewert-Dawkins 1995).

The most frequent quality problems experienced by consumers after purchasing apples from a retail store were soft, floury apples (84%) that were often brown inside. Such is indicative of fruit that has either been stored too long or stored under inappropriate post-harvest conditions. There was also evidence of consumers selecting fruit that tasted sour (18%) suggesting that fruit had been harvested immature.

While the brand name, the growers name and the presentation of fruit in pre-packs were considered to be the least important attributes used by consumers in their decision to purchase apples, factor analysis revealed that these same three attributes, with the inclusion of the origin of the fruit, collectively comprised the most important factor that influenced a consumers decision to purchase apples from a retail store (Table 6).

Table 6. Factor Analysis of Selection Criteria for Consumers.

WA Apple Industry Survey. 1998.

NOTE: factors unable to account for more than 10% of the variation have been excluded.

However, it is highly likely that rather than positively influencing purchase, consumers may use each of the attributes comprising Factor One as a means of selecting against fruit which has provided a bad experience in the past. Consumers have demonstrated a preference for selecting loose apples (HRDC 1990) believing that the quality of pre-packed fruit is inferior. Similarly, if consumers believe that labelled apples are not an indicator of high quality, consumers may negatively select against a growers name or a brand name in the market which has failed to meet their expectations.

Consumers will then use those visual attributes which they believe best represent quality; blemish free, colour and size (Factor Two) as the means of selecting fruit in a retail store. However, as a criterion for selection, colour is a complex attribute, for while previous studies have indicated that consumers prefer red apples (Yuen et al 1994) , the consumer may also use colour as a means of differentiating between varieties and between mature and immature fruit. Consumers may also respond positively to various in-store variables including signage and the manner in which the fruit is displayed.

Factor Three considers the importance of price in the decision to purchase. Price, as a selection criterion, was of moderate importance suggesting that the majority of consumers are more concerned about quality attributes. For some consumers, price may be an indicator of quality, but, irrespective of the price, there is little point in the consumer purchasing apples if no-one in the family is going to eat them. In this regard, family preferences may over-ride or at least interact with price considerations.

If labels on apples are not an indicator of quality and if consumers experience problems in using visual criteria as a means of selection, the two remaining criterion for selection are variety (Factor Four) and firmness (Factor Five).

While some 29% of consumers believe that growers label apples to indicate the variety name, for 78% of consumers, the presence of a label on the fruit did not influence their decision to purchase, indicating that consumers place much greater importance on other in-store variables as a means of selecting their fruit. In this regard, it is not an uncommon practice for retailers to erect signs either above or below the fruit offered for sale, indicating the variety and the price.

While 43% of consumers indicated that they did not have any problems with labels on fruit, the majority of consumers had experienced some dissatisfaction with labelled fruit. Over 30% of consumers found labels on fruit annoying. The most common problems were difficulties experienced in peeling the label off the fruit (8%), the residue left on the fruit (7%) and the knowledge that labelled apples were of no better quality (6%). Some 10% of consumers considered that labels presented a health risk and that labels on fruit were damaging to the environment (8%). A further (3%) suggested that labelling apples was an additional and unnecessary expense. Given that the majority of consumers (62%) indicated that they paid no price premium paid for labelled apples, such is perfectly understandable.

As labelled apples did not guarantee higher quality fruit and given the difficulties consumers experienced with labels on apples, some 41% of consumers actively sought to select fruit which was not labelled.

Conclusions and Market Implications

With many of the larger retailers demanding that growers label fruit as a means of identifying varieties for consumers and their check-out staff, fruit growers are labelling apples primarily to meet retailers demands, rather than to emphasize quality.

Consequently, the majority of growers, agents, retailers and consumers do not believe that apples with labels indicate better quality fruit, and, therefore, the majority of participants in the fresh fruit marketing chain do not use labels to assist in the selection of apples. Given that there is no tangible difference between the majority of labelled apples and non-labelled apples, labelled apples do not receive a premium price, nor are consumers prepared to pay a higher price for labelled apples.

A number of reasons are thought to contribute to this situation including; (i) the lack of uniform quality standards used by growers; (ii) poor post-harvest management; (iii) agents and retailers often demand new seasons apples which may result in immature fruit being placed on the market; (iv) inadequate quality control throughout the distribution chain; and, (v) the reluctance by retailers to pay more for superior quality, labelled fruit. If growers are to use labels on fruit more effectively, only quality apples that reach consumers in premium condition should be labelled.

References

Cunningham , M.T. and J.G. White. 1973. The Determinants of Choice of Supplier. European Journal of Marketing. Vol 7 (Winter). pp 189-202.

Dempsey , W.A. 1978. Vendor Selection and the Buying Process. Industrial Marketing Management. Vol 7. pp 257-267.

Horticulture Research and Development Corporation. 1990. Consumer Study of the Fruit and Vegetable Market.

Radice , C. 1987. Assessment of the Effectiveness of Consumer Education Aids in Relation to Fruit Standards by Female Consumers in Kalamunda and Balcatta. Research Project 351. Home and Consumer Studies. Curtin University.

Stanton , W.J., K.E. Miller and R.A. Layton. 1994. Fundamentals of Marketing. Third Edition. McGraw Hill. 771 pp.

Stewert-Dawkins , S. 1995. Marketing of Produce by Brand Names. Horticulture Project 491. Curtin University.

Yabsley , D. and V. Wright. 1994. Sticky Labels on Fresh Fruit: Marketing Sense or Nonsense. Dept. of Marketing and Management. University of New England.

Yuen , C.M.C., N. Caffin, K. Hunter, W. Newton and Y. Hayes. 1994. Consumer and Consumption Patterns, Purchasing Habits and Attitudes to Fruit and Vegetables. Food Australia. Vol 46(10). pp 455-458.