Apple Growers Add Sweeter Fruit to Jolt Sales

ST. PAUL, Minn. ( TheStreet) - Food companies like Kraft Foods ( KFT) and General Mills ( GIS) are always hunting for new ways to tempt the palates of fickle Americans. Local apple growers face the same challenge.

The U.S. Department of Agriculture is predicting a massive apple crop of 241 million boxes (the 37- to 40-pound unit of measure formerly known as bushels). That's up from 233 million last year and the 229 million average for the past five years, but it means little if consumers won't buy or eat them.

High volume and competition from China have contributed to a 34% drop in apple prices during the past year, according to the USDA. Apples had the second-biggest decline among major fruits and vegetables produced in the U.S., behind lettuce's 46% decrease.

Growers are trying to jolt sales by branching out from their top sellers, Red and Golden Delicious. Those breeds comprise 36% of the industry's harvest, down from 60% in 1996. Instead, producers have been introducing sweeter varieties with catchier names.

"Consumers have moved away from their dependence on the Red Delicious in the grocer's aisle and into more sweet Empire or a tart McIntosh or Cortland," says Mark Nicholson of Red Jacket Orchards in Geneva, N.Y. His 51-year-old farm has boosted sales by supplying apple juice to Whole Foods Market ( WFMI).

James Luby, director of the fruit breeding program at the University of Minnesota, has been playing matchmaker for apple varieties since 1982 and was part of the team behind the popular Honeycrisp varietal. Sometimes his cross-pollination produces hits like this year's SweeTango, which took 15 years to develop. Sometimes it creates a flavor more akin to gasoline.

"In apples, just like in humans, the results aren't predictable," he says. "Just because you have a bunch of kids it doesn't mean that each of them will combine the best traits of you and your wife."

That element of chance, coupled with a 15- to 20-year development process, generally keeps companies like Monsanto ( MON) and Del Monte ( DLM) out of the apple industry.

Between 10,000 and 15,000 new varieties are grown each year, with Luby and company chewing up and spitting out 500 apples a day. Roughly 15 make the cut and are cloned into orchards that are observed for five more years. There's no guarantee that any of them will become a sellable variety.

"There are some varieties that just don't work, where maybe the fruit falls off before harvest," says Susan Brown, a fruit geneticist at Cornell University who helps develop new apples at the New York State Agricultural Experiment Station in Geneva. "They're good for the backyard, but not for a grower."

Cornell's breeding program has produced mainstays like the Cortland, Macoun and Empire during its 125-year history. Similarly successful varieties can net big money for their breeders.

The University of Minnesota earned more than $8 million from $1-per-tree royalties on the popular Honeycrisp and has a similar deal for SweeTango that includes a 4.5% cut of sales. Almost all of that money will go toward creating the next branch of its apple family tree.

Even rejected apples can be studs in other capacities. One of the Honeycrisp's parents, the Keepsake, descends from Northern Spy, a lowly brand known for its irregular color and shape, and a sugar-cane flavored breeding variety called Minnesota 47. The unlikely combination of all three has stopped Luby and apple aficionados in their tracks.

"We may taste several hundred apples in a day, but when you find one that you taste, then go back for a second bite and then eat the whole thing, that's a pretty good apple," Luby says.

-- Reported by Jason Notte in Boston.

Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.

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