Onion World: The Voice of the Onion Industry

Mininger Report

What Is the NOA Doing for You?

Onion World
September/October 2005

Back in the days when train travel was the way to get around, Will Rogers was fond of saying: “Even if you are on the right track, you will get run over if you just sit there.”
Time and circumstance march on. It is impossible to keep up or get ahead without information and advocacy. The National Onion Association (NOA) is active on both fronts. The most successful people in life are generally those who have the best information.

Let me share some of what NOA has done for you lately as well as review several onion industry trends:

North American Free Trade Agreement (NAFTA): NOA’s purpose and mission include advocacy. In 1993, NAFTA negotiators proposed an immediate elimination of the Mexican and Canadian onion import tariff. NOA immediately went into action with USDA/ITP and USTR negotiators. NOA started by asking for at least a 15-year phase-out of the tariff and a snap-back provision that would be triggered by seasonal import gluts. USTR and ITP came back with a 4-year, no snap-back position. A year of negotiating back and forth resulted in a 10-year phase-out of the tariff for the U.S. onion industry at a rate of 10 percent reduction per year. Imports averaged about 10.5 million bags of tariff protection worth over $46 million to the U.S. onion industry. This was a direct result of NOA government relations efforts.

Research Initiative for Iris Yellow Spot Virus Disease: This is a potentially devastating virus. Sizing, yields, quality – all can be affected. Not all states have reported a problem, but researchers have indicated it is just a matter of time before it will probably be confirmed in virtually every growing district in the country. NOA is pressing for a 5-year, $7 million federally funded research initiative to seek solutions to this advancing problem.

Green Onion Hepatitis Outbreak: On Nov. 28, 2003, the national news began reporting a very deadly hepatitis outbreak linked to green onions. By the second day, the lower screen scrolls on network and cable TV changed from “green onions” to just “onions.” NOA immediately contacted the media networks and cable outlets to differentiate the products and clarify that bulb onions were not suspected and that there was no risk in eating them. NOA also asked the media to report that bulb onions could substitute for green onions so that consumers could still enjoy the flavor and nutrition that onions provide. Within hours, the TV screen scrolls changed back to “green onions.”

Child Labor Documentary: “Stolen Childhoods” is a documentary showing around the country. On June 15, it was a storyline on ABC’s Nightline with Ted Koppel. Children were shown working in an onion field. NOA is consulting with a crisis communication expert who has been at the forefront of numerous critical food events. We have an experienced consultant at our immediate disposal—one that knows both PR and onions well.

Truck and Rail Transportation Shortage: New trucker hours-of-service regulations eliminated 12-15 percent of the net driving time allowed a single driver. This slows interstate service and drives up costs substantially. Powerful safety activist groups and strong transportation union opposition have lobbied hard on this issue. The 2005 Federal Highway Bill is now in House/Senate conference. The new restrictions will likely remain in place. NOA has advocated that previous standards be maintained.

NOA recently supported a petition to the Surface Transportation Board requesting that the common pool of vans currently available for railroad piggy-backing remain intact. Railroads are deliberately moving their business to containers only. Containers take longer to deliver and do no allow appropriate ventilation. The WTL petition was denied in June, 2005.

What about rising fuel costs? NOA has spoken against proposed fuel surcharges, believing that the free market should be left to operate. Rates should rise and fall according to what is happening in real time in the real marketplace, not adjust according to some arbitrary regulatory mandate.

EBDC Fungicide Re-registration: EBDC fungicides are under review due to the requirements of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), passed in 1996. This class of chemicals is crucial to onion production. It is imperative that they be re-registered so that their use can continue unabated. There is virtually no safety issue with onions since the residues do not transfer from the skin into the bulbs. Other produce items are being scrutinized very carefully.

CAFTA—Increased Sugar Imports Versus Minor Onion Export Market Potential: The Caribbean Free Trade Agreement is troubling. Sugar imports will increase at the same time the U.S. sugar beet industry is struggling. Populations are relatively low in the region and are not expected to generate significant onion export business. Most of these small countries are onion producers themselves.

Per Capita Consumption Increase: There has been an increase of over 60 percent in the past two decades that the NOA’s public relations program has been in effect. Of course, various state and regional efforts have contributed tremendously as well to this phenomenal growth. Favoring this trend is greater availability of appealing varieties, the expansion of high onion consuming demographic groups and widespread penetration of ethnic cuisine.

Overcapacity
In an article in Fortune Magazine, Geoffrey Colvin wrote: “No matter what business you are in, it probably has too much capacity. In industries around the world, from cars to chemicals to computers, overcapacity threatens to commoditize just about everything. How do we compete in a world like this?”

Hard commodity markets are usually characterized by incremental shifts in demand. With a perishable commodity like onions, demand shifts can certainly develop quicker and can be more pronounced than shifts in wheat or crude oil businesses, for example.

In a commodity market, the seller must do something to distinguish himself from the rest of the competition. What are your distinguishing factors? Is it your service, quality, location, timely deliveries, personal niche variation on a common theme? Or could it be your ability to establish a lasting relationship with a buyer in an ever-changing marketplace?

Why does your company stand out? What is it that you have mastered that is providing you with a competitive edge? The U.S. consumes approximately 375 loads of onions each day. Everyone wants a piece of the action. It is important to sell from a position of strength, emphasizing at least one of your company’s positive attributes.

Onions, a Mature Market?
Last winter, I commented that many consider the onion business a “mature market.” “There is only so much you can do with an onion,” some say. Since that time, I’ve rethought that assessment. Sure, we see and do things on a fairly routine basis, but maybe our imaginations need jarring now and then. Is there an untapped niche waiting to be filled? Is there a new way of presenting or packaging onions? What can we do to generate the next new wave of interest in our product? Innovation either begins with a “dream” or is driven by “necessity.”

Being a “stable staple” is a great platform from which to perform. However, there are other commodities and products that are more than anxious to gobble up market share. Many have significant budgets and “jazzed up” marketing campaigns. NOA works with very limited funding in relation to the size of this industry.
Perhaps we should ask ourselves, what are they doing better than we are? Is it a question of superior product, service or methods? Or, is it a combination of all three? The greatest asset you can bring to your company in times like these is your ability to inspire fresh thinking and experimentation. Plan a full-scale assault on the “this is the way we’ve always done it” assumption.

Profitability
Let’s face it. We have had some gratifying, profitable years in the onion industry. Always have; hopefully always will. In one sense, the onion industry is a victim of its own success. Growers and marketers make money and then do what? They do more of the same—more of what just made their bottom lines gleam.

It does not take much of “more of the same” to simply be too much. So, we plant a little more. Then, Mother Nature comes along and blesses the country with a wonderful growing season. What do we have? We have such an abundance of product that the industry goes into a tailspin. It experiences low, low commodity prices and an elimination of anything resembling satisfactory returns on investment.

Whatever segment, or combination of segments, overproduces and underperforms for the bottom line—be it spring, summer or fall storage crops—must go through the pain of regrouping and recovering. At times, basic capitalistic economics teaches hard and unyielding lessons.

When times are tough, there is a temptation to draw back on marketing and educational efforts. However, it is at this point that commitments to public relations should be affirmed and confirmed. This economy is an engine of consumption. Even momentary periods out of the public’s eye can result in lost market share—very difficult to recover.

Between 1952 and 2003, the ratio of food prices to the price of all other goods fell by 12 percent. The drop is even more dramatic if “quality” improvements are factored in—factors like the reduced time cost of acquiring and preparing food (i.e., the convenience factor), greater variety and the omnipresence of prepared food outlets and vending machines everywhere. Foods that were once only available seasonally are now available year-round. Advances in food processing and packaging have introduced a multitude of ready-to-eat foods available virtually anywhere, any time.

Harvard University’s David Cutler, Edward Glaser and Jesse Shapiro have suggested that the increase in food consumption prompted by the falling time cost of food is the major cause behind the surge in obesity since 1980. They note: “Technological innovations—including vacuum packing, improved preservatives, deep freezing, artificial flavors and microwaves—have enabled food manufacturers to cook food centrally and ship it to consumers for rapid consumption.”

Although greater convenience, growing portion sizes and increased accessibility of restaurant meals have been blamed for contributing to the rise in obesity, in economic terms, these are quality attributes that are valued by consumers. As a matter of fact, an increasing share of our food dollars are going toward such value-added attributes rather than the food itself.

Marketing bill data show that between 1953 and 2000, the share of total consumer food expenditures that pay for such marketing components has gone up from 63 to 81 percent, with most of that growth occurring since 1980.

Onion PR efforts stepped up significantly in the early 1980s. However, the NOA is basically working with the same dollars it did 20 years ago. The point is this: Onion consumption has risen over 60 percent, which is terrific, however, the onion industry needs to keep in mind that marketing costs have skyrocketed during the corresponding time frame. To just maintain onion market share may take everything we can muster in the face of so much competition from other commodities.

It would be wise to continue to work with various consumers, educators, food professionals and media or onions could be lost in the shuffle of media attention given to different commodities and consumption could again stagnate.

Editor’s note: The material here is edited and condensed from a presentation made July 21 during the National Onion Association Summer Regional Conference in Ontario, Ore.

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