July, 2012

Research Perspective and Comments & Analysis

Creating The Tasti-Lee Tomato: A Marriage Of Plant Breeding And Consumer Research

John Beuttenmuller, Executive Director, Florida Foundation Seed Producers Inc.

The University of Florida has some of the most active plant breeding programs among the nation’s land-grant institutions, and releases numerous fruits, vegetables, ornamentals, forages and other crops developed by UF researchers. These cultivars are often licensed to producers who sell seed and plants to growers.

The Florida Foundation Seed Producers Inc. (FFSP) is a UF direct-support organization responsible for the licensing of such improved plant varieties. In fiscal year 2010-11, FFSP’s licensing income from all UF cultivars totaled $4.41 million, and 70 percent of that money was reinvested into the breeding programs that developed the licensed cultivars. Despite this success, our plant-breeding programs are largely unknown to consumers, due to some practical considerations.

For starters, many food crops are branded and advertised using the marketer’s name. That name may be widely recognized, generating sales on its own merits.

Generally speaking, there is little value in conveying the name of a particular cultivar to consumers. Many new varieties are bred and selected for traits that only producers would notice, such as better disease resistance. The average shopper can’t fully appreciate the importance of traits that make production of a particular crop easier or more profitable.

One of FFSP’s biggest success stories is a new hybrid tomato sold under the Tasti-Lee brand. This unique genotype was developed to give Florida growers a foothold in the premium tomato market and to offer a high-flavor tomato to consumers. When FFSP licensed this variety and the brand, FFSP worked with our licensee, Bejo Seeds Inc., to establish the Tasti-Lee brand and plan a large-scale promotional campaign that would spotlight the University of Florida.

The Bejo marketing team was eager to help. Together, we spent a great deal of time developing labels, displays, print advertising, recipes and other materials needed to grab consumers’ attention and convince them to try this unique product. Usually, this kind of work is left completely up to our licensees, because they have made an investment and want the freedom to promote sales in whatever ways seem best.

We took the unusual step of working with Bejo on this marketing campaign because we believed Tasti-Lee was worth bragging about. We knew how consumers complained that store-bought tomatoes tasted bland. After 10 years’ development by UF tomato breeder Jay Scott, Tasti-Lee was ready to quell those complaints. It had a deep crimson color, high lycopene content and a balance of sweetness, acidity and aroma likely to impress tomato-lovers.

We believed that by branding and promoting such a unique variety we could generate a great deal of sales, and a great deal of positive publicity for UF. What’s more, we believed growers might need a little convincing to produce Tasti-Lee tomatoes because, unlike average supermarket tomatoes, this variety ripens on the vine and requires hand-picking — a costly alternative to machine harvesting that necessitates a premium price.

Before the variety was commercialized, we wanted empirical evidence that the Tasti-Lee brand would be a hit. So in spring 2009, UF began a two-year marketing study on the new variety. Aided by a grant from the U.S. Department of Agriculture, we worked in partnership with Bejo and the Florida Department of Agriculture and Consumer Services. One of the study’s main objectives was to gauge consumer reaction to Tasti-Lee brand tomatoes in several dimensions: the fruit’s sensory qualities, consumers’ willingness to pay premium prices and so forth, and then make projections about the potential market demand for Tasti-Lee.

Consumer reaction was assessed with a survey and taste test that involved a total of 100 self-described tomato-lovers from major cities in Georgia, Indiana and Virginia. Each participant answered questions on their produce buying and consumption habits, opinions about store-bought tomatoes, and favorite tomato traits. They also provided demographic information.

Then they tasted samples of three tomatoes — Tasti-Lee brand and two varieties commonly found in supermarkets, one average-priced and one premium-priced. The participants gave written comments on each sample’s flavor, texture, color and overall appeal.

The Tasti-Lee brand trumped the competition, being rated “good” or “excellent” by 71 percent of the participants. The store-bought premium tomato earned those ratings from 62 percent, and the average-priced store tomato was rated “good” or “excellent” by 51 percent of participants.

These results encouraged our belief that branding and advertising Tasti-Lee would be a worthwhile investment, and promotional efforts went forward as planned. Commercial release of the Tasti-Lee brand began in August, 2011, throughout the southern United States, and sales have been impressive, with supermarkets often selling out their entire supply within a day or two. Plans are also underway for retail promotions and displays in major grocery store chains, such as Wegman’s and Whole Foods. 



Model For The Future?

The Bayh-Dole Act of 1980 gave universities intellectual property rights for things such as university-developed varieties of fruit. This meant that what was traditionally a kind of public service provided by land grant institutions to growers within the state in which the institution was located now became a revenue-producing activity.

We can give personal testimony that Tasti-Lee is a pretty tasty tomato, though the claim of premium pricing should really be qualified. This is a field-grown tomato, and although the price may be premium compared to most field-grown tomatoes, it is typically less expensive than most hothouse tomatoes. So good taste at a decent price sounds like a winner.

Indeed, Bejo Seeds hopes to use this format as a model for its own growth: Get the rights to a proprietary variety, brand it for consumers and offer farmers a way out of the commodity trap.

Tasty varieties are important, of course, yet being tasty doesn’t in and of itself escape commodity pricing. After all, the new variety can just become the new commodity. Driving consumer recognition and preference through marketing is helpful, but the marketing efforts being done on behalf of Tasti-Lee are very small-scale. There is no $50-million-dollar-a-year TV advertising program to make consumers demand Tasti-Lee.

The real key to this business model is restricting production and limiting competition. That sounds like something evil but, in fact, is the only way to increase returns to growers.

Traditionally, land grant institutions simply made new varieties available to all comers and let the market sort itself out — remember they had little financial stake in the outcome. This had two negative consequences:

First, it had a negative impact on quality — when anyone can grow something, some of what is grown will be planted in climates, soils and under conditions that are sub-optimal, so the product will suffer. Flavor and other desirable attributes are not typically qualities inherent in a magical seed; the fruit quality will vary based on where, when and how it is planted and what horticultural practices are used to raise the crop. Even if the quantity of off-flavor fruit is low, it can have enormous impact on the price consumers are willing to pay.

Nobel-prize-winning economist George Akerlof wrote a seminal paper called “The Market for Lemons: Quality Uncertainty and the Market Mechanism,” and it is not, literally at least, about the fruit. It is playing off the slang term for used cars that are discovered to be flawed after they are purchased. It deals with two variables — variable quality, as in when tomatoes of the same variety taste differently — and asymmetric information — when the sellers know more about the product than the buyers — say whether it was grown in an area that produces the most tasty fruit.

The comeuppance of Akerlof’s article is that consumers won’t pay a premium for a product because they will not be certain they will get a premium product. So by  carefully selecting who can grow a proprietary variety and then ensuring it is not grown in sub-optimal environments, consumer confidence in the quality of the variety can be increased, and thus consumer willingness to pay a premium will increase.

Second, allowing unrestricted planting and marketing of a variety led to a-predictable cycle for even the best fruit. A new variety would be introduced; it would attract a premium price and attract high demand. This would lead to more plantings of the desirable variety and ultimately, as supply rose, the markets would become flooded, prices would drop and what was once a premium item would become, at best, the new normal and, often, a loser.

In theory, by licensing the variety exclusively to Bejo Seeds and then Bejo selecting key growers in different areas, assurance can be found that the tomato will only be planted in optimal conditions and the quantity produced will be restricted so as to avoid saturating the market and putting downward pressure on price.

It is a great play, and may well be the future of the entire industry.

Yet it is not without its challenges. For the universities, the model is a challenge to the land-grant culture. These institutions get taxpayer funding and typically sit on land given to them by the taxpayers — with the ethos that they are there to help all the farmers in their state. This approach challenges that ethos in two ways: first, often these varieties get licensed out of state, and second, even within state, they are licensed to specific growers.

The model also is a challenge for seed companies. Seed companies make money by selling seed; the more they sell, the more money they make. It takes an enormous discipline focused on long-term value to restrict plantings so as to boost grower returns — when simply meeting demand would mean a big boost in profits for the seed company.

There is much to be hopeful about in this effort. The focus on the consumer; the focus on flavor; the use of research — albeit small-scale — to ascertain consumer perception; the use of marketing, again albeit small scale, to differentiate the product. The open questions are how land-grant institutions can reconcile restricted marketing with their public service mission and whether new ways can be found to price seed so that seed companies won’t constantly be driven to increase plantings.