The Hindu Business Line : Nuts about it!

It is as ambitious a target as it can get, and requires a massive marketing effort – to sell an additional 300 million lbs of pistachios around the world in the next five years; a doubling of its current sales. This is the goal set down by theCalifornia-based Paramount Farms, the world’s greatest producer of pistachios.

The 2008 Annual Pistachio Conference held in Monterey on March 13 was hosted by Paramount Farms, which had invited a group of international journalists and nutritionists from India, China, Mexico, Spain and the UK, as these are some of the major markets which Paramount plans to tap more aggressively in the next five years to meet its ambitious sales goal. But what strikes you most is that there is a concerted effort to promote ‘California pistachio’ as a brand, even while pushing Paramount’s three brands – Sunkist, Wonderful and Everybody’s Nuts. Addressing the conference “on behalf of our 500 grower partners,” Paramount Farms President Stewart Resnick spells out the “challenge as an industry to double California pistachio sales in the next seven years while maintaining a profitable grower return.”

The company processes almonds and pistachios grown over a massive 70,000 acres in California – half is grown by Paramount and the other half by its grower partners. The message at the conference is simple. Says Resnick:“We are materially impacting government relations around the world in favour of the California pistachio industry,” and doing all it takes to protect the domestic market and gain “fair access” to international trade.” Through the conference and interactions with the media, Paramount executives show this is no empty talk. All efforts are made to promote “California pistachios” as far superior to their Iranian counterparts and both astonishment and outrage are expressed that Paramount should have only 10 per cent of the Indian pistachio market (total size 10 million lbs), with a whopping 90 per cent going to Iranian pistachios. (India also gets a small quantity from Afghanistan). Paramount Farms is lobbying hard with the Indian government to reduce the “steep import duty” on California pistachios and the company was disappointed such a duty cut was not announced in Budget 2008. But at the same time, Mark Masten, Vice-President (Sales), says since 2002 the company had “worked closely with trade law experts in Washington D.C., to ensure that pistachios imported from Iran are subjected to the maximum import duties allowed by law”! Reporting success, he said, in-shell pistachio imports from Iran in 2007 were at “minimal levels.”

Marketing a healthy nut

Dominic Engels, Vice-President (Marketing), says Paramount Farms had drawn out a detailed road map to achieve the incremental growth of 300 million lbs over five years. A core component of this was to promote pistachio as a healthy snack versus potato chips and other fast foods. Describing it as “one smart health nut,” he said pistachios are not only “delicious but also nature’s super heart-healthy snack,” being full of fibre and anti-oxidants. He explained how his team had begun a “sustained relationship” with health professionals and nutritionists to keep them armed with the latest research findings on the beneficial effects of pistachios on health. “Paramount is single-handedly driving the research and communicating the findings through public relations,” he says.

In 2007 the Web site PistachioHealth.com was established to disseminate the beneficial effects of this tree nut. “The Web has proven to be an invaluable tool in our international expansion”; now information is available there in 11 languages, he said.

Paramount produces over 70 million packages of pistachios annually and it judiciously uses different brands to target different segments of consumers. “For example, three out of four consumers who have purchased Everybody’s Nuts had not bought pistachios in the last year,” says Engels. The US continues to be Paramount’s biggest market, and half of its produce was consumed in US and Canada last year, and an incremental growth opportunity of 60 million lbs is seen in this market over the next five years. Adds Engels, “In the US, snack nut consumption is growing overall by four per cent, driven by tree nuts with eight per cent growth, while peanut sales are declining. Within tree nuts, pistachios and almonds are the heroes, with 14 and 21 per cent growth respectively. The most recent point-of-sales data shows pistachios should surpass almonds in terms of growth in 2008.” Last year, the company reached its pistachios to an additional 3 million US households.

Expanding global markets

While Paramount’s total volume of pistachio sales is expected to cross 310 million lbs this year and touch the 450 million lb figure in calendar year 2009, in the coming years, the bulk of the growth will come from global markets, particularly emerging markets such as India, China, Mexico, Russia and Eastern Europe. The mood of the global sales and marketing teams was extremely upbeat at the conference. The Indian pistachio market, estimated at 10-11 million lbs, was described as a “peanut market” — Paramount share is a mere 10 per cent — particularly when compared to the almond market. India, we were told, is the second largest export market for California almonds and in the current year it absorbed 70 million lbs of almonds. So, comparatively the Indian pistachio market is smaller at 10 million lbs (Paramount share is 1.1 million lbs), and the challenge, says Engels, is to sell to the growing middle class. With nuts and dried fruits being an integral part of the Indian diet, the sales team at Paramount is confident that the Indian market will absorb 50 million additional lbs of its pistachios in five years. With Paramount’s $5-million roasting, processing and packaging plant coming up in India, this should be an achievable goal.

Keith Sunderlal of SCS Group, the agri business consultancy representing Paramount in India, says the major importers of pistachios in India are wholesalers and while this category does not carry any of the Paramount brands on their packets, they do label the product as ‘Paramount Farms’ and Reliance Fresh markets ‘Wonderful’ pistachios.

He attributes the small presence of California pistachios in India – just over 10 per cent – to the “misconception in the trade that California pistachios are inferior, though at the consumer level there haven’t been any such complaints.” Over 60 per cent of pistachios in India are consumed in the northern region with the South having a very small share; Hyderabad is the exception.

In the Indian wholesale market, the price of unroasted pistachios is in the Rs 350-425 a kg range and in retail at Rs 500-600 a kg. “To improve its market share in India, Paramount has resorted to aggressive pricing (lower prices) in the Indian market, as pre-Diwali the share of Iranian pistachios was about 95 per cent,” says Sunderlal.

In China, where 2006 saw a pistachio market of 13 million lbs, the 5-year incremental growth is seen at a whopping 70 million lbs. The challenge here is to combat the practice of counterfeiting and bleaching; strangely enough most Chinese believe that the pistachio should be white in colour. Says Masten, “Some have said let the Iranians have China and we’ll focus on the US and Europe and in Asia we’ll target Japan; we do not believe in that strategy because China has over one billion consumers, it is the fastest growing and fourth largest economy in the world.”

For Paramount, the Western Europe market is huge; 83 million lbs in 2006, “but 10 years ago, it was double than what it is now.” While an additional 60 million lbs is targeted in this market, there is optimism that Russia and Eastern Europe markets will take another 30 million lbs and Mexico 20 million lbs in the next five years.

While Engels’ objective is to make the “cash registers ring,” Resnick realises that an aggressive marketing budget can do the trick. He says the company has invested more than $120 million into “marketing the pistachio category” over the last 10 years, and would continue to make strategic investments to grow the industry in the coming years too.

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