PORTLAND BUSINESS JOURNAL

AS CANNED FRUIT SALES SLO\\!; OREGON

FRUIT PRODUCTS FINDS SWEET

SALVATION IN CRAFT

According to a 2015 study by the Produce for Better Health Foundation, the number of "annual eatings" per capita of canned fruit slid from 17 to 14

NOVEMBER 27, 2015

BRE\\!; EXPORTS

BYPETE DANKO Contributing writer

Maybe it will end up in Oregon Fruit Products ' marketing materials.

Maybeyou'll see it on a billboard someday. Or maybe not. But the phrase that CEO and President Chris Sarles happened upon in a recent interview definitely cap­tures what the Salem fruit pro­cesser is doing to grow these days in spite of headwinds to its tradi­tional business.

"Think outside the can." The Oregon Fruit Products

can is iconic: black, with "Ore­gon" emblazoned across the top in big white lettering, colorful fruit below and a buzzing bee in the middle . The contents - Red Tart Cherries, Blueberries,Black­berries, Dark Sweet Cherries and more - have filled untold mil­lions of pies over the company 's SO-yearhistory.

But whil e fruit is In, the canned variety is struggling in the United States.

between 2004 and 2014, while the "store fresh" category saw an increase from 130 to 150. Frozen is a rising competitor to canned as well; it remains a smaller play­er, but consumption doubled in the period.

Canned still accounts for a "sizeable piece" of Oregon Fruit Products' total annual sales, which Sarles put at $20-plus million, but canned sales are "just kind of steadily dropping. " So how is the company pulling off what it says is "double-digit growth year over year," and how does it aim to keep that going?

One way is by hitching its fruit wagon to the gallopinghorse that is craft beer. Sarles, a long­time beer and wine distribut­ing executive who came to Ore­gon Fruit Products in July 2014, saw opportunity in a segment where Oregon Fruit Products was alreadyknown for itsfruit purees. Fueled by a double-digit month­ly growth rate, sales to brewers now account for 20 percent of the company 's business.

The company is also innovat­ing to get out of "middle aisles" in grocery stores - the ones we're all being told to avoid these days - with frozen and glass-pack­

aged products, some of which are helping drive another aspect of the growth strategy: exports . There, the company has its fin­gers crossed that the Trans-Pacif­ic Partnership can help it push deeper into Asia, where Korea and Japan already represent sig­nificant markets.

Sweet growth through sour beer John Harris was surprised when he looked up at the board at his Portland pub Ecliptic Brewing on a November afternoon and counted four fruit beers out of 13 brews on tap.

Harris said the number would probably dwindle in the weeks ahead, but for him and for other brewers, fruit in beer is definitely a thing. That's a shift in U.S. craft brewing, which went through an unfortunate fruit-beer phase a few decades ago, according to Jeff Alworth, the Portland-based author onhe BeerBible.

"Some people have a dis­missive sense about fruit beers because they recall the early days of craft brewing, when fruit was used to make 'crossover' beers

that would appeal (like alco­pops) to people wary of strong flavors," Alworth said via email. "Fruit developed a slight reputa­tion for being frivolous.The cur­rent trends in brewing are far different"

Oregon Fruit Products has benefited from those trends and "amazing word of mouth about our products," Sarles said , but he's also pushed to expand sales to brewers.

"You go to what you know in life," he said. "I knew that side of the business, I had a lot of friends in that side of the business , so I picked up the phone and I made calls. In some cases to talk about how to use our fruit and in a few cases, even, it was to get some­body to consider making a fruit beer jf they weren't. ..

One early call was to No-Li Brewhouse in Spokane, and the first result was Krumpkin, a sin­gle-batch cranberry pumpkin ale with Oregon Fruit Products cran­berry puree.Thencame Mash Pit, a tart beer fermented with cran­berry and cherry purees that 's offered year round.

As was evident at Eclip­tic, fruit is an especially good fit

This article appeared in the Portland Business Journal on November 27, 2015 on page 1 & 4-5. It has been rep rinted by the Portland Business Journal and further rep roduction by any other party is strictly prohibited. Copyright ©20 15 Portl and Business Journal, 851SW 6th Avenue, Suite 500, Port land OR 97204

PORTLAND BUSINESS JOURNAL

blender. "It's part of our identity." Oregon Fruit Products purees

are 100 percent fruit, processed to remove skins , seeds, stems and the like, and pasteurized. "It's real fruit and tastes great," Harris said. "Knowing that it's not car­rying any bacteria or yeasts with it has really opened up the doors for brewers to experiment more with fruit"

Sarles said more than sao brewers, along with dozens of cider-makers, are using Oregon Fruit Products purees. The purees come in a range of sizes but the most common format for craft brewers is a 42-pound box that contains a bag filled with about five gallons of fruit. Much of the fruit is from the Willamette Valley, but obviously not allofit - it might take a few more decades ofclimate change before blood oranges or grapefruits, another new puree, are grown in these parts .

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in tart or sour beers, which are gaining in popularity, and Ore­gon Fruit Products has stretched beyond its usual fruit repertoire to give brewers what they want.

"The Rare Barrel (in Berke­ley,California), who are sour beer makers, asked us to do a blood orange so we partnered with them and did a blood orange, " Sarles said. "We made a small first-pro­duction run and sold out. We're out for a few weeks, then we 'll have another production of that. "

Some sour-beer specialists, like Portland's Cascade Brewing, prefer to use fresh fruit in their sours, highlighting vintage varia­tion and embracing the renegade yeasts that might be aboard that fruit. "We're comfortable with that risk and variability," said Kevin Martin, the brewery's lead

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TPP's promise While the craft beer segment is sizzling at home, Oregon Fruit Products is casting an eye at overseas markets to bolster reve­nue. Exports now make up about one- fifth of the company's sales. On a recent visit to its block-long hodgepodge of newer and older processing buildings, warehouses and freezers in West Salem, pal­lets of jumbo cans of Dark Sweet Cherries were wrapped and ready to ship to Korea.

They'll go out of Seattle, a longtime choice that's unrelated to the Port of Portland's contain­er shipping woes. "It's just what's worked best for us and our cus­tomers, " Sarles said .

The U.S. already has a trade deal with Korea, but the U.S. Department of Agriculture says exports of processed fruit to other Asia Pacific countries - Japan, for sure , but also Malaysia, New Zea­land and Vietnam - could grow if Congress approves the Trans-Pa­cific Partnership. EXisting trade deals between those countries and many processed-fruit export­ers' like Australia, Chile and Mex­ico, put American companies at a disadvantage, the USDA says.

According to the USDA, tar­iffs on processed fruits that range as high as 21.3 percent for Japan, by far the biggest TPP market for U.S.companies, will be eliminat­ed, some immediately and oth­ers over the course of the next 11 years.

Sarles has been outspoken in support of TPP, appearing in a video produced by Oregon Jobs Through Trade, a group formed by Oregon businesses, including Nike, to promote the agreement. Oregon Democratic Rep. Peter

DeFazio has said TPPwould "pri­oritize corporate interests over the needs of everyday Americans," but Sarles said small companies like Oregon Fruit Products would benefit from it, and not just from reduced tariffs.

"One of the challenges of trade in today's environment is that there's just a labyrinth of rules in every country," he said. "For a small company like us, you almost need outside resources or really incredibly strong inside resources to be able to navigate those rules ."

Sarles said the year-round workforce at Oregon Fruit Prod­ucts, including some part-tim­ers, is up about 10 percent in the past year, to 76. Bystandardizing rules, TPP could make it easier to grow exports, which "translates into more production, and more production means more jobs ," he said.

Alexa Byers, a global trade specialist with the state, said it makes sense to pursue growth in Asia.

"Alot of people in Asia, even the Chinese, are skeptical of the safety of their 0\;\'11 products," she said. "People are looking for pure, natural and wholesome, and Ore­gon has that good reputation. "

Beyond cans Sarles, a 1987 Oregon State grad who bubbles with pride at now "representing something great from Oregon," was lured to the world of processed fruit by Ed Maletis,a formerownerofColum­bia Distributing who bought Ore­gon Fruit Products in 2011 from the founding Gehiar family.Sarles spent 16 years at Columbia Dis­tributing and Young's Market, and was an executive vice pres­ident there when he moved on to Oregon Fruit Products.

"What Ed and I shared is that you feel like you've done a lot of things to grow and position a business and it finally gets to a point and you look back and you go, 'Wow, that's really cool,"

NOVEMBER 27. 2015

Sarles said . "The thought was , wouldn't it be fun to see if you could rebuild another business. "

If he's not enjoying the chal ­lenge, Sarles is doing a good job faking it. Touring the plant, he enthusiastically greeted and engaged employees. Back in a meeting room, he was eager to show off "Pourable Fruit." It's essentially the same sweetened, slightly chunky fruit sauce the company sells to cafes and restau ­rants for use in things like parfaits and milkshakes , but packaged in an 18-ounce plastic container and found with the bagged fro­zen fruit in groceries. "The tag line is, 'Thaw, Pour and Enjoy,'" Sarles said.

Alsonew: Red Tart Cherries in 100 percent juice, no sugar added. Studies have shown tart cherries can reduce inflammation and aid sleep. Under Sarles, Oregon Fruit Products is putting them in jars - its first product to go in glass ­aimed at natural food sections in supermarkets.

"It's building on the com­pany's incredible brand equi­ty," Sarles said. "We're trying to take all of the hard work that's been done over 70 or 80 years and shift a bit so that strategical­lywe're going in additional direc­tions. Not getting out of one, but using that weight and size of the canned businesses to help invest and grow into new areas." ~

Oregon Fruit Products What: Distributor of canned, pureed and frozen and other fruit products

CEO: Chr is Sarles Founded: 1935

Number of different purees for brewers: 15 Top selling puree for brewers: Raspberry

Top selling canned fruit: Red Tart Cherries

Top export markets: Korea. Australia , Japan Number of year-round employees: 76

This article appeare d in the Portland Business Journal on November 27. 2015 on page 1& 4-5. It has been reprinted by the Portland Business Journal and fu rther reproduct ion by any other party is strictly proh ibited. Copyrigh t ©2015 Portl and Business Journal. B51SW 6th Avenue. Suite 50 0. Portland OR 97204