Demand for California walnuts in markets around the world has elevated walnuts to the fourth-leading export from the state, valued at $970 million. Fueled by both increasing export demand and increased production, the industry has experienced record growth in the last 10 years, reaching $1.32 billion in farm gate revenue during the 2011 crop year. Production has nearly doubled in the past 10 years to reach 496,000 short tons with 58% of the crop now being exported to countries in Asia, Europe, and the Middle East.
China has become the leading export market for California walnuts, with more than 101 million in-shell equivalent pounds shipped in 2011. In-shell walnuts are predominantly used by the snacking sector, where they are flavored and slightly cracked for consumer consumption. Walnuts are also processed for kernel use in snacks, such as sweet amber-coated walnuts, and for use in the baking and beverage sectors.
The industry estimates that the baking and processed food sectors account for 60% of volume in China. Expanding distribution through export development programs has led the industry to regionally grow consumption of walnuts beyond the major cities of Beijing, Shanghai, and Guangzhou to Chengdu, Shenzhen, and Northern China. Promotion to the trade has increased the visibility and use of walnuts through bakery and retail promotions in addition to partnerships with key associations such as the Restaurant Association in Chengdu.
The California Walnut Commission (CWC) marketing program educates Chinese consumers to California walnuts’ quality, taste, versatility, and health benefits. Fully 65% of consumers are now aware of California as a producer, and purchase walnuts because the nuts are healthy, good for the heart, and reduce cholesterol. The CWC emphasizes these attributes in public relations and advertising campaigns to, “build upon traditionally held beliefs that walnuts are good for health,” says the CWC Chief Executive Officer Dennis A. Balint.
Snacking remains the primary use for walnuts. However, walnuts’ versatility as an ingredient continues to grow, with consumers indicating they use walnuts in beverages, breakfast cereals, and in home baking. Purchase rates continue to see dramatic increases year over year with consumers purchasing in-shell walnuts 4.9 times annually, shelled walnuts 4.2 times annually, and products containing walnuts 8.6 times annually.
The California walnut industry has continued to experience strong demand from China, which is interesting because China is the world’s largest producer of walnuts. Chinese production is estimated at 500,000 short tons. However, exports have continued to fall while California imports have sharply increased, thereby making China a net importer of walnuts.
Middle Class Growth
The huge increase in walnuts imported from California is due to the increasing affluence of China’s middle class, which is currently estimated at 300 million people. They are developing purchase behaviors that have contributed to the market expansion. Chinese consumers increasingly seek out food choices that are safe, and imported food products are often viewed favorably. Although estimates vary, analysts project China’s middle class to reach 700 million people by 2020 which, for the foreseeable future, will continue to drive demand for imported food products, including walnuts.
The California walnut industry’s commitment to market development, by growing consumer awareness of walnuts’ many benefits, continues to yield favorable results. Global consumption continues to increase, allowing the industry to fully utilize production gains. As the industry looks to the future, continued expansion of export markets will be critical to future production gains. New emerging markets, such as India, will play a vital role in developing the industry’s future consumers.