ALTERED STAKES

TONY SPLEEN

DAVIS, Calif. -- It's been three months since the Flavr Savr tomato hit the market, stirring up a media frenzy and fueling the debate over the future of genetically engineered foods.

Now that media attention has subsided, industry leaders say the real test of the tomato's future has just begun.

While the future looks promising, the tomato may have its share of challenges to meet, including its higher price and some initial inconsistencies in quality and availability, according to those interviewed by SN.

"I think the introduction of the MacGregor tomato has been very successful," said Bert Gee, owner of State Market IGA, a 15,000-square-foot family-owned store in this small university town, which has

carried the tomato since its introduction. "People enjoy the flavor."

Although, of late, he added, competition from lower-priced summertime tomatoes has cut into its sales.

MacGregor is the brand name for the genetically altered tomato developed by Calgene Inc., a biotechnology company also based in Davis. The tomato, grown from Flavr Savr seeds that have been genetically altered to slow rotting in the fruit, is said to have a three-week shelf life and better flavor than conventionally grown tomatoes.

Shoppers at State Market surveyed agreed that the flavor of Calgene's new tomato is at least an improvement over conventionally grown tomatoes that are picked when they are green and later ripened with the application of ethylene gas. However, some industry observers said Calgene will face other challenges that, if not managed properly, could be a stumbling block to its success.

The high price tag on the Flavr Savr tomato will be one of those challenges, according to industry observers. When the tomato was introduced in May, its retail price was $1.99 a pound. At that time, State Market was selling regular vine-ripes for $1.19 a pound.

Now, with the California tomato season picking up, regular small vine-ripes are selling for 59 cents a pound, large for 99 cents.

Demand for the Flavr Savr has dropped, said Gee. "People are starting to see the price differential," he said.

Sales of the Flavr Savr tomato accounted for about 80% of tomato sales when they were introduced, Gee said. Now they're running at 45% of sales. "The price really needs to come down," he said.

"When tomatoes are off-season, [Flavr Savr] will have the edge because they've got the flavor. Right now, when the California tomato is coming on, it's touchy."

In what some said is a move to remain competitive during the tomato season, Calgene recently dropped its retail price to $1.59 a pound.

In addition to State Market, the Flavr Savr tomato currently is being sold in five other California stores: two Raley's supermarkets and a Bel Air Markets store in Sacramento and two stores operated by Ralphs Grocery Co. in Los Angeles. Earlier this spring the tomato was in 22 stores, including some in the Midwest, but short supplies forced Calgene to reduce the number of stores carrying the product.

At Raley's, the Flavr Savr tomato sells for $1.59 a pound, while local vine-ripes are selling for 49 cents a pound. "The price is the big deal now," said Mike Cummings, produce manager. "They [Flavr Savr tomatoes] are still selling, but not to the magnitude they were when they were introduced."

He said that when the Flavr Savr was introduced, Raley's was selling about 1 pound of Flavr Savrs to every 7 pounds of conventionally grown tomatoes. Now the ratio is more like 1 pound of Flavr Savrs to 50 pounds of conventional, he said.

"Maybe this winter they'll pick back up," he said.

According to Calgene, despite the recent price drop, the tomato will continue to carry a high price tag. "Consumers are willing to pay for a good value," said Carolyn Hayworth, manager of investor and public relations. "It's a premium product. The price will fluctuate over the years as the price of tomatoes does. It will always be sold at a premium. But we're talking about a dollar or two, not $10 or $20."

Several State Market shoppers said they'd be more inclined to pay the higher price for the Flavr Savr tomato during the off-season when the price of other tomatoes goes up.

"In the wintertime it would be a great price for a good tomato," said Shermain Hardesty, a food marketing consultant from Davis and a customer at State Market. "I'd be willing to try it then."

Said Hayworth: "We've never claimed that the height of our season was going to be during the height of the tomato season. Consumption of tomatoes drops off by about 30% from October to June, when tomatoes are not readily available. Our goal is to provide a product with good taste when seasonal tomatoes are not available. We'd love to bring back those 30% who stop buying tomatoes during the off-season."

In addition to price, some industry observers, who asked not to be identified, said Calgene has had difficulty maintaining consistent quality, supply and distribution. They said these issues need to be ironed out if the company expects to establish a loyal customer base.

State Market's Gee concurred that on some occasions he has come close to running short on supply. "We actually had to put a limit on what people could buy: two per family or four per family," he said.

He also said he occasionally has seen a drop in quality. When the tomatoes first were introduced, he said, "they were almost picture perfect." Now, he pointed out, several shipments have come in with blemishes or bruises.

Calgene's Hayworth acknowledged that the company has experienced some supply and quality problems, but explained that some problems were expected. The company had only a few fields planted when the Food and Drug Administration gave its approval in May to market the tomato. "We have significantly increased plantings in the last couple of months, so we'll have known quantities coming out in the beginning of October," she said.

While she declined to say how many acres have been planted or the anticipated volume, she indicated that the company would have enough tomatoes by the end of the year to supply most of the 750 stores -- primarily in the Midwest -- that currently are carrying the company's nongenetically engineered vine-ripened tomato.

"There has been a lot of talk in the industry lately about whether or not Calgene should be a distributor," said Hayworth. "Should we even be in the fresh produce industry? The fact is, we're doing it. We're in 750 stores right now. We have a great base for marketing our new product and moving it into those stores. "We have created a brand and brand awareness. We have a branded premium, quality product that is selling right now. There is a demand out there."

As for the quality problems, Hayworth said the company currently is working with different growers and testing different varieties. "Some are performing better than others," she said.

"Right now we are testing three different varieties -- they taste different and perform different -- just to see how well they'll do. In the end we'll probably have 10 to 15 different varieties nationwide."

Hayworth said the tomatoes are currently only available in six stores in California primarily because they are still in the test phase. The company is trying to eliminate those varieties that don't hold up well in the marketplace in order to narrow down the best varieties in time for large-scale distribution.

She said Calgene has in-store support staff to work with produce managers to identify problems and to ensure that the tomatoes live up to the company's standards and those of the retailer.

According to Gee, "As long as the appearance and the quality is there, I believe [Calgene's] share of market will grow."

According to a research analyst who has been tracking Calgene's performance, the Flavr Savr tomato will be a success and will serve as a model for future developments in food biotechnology.

"The consumers we have talked with have accepted the tomato as better than what is out there," said Jeffrey Kraws, a senior research analyst with the San Francisco-based investment banking firm Montgomery Securities. "They believe it is safe and that it tastes as good as what's in the back yard. The big challenge for Calgene now is keeping up with the demand. I think the company will do well and will be profitable by 1996."

The introduction of the tomato last spring resulted in a firestorm of protests from consumer activists opposed to genetic engineering of foods. One group, the Washington-based Pure Food Campaign, staged "tomato dumps" in front of State Market as well as a Jewel Food Stores unit in Melrose Park, Ill. How did the protests affect consumer acceptance?

"They didn't," said Gee of State Market. "Some customers expressed concern early on, but I think it's a passe thing now."

According to Ronnie Cummins, an official with the Pure Food Campaign, the group believes that while the tomato might be safe, there could be health risks associated with other bioengineered foods. The group plans to continue encouraging consumers not to eat the tomato in an effort to get lawmakers to establish stricter guidelines for testing and marketing such products.

Cummins said the group will work with its grassroots supporters throughout the country to distribute leaflets about bioengineered foods to consumers at supermarkets this fall

Several State Market shoppers said they buy the tomato because of its better flavor. "I've been buying them ever since the first day I could get them here," said Lollie Hannagan, a retiree from Woodland, Calif. "They're ripe, they don't have the white core in the middle and I can get them year-round. They've never let me down."

"I like them," said Debbie Clark, a school teacher from Davis. "They taste good and they have a long shelf life. When I buy tomatoes, I buy these."

Some shoppers said they don't believe the tomato lives up to the marketer's claim that it tastes as good as home-grown tomatoes.

"It's still no competition for a back yard-grown or a real field-ripe tomato," said Jeanette Lewis, an editor from Davis. "But it's an improvement."

Tom Hill, a nurse from Davis, agreed. "I think it tastes better than your standard green-picked tomato, but I think the claim that it tastes just as good as one out of your garden is a little bit of a stretch, but it's pretty close."

"I've bought it once and I won't buy it again," said one customer, who refused to give her name. "Tomatoes are still better from the farmer's market."

Even Calgene's Hayworth said the flavor of the new tomato might not match that of a home-grown, but it comes close. "The best tomato anybody can get is from their back yard," she said. "The distribution system is from the vine to the table."

Calgene spent five years and more than $20 million developing and waiting for government approval to market the tomato.