I. Identification

1. The Issue

2. Description

A farmer in Toombs County, Georgia produced onions in 1931 that were unusually sweet and mild, and managed to sell them for 7 cents a pound, which was a good price then. This encouraged other area farmers to start producing the onions, as well. This is the Vidalia onion, which gets its mild, sweet flavor from the low-sulfur soil, short-day onion varieties, plenty of irrigation water, and moderate climactic conditions of Georgia. "By the 1940s, the farmers' market in Vidalia, Georgia, was doing a brisk business selling the onions to tourists. Although production was not limited to the immediate Vidalia area, the onions became known as Vidalia onions. By the mid 1970s, about 600 acres were devoted to producing the Vidalia onions and a national marketing effort was begun. Production increased by almost tenfold during the next ten years."

Vidalia Onion producers of Georgia have protected their niche market from domestic and international competition, as well as gaining national and international recognition, through marketing, legislative protection, and research. They have also protected the name, quality, and image of the product through state ownership of the trademark. "The Vidalia onion is one of 17 approved varieties of hybrid yellow Granex onions produced in a specified geographical area in Georgia." Though Vidalia onions are not greatly exported out of the country, they do have international recognition as a branded agricultural product. This exclusive hold on the market allows grocers to sell the product for between 30-34 cents more per pound than other onions. About 70% of the onions are sold in grocery stores, and the rest are sold either in roadside stands or by mail order (where they can fetch up to $2.49/lb).

Vidalia onions gained legal status as a trademarked product in 1986 through the Vidalia Onion Trademark Act (State of Georgia 1986), in order to stop the practice of rebagging onions grown in elsewhere and selling them as Vidalias. The Georgia Department of Agriculture holds the trademark, which gives the Commissioner of Agriculture the authority to impose and collect fees or royalties for use of the trademark, including use on the label (but not on the ingredient list). The GDA registers all Vidalia onion producers and packers each year (at no cost) and enforces the trademark.

In 1989, the USDA Agricultural Marketing Service granted the Vidalia onion growers Federal Marketing Order No. 955. This order gave the growers and handlers the legal rights to establish the Vidalia Onion Committee, extended the state legal status of the Vidalia onion to the federal level, and allowed producers to fund research and promotional programs to improve the marketing, distribution, consumption, and efficient production of the onions. An assessment rate of 12 cents per 50 pound bag funds these activities. The VOC can only pass onion regulations with the approval of two-thirds of the producers and the secretary of agriculture.

The Vidalia onion became the official Georgia state vegetable in 1990. At that time, the short shelf-life of the Vidalia onion limited market availability to four months (April-July), which forced producers to let part of the crop rot in the field due to oversupply and lack of storage. University of Georgia researchers solved this problem in 1990 by adapting the apple industry's controlled atmosphere technology for onions, which allowed the producers to store onions from April through December and to triple the production area by 2000. This allows producers to store up to 50% of the annual crop (20 million 50 pound bags), or extend the selling season when prices are too low. Beginning in 2002, the Vidalia onion producers agreed that all their onions would pass the U.S. #1 grade before they could be sold as whole, raw onions. The state is helping producers in differing some of the additional costs that this inspection entails. The state and federal legislation has greatly reduced the incidences of onions falsely labeled as Vidalia through inspections and fines of up to $100,000.

Regulators check with seed companies to see who is purchasing the Vidalia onion seeds, and also checks Internet sites to see where and how the Vidalia trademark is used, and who is using the Vidalia name on their products. The mail-order portion of Vidalia onion sales yields higher profit margins than wholesales to supermarkets. "Only about 2 percent of the raw Vidalia onion crop is exported (Canada is the major export destination), with almost no overseas shipments."

The best way for producers to enter international markets will most likely be through processed products. The Georgia Extension Service estimated that the farmgate value of the onions in 2000 was roughly $5,833 per acre. "Approximately 87 percent of all Vidalia onions are produced on family-owned and -operated farms of 15 acres or less. In 2000, there were an estimated 133 growers and 91 handlers." Most producers and handlers are small entities, however, with annual receipts of less than $500,000. Processed foods, cookbooks, mixes, souvenirs, and the annual onion festival in Vidalia, Georgia bring additional revenue to the industry and surrounding communities. The industry is, naturally, susceptible to weather conditions, and an undetectable disease called Botrytis neck rot that can ruin up to 70% of stored onions. If stored successfully, the CA storage means that producers can sell roughly 80% of the stored onions. The industry is becoming more competitive; profits fell by about 50% over the last few years. As in all agricultural sectors, the trend in the Vidalia onion industry has been towards fewer and larger producers in the business.

http://www.card.iastate.edu/publications/DBS/PDFFiles/02mbp3.pdf

3. Related Cases

4. Author and Date: Suzan Herzeg, Bryan Rund and Jim Lee

II. Legal Clusters