As Martinelli’s cancels contracts, Watsonville apple farmers lose their biggest buyer – and a way of life

At the start and end of the harvest season, fourth-generation farmer Peter Knego drives the long way to deliver the first and last loads of apples from his Pajaro Valley orchards in order to pay homage to his great-grandfather. 

Steven Peter Knego is buried in a family crypt on Freedom Boulevard, an agricultural thoroughfare that runs the length of the valley in southern Santa Cruz County and connects Watsonville with the smaller hamlets of Corralitos and Freedom. More than 100 years ago, he was the first Knego to farm apples on the Central Coast, alongside many of his countrymen who fled political unrest in what is now Croatia to establish an apple empire at the turn of the last century. 

After a lifetime spent nurturing orchards and adding branches to his own family tree, Knego’s ancestor chose a spot in the heart of apple country as his final resting place. So as Knego takes his circuitous route and passes the cemetery in a truck laden with dusky green and russet fruit, he raises a hand. 

“He always said that he wanted to see the guys bringing in the apples, and he wanted to wave to them,” said Knego. “I would do it out of respect for them, because we wouldn’t have what we have now if it wasn’t for them, and their sacrifices.” 

But after more than a century, an unbroken line of apple farmers will end with Knego. This winter, he began tearing out his trees. At an orchard on Freedom Boulevard planted by his family in the 1920s, branches full of spring leaves lay next to gnarled roots ripped from the earth. This year, Knego will lease the newly flattened land to Aptos Berry Farms, a subsidiary of Reiter Affiliated Companies, one of Driscoll’s largest berry growers. 

Like other longstanding apple farmers in the Pajaro Valley, Knego is losing his only client. For decades, almost every apple farmer in the area sold their apples to a single, behemoth buyer: S. Martinelli & Co., an internationally distributed 158-year-old apple cider company known for its round, apple-shaped bottles. This winter, Martinelli’s told Knego and other apple growers in the valley that, within the next few years, it would stop renewing their contracts. 

With no substantial replacement buyers waiting in the wings, apple farmers are confronting difficult decisions about how to eke out an income from land cultivated specifically for cider apples, and question whether this marks the end of the local apple industry as they know it. 

Founded in Watsonville in 1868, a pillar of Martinelli’s sweet-tart cider recipe comes from Newtown pippins, an aromatic and flavorful heirloom variety grown widely in the Pajaro Valley. The company is the foundation of the area’s apple industry, an often exclusive buyer, and provider of critical infrastructure like labor, equipment, and orchard management.

“The apple industry in Watsonville over the last 30 to 40 years has become mostly focused on and supported by selling fruit to Martinelli’s,” said Jake Mann, a fifth-generation apple farmer in the valley. His family, like others in the area, felt it could rely on Martinelli’s to purchase its apples at a fair price. “They want Newtown pippins. That’s always been the mantra I’ve grown up with for their blend.” 

About the size of a child’s fist, with a short stem and green and russet coloring, pippins are rugged and squat. Although delicious eaten out of hand, they pale in beauty compared to the large, glamorous fruit designed to catch a customer’s eye at the grocery store. 

In December, after harvest, when Mann met with Martinelli’s to discuss his contract for the following year, the company told him that it would no longer commit to purchasing Mann’s apples at a set price after the 2027 season. “They said, you have two more years to sell us at contract price,” said Mann. “That’s a huge shocker for me and my family.” 

Martinelli’s wouldn’t divulge where it sources its apples, but it’s an open secret in the industry that the company purchases a significant portion of fruit and juice from Washington state at a fraction of the cost compared to Watsonville apples. Apple farmers in Washington grow primarily for the fresh market, and sell less-than-perfect fruit to juice buyers like Martinelli’s at steep discounts. 

A ton of cider apples grown in the Pajaro Valley sells for around $400, according to the 2024 Santa Cruz County crop report, the most recent year that’s available. Imperfect market apples, known as “seconds,” from Washington sold for around $135 a ton, and juice sold for $70 a ton, according to a 2024 apple processing report from the U.S. Department of Agriculture. 

Since January, apple farmers told Lookout that Martinelli’s declined to renew leases at farms throughout the area, claiming that the fruit is low quality or there are too few apples. According to Mann and Knego, the company also passed on leasing a large desirable orchard, which they took as a sign that it doesn’t plan to expand local farming operations. 

Mann believes that Martinelli’s decision is financially motivated: “They claim it’s quality, but it’s apparent that they don’t want to pay for local fruit if they don’t have to.”

Gun Ruder, president and CEO of Martinelli’s, wouldn’t confirm whether the company is not renewing contracts with local farmers in favor of less-expensive out-of-state fruit.

“While we can’t discuss our sourcing strategy or internal operations practices, as a business, we are constantly evolving to ensure that only the highest quality fruit bears the name Martinelli’s, including the planting of 250 local acres of apples over the past decade,” Ruder said in an email to Lookout. “Rest assured, our long-term commitment to growing and sourcing apples in the Pajaro Valley continues.”

According to apple farmers who spoke to Lookout, Martinelli’s also leases and owns its own stock of apple trees in the Pajaro Valley.  

Farmers left with few choices

Farmers like Mann and Knego, who sold all or the majority of their apples to Martinelli’s, are faced with a generational hurdle of what to do with their apples. Grocery distributors aren’t interested in pippins, and there are no other significant juice buyers in the state. 

Manzana Products, an apple cider vinegar company in Sonoma County, was a buyer for some certified organic growers in the Pajaro Valley, but it’s moving manufacturing to the Yakima Valley in Washington this fall. 

“There’s no competitor,” said Mann. He’s considering grafting boutique varieties desirable to restaurants and specialty markets to his trees – a process that takes three years to mature – but courting individual sales a few bins at a time might not be a viable solution. During peak apple season, he typically ships more than 100 bins of apples to Martinelli’s a day. 

Martinelli’s monopoly on the local apple market has been an issue for decades, said Mann. As a young man, he heard his parents and fellow farmers complain that they had little leverage to negotiate higher prices. “They said, ‘We don’t have a choice. We just take what Martinelli’s pays us,’” said Mann. It’s been his goal to cultivate other sales channels through hard cider and other fresh markets. “I’ve had moderate success, but it’s not going to completely replace the amount of fruit that we sell [to Martinelli’s].” 

The company didn’t just purchase local fruit; it often provided labor through contracts with skilled pickers and pruners. It leased large pieces of equipment that were too expensive for small farmers to purchase and care for on their own, and provided chemicals and materials to combat pests and increase yields. 

Mann also sells apples to two Watsonville-based craft cideries, Santa Cruz Cider Company and Tanuki Cider, but these relationships are possible only because he already has the volume and variety of fruit, cold storage, tractors and labor thanks to huge sales to Martinelli’s, he said. Even though Santa Cruz Cider pays around $600 a ton to Martinelli’s $400, these small sales are not, and could never be, his main gig. 

Nicole Todd, co-owner of Santa Cruz Cider, said five farmers have reached out to her this year asking if she will purchase their apples because Martinelli’s is canceling their contracts. With a small team of three people, she had to decline all the offers. 

“We’re not big enough to take as many apples as Martinelli’s is canceling, so we’re having to turn these people away, and it’s breaking my heart,” said Todd. 

When she, her sister and husband founded the company in 2013 with a priority of using apples grown on the Central Coast, they discovered that they could be orchardists or cider makers, but not both. They formed a partnership with Mann to facilitate harvesting and deliveries to their apple shed in Corralitos, where Todd stores the apples and presses them into juice for cider throughout the year. 

“Martinelli’s is also taking the infrastructure, like tractors and bins, with them,” said Todd. “Some people are left with no way to get the apples off of the orchard to anywhere.”

Some farmers, including Knego, plan to tear out their orchards and try to lease the land to berry farmers. Todd points out that berries, grown in plastic mulch or hoop houses and replanted annually, often with abundant pesticides, are less sustainable for the environment than apple orchards, which sequester carbon and can produce fruit for decades. People don’t get into the apple industry to make money, said Todd: “You’re in it for the love of the apples and the orchard.” 

Some of the farmers who have reached out to her want to keep their trees in the ground if they can, and she’s encouraged them to explore operating as a u-pick or event venue. Longstanding family farms Prevedelli Farms and Gizdich Ranch use independent models by opening to the public, selling direct-to-consumer through online sales and selling value-added products such as pie, juice and jam. Prevedelli Farms also sells at 10 weekly farmers markets throughout the Bay Area from May through the end of the harvest season. 

Todd compared raising apples to growing grapes for winemaking. “Each tree has its own individual personality and flavor. There is a difference in terroir, even across the valley. A Gravenstein [apple] on Pioneer Road is going to taste different than a Gravenstein in Pleasant Valley or on Casserly Road,” she said.

If the trees are pulled out, she fears that a connection to history will also be uprooted. “I’m still planting apple trees, and these trees are going to be here long after I’m dead and gone, producing apples for the next generation,” said Todd. “You don’t get to plant a strawberry and leave it for your grandchildren.”

Pajaro Valley’s apple farming roots

In the early 1900s, Knego’s great-grandfather fled fascist radicals in his native Croatia, then part of the Austro-Hungarian empire, and joined an enclave of his countrymen in the Pajaro Valley. Croatian immigrants recognized the area’s cool coastal climate and late summers as ideal for growing apples, and swiftly established one of the nation’s largest apple industries at the time. 

In his 1913 novel “Valley of the Moon,” Jack London described the Pajaro Valley as “an apple paradise.” He wrote of the Croatian immigrants: “They have a way with apples. It’s almost a gift. … Each tree is just as much an individual to them as a horse is to me.”

According to “Blossoms into Gold: The Croatians in the Pajaro Valley,” written by Croatian Americans Donna F. Mekis and Kathryn Mekis Miller, immigrants established packing houses and pioneered distribution methods for fresh fruit throughout the U.S. and internationally. The industry remained strong through the 1960s before it faded due to competition from the Pacific Northwest and other apple-growing areas. 

The industry continued to decline in the modern era, while berries, particularly strawberries, became Santa Cruz County’s top crop. The 2024 crop report valued strawberries, blackberries and raspberries at over $446 million, planted across 5,390 acres. In the same year, apples brought in just $13.3 million across 1,790 acres. 

‘This is business’

Knego felt a change was coming when Martinelli’s declined to lease 100 acres of premier orchard adjacent to its own at the end of 2025. The trees were farmed with care by his uncle, Mark Pista, one of the most highly regarded apple farmers in the area.

“It’s breaking my heart, but we’re tearing it out right now. It’s beautiful,” he said. After touring the orchard, the Martinelli organization said the quantity was too low to invest. “When they passed on us, I knew things were bad.” 

When Knego heard that Martinelli’s told Mann and other farmers that it would let their contracts expire, he knew his fears were founded: “I thought, here it’s coming, but I had already made the choice that we should get out. I read the tea leaves, and I just don’t see this getting any better.”

In years past, Knego could have taken his concerns to the Martinellis directly. He graduated from high school with Robert Martinelli, and his father served on the school board with Pat Martinelli. They were like family, he said. But within the past five years, the Martinelli family members seem to have stepped back from daily operations. Now, when he drives his truck into the warehouse, no one recognizes him. 

He doesn’t bear any ill will toward the Martinellis or the company, he said. “This isn’t a personal thing. This is business,” said Knego. “I get where they’re coming from, and now I’m going to do what I’ve got to do. I don’t like to do this, but I’ve got guys banging down the door to take that property. I’m tearing out all the orchards.” 

In May, as he ripped up his trees on Freedom Boulevard, he was aware that it would be a sign to the community that a seismic change had arrived. “When that orchard goes, that’s when everyone’s going to know we’re done. That orchard was the first one you see when you enter Watsonville, and it’s been there since the late 1920s,” said Knego. 

Knego understands other farmers’ anger, and he thinks that Martinelli’s could have given them more warning. An extra few years would have given farmers time to find new buyers without flooding the market with apples and available land. 

He’s taking the shift from apple grower to landowner in stride. “I’ll never leave this area. I can’t, because I’m locked in to make sure that I can be a good steward to all this,” said Knego of the land. He’s mindful of building on his relatives’ vital lessons of perseverance, integrity and the importance of family that transcend their apple farming legacy. 

When Knego brings flowers to his family’s crypt, he believes they understand. “They know what I’m doing, because I have passion in my history, and what these people went through to get to where we’re at now,” said Knego. “I’ll never lose this on my watch, and my kids won’t either.” 

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