NIGEL JENNEY, CHIEF EXECUTIVE, FRESH PRODUCE CONSORTIUM
In 2008, we need the nation to maintain its interest in eating a healthy, balanced diet by marketing good produce and promoting convenience.
There are lots of food programmes on television at the moment, looking at the risks involved with meat and other types of food, and such programmes have almost become a way of life to the nation. The produce industry, of course, contains an element of risk, and can be undermined by a food scare or pesticide issue - but generally, the industry robustly manages to ensure products are intrinsically grown to a very high standard.
The issue of sustainability will also become a key trend in 2008. We need to educate consumers so that they understand what sustainability is, and what the difference is between air miles and carbon footprint. Social economics must also come into play. This is a very complicated issue, and one that could be potentially misused by those with a vested interest. The consumer should have the capacity to pick and choose which products suit him or her best.
There are expectations this year of ongoing consolidation, and drives to increase efficiency will be inevitable. Fresh produce companies need to develop a clear understanding of the sector, of their customers’ needs and the consumer’s needs, and continue to push forward new ideas and opportunities, taking into account changing demographics in the UK and what chances that might open up.
As an overriding resolution, in 2008, I think companies should actively engage in and support the fresh produce industry’s trade association, and throw their weight behind its generic consumption campaign, Eat in Colour.
MARTIN DE LA FUENTE, SENIOR BUYER, TESCO
The key factor influencing the performance of fresh produce firms this year will be their ability to respond to customers’ and consumers’ changing needs. Produce companies who are close to their customers will be better placed to do this than those who are not.
The landscape is going to change many times over 2008. Supply companies need to see these changes coming. Many consumers will be tightening their belts, so price will remain ever important. However, consumer segmentation will become even more important - one size will not fit all any more. Everyone will need to be catered for - upmarket consumers, people who want to shop in small stores, people who want to shop in large stores - and product ranges will need to be adapted accordingly.
External factors such as exchange rates and interest rates will drive cost pressure across the industry, requiring the very best financial controls and management throughout the supply chain. There is also polarisation to consider - upmarket products need to be better than ever and deliver a great consumer experience every time, while low-end products need to deliver even better value to customers. It’s certainly going to be hard graft in produce this year! The industry is going to have to chase every sale.
I believe exotic fruit, nuts and prepared produce show the greatest potential for growth in 2008.
To my mind, fresh produce companies should resolve to get closer to their customers and the consumer this year.
RONAN LENNON, MANAGING DIRECTOR, CAPESPAN UK
The economic environment is bound to have a big effect on fresh produce; consumer expenditure will drop and cash is going to be tight.
Any company in this industry starting 2008 with debt is going to find this year very difficult, as the banks will be reining in their horns.
Increasing costs of fuel, energy, labour, as well as an increase in raw material costs, will all add to the pressure, particularly as there is no global oversupply at the moment. The $64,000 question, of course, is how easy it will be to pass that back to the customer. The retail sector is equally tough, and there will some quite difficult discussions to be had with supermarket customers in the next few months as suppliers try to drag prices up. The basket of basic commodities has risen 12 per cent in value year on year. Retailers have consistently looked for year on year decreases in price, but this may be the year that some of that comes through in fruit and vegetables. Growers around the world are concerned that the UK retail market does not provide the returns they want, but represents a bigger risk than other markets. Rejection rates are higher than in Russia or Germany, and with other markets opening up, growers are in a position to evaluate their options.
Global warming is obviously going to have a big impact again, making the availability of product from regions around the globe more uncertain. Increasingly, we are seeing shortages of products and that is affecting the price structure; on wholesale markets, for instance, the prices are very high for this time of year. Grapes, bananas and lemons have been very strong price-wise and, against this background, it is very difficult to get involved in contract pricing. Most produce firms are working on a margin of one to 1.5 per cent, so fluctuation in availability, prices and currencies can have a significant impact.
One trend fast becoming more prevalent is that supermarkets are looking to go more direct to the grower base, changing the balance of categories by taking some of the work from importers and using these companies for logistics and service provision. This can only lead to further rationalisation and consolidation of importers, which began to gather pace in 2007.
Our main categories - top fruit, citrus and grapes - are either static or growing gradually. We perhaps regret not getting involved in berries five to 10 years ago, but we are looking to get involved in more categories now. Suppliers need access to new varieties, and exclusivity wherever possible, to offer something different. I still believe the fruit categories have great potential to grow, and I would pick out foodservice as having a lot of growth left within it.
Without wishing to sound negative, I think my one resolution for the industry would be to batten down the hatches, because we are in for a tough time.
TONY REYNOLDS, MANAGING DIRECTOR, REYNOLDS CATERING
Economic slowdown and the exchange rate between the euro and the pound will have a big impact on the fresh produce industry, especially in the first half of 2008.
On top of this, the Far East is now a major part of the global economy, and its population is converting to a western-style diet - and that is encouraging farmers to look at their land differently and re-assess what crops they can grow in order to get higher value. Many may convert to production of wheat, to get greater yield and value, at the expense of traditional produce lines like potatoes and lettuce - so prices of these will go up. The unpredictable climate and rising fuel prices are further issues that we will have to factor in.
All of these issues together will pressurise produce prices, pushing them up - but to be fair they ought to increase, as they are not really at the level they should be.
It will be a very tough 2008 for foodservice, and I believe it will sort the men from the boys. We are all competitive, but it is not just about how competitively we buy any more - there are lots of other trends influencing foodservice we have to deal with. Sustainability is the most prevalent of these - we have to show how we are recycling our waste, how we run our fleet, etc. We are big diesel users at the moment, but if we can convert to biofuels that will make a big difference.
Local product is still very much in vogue and I don’t see that changing in 2008. Its popularity has really helped UK growers, and it is a great opportunity to get good-quality, locally sourced product into the foodservice sector, much as the retailers have done in their sector.
Our resolution at Reynolds is very much to find smarter and more efficient ways to serve, starting with how we are serviced by our growers and suppliers, up to the way we serve our customers. We are driving efficiency, and are lucky we have the scale to do that.
KATHRYN RACE, MARKETING DIRECTOR, BRITISH POTATO COUNCIL
For potatoes - as with practically every other food sector - there will inevitably be a range of short-term challenges that need immediate, competitive response. However, these will be best addressed against the backdrop of longer term considerations.
The downturn in the economy has to be taken seriously, especially at a time when commentators are predicting the end of the cheap food era. Retailers will inevitably demand a response from their supply chains. For the potato sector specifically, a good harvest from increased planting areas giving greater supply, but a consequent pressure on farm-gate prices, will present a challenge.
While that supply side situation bodes well for retailers and consumers, paradoxically, it is that very challenge that creates the opportunity for the industry to respond accordingly.
While three main drivers of consumer choice will continue to be convenience, indulgence and health, the subtle changes in the relationship among and the relative importance of each of those drivers will determine how the potato sector - both fresh and processed - responds.
For example, the increased concern on health - given added momentum by a raft of government initiatives - affords an opportunity to promote the health benefits of the potato and position it as the carbohydrate of choice.
The trend towards ethical eating - whether linked to organic production, local provenance, the reduction of food miles or carbon footprinting - presents an opportunity for growers and processors alike.
At the same time, the consumer will continue to demand convenience, but this may well be redefined to take account of wider health and environmental considerations.
Inevitably, consumers will be making mindset adjustments in their assessment of value for money, and for all those involved in the supply chain, strategies based on understanding and responding to those changing consumer values will be key.
The potato is a natural, healthy product, and the more that can be done to communicate its values to the consumer in a way that resonates with their concerns, the stronger the proposition becomes. At the same time, the processed sector in recent years has demonstrated its ability to keep in touch with consumer demand for inspired and innovative meal solutions. It will be those qualities of understanding the consumer and responding with innovation and inspiration that will determine the successes in 2008.
DAVID PICCAVER, CHAIRMAN, BRITISH LEAFY SALADS ASSOCIATION
The main internal factor facing the industry is how shoppers respond to consumer food inflation. We have seen the share of consumer spend on food continue to decline, but I wonder, are we about to see this balance change upwards?
Even if price increases are achieved, controlling cost will be critical. Fuel and labour costs continue to rise, particularly fuel. Due to commodity foods rising in value, we are likely to see increases in fertiliser and chemical costs; nitrogen has doubled in price on a few years ago.
Another internal factor will be whether we can make up the ground lost because of poor sales in 2007. We need a good summer, and we need to note consumers’ desire for upmarket purchases.
It will be interesting to see what impact the fuel cost has on winter suppliers, and also how the impact of the weaker pound against the euro will affect business.
This year, the quality of leafy salad needs to be improved after last season’s appalling bad weather, and with that a longer shelf life needs to be achieved.
I think that we will see more innovative packaging in an attempt to reduce waste. The prepared sector will continue to be innovative, but the amount of choice should not be overdone.
The resolution for 2008 should be to listen to and delight your customer. We should also ensure that the government seeks no further reduction in R&D.
LAURENCE OLINS, CHAIRMAN, POUPART GROUP
The three key areas that all companies should be looking at are recruitment and development of the right people for their businesses; development on IT; and implementation of strong financial controls.
Externally, I believe there will be further retail consolidation in the next 12 months, and we are all going to have to deal with the climate and its excesses. The state of the pound has suddenly reared its head as a serious issue too, and that could cause major problems.
The rising price of food is bound to have an impact on the fresh produce industry. In some ways it could be good, because our margins potentially go up, but in other ways it could cause demand to fall away. Hopefully, food demand will remain high, and if consumers show a desire to trade down a bit, maybe we can trade down for them. Reduced pack sizes at the same prices could help to keep demand high.
Markets around the world are also becoming more competitive for fruit that might have come to the UK. The eastern bloc and Russia, India and China, and the domestic markets of producers around the world, have become more attractive propositions. In the UK and globally, competition for land will continue to get more intense.
There is a continual trend towards improving every product we deal with, both in terms of yield and flavour. In the past, the industry mostly relied on state-funded breeding programmes for new and enhanced varieties, but there are more companies investing heavily in private breeding programmes now, and this is bringing more varieties with enhanced characteristics through all the time. There is so much work being done, it is not surprising that we are seeing significant results.
With my British Summer Fruits hat on, I am extremely optimistic that 2008 will be another year of increasing availability. It is a category in which additional availability still drives demand, so we can be confident that demand will rise again this year. I think soft fruit and stonefruit have the most potential to grow of all fruit categories, with most other categories more mature.
My one piece of advice to every fresh produce company this year would be KISS. Keep It Simple Stupid.
ALASDAIR MACLENNAN, TECHNICAL DIRECTOR, SOUTHERN ENGLAND FARMS
After two very different yet difficult UK summers, there will be a movement of UK crop production away from those more traditional areas, as suppliers and retailers try to better manage the risk of inclement weather conditions affecting crop availability.
Industry wide, several retailers are reviewing their supply bases in 2008, and hence there is expected to be some consolidation going on, as well as suppliers looking for new customers.
Local branding and sourcing will continue to increase, giving opportunities to those who can overcome the logistical- and volume-related challenges that this poses. And less packaging and more environment-friendly packaging will continue to be important.
I think 2008 will be fiercely competitive, with a continued decline in growers continuing to crop brassicas.
The market for local, as mentioned, shows great potential, albeit from a small base. This area is growing, and I reckon will be challenging the organics movement before too long. Organic and local across the country, now that may take some time...
As a company, we certainly feel the need for a continued focus on quality, cost and availability for our customers through growing efficiently, in the right locations and “getting it right first time”.
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When compiling these predictions, FPJ asked all eight people the same four questions. They were:
• What will be the key internal and external factors influencing the success or failure of fresh produce companies in 2008?
• Are there any trends that you see as being more prevalent during the next 12 months?
• In your category or categories, how do you see 2008 panning out?
• Which areas of the fresh produce industry show the greatest potential for growth in 2008?
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