Fresh produce players on both sides of the Atlantic have endured a particularly tough 2009, with the global economy plunged into recession and many consumers shifting their attitudes and values to reflect their decreased purchasing power. There is a sense of a common experience between the two industries that means there are numerous lessons to be shared, with trends from the States being felt in the UK and vice versa.
Julia Stewart, public relations director at the Produce Marketing Association (PMA), says that the economic downturn is the biggest trend affecting US consumer behaviour at the moment. “We expect that its effects will have an impact on consumer behaviour for long after the recession itself is over,” she tells FPJ. “Our consumer research validates what other researchers have been reporting: consumers are eating out less and cooking at home more, which presents a tremendous opportunity for supermarket produce departments and foodservice operations alike. Consumers are also telling us that they are shifting to more staple, cheaper fresh produce items, but they aren’t yet at the point of moving to frozen or canned - that means an opportunity for providers of staples.
“Consumers are also telling us they want more value, but that doesn’t mean they want lower quality. That presents the opportunity for retailers to reinforce produce’s nutrition and cost-per-serving value. But retailers shouldn’t just expect consumers to flock to them - they will need to help these consumers, many of whom have forgotten how to cook, if they want to get and keep them as customers. How retailers opt to respond to the economy’s impact on consumers can make the difference between losing sales and gaining them.
“Smart companies aren’t only ready for a downturn - they take advantage of it,” she adds.
Jim Prevor, also known as the internet’s Perishable Pundit and publisher of Produce Business magazine, says it has been a tough year for the foodservice sector in the US, whereas retail has been able to weather the storm better. “If you are in the foodservice arena, you have probably been substantially hurt,” he says. “Restaurants have seen a dip in business and are working to offer value meals and get their clientele back.
“In retail, it depends on where you are in the sector. Value-based retailers like Aldi and Wal-Mart have had a good year, although the hard discounters are not as pervasive in the US as they are in the UK. There is good business in the warehouse clubs such as Costco and BJ’s, but some consumers who are more pressed for cash don’t see buying at wholesale clubs as a win if they have to buy more volume.
“But those producers whose businesses models have evolved by selling to discounters and warehouse clubs are doing better at the moment than those with business models serving upscale retailers such as Whole Foods.”
In the UK, numerous media reports have painted a picture of the middle classes abandoning Waitrose in favour of the hard discounters, and it seems this phenomenon has not been restricted to this side of the Atlantic. The US middle classes, says Prevor, have also converted to more cost-conscious shopping methods.
“The psychology has changed a lot,” he explains. “Two years ago, if you went to a dinner party in an upscale suburb, it would have been trendy for all the food to have come from Whole Foods. At the same dinner party today, the food might well be from somewhere like Costco. That changes the industry in terms of what products are being emphasised.”
Gordon Smith, director of marketing at the California Tree Fruit Agreement, believes that while consumers are trading down in some items, the larger story is the impact of the recession on retailers, both in the US and the UK. “In an effort to drive produce sales, we see lower prices across the board,” he says. “Domestically, retail prices for stonefruit - even with 20 per cent less fruit than last year - are down slightly compared to 2008, but that is the case for all fruits. Those competing US fruits with above-average supplies this year have resulted in even lower retail pricing, which is sure to impact a retailer’s total dollar sales.”
The UK is a key market for suppliers of California peaches, plums and nectarines, but Smith says that this season, bumper supplies of European fruit and a short crop in California have taken their toll. “These have had a larger impact than the economy or a stronger US dollar - at least compared to August 2008,” says Smith. “The weather in the spring with frost and some hail drove nectarine and plum pack-outs down for most of the summer. On the bright side, the late-season varieties being harvested right now were the least impacted by poor spring weather, and we are pleased to note that California peaches, plums and nectarines are now available in the UK.”
Product categories such as fresh-cut have suffered as a result of the recession, reports Prevor, as US consumers who previously craved the convenience of fresh-cut products now have more time to shop around and cook from scratch. However, the situation is slightly different on the organics front. “There has been a shortage of organic produce for several years in the US, as less than one per cent of all the farmland here is certified organic,” he explains. “Because there has been that shortage, the downturn has not shown up in fewer sales because supplies are now better able to match demand.
“A lot of growth in organics has come from retailers rationalising. Take a low-volume item such as leeks - if a retailer used to sell conventional and organic leeks, they might have now realised they don’t sell many leeks at all, so there is no need to carry two lines. So they may well have chosen just to stock organic for a little extra cost.”
Sales of organics are holding their own or just falling slightly, says Stewart. “Costs have come down considerably for many organic items, which allows them to remain competitive,” she explains. “Restaurant sales are off quite a bit, the National Restaurant Association reports. But that hasn’t been all bad for everyone, as consumers have traded down. But many pundits see the light at the end of the recession tunnel - there’s hope.”
In what Prevor calls “white tablecloth” establishments, footfall is being driven by a greater focus on local food. “Local food is a way for a chef to add value and put details of the grower on his menu, which is something the consumer can connect with,” he says.
Stewart believes consumers rate local produce as even more important than organic. “We believe that what is behind locally grown is an interest in reconnecting with the people who grow their food and have such an impact on consumers’ lives,” she says. “As PMA president and ceo Bryan Silbermann said in his State of the Industry presentation at Fresh Summit last year, people want to know the face behind their food, the story behind their sustenance. We think the message to the produce industry is to start telling your story - whether you have grown locally, across the country, or around the world. Locally grown isn’t going away - it’s a trend that is here to stay.”
The trend of authenticity - products sourced from a particular region for their historical provenance - is also growing, says Prevor. “Authenticity is a way for national marketers to tap into the local trend, as they can’t grow everything everywhere,” he says.
Along with the recession and its impact on consumer behaviour, Prevor outlines a move towards stricter traceability standards as another concept making its mark in the fresh produce industry. The government is looking closely at the industry’s Produce Traceability Initiative, he says. The scheme, sponsored by the PMA, the Canadian Produce Marketing Association and the United Fresh Produce Association, is designed to help the industry maximise the effectiveness of current trace-back procedures, while developing a standardised industry approach.
“Traceability is an extra cost on top of the tremendous costs of food safety and sustainability initiatives,” says Prevor. “There is especially a lot of pressure because many buyers say they want to see growers using these sustainability initiatives, then when it comes down to paying for that in the produce, they often wind up deciding to buy from someone cheaper. That is the over-arching issue in the produce industry - there is more pressure to reach the industry standards, without it being clear how companies can achieve that.”
Following a spate of high-profile fresh produce health scares in the US in the last couple of years, food safety is very much a priority for the industry, says Stewart, with Congress on the verge of passing comprehensive food safety legislation and a more activist Food and Drug Administration and US department of agriculture on the watch.
“Fortunately, it’s a new era in Washington DC - Congress and the agencies are more open to hearing from the industry and tapping into our real world experience, which in turn helps us work for legislation and regulation that will work in our real world business settings. And it even works to our benefit - new agriculture secretary Tom Vilsack is very interested in promoting healthy eating and that means promoting fresh produce,” says Stewart.
Prevor agrees that the new leadership at the White House is certainly making a difference on this front. “Food safety is clearly still high on the agenda and the big change in the US this year is that we have a new president in Barack Obama, who is more aggressive on these issues,” says Prevor. “But this year, business practices have been driven more by the need to offer value for money.”
The key experience that the UK and the US can share in the midst of a global recession is learning how to operate in a totally different financial environment, says Prevor. “The main change is that there is less credit available and it is not easy to get investment capital. London and New York as the world’s two leading financial centres were at the centre of this crisis, so it would be good if they could find a way to salvage it.
“For produce operations, the key is looking at things differently after years of pushing upscale with more variety and assortment, and now going back to something that is more basic.
“But there is a threat to watch out for. I was shocked on my recent visit to the UK to see Tesco so strongly positioning itself as a value retailer. The problem is that we won’t always be in recession, and it is not easy to switch your reputation from downscale to upscale. Whole Foods, for example, is trying to find a path to allow it to claim it is economical and also upscale.”
But the general sense in the US is that most produce companies are, by and large, holding their own. “This year, I think people have not been aggressive in pushing for new business, as they can’t get the financing,” says Prevor. “It is a truism - but it is true - to say that people have to eat. “They don’t have to eat fresh, of course, but there is a core of people who will always eat fresh produce. In 2008, the US sold more produce than ever before, because the population is growing.”
The global produce industry needs to pull together in a time of recession, believes Stewart.“Produce is a truly global marketplace,” she says. “East and West can work together to grow their businesses, instead of competing with one another; and each link in the supply chain should support the other for the common good.”
FLORIDA PREPARED
The Florida Department of Citrus is gearing up to ship its new-season crop of grapefruit to the UK next month.
“I think the biggest challenge this year will be availability of fruit,” says the department’s Mike Yetter, pictured. “Our grapefruit juice inventory in the state of Florida is currently down 20 per cent from a year ago. Juice inventories are tight. Consequently, juice processors will compete more vigorously for fruit this year. That could translate to pricing pressure for the fresh market.”
The impact of the economy on grapefruit does not appear to be significant, according to Yetter. “From our experience and the feedback we have received from the field, it appears that the recession has not had as big an impact on grapefruit as originally thought. But our disease and supply issues are much more top of mind right now in Florida.
“The industry has committed considerable resources to addressing canker and greening. We feel that we are making progress every day. For example, just recently we have identified a pesticide and a low aerial spraying technique that is effective in controlling the greening vector. I perceive the challenges for next season to be more supply-side oriented than market-driven.”
Supply issues aside, the UK remains the number-two European market for Florida grapefruit, according to Yetter. “When we bounce back from our disease problems, we are going to need markets for our products,” he says. “It’s important, for the long run, that we maintain a healthy relationship with the trade and a dialogue with consumers. I see the UK as an important market for the Florida citrus industry for many years to come.”
MUDDY BOOTS TAKES TECHNOLOGY TO US
For many years, Europe has led the way in food safety, with third-party certification of suppliers to food safety standards recognised as a key factor in supporting this critical area, says Jeff Goulding, sales director for Muddy Boots Software. North America, however, recently rocked by a devastating catalogue of food-related issues, is now fighting hard to catch up. And technology is playing an important role.
Since the business began in the late 1990s, Muddy Boots Software has established itself as a global player in the IT industry, deploying solutions throughout the food supply chain from growers and importers through to food manufacturers and retailers. This widespread interest has given us an intense understanding of the food industry, ensuring companies we partner with can share in our learnings and leverage off their experience. With Muddy Boots at the forefront of compliance and quality assurance solutions across the global food industry, a partnership between Muddy Boots and the Safe Quality Food Institute (SQFI) - a division of the North American Food Marketing Institute (FMI) - has opened up some unique opportunities.
The partnership was created four years ago when Muddy Boots was approached by FMI to help it develop a data capture and audit management solution for its SQF food safety program. The initial goal of the project was to improve the efficiency of the audit process and drive consistency in the program, but the benefits of this web-based solution have been far reaching.
Designed as a collaborative tool, SQF Quickfire provides permission-based access to up-to-the-minute audit information for all stakeholders, including certification bodies, auditors, sites and buyers. This innovative technology represents significant progress in how audit data is captured, managed and made available and sets the SQF program apart from other similar global food safety schemes. Delivered as a fully managed service to SQF, Muddy Boots also hosts the solution and provides support for the system and its users.
Monitoring compliance with food safety standards rests on the ability to capture accurate and timely information and ensure secure access to the data by authorised stakeholders in real time. The investment in SQF Quickfire demonstrates a commitment by FMI to maintaining and developing the SQF Certified Program, not only for suppliers, buyers and retailers but also as part of the Global Food Safety Initiative (GFSI). The GFSI, whose objectives are to reduce duplication and improve cost efficiency in the supply chain, manages convergence between food safety standards through maintaining a benchmarking process. This simply means that suppliers, as long as they meet one of the GFSI standards, will have common acceptance by a growing number of retailers around the world, including Wal-Mart, Carrefour, Metro and Tesco.
SQF has so far issued more than 9,000 certificates to suppliers in over 20 countries, verifying that they comply with the most stringent international food safety standards and company buyer requirements. SQF certification means that a grower, producer or manufacturer is in compliance with international, regulatory and other specified standards. With the global food supply chain growing and becoming more complex, and food sourced from new and unknown areas, the requirement for implementing these global food safety standards is ever increasing.
Partnership with SQF has opened up opportunities for Muddy Boots to engage with other food companies in the US, until recently a marketplace relatively untapped by Muddy Boots, and also in other parts of the world. Interest in our integrated suite of compliance and traceability solutions as a result of our activities with SQF has been a welcome spin-off for Muddy Boots, highlighting the true value of international partnerships.
FRESH & EASY BUILDS 98c RANGE
Fresh & Easy, the US subsidiary of Tesco, has enjoyed success with its 98c produce lines.
Delivered daily to the chain’s 125 stores in southern California, Nevada and Arizona, the range comprises a selection of fruits and vegetables available in packs of six for just 98c.
A spokesman for Fresh & Easy says: “Customers told us they were finding it hard to find high-quality produce at affordable prices. The range was launched earlier this year and has so far been a success with consumers. Produce sales have increased in store as a result.”
The products in the range are apples, pears, bell peppers, Baja classic tomatoes, carrots, green onions and potatoes.
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