Let’s start at the beginning. What makes something a commodity? The definition is as follows: “A commodity has full or partial fungibility; that is the market treats it as equivalent or nearly, so no matter who produces it, they do not have many aspects of product differentiation, such as a brand, a user interface, and therefore perceived quality. It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market.”
Onions, bananas, potatoes, carrots, cauliflower and more could all be said to fit into this description quite neatly, and with no clear identification, the seed breeders, growers, packers and suppliers become faceless and lost.
But there is a light at the end of the tunnel, with more niche or high-value products, like shallots, Tenderstem broccoli, asparagus and speciality tomatoes, brands such as Rooster and Pink Lady, and various premium varieties enjoying the limelight.
So where’s the escape route? Commodification or commoditisation occurs as a goods or services market loses differentiation across its supply base, often losing money along the way because inevitably, consumers take it for granted.
Supermarkets tend to get a lot of the blame for commodification, but at the UK Onion and Carrot Conference in Peterborough, retail analyst Kantar Worldpanel’s communications director Ed Garner told onion growers in particular that the fresh produce industry was also to blame. “Are onions at risk of becoming a commodity?” he asked. “Tomatoes used to be a commodity, but with different flavours and varieties came price points. Is there any branding potential? Like Albert Bartlett, Pink Lady, Chantenay carrots? If you treat them like a commodity then the retailers will as well.”
But of course, it is difficult to achieve that fine balance between a product that makes money through volume and a low-volume, high-return offer. Barfoots of Botley board director Jon Barfoot cites the Kotler product life cycle as a good theoretical model to understand the economics of how products go from launch to maturity, and the pricing and challenges that accompany each stage.
To summarise, he says, you can’t stop a product reaching maturity or even a market. But he admits there can be a middle ground. “Provenance and Britishness command consumer interest and branding also offers some protection of variety and generates on-shelf differentiation, but the retailers can always imitate and create an alternative supply source once the market is established, from which point they want lower prices to drive it further into mass market.
“But the life-cycle rules are the same: as soon as a product becomes mass market, revenues are high but margin becomes ever lower. It’s about managing a range of products at different stages of the life cycle and making sure that you know when to pull out of the more mature ones if the retailer decides to take the market down through devaluation.”
And there are some stars of the show - apples, asparagus, and tomatoes, to name a few - but potato brands have certainly been ones to watch over the last five years. Some companies have managed to get consumers to come back and buy their brands again and again, escaping the commodity trap while still maintaining high-volume sales.
Albert Bartlett has had particular success with both Jersey Royal and Rooster potatoes. “Brand recognition is at 96 per cent for Jersey Royals,” says John Heginbottom, sales and marketing director. “It is also unique in that it has PDO status, which clearly differentiates from commodities.
“Rooster potatoes are also now a well-known brand. They are versatile, consistent in taste and quality, and are supported by a powerful above-the-line advertising campaign. The packaging offers recipe inspiration and a QR code directing consumers through to a mobile recipe page, and we are now using our website and social media to engage even more.”
So, a good product and a proactive marketing plan is key. But it’s also about staying ahead of the game.
“Retailers are insatiable for new ideas and new products in their private-label ranges to beat the competition,” says Barfoot. “In the consumer technology market Apple has mastered the marketing pipeline model, but in produce the marketing pathway is less clear for a producer and doesn’t behave rationally. In the world of fruit, varietal development creates a high-value niche that will gain private label exclusivity and tenure with retailers, but not even that will last forever as new varieties come online and usurp older ones.”
Consumer pressure for provenance can drive fairer purchasing practice, which has been made obvious by the sales the British asparagus new season generates. “Direct sourcing and therefore better communication from top to bottom helps keep you away from becoming a commodity,” says asparagus grower Cobrey Farms’ Chris Chinn. But even asparagus get sucked into the commodity trap. “Growers feel like they have a commodity when the buyers put increased pressure on price. This happens particularly when any supply, no matter how glamorous the product, gets near to demand. Asparagus definitely falls into this category for a few weeks in peak UK season, which bearing mind the season, is a while.”
To find your way out of the trap, you need control, says horticultural consultant Sarah Calcutt. “It all comes down to a few control measures: quality management, volume management and a good marketing message,” says the founder of SEC Consulting.
“However, well-managed commodities produced in scale can still represent a quality, profitable product. The industry needs to stop scoring own goals and get strong marketing strategies that offer solutions to discounting demands, manage stock efficiently and prevent weaknesses from appearing in supply chains. Badly managed oversupply leads to a product being taken for granted.” -
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