Retail volume growth provided some cause for celebration last year but the mushroom industry still faces key challenges in 2006, according to leading players. Many companies will readily tell you it is not an easy sector to be involved in.
“If you look at the market in terms of retail volume growth, figures have been positive,” says Andrew Middlebrook of Monaghan Mushrooms. “According to TNS figures, up to August 14 last year, volume growth was up five per cent.”
“I estimate that 25-27 per cent of the market is now supplied by the UK, compared to Defra’s report of 33 per cent in 2004.”
If you can market mushrooms, you can market anything, says John Smith, managing director of Greyfriars. “Mushrooms involve high labour costs, they’re perishable and highly competitively priced,” he notes.
Indeed, the challenges facing the mushroom industry have been well documented. Rising competition from a number of newish kids on the block, most noticeably Poland, heavy costs and recent high profile names exiting the sector, have dominated the headlines.
Some marketers also feel that recent promotions, which are concerned with the cost of mushrooms, such as “money off” or “extra free” offers, are squeezing the industry further.
According to Smith, in recent years supermarkets have put mushrooms into the Every Day Low Prices (EDLP) category and as such there is very little specialist promotional activity going on. “Suppliers have little, if any, scope to provide the requisite funding for any further effective price reductions - which is really what extra promotions mean when EDLP is in place,” Smith notes.
“One major problem of promotion is that it is no longer about the product,” says Jon Fuller, marketing manager of Waveney Mushrooms, a co-operative of mushroom growers in Norfolk and Suffolk. “As an industry we now promote the sales outlet. For example, we use mushrooms and money from the mushroom industry to promote footfall rather than to buy mushrooms.
“This means that we promote products at a time when they would sell anyway rather than when sales are traditionally low. The response of buyers to a November promotion is that sales don’t increase that much - but from an industry point of view maybe it means that sales have held up way beyond normal figures.”
One company that is taking an innovative approach is Heveco. The company supplies Asda and the two teamed up with the Mushroom Bureau in early December. A recent promotion focuses on the Mmm…mushrooms Cookbook written by Victoria Lloyd-Davies of the Mushroom Bureau.
Asda is sponsoring 2,000 copies of the book and customers who buy 250g closed cup mushroom punnets could bag a free copy if they spot a winning message incorporated under the specially designed label.
“We are working closely with Asda and have plans for further promotions in 2006,” says Caroline Lincoln, Heveco’s marketing manager.
That promotion is paying off. “The Mushroom Bureau website gets over 1,000 hits a month,” says Lloyd Smith. “There’s a lot of interest in mushrooms from consumers.”
Other promotions include a link-up with bean giant Heinz. During Farmhouse Breakfast Week, which kicks off on January 22, Heinz is offering 20p off a single can of baked beans when a special voucher is redeemed on a 500g pack of closed cup mushrooms in Sainsbury’s.
Chinese New Year will also put mushrooms in the spotlight as Heveco has arranged a tie-in with Uncle Ben’s. A flash label on a 250g closed cup pack will show a picture of Sweet and Sour Sauce plus Uncle Ben’s Rice. “This link is to catch the moment of thought when shopping at the mushroom category,” says Lincoln.
Middlebrook believes that more public relations are needed to boost the profile of mushrooms. “One thing that we can do at low cost is to fund PR support work via the Mushroom Bureau to increase promotions at a generic level,” he says.
“We need to stimulate the supply industry at large. I’m not talking about one-off promotions but something that we can build on, year-on-year.”
Those in the mushroom sector feel that now is the time to move forward, especially in these highly competitive times. Following a period of turbulence and uncertainty, there are some bright spots for the sector, including growing demand for exotics.
Although exotics represent a small percentage of total mushroom production and account for less than 10 per cent of retail sales, consumers are showing enthusiasm for speciality varieties.
“With TV food programmes showing how to use different types of exotic mushrooms, this area is growing and people are experimenting and trying new things,” says Mike Ewin of Leckford Mushrooms.
“During the late November-December period, we ran an exotics multi-buy promotion for the varieties Enoki and Buna Shimeji which proved very popular with our customers.”
He believes that there are further opportunities to increase market share for mushrooms, particularly for product that comes from good quality, well established farms.
Consumer demand for convenience has ensured that pre-packs are another area of growth. “For pre-pack loose cups, there’s been a 14 per cent retail growth in volumes and for pre-pack flats, growth is higher at 21 per cent,” says Middlebrook.
All sectors, such as conventional, organics and exotics, are performing well, says Ewin, who believes freshness and presentation are better in pre-packs.
“Consumers also prefer them as mushrooms haven’t been handled by anyone else in the stores,” he says.
Meanwhile, UK suppliers are also keen to stress the positives of producing mushrooms on home turf.
“The advantages we have over the imported side of the business is less food miles,” says Denise Stock of Heveco. “We can deliver fresh product picked on the day of delivery to the depots and also emphasise the localness in produce where we can print the farmers name and the county the product is grown in.”
“The main advantage the UK has over its European rivals is that we are closer to our marketplace,” Fuller agrees. “Freshness and cost of transport must be favourable if reasonable government regulations about free use of our roads by foreign hauliers were introduced and policed effectively.”
“If our government is truly concerned about global warming, then surely the number of food miles travelled by everyone’s weekly supermarket shop would be addressed. Why do we buy food from abroad when we can buy identical food locally?”
In terms of freshness, Smith notes that overseas growers have made significant strides and some of Poland’s most professional growers seem to have their crops chilled to 2°C, using dry air, within minutes of being picked.
While some firms are keen to emphasise the positives, they are also fully aware of the obstacles they face. Ewin notes that the key challenge for UK suppliers is to continue to improve productivity to meet low cost imports, primarily from Poland.
“Poland is likely to continue its drive into the UK market,” agrees Smith. “As it goes up the learning curve of supermarket requirements, it will become increasingly effective at meeting those standards.”
While some might argue that labour costs in Poland will catch up with those in the UK, this is wishful thinking in the short to medium term, Smith believes. “A four per cent increase in picking wages in the UK means a halfpenny per pound increase in picking costs,” he says. “A halfpenny a pound increase in picking costs in Poland would require a 20-30 per cent increase in wage rates there - which is not going to happen.”
However, he believes that imports and domestic production can co-exist relatively harmoniously. As a production and marketing company, Greyfriars markets button mushrooms for a large Polish farm.
“The farm produces half a million lbs of mushrooms a week and with its entrepreneurs, Poland has an increasing ability to come to grips with all factors to supply the UK market,” Smith says. “It also has the advantage of being able to pick well on the more difficult lines such as button mushrooms.
“Buttons are more difficult to pick than flats. However, buttons have a higher value line, and can stand transport costs very well.”
Smith also believes that Poland has become increasingly competitive on other lines. Even with current exchange rates, he believes that Poland will be a dominant force in the market.
The main challenges for the UK mushroom market remain much as they have been over the past five or six years, Smith says. “It’s a question of how to remain viable with constant downward price pressures and cost increases,” he notes, adding that diversification into other products could prove beneficial for suppliers.
Meanwhile, rising energy costs are likely to be a major factor this year. “This is one issue that’s facing the industry at large,” says Middlebrook. “It doesn’t matter which country you’re producing in or which sector you’re supplying, energy costs have risen in the last quarter and are undoubtedly going to be an ongoing concern.”
However, even the most pessimistic would agree that there are positives about the industry. Volume growth has been reported and exotic mushrooms are likely to continue finding favour, as is the pre-pack industry. Many further believe that state-of-the-art farms will prove to be sound investments.
REO EXTENDS MUSHROOM OFFER
There were some noticeable changes in REO’s mushroom activities last year, when the Belgium auction began selling white Japanese cinnamon cap mushrooms in October. “In Japan, this product accounts for the country’s second largest mushroom volumes, after Shiitake,” says REO’s Ann Van Nieuwenhove.
In May, the first field, or horse, mushroom (Agaricus arvensis) was delivered to REO. This variety, with its aniseed-like taste, is a new product in Belgium.
In terms of varieties, REO’s chestnut volumes rose from 22 tonnes in 2004 to more than 28 tonnes last year. Shiitake volumes were stable, while the Buna-shimeji or hon-shimeji variety showed a slight increase from nine tonnes in 2004 to 9.2t in 2005.
No comments yet