It was touch and go over whether the credit crunch would bring down the prepared fruit and vegetable category for a while, but insiders are now adamant that the industry has been hit hard by consumers cutting back on both time-poor, cash-rich prepared retail lines and eating out of home.
A GfK NOP survey out last week revealed that only a fifth of people in the UK said that they would not be cutting back on spending and more than 50 per cent of the respondents said they would be tightening their belts when it came to eating out.
The effects of consumers voting with their feet is already being felt with even high-profile Michelin-starred chefs suffering and leaving their suppliers in the red.
Consumers are switching back to wholehead fruits and vegetables to save money and, as a result, retailers are streamlining their prepared offer - meaning less choice and shelf space for the category.
Wastage within both retail and the foodservice industry has become a major concern in light of the credit crunch and orders in general have been down on last year, making the job difficult for suppliers.
Prepared industry insiders are in no doubt that they are experiencing a downturn. “We are in a recession - there is no question of that,” says one. “We have been for a while and the global financial situation is affecting every business, especially European imports.”
It has been estimated that the purchase price of raw materials has increased by 20-30 per cent, making life very difficult for suppliers and processors. “It is the same for everyone, but the up and down nature of the industry this year has affected us moving on to the winter lines and looking forward in general,” says one foodservice supplier. “Annual pricing is not being encouraged, and customers and suppliers are being very cautious.”
The financial credit of the whole prepared industry has been knocked by Iceland’s three biggest banks, Glitnir, Landsbanki and Kaupthing all being seized and placed in receivership by its government. According to insiders, the collapse of Iceland’s financial system has had a big effect on one of the industry’s biggest food manufacturing companies.
As a result, insurers are reducing cover on prepared companies and in some cases removing cover completely. “It has become an incredibly hard industry to get any kind of credit in,” says one source. “You have to watch every business and everyone is chasing accounts departments. Before, companies have been lenient, but now you either pay or do not get served.”
Prepared fruit for both retail and foodservice has seen the end of its terrific growth over the last couple of years and has been static over the last couple of weeks, with no signs of demand perking up any time soon.
“One of the reasons behind this recession is false speculation and negativity,” believes one supplier. “So we have to stay positive in this negative period, but the reality is that we have reached a certain level with prepared products, where salad and veg have gone backwards and there is no growth in the prepared fruit sector. It was decent at the beginning of the year, but now sales are flat.”
And ironically, as demand fritters away, supply has rarely been so plentiful. The weather has been good in the main melon, pineapple and grape producing regions and, despite hurricanes causing delays for Florida’s grapefruit season, availability for fruit in general has been decent.
But rising prices of fuel, pesticides, seeds and labour have sent the price of prepared fruit for the end consumer through the roof and, according to insiders, growers have failed to take this into account and programmed for the same volumes as last year. “Because the price is higher, customers are buying less,” explains one supplier. “People and businesses have less in their pockets and switching to wholehead produce rather than prepared. This means that the industry has a surplus of prepared fruit on its hands and, at a time when prices should be maintained or going up, supermarkets are eager to promote the excess fruit and want to go cheaper.
“So the situation at the moment is that we have a mountain of fruit being sold at a loss - not to the supermarkets’ loss, of course.
“It is a no-win situation for processors and importers at the moment. Life is being made difficult.”
The prepared vegetable sector is cautiously gearing up for the Christmas period, which usually sees demand from both families and restaurants for prepared vegetables increase. “Prepped cauliflower and broccoli have seen a lull because they are relatively easy to prepare,” says one insider. “But we will see come Christmas how much value people will put on prepared Brussels sprouts, peeled potatoes and the like. I think the next couple of months are going to see people going for higher-end, premium prepared products such as fondant potatoes.”
The prepared fruit and vegetable industry is very glum and many are signalling this as the beginning of the end for the once profitable sector.
“There is no light at the end of the tunnel,” claims one supplier. “We are just going to have to ride the storm. Hopefully, the New Year will bring a health kick and reel people back into the category, but then, more than ever, consumers will be wanting to cut back spending because of over-spending at Christmas. A lot of businesses could fall by the wayside.”
But one insider can see the bright side. “Sometimes this kind of situation is not always a bad thing,” she says. “People who should not really be in the business will disappear and only solid companies will survive, and hopefully come out of it better for it.”
BARROWCLIFFES ROLLS WITH PUNCHES
The fresh produce industry is fast moving and Barrowcliffes’ strong and experienced management team have been at the coalface of the food industry in all its guises for over 20 years, with the directors taking hands on, day-to-day control, says Tony Archer, director of Barrowcliffes.
We process more than 50 different types of fruit and vegetables, which are converted into almost 500 different product lines that are prepared and delivered daily.
The company operates out of 15,000sqft its own high-care production facility for specialised prepacked fruit and vegetable packets and other washed and ready-to-eat raw materials.
We place great importance to our development sample service - working closely with the development chefs of our clients, delivering bespoke samples for their briefs on a daily basis across all price points, from specialist hand-cut products to cheap dicing cuts for all levels of manufacturer and their differing client bases.
Barrowcliffes has always worked closely with key manufacturers with regard to quality and procedures, and thus the move towards British Retail Consortium (BRC) accreditation has always been a key objective. For this to be achieved, additional resource was required and Mike Wood was appointed technical director for the site in February this year, with BRC as one of his team’s main objectives.
We are pleased to announce that Wood has delivered on his promise and achieved this accreditation to the latest version level five, which has been well received by both old and new clients.
This accreditation will help secure existing business and provide an excellent springboard for new customers. Sales this year reached over £10 million, and the accreditation will further the company’s growth.
The company is used to having to manage clients varying expectations. The organisation operates 24 hours a day, 364 days of the year, and has worked on Christmas day on occasion to meet special client requirements.
We have dedicated offices for procurement in Spain, which allow us to manage, quality control and ship direct to us on dedicated transport and therefore eliminating the need for third-party margins or groupage on transport so the product arrives faster, fresher and cheaper.
Our Nottingham location and easy motorway access with our own chilled transport enables us to effect daily deliveries as far south as London and Colchester and as far north as Hartlepool. Same-day emergency requirements are a way of life with our own fleet of smaller chilled vehicles ideal to service any emergency supply situation.
Barrowcliffes is keen to evaluate any new opportunities, as it strives to deliver what its customers expect in terms of price, availability, service and quality.
