The last couple of months have seen national newspapers take the issue of the credit crunch and increasing food prices and whip up a frenzy, causing consumers to rush to the discounters and stay in for their supper.
The Guardian has highlighted the large premium that prepared fruit consumers end up paying at the multiples, saying that Tesco’s fruit medley, retailing at £1, could be made at home for half the price, and Sainsbury’s exotic fruit mix can be put together for less than half the price charged in store.
In what seems to be a move against the multiples, other articles have advised consumers to “avoid the supermarkets”, as well as shop daily for perishables, plan their meals, buy vegetables whole and rediscover pack lunches in order to cut down on waste and survive the credit crunch.
And the message seems to be getting across. Marks & Spencer has seen its food sales fall by 4.5 per cent in the 13 weeks to June 28, and Sainsbury’s has said that sales of plastic lunch boxes are up by more than a third and sandwich bags by a quarter.
According to Sainsbury’s, customers are buying more prepared takeaway bags instead of going to an actual takeaway outlet, and consumers are generally limiting the number of times they dine out in the week.
This all spells bad news for the prepared fruit and vegetable sector, which relies on cash-rich, time-poor consumers who are willing to buy prepared lunches and plough money into the foodservice industry.
According to foodservice analyst Horizon, the foodservice industry is being squeezed and buying in prepared fresh produce is on the decline. Foodservice companies are paying 9.3 per cent more for food than they were this time last year, and the selling price has only increased by three per cent.
“Caterers are having to do a number of things to reduce costs,” says Peter Backman, managing director of the company. “Many are re-engineering their menus or focusing on higher margin produce, and becoming more efficient generally by cutting down on waste or buying cheaper produce.
“A lot of caterers and restaurants are starting to buy in unprepared product and prepare it themselves, and reducing costs that way. But then others are finding that employing skilled workers to do this is in fact more expensive than buying in prepared fruit and vegetables.
“The more forward-thinking businesses will be looking very carefully at what is the real cost saving. In the US, a number of foodservice operators have found that they are too far down the line and have lost their skilled workers. The increased price of food is forcing them to totally re-evaluate the business.”
But one prepared salad supplier to restaurants, sandwich outlets and convenience retailers says that sales are up, and believes that the weather is still the main contributing factor to consumer demand.
“The nice weather recently has given our sales of lettuce in particular a good boost and people are back on salads,” he says. “Sales across our prepared lines remain steady and strong, with baby leaf, iceberg and cos, as well as sliced cucumber and tomatoes, all doing well. We have been supplying our sandwich foodservice customers with a steady volume of product.”
Others agree that the weather is still the main factor when it comes to demand for prepared fresh produce, and believe that the media has exaggerated the effect of the credit crunch. “We have been sending less volume into prepared,” says one grower. “Who knows whether it is because people are spending less or have moved onto another product? In general, volumes going into prepared lines are not strong and we are about five per cent down on last year.
“But the weather is to blame as well. Normally there is a peak, but the start of July was awful, so we may have missed that peak.”
And prepared produce continues to perform well in the cheapest of the big four, Asda, with strong year-on-year growth both in fruit and stir-fries - so much so that prepared produce makes up 12 per cent of total produce sales in Asda, and it is its aim to reach 20 per cent participation by 2009. Asda maintains that it has not seen an adverse effect on prepared sales due to the credit crunch, and prepared produce continues to provide strong year-on-year growth.
“The weather has affected sales, with salad and fruit sales stronger when the temperature has been higher than 20°C and prepared vegetables doing better when we have had adverse weather conditions,” says an Asda spokesperson.
“Prepared salad and fruit should continue to trade well through the summer months, and our kids range - Garden Gang Great Stuff - will pick up trade once the school holidays finish. Prepared vegetables will start to trade stronger once we move into October, with more space being given over to vegetable at the expense of salad.”
But the credit crunch has been affecting growers of vegetables and salads for prepared lines in the UK. “Increasing prices have had a massive effect,” says one insider. “The cost of production and oil has shot up, and we are trying to minimise what is passed on to the customer. We are trying to absorb and manage.
“But consumer spending has not been affected that much, from what I can see. It is all media hype. Our priorities have changed and our promotions have become more value-orientated.
“It will be interesting to see how it will affect the domestic market if people do not go abroad for their holidays. August is usually a quiet month, but we might end up seeing a strong demand.”
Others are more concerned and believe that the credit crunch could continue way into 2009.
“The credit crunch is bound to reduce consumer demand and the affects of inflation are really noticeable now,” says Backman. “Some demographics have been affected sooner rather than later, but now we are seeing a decline in prepared products going into foodservice.”
PARRIPAK FOODS MOVES FORWARD
The last quarter has seen Parripak Foods go through a rapid expansion, says Dom Pleasance, national account manager at the fresh vegetable preparation specialist. The company is moving towards a seven-day a week production schedule, and we acquired Solway Peelers in June 2008, which means, among other things, that Parripak Foods will become a two-site operation. We are particularly excited by this, as it will increase our geographical coverage.
Solway will become our northern operation. This means that as a single source we can now deliver to customers anywhere in the UK, providing a maximum delivery turnaround time of 24 hours from placements to order. This will significantly enhance our networking infrastructure and help reduce food miles - a cause we take extremely seriously.
Parripak Foods’ main products are fresh processed potatoes, carrots and onions, and another part of the factory does more bespoke lines, such as chillies, garlic, ginger and peppers. The season changeover on peppers at the end of April was much more difficult than normal due to high demand and poor supply, but we overcame it.
Sales across the industry have generally been challenging, with signs of the credit crunch impacting over the last quarter, although we have managed to pick up new customers to counteract this. Our products tend to go into the upper tier of retailers, so there will be increasing pressure from consumers trading down.
Parripak Foods is doing some exciting process development work on traditional hand-prepared vegetables. Cutting methods such as halving and floreting create mainstream products and require ever-increasing automation. In terms of product development, it is finding the balance between what is genuinely new and exciting, but still viable for a ready meal or prepared line. Baby vegetables and rare exotics are very popular, but often do not hit the price point required for prepared foods.
Both Solway and Parripak operate in a green environment, and Parripak is actively working towards producing ‘greener’ vegetables by ensuring operations are environment-friendly. For example, fresh water that is drawn from our own borehole is used to wash the vegetables; the water is then treated in our effluent plant and recycled.
Part of the William Jackson Food Group (WJFG), Parripak operates from a 62,000sqft purpose-built factory in Bedfordshire, producing a wide range of freshly processed-to-order vegetables, with many grown on 700 acres of vegetable farmland surrounding the factory. A dedicated garlic-processing unit within the site supplies puréed, whole peeled, chopped and diced garlic to ready meal, pizza and soup customers.
Parripak Foods was founded as a farm diversification in 1987, and it is celebrating its 21st anniversary this year. The aims of the company have remained true to what it set out to do 21 years ago, in that we do not supply to the retail sector and concentrate exclusively on food manufacturing and prepared products.
Today, it has become the largest supplier of freshly prepared, quality vegetables to food manufacturers. The company still grows a percentage of its products on the farm and, despite its growth, retains the values of a family business; an ethos it shares with the WJFG.
As to the future, Parripak Foods will continue to concentrate on achieving steady growth. We will also be focusing on integrating our operations with Solway Peelers and providing further value engineering on core lines.
