soft-fruit players will be crossing their fingers that sales pick up in the final weeks before Christmas, to breath some life into the category following a difficult three months. The four major berry lines - strawberries, raspberries, blueberries and blackberries - have each faced their own sets of challenges in the last quarter, from production and supply issues to the exchange rate making trading tough and pushing down returns.
But even though consumers might be re-evaluating what they put in their shopping baskets and dismissing berries as what they perceive as luxury treats, the sector is hoping its strong health message and the popularity of the colourful fruit over the festive period will see it through.
“At the moment, we are in a bit of a dead period as consumers hold back on spending as they get ready for their Christmas shopping,” says one insider. “Retailers are under pressure not to pass on inflation so there is a squeeze on any product from the euro zone, or that is traded in dollars - and it will be hard over the next six months. The easiest thing to boost sales is to reduce the price, but that is not always the best way.”
This has not stopped the price of strawberries, for example, soaring to £3.50 for 454g and then 400g, or £2 for 227g at some retailers - an interesting decision, given the recent preoccupation with cutting prices.
So far, supermarkets have changed the way they offer soft fruit and this is expected to continue to boost sales. Traditionally, berries have been presented in smaller pack sizes until supply and demand peak and retailers switched to larger formats to get the volume through. This has since been reversed and soft fruit is now sold in smaller packs, so that it is moved at a higher price per kilo, but at a lower price point. “This is true for raspberries and blueberries in particular,” says an insider. “Any price points above £1.99 or even £1.50 are dead in the water.”
But suppliers are in the tightest spot, pushed and pulled from all corners as they try to secure high-quality fruit at the best prices and sell it on for a reasonable return. “The major issue that we have as suppliers is that we are caught in a squeeze between retailers wanting to counteract the economic situation by increasing sales and lowering prices, while being under pressure to increase their own margins, and on the supply side, the exchange rate has made imports 20 per cent more expensive,” says one supplier.
Each of the main lines has had to face ups and downs of their own. The strawberry sub-category is still far and away the number-one soft-fruit line, but the winter months have never been the easiest to negotiate at the best of times, with consumption traditionally falling as the weather turns colder. But, on the whole, supply and demand has reached an even balance.
UK outdoor production was on the market until the end of October, but it came to an abrupt end when it was hit by frost and snow. At this time, UK and Dutch glasshouse production came into its own to meet demand, but availability has not been as good as in previous years. This supply is now coming to an end after a challenging period, in which high-quality fruit was readily available, but the exchange rate with the euro saw fruit prices rise by 20 per cent.
Supply from Middle Eastern sources has taken up the baton and, as always, the quality of the fruit has improved with each new arrival. Alternative imports from the US and South Africa have helped meet demand.
The Spanish raspberry season is well underway, but demand has so far been disappointing. Supply has been patchy since a bout of cold weather affected production, with volumes coming on stream last week and then drying up again. Importers are expecting the “topsy-turvy” pattern to continue.
Blueberry supply from South America has come up against more than its fair share of problems, with production and supply issues in Argentina in particular proving disastrous for returns. A massive production spike pushed down prices at the height of the season. In many cases, growers left around half the fruit on the trees because it was not worth their while picking and packing the fruit for export to either the US - where prices crashed because of oversupply - or the UK.
The Chilean season is gearing up and so far, volumes and fruit quality have been very good, but whether the exchange rate will take its toll in the same way that it has on other sources remains to be seen.
The blackberry sub-sector is still showing promising growth and it has benefited from a series of promotions in the last three months, as well as good publicity about the health benefits of the fruit. Supply from Mexico, Guatemala and Uruguay has covered the market and fruit quality has been high, with volumes expected to be similar to last year. However, now that high volumes of blueberries are coming onto the market and special offers are making the fruit a more attractive option, this is expected to put pressure on blackberry sales.
So what are insiders predicting for the lead-up to Christmas and beyond? And how will they ride out the economic storm? “We can only continue to do what we are doing and hope the financial crisis will not hit us,” says one supplier. “I don’t think consumers will compromise on food - or their health - in terms of the way they spend. We are expecting demand to pick up in the New Year, when everyone starts off on a health kick.”
SILVA LINING FOR SOUTHERN FRUIT
vital berry Marketing SA (VBM) is the largest berry exporter out of the southern hemisphere to the UK and this has influenced our policies so that we are very focused on the UK produce business model, says Felipe Silva, European sales manager at VBM.
Our companies around the world are vertically integrated, from production to sales, with involvement in growing, packing and export operations in Chile, Argentina, Uruguay, Mexico, Romania and the US, as well as marketing alliances in the Netherlands, Germany and the US. We have a very active role in all of them.
VBM has supplied berries to the UK from its different supply sources with an average yearly tonnage increase of 64 per cent. Total sales of the group to the UK in the 2007-08 winter season reached £17 million. This has meant sales have exceeded 3,370 tonnes during the 2007-08 winter season to this market. Even though these figures are important, we think there are other aspects of the UK market that have impacted strongly on the way we do business.
We have worked with UK-based importer BerryWorld - its philosophy and knowledge of the UK retail sector on the soft-fruit business has been very important for us. The results of this close collaboration have meant a continuous effort on VBM’s side in order to:
• Project commitments based on the development of seasonal programmes
• Conduct and direct the breeding of varieties that provide the fruit characteristics that the market prefers
• Ensure that production meets all standards that customers desire and is subjected to detailed certification as a guarantee of compliance with all that is specified, in order for the product to be a safe one, which provides the client with a healthy fruit that has been produced without undesirable labour practices
• Abide by customer preference in packaging formats used as far as looks, size and recyclability are concerned
• Apply all of the latest post-harvest techniques to assure a prolonged shelf life after the fruit is unloaded from the carrier
• Ensure the absence of factors that in any way may harm the quality of the fruit.
In other words, we have, together with BerryWorld, understood the benefits of category management.
As a consequence of all this, we have concluded that the UK market is pioneering the right approach and procedure for not only having a well-serviced market, but also its development in terms of its ever-growing number of customers.
VBM has directed its supply activity in the worldwide search for the most appropriate growing areas, which can guarantee the proper quality during the most desired harvest dates, and have the necessary export and transportation conditions and facilities.
In executing these goals, VBM has designed a programme of climate and land testing in the different countries and areas that show a clear potential of optimum adaptability to berry production. This has required the establishment of test stations in different countries for the development and evaluation of the most promising varieties from VBM’s own breeding programme, as well as those of other breeding sources.
As is evident from the programme, we will constantly add to our increasing commercial capabilities in the future, to continue to improve the fruit we offer.
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