The US is an enormous and diverse supplier of fresh produce to countries all around the world. With a geographical position that gives it easy access to both the lucrative European and Asian markets, its suppliers are in the enviable position of being able to take advantage of a surge in global demand for commodities and seek out the most stable and profitable export markets.
As the recession began to take a vice-like grip on the world’s economies in late 2008 and 2009, the US department of agriculture (USDA) released a report raising serious concerns over the logic of American suppliers sending their products for sale in the UK. What was the point of supplying food, it reasoned, to UK supermarkets who were discounting them so heavily that supply chain profitability became so difficult? The report mooted that if the situation continued, US suppliers might instead consider the ever-expanding and financially attractive range of markets that were opening up around the world.
While the recession might have officially ended, those doubts still linger. USDA statistics show that exports of grapefruit, lemons, apples and grapes all had single digit percentage falls in the 2009-10 season, with peach and nectarine exports dropping 15 per cent. By contrast there were impressive gains on pears (up 9.5 per cent), strawberries (11 per cent), oranges (30.8 per cent) and - the big success story - cherries (42.5 per cent).
So what is the outlook for new season exports, and will the UK remain the major export partner it has been over many years? Or will new markets eat away at the UK’s slice of the pie?
Mike Yetter, director of international marketing at the Florida Department of Citrus, admits having concerns over the level of heavy supermarket promotions but insists there are no plans in the short-term to reconsider supply plans.
“As a marketer, deep discount promotions always bother me,” he says. “You end up training the consumer to look for deep discounts, consequently they never buy anything at the regular price. Price becomes the motivating reason to purchase something.”
Despite that, Yetter says the UK is “still a very important market for us, and I don’t see that changing anytime soon”. The country offers an established distribution system and sophisticated consumer that understands the nutritional benefits of Florida grapefruit, he points out. “Emerging markets are not our priority right now. Should our supply situation change, emerging markets could pose an opportunity for us in the future.”
Florida grapefruit has benefited from wide-ranging PR activity in the UK and that is set to continue over the coming year. With production likely to be similar to last season, Florida anticipates sending between 650,000 to 700,000 cartons to the UK this time around, matching last year’s 700,000 cartons. That figure is being seen as a success in the context of the problems growers have had with canker and greening in recent years, which has brought an overall decline in grapefruit production.
Although there has been growing interest from new markets, grape producers are also insistent that the UK will remain a key area for their products. California expects to produce 90 million 19lb boxes this year - a figure largely unchanged for several years - and even growing demand from its key Asian customers is not expected to lead to a rethink in export destinations.
“Asia has always been a very strong market for us,” says Susan Day, vice-president of international marketing at the California Table Grape Commission. “A lot of countries there have shown a lot of growth and improvement in their economies, infrastructure and retail structure. It’s really taken off in China, Indonesia, Vietnam and Singapore.
“But we’ve been a staple supplier to the UK and last year it rose to become our ninth largest export market and it’s always up there in our top 15 markets.”
Day claims that no concerns over UK supermarket pricing have been discussed by the commission and argues that there has been little effect on grape sales during the recession either. In fact, UK retailers have now become agreeable to running more in-store promotion of California grapes through tastings, which are backed by on-pack promotions to win holidays to the US state. “It’s a new thing in the UK - we’ve been able to do very little [promotion] in UK retail stores before,” she adds. “These tastings are working very well to increase the sales speed. We focus our promotion on the three colours - green, red and black - rather than specific varieties, because it’s important that they are always available.”
Producers of other fruit lines are humming a similarly upbeat tune in terms of their UK relations. Gerhard Leodolter, senior director for international sales at POM Wonderful, says the pomegranate outlook is for 15-20 per cent more fruit than last season with very good fruit quality. The company has had steady shipments of around 100 containers to the UK annually over each of the last five seasons and expects a similar level this season, which kicks off next month.
“Yes there are many new markets where I ship (more than 50 countries now), but the UK continues to be one of our most important,” insists Leodolter, who points out that POM Wonderful juice sales are also key in the UK. The company aims to grow fresh pomegranate sales as well as expanding its international juice business.
Elsewhere, the US Apple Export Council (USAEC) is going on the offensive to try to increase penetration and sales in the UK this year, and has appointed The Garden as its representative for the UK and European markets. The Garden is aiming to boost sales in the UK, which still represents the largest market for USAEC produce.
“We have been given a wide remit to increase the sales of apples from USAEC members and over the next few months, will be providing some new impetus both in trade circles and with the UK consumer,” says account manager Iain Forbes. “The UK continues to be the leading export market for USAEC and in a market that is continually striving for innovation and value, as well as the best quality product available, we believe US apples are well placed to increase their profile and add some energy to the imported apple category.”
Pear Bureau Northwest’s estimates for the new season are that this year’s crop will be as much as 11 per cent down year on year at 17.9 million boxes, a two per cent fall on the five-year average. On the plus side, with the whole northern hemisphere crop significantly lower this year, prices could well be more robust, according to bureau president Kevin Moffit. The bureau is planning export promotions in 39 countries this year, including the UK.
Organic fruit and veg specialist OTC USA is increasing its business relationships with international USDA-certified growers of fruit and vegetables around the world, and has defied the tough organic market by doubling its sales of organic produce in 2010. It has set its sights on increasing volumes again in 2011 through retailer promotions and more active marketing.
So UK supermarket buyers need not fret over losing their US suppliers just yet. The close and long-established links between the two countries look set to continue and while new markets are emerging to challenge that status quo, for now at least US produce will remain a vital part of the British retail offer.
Tech firms target US market
It’s not just US companies who are looking to sell their products into the UK market - UK firms are also taking steps to capitalise on the many opportunities that the American market has to offer.
Anglia Business Solutions has set up a joint venture called AgFresh Solutions Inc in San Ramon, together with California-based business AgriWise. The jv will better position Anglia to supply the US market with its LINKFresh suite. “Operating from our new base in California means that US companies will now be able to benefit through the presence of a locally based implementation and support team,” says commercial director Robert Frost.
The new company has already signed a deal with The Giumarra Companies - a network of fresh produce growers, distributors and marketers based in Los Angeles - for the LINKFresh solutions. The contract kicked off this month, and sees the solution deployed across a range of Giumarra locations in the US, Mexico and Canada.
Also on a technology theme, Israeli company StePac - which is a part of UK-based DS Smith Plc - will unveil its new line of Xtend roll stock films at the PMA Fresh Summit next month, alongside its veteran line of Xtend bulk and pre-formed retail bags.
Expanding its Xtend modified atmosphere/modified humidity technology, the company is now selling roll stock film for flow pack for form fill and seal applications. US customers are already using Xtend flow pack films to package green asparagus.
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