Craig Stauffer – I’ve always known the produce industry to be dynamic and quick to change. Of course, geopolitics and consumer demand patterns write new rules, but technological innovation that was hard for me to imagine years ago is now constantly shifting the industry. The year that was 2019 was no exception, presenting pivotal moments worth highlighting. Let’s take a look back at some trends that defined the trajectory of our industry over the past year.
The war on trade persists
The single largest impact on produce sales and distribution world-wide last year was the war on trade between the United States and China. Significant markets were forced to look elsewhere for fresh produce as a result of the trade war. This breeds a whole new set of challenges starting with where to look for supplies and ending with increased paperwork. We’ve seen increased pressure on domestic producers to market supply that would have been destined for China. We’ve seen increased demand and opportunity for countries such as Chile, Peru, Egypt, Spain, and Indonesia to fill in the “supply gaps“ created by the high tariffs.
And, the bigger issue in my opinion coming out of the United States and China trade war is that new supply sources, such as those listed above plus Poland and others, have now secured a position in China. The question now is how much of the market can United States producers win back.
I spent much of 2019 challenging our global team to satisfy market demands like never before, reaching across oceans and borders to bring business to our connections in these countries. It’s been incredible to watch everyone pivot as a team and make room for new markets, and for new sources of supply to emerge. You can read more about how this impacts our industry in Vanguard’s blog: How natural and political unpredictability impact demand for global produce.
Organic Produce reaches record-breaking sales
Partway through 2019, the Organic Trade Association reported that the United States’ organic market in 2018 broke through $50 billion in sales for the first time, with sales hitting a record breaking $52.5 billion. Although organic sales are not increasing at the double-digit rate they once were, we are still seeing incremental and important increases in this market, driven by consumer demand. Global markets are following suit, albeit at a slower pace, and Asia and Europe are experiencing the same increase in demand.
‘Organic’ is no longer a niche market solely defined by an aspirational purchase. Almost 6% of food sold in the United States is organic, and it’s spilling into other markets. Millennials with young families that are driving household shopping decisions are increasingly turning to clean, organic goods to fill their homes, including cleaning supplies, clothing, toilet paper, and more. It’s becoming important to distinguish which consumers are under this ‘halo effect’ of buying anything and everything organic, and which are still sensitive to a cost increase of 15-20%.
Organic certification has become a crucial piece of a portfolio for produce growers to access markets with top-tier customers. Vanguard has plans to achieve an organic certification and increase a percentage of our own production to organic in the coming years. We will be watching closely to see if 2020 is another record-breaking year.
Packaging produce is more on-trend than ever
Packaging innovation has revolutionized the industry we know. Bulk produce used to drive over 70% of retail sales and was your only grocery-store stop for the highest quality produce. This has changed. Packaged produce is no longer seen as an avenue for growers to sell produce that was off-size or under-quality; instead, packaged salads kit sales are at an all-time high, followed by berries, pre-cut veggies, tomatoes, potatoes, and more.
In 2019, we saw consumers willing to buy innovative, packaged products at price premiums. Not only is this exciting for margins, packaging produce provides growers increased advertising and branding space, and lower costs as they prove easier to stack. But with increased interest in packaged products comes a whole new set of problems, including, how much plastic consumption does this packaging require? It’s exciting to encounter a new innovative strategy for retail sales; however, it’s also important to understand the implications of such an innovation, which I elaborated on earlier this month in my article: Are edible peels the new plastic? We will undoubtedly see more innovation in the packaging category in 2020.
Trust and transparency remain incredibly relevant
Although food safety has always been regarded as a critical component to growing and selling crops, trust and traceability of fresh produce has been a prevalent and sometimes devastating point of discussion during recent recalls.
The removal of contaminated food product from store shelves, such as romaine lettuce, is damaging to the whole industry. Not only is consumers’ safety at risk, an immense amount of expense is incurred, including labor costs, lost sales, and time spent dealing with the crisis. It can negatively impact an entire category or market for years. Just look at the ban on lettuce imports into Hong Kong. The economic impact is huge. But more importantly, consumer trust is effected.
After the romaine lettuce recall of 2018, the Food and Drug Administration (FDA) implemented a voluntary leafy green labeling plan to mitigate outbreak of disease through consumption of leafy greens to increase customer trust to repurchase. Major growers of leafy greens have agreed to label romaine lettuce with the date of harvest, and the harvest growing region to elevate traceability. According to this same announcement, there are industry-led forces in play to pursue a more permanent labelling scheme for the future.
The truth is that a lot of our food is grown outdoors, where there are many variables and unknowns to consider. It’s why growers are scrupulous about safety standards, and take all reasonable steps to minimize danger, and will continue to do so to bring safe produce to the tables of consumers. Growers should be applauded for all the efforts they expend to deliver food safety-assured and healthy products to consumers worldwide.
To conclude
In the face of our latest challenges, this industry has pivoted time and time again. It’s not the first time we’ve had to pivot, and it won’t be the last. The resilience of growers, packers, distributors, and retailers continues to impress me. I look forward to seeing what 2020 will bring, and will continue to report on major movements that define this business, such as increasing labor costs and immigration matters.
