The fresh produce industry is now well versed in the rationalisation process being carried out across the retail sector. Tesco decided last year to reduce its grape category supplier network. RHG’s position within the supply base strengthened and the resultant expansion of its grape - and also stonefruit - business with the UK’s number one retailer necessitated a restructure internally.
At the beginning of 2004, commercial director Alan Guindi was running the company’s grape and stonefruit desks. He says: “It is not often that companies in mid-flow are able to hold a mirror up to their operation. But we did just that and found it was the best thing to happen to our grape and stonefruit desks, and our company as a whole.
“Before the restructure, Neil Denny was account manager for Tesco and Jim Brown looked after the rest of the grape and stonefruit business, while Richard Freeman was developing new business opportunities.
“The expansion of our grape business, by around 50 per cent in the last 12 months, and an even bigger increase in our stonefruit volumes proportionally, has meant we have had to make a few changes. We are very much a Tesco focused company and we fully intend to keep it that way.”
Guindi knew RHG had to create a situation whereby it could focus on grapes separately from stonefruit, all for Tesco. “Neil is now exclusively working on grape procurement, while we brought in Mark Kidd, formerly of Gomez, to be Tesco account manager. Mark Sanderson also joined us from JP Fruit, to work with Jim Brown on logistics for both grape and stonefruit. On the technical side, Karen Cleave, who was responsible for grape and stonefruit, now concentrates solely on her role as grape technical manager, and she is assisted by Guy Coulthard, her quality manager,” he says.
An agreement with stonefruit specialists Corer and Apofrut, which created Global Stonefruit, has effectively separated the two categories and given Hochfeld the ability to focus more heavily on its grape job. John Pagliero, formerly of Corer, now co-ordinates stonefruit procurement for Global Stonefruit, which is jointly owned by the three parties, and has become a dedicated supplier to RHG.
The company doubled its storage capacity in 2004, including taking on a satellite facility in Faversham for grape storage and quality control work, installed ripening rooms at its Borough Green base, and purchased a new flow wrapping machine which will initially be used for stonefruit, and subsequently for punneted grapes.
While RHG has always had a long-term view on its grape strategy, the planning process throughout the supply chain has taken on even more importance. “Neil has an ongoing planning process with our supply base,” says Guindi. “We have stepped up the way we view things strategically. We have three and five year growth plans and all of our growers are aware of these and are measured for their performance.”
Denny explains: “Our technical team developed and implemented a quality awards system based on volume targets and specification criteria. Depending on the percentage of fruit that is delivered to Tesco within the correct specs, a supplier will be awarded either a Gold, Silver or Bronze award. To gain a Gold award, our quality assurance managers have set targets that exceed 99 per cent of compliance with criteria that include elements such as sugars, sizes and colour, so it is a real achievement.”
A certificate on the wall of the office is one thing, but the cross-measurement of suppliers in different regions and countries provides the additional element of competition that comes with potential peer recognition. The added incentive of course is to remain a RHG/Tesco supplier.
With a well-established southern hemisphere and European supply base in place, RHG has thrown its nets out this year to create a network of producers capable of filling the gaps that remained in its 12-month supply calendar. New suppliers have come on board in the US and Israel in 2004 and 2005 will see expansion into Mexico and an increasing volume from existing Brazilian suppliers. The concentration is firmly on securing the varieties preferred by Tesco from the best producers available, says Denny.
While widening its geographical spread, there remains the need to optimise efficiency and performance levels. “Further consolidation of our supply base is still possible,” says Denny. “We are constantly looking to ensure we’re able to optimise the volume of fruit we source from better growers and reduce the volume that comes in from those that have measurably lower overall standards. Therefore, the awards system is a useful tool on a number of levels, and from the grower perspective it lets them know exactly where they stand in the supply picture.”
From a retail point of view, that supply picture changes every year. The segmentation of the grape market has moved on dramatically from the red or white, seedless or seeded days. Tesco still sells the vast majority of its grapes loose, but it has increased its punneted sales and the advent of mixed, snack and kids packs is likely to see that proportion expand in the near future.
“Segmentation is driving growth,” says Kidd. “The grape sector is strengthening every year and vying for top spot with bananas in the fruit value stakes. The fact that there are more opportunities to segment our offer in-store enables us to utilise more of the crop and therefore return more back to the grower. The message to the growers is a positive one - if they meet the standards expected of them, they will be able to sell more of their crop.”
The last 12 months at RHG has been all about Tesco. But Guindi says the evolution must be constant. “Tesco is still increasing its market share; it is inarguable that nobody out there is performing as well at the moment. But that doesn’t give Tesco, or us as its supplier, room to take anything for granted.
“The last few years have largely been about price, and the companies that have succeeded have done so because they have found the formula to balance costs with quality and assisted their customers in creating real value within their offer.”
SALIARIS PUTS GREECE IN FOCUS
George Saliaris is responsible for tying together RHG’s grape procurement in Greece. The expansion of the company’s grape business has given its Greek growers greater focus, he says.
“We have been able to sharpen the focus of our growers by becoming very customer-specific in our approach,” he says. “Four of our grape farms have been accredited with Nature’s Choice in 2004, amongst the first farms in Greece in any sector to have achieved this.
“It has been quite a challenge to change the mindsets of growers. Every grower thinks that his grapes are the best, but to produce to the exacting specifications of the customer is a different matter. We have provided literature and a lot of practical assistance to ensure that growers are totally aware of what is expected of them.”
This year, for the first time, RHG’s suppliers in Greece have been using Tesco green plastic trays at source. “They are not produced in Greece, so we bring them over from the UK and ship the product back in them,” says Saliaris. “Handling is made easier at all stages of the supply chain and the trays keep the uniform appearance that Tesco requires in-store. We are looking to make the use of the crates cost-neutral”
Variety-wise, RHG suppliers began to transform their offer, with the first plantings of Crimson. “There has been a big growth in the market for Greek red seedless,“ says Saliaris, “and we hope to have commercial quantities in 2005. We are aiming to add Greek Crimson to the October/November window, which is all a part of us fitting into the 12-month supply strategy of RHG.”
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