Once the fastest growing sector in the fresh produce industry, prepared fruit and vegetables have taken a nosedive and are experiencing a downturn in demand and sales.
Consumers have gone back to basics by preparing their own produce, with fresh-cut fruit in particular being hit as more and more people opt for the home-filled lunchbox instead of a once popular lunchtime shopping trip.
The swift change in consumer attitudes has turned the fresh-cut sector around and made it u-turn back to the core value ranges that it started with when the sector began to excel seven years ago.
“Last year, lots of novel products and fruit mixes were coming onto the market,” says one insider. “Pomegranate seeds were becoming really popular in mixes, as well as on their own, but now retailers have really cut back and gone back to the basic core lines, which are more likely to sell.”
Melon and pineapple remain the main cut-fruit offering, whereas mixed packs with berries and the like are nearly non-existent.
“The varieties that processors are using are the same but, like in most sectors, pack weights have been reduced so that retailers can offer a cheaper price to consumers,” says a prepared fruit supplier. “Retailers are looking for that magic £1 price point and it is being met, but sales are not picking up as a result. There has been up to a 40 per cent reduction in pack price as well, but consumers are still not taking the retailers up on the offer.”
And if the downward turn in demand was not enough, prepared vegetable and salad suppliers have also been hit hard by the poor weather in southern Spain and the weakening of sterling against the euro.
Prices for courgettes and cucumbers are particularly high, with wholesale markets charging as much as 120p a cucumber and 300p a kg for courgettes. The temperature in Almeria reached as low as 0°C in the second week of January and crops have been damaged. “The exchange rate is making goods expensive and in some cases there is no consistency on prices, even on a daily basis,” says one insider.
One insider says that raw products from the eurozone have never been so high in price.
“Peppers have been okay, as they are quite hardy,” says another importer. “But salad products like cucumbers have been seriously damaged and there is a real shortage on the market. When you can get the goods, it is more expensive then ever for average quality.”
The fact that smoothie manufacturer Serious Foods Ltd and its subsidiary SunJuice went into administration last week has given the prepared sector cause for further concern. Many view the smoothie industry as a sub-sector to prepared and realise that this may be a sign of things to come. “There used to be any kind of smoothie you wanted available, but now there are just the normal flavours such as banana, strawberry or mango,” says one insider. “It is a sign of the times and I believe that consumers are going to be frugal for at least the next six months. It is going to be very hard for the prepared sector.”
But there are hopes that this downward trend will not last forever and insiders believe that either way, the situation will become clearer in the next quarter, when warmer weather could persuade consumers that they have better things to do than prepare their own fruit and vegetables.
And while the hotel and restaurant trade has seen a marked downturn in customers - with people staying at home instead of eating out - trading at this time of year is usually difficult, points out one supplier.
If the UK is blessed with a good summer following two years of bad weather, it will be interesting to see whether they will holiday in Britain more, as predicted, and therefore give the catering trade a much-needed boost.
One supplier to the catering industry admits that the prepared sector is in uncharted waters. “We are soon going to be asked to submit new prices for our catering contracts and those prices are going to have to change drastically,” she says. “But fortunately, we are all in the same boat. The state of the dollar and the euro has affected everyone, as has the unbelievable weather in Spain. The Spanish cucumber season is soon going to end very abruptly.
“We have managed to get everything we need, but we have paid a premium for it.”
Suppliers to retail are also biding their time. “For the time being, we have to stick to the core products and hope for rosier times ahead,” says a supplier. “We have to be ready to redevelop the fresh-cut sector after the financial crisis blows over.”
It is certainly a different outlook on the prepared industry than a year ago, when the first-ever exhibition dedicated to the fresh-cut industry, Freshconex, took place alongside Fruit Logistica in Berlin. It remains to be seen if the atmosphere at the event will be affected and whether the fresh-cut industry’s innovative streak will be dampened by the circumstances that the sector finds itself in.
Many believe that the sector has got a fight on its hands to keep its head above water.
“Yes, there is downward pressure on prepared produce and it must fight to maintain its sales and place within the retail arena,” says one supplier. “Growth will undoubtedly slow in the short term; however, I remain optimistic for the long term - especially for the fresh prepared sector, in all its guises, as it has revolutionised produce purchases within the retail, foodservice and food manufacturing sectors.
“We are, after all, thankfully in the food sector, which will fare far better than many sectors of the economy during the recession.”
GEARING UP TO WEATHER THE STORM
In this extremely difficult economic climate, with a poor exchange rate against the euro for purchases from the continent, we have seen our costs rise, says Stuart Howarth, managing director of Stuart’s Foods. However, we are still investing in new equipment to ensure we meet the needs of our customers.
Our main concern for this year will be regarding both suppliers and customers’ ability to continue trading in the current difficult financial climate.
Stuart’s Foods is a family business, with my wife Brenda Howarth as company secretary, and my daughter and son, Samantha and Damian, as directors. The firm operates on the outskirts of Scarborough, North Yorkshire.
We started in 1981 as a business supplying local caterers with prepared fresh potatoes and chips, and now have a dedicated prepared division.
Prepared potatoes, carrots and onions are historically some of our best selling products, but recently courgettes, peppers and cucumbers have become top sellers to manufacturers of regional produce, as well as some speciality lines such as diced artichokes and asparagus. These lines are available through our purchasing of new machinery, which can dice the softest produce without crushing it - even tomatoes.
We supply prepared vegetables to the public and private sectors of the foodservice industry. So far, our public contract sales have been good - often this area is one of the first to show signs of tightening finances, especially with employee numbers and wage costs, but we do not seem to have been affected, as everyone has to eat. Regional Yorkshire manufacturers are being inventive with our products and are weathering the hard times reasonably well.
With our new equipment and some good weather for growing crops throughout the spring and summer, 2009 will hopefully be another year we see our usual increase in turnover and profits. We have survived previous recessions and do not see any signs that we will not weather this one in the same way.
We have our normal lines that we produce for our customers, but as we offer a very bespoke service we are always led by our customers and recently have produced several new lines including diced tomatoes, asparagus and Jerusalem artichokes. We will always talk to our customers and then produce a product to meet their needs for evaluation. One of our new products - the roasted vegetable pack - recently won the Deliciouslyorkshire Award 2008 for the fresh produce category. The product includes cherry tomatoes, wedged onions, parsnips, carrots and red and yellow peppers, which are tossed in Yorkshire rapeseed oil and fresh rosemary - the customer just has to place it into a tin.
This bespoke service has been the foundation of our business and is one of the main reasons behind our success. We pride ourselves on excellent customer service and delivery; we are known for our open approach and always making sure we meet customers’ needs, and at the same time make a profit.
As the years have gone by, we have added dairy, eggs, cooked meats, sandwich fillings, oils and bread to our lines, but we have always kept our prepared division, which has the ability to supply both a single bag of prepared potatoes and a large quantity.
In the next quarter, we hope to see our usual increase in sales, which has grown every year since we started the business. All producers are looking forward to the easing of the difficult financial climate for both suppliers and customers. Looking a little further forward, we hope that the weather will provide good growing conditions for salad crops and bring tourists to Yorkshire.
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