Reading the recently published FPJ 50 Big Products list, I was struck by one overriding theme: deflation. It was everywhere.
Put simply, our fresh produce is worth less than it was a year ago. Of course we all know that about the products we work with, but seeing everything in one place really struck home.
Fresh produce has always had its ups and downs, it’s par for the course when dealing with seasonal goods that are so reliant on weather conditions and global economics, but I can’t help thinking there are greater forces at work.
While consumers often enjoy the benefits of cheaper goods, economists often cite deflation in any sector as having a negative impact: as products become cheaper, profitability is tightened, reducing reinvestment into the companies involved. For produce, this can manifest itself in reduced investment in equipment, land, environmental practises and, crucially, people.
It’s ironic that during an age where everyone talks about sustainability, on the face of it, the situation seems anything but. So how do we reverse this trend and ease the situation?
Some ideas that I’ve recently heard include adapting the Common Agricultural Policy to be more sympathetic to fruit and veg producers and bringing the Groceries Code Adjudicator in to maintain minimum pricing or margins. The problem with this is long-term, artificial pricing just doesn’t work. Our colleagues in milk and lamb production will testify to this and subsidies would only benefit growers within the EU.
Recent years have seen a big push to adding value to produce through offering the consumer a prepared option or differentiating through varietal traits, assurance standards and branding. There are problems here too. Improved varieties slowly become preferred to the standard and depreciate themselves, while prepared goods limit their functionality with consumers, often with reduced shelf life.
Assured and branded produce often struggle to get listed by retailers and have even more difficulty trying to resonate with consumers. Ultimately, the majority of fresh produce will always be seen by consumers as commodity-like goods that they want safe and free from serious defects, but in their basic form and as cheaply as possible.
It is interesting to note that many categories have increased in volume and I do believe we’re all guilty of chasing turnover and market share to the point where ensuring margins that will maintain sustainable business becomes an afterthought.
I think everyone, growers, agents, packers and retailers, will need to consider margin appropriation at all stages to ensure a healthy supply chain. Not everyone will make it that far, but ultimately prices will rise again, it’s just a case of hanging on until they do.
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