If there’s one word we hear again and again to describe the produce industry, it’s change. Like the plants, soil, and climate, the industry is in a constant state of flux and growth, some of it easy and some of it painful.
Last year, we talked to industry members far and wide, asking them to look ahead and predict pivotal events, challenges, or triumphs for the fresh produce industry in 2015. As we suspected, these folks turned out to be pretty savvy about what was on the way and what buyers, sellers, and consumers alike should prepare for.
As we march into 2016, we went back to some of these sages along with a few more and asked what we would see this year in terms of competition, food safety, labor, innovation, transportation, and the ongoing perils of the California water shortage.
COMPETITIVE LANDSCAPE Although change may be constant, it doesn’t have to be sudden. Our experts talked about changes in terms of trends happening now and on the way, with several seeing 2016 as the beginning of much larger changes to come.
Buying & Selling Online “You’re definitely going to see a proliferation of consumers using online networks to order products,” comments Bruce Peterson, formerly of Walmart, and president of Bentonville, AR-based Peterson Insights. “There are exclusive e-commerce players and now brick-and-mortar retailers providing an e-commerce avenue. Every major retailer is in this space, one way or another.”
Kristen S. Park, extension associate at Cornell University agrees. “Everybody is looking online. Every time you open up a trade publication, there’s Instacart and Fresh Direct and Door-to-Door Organics. What will happen when these third parties are in retail stores picking produce for their customers? It will be up to the store to be able to offer consistently high-quality produce a [home shopper] will accept, and everything has to be in stock.”
Karen Caplan, president and CEO of Frieda’s, Inc. in Los Angeles, believes brick-and-mortar stores will always have a place in the retail industry, in conjunction with online ordering. “I don’t think online grocery sales will replace in-person grocery shopping,” she comments. “Online sales will be a factor for both major commodities like bananas, melons, potatoes, onions, apples, and grapes, and for specialties—i.e., you need a special ingredient for a recipe and your local grocery store doesn’t stock it.”
The difference, according to Peterson, is how consumers will choose to get the products they buy online. He predicts more consumers ordering fresh produce online and picking it up at a brick-and-mortar location. Much of this depends on location, as delivery services in some areas are prohibitively expensive, often more than the entire purchase itself.
If there’s one word we hear again and again to describe the produce industry, it’s change. Like the plants, soil, and climate, the industry is in a constant state of flux and growth, some of it easy and some of it painful.
Last year, we talked to industry members far and wide, asking them to look ahead and predict pivotal events, challenges, or triumphs for the fresh produce industry in 2015. As we suspected, these folks turned out to be pretty savvy about what was on the way and what buyers, sellers, and consumers alike should prepare for.
As we march into 2016, we went back to some of these sages along with a few more and asked what we would see this year in terms of competition, food safety, labor, innovation, transportation, and the ongoing perils of the California water shortage.
COMPETITIVE LANDSCAPE Although change may be constant, it doesn’t have to be sudden. Our experts talked about changes in terms of trends happening now and on the way, with several seeing 2016 as the beginning of much larger changes to come.
Buying & Selling Online “You’re definitely going to see a proliferation of consumers using online networks to order products,” comments Bruce Peterson, formerly of Walmart, and president of Bentonville, AR-based Peterson Insights. “There are exclusive e-commerce players and now brick-and-mortar retailers providing an e-commerce avenue. Every major retailer is in this space, one way or another.”
Kristen S. Park, extension associate at Cornell University agrees. “Everybody is looking online. Every time you open up a trade publication, there’s Instacart and Fresh Direct and Door-to-Door Organics. What will happen when these third parties are in retail stores picking produce for their customers? It will be up to the store to be able to offer consistently high-quality produce a [home shopper] will accept, and everything has to be in stock.”
Karen Caplan, president and CEO of Frieda’s, Inc. in Los Angeles, believes brick-and-mortar stores will always have a place in the retail industry, in conjunction with online ordering. “I don’t think online grocery sales will replace in-person grocery shopping,” she comments. “Online sales will be a factor for both major commodities like bananas, melons, potatoes, onions, apples, and grapes, and for specialties—i.e., you need a special ingredient for a recipe and your local grocery store doesn’t stock it.”
The difference, according to Peterson, is how consumers will choose to get the products they buy online. He predicts more consumers ordering fresh produce online and picking it up at a brick-and-mortar location. Much of this depends on location, as delivery services in some areas are prohibitively expensive, often more than the entire purchase itself.
Park believes this cost factor will cause home delivery to be big in cities, but less outside of urban zones, though she hopes it will work for everyone. “If Amazon is doing it, they must have figured something out. Most of the growth is in professionals and dual-incomes, and the people who have a little more purchasing power, but definitely need the convenience.”
Many speculate Amazon’s move into food is just another way to drive overall merchandise sales, similar to Walmart’s entry into the grocery segment years ago.
Cost vs. Convenience In speaking of cost, Peterson predicts a rise in deep discounters like Aldi and the newer Lidl chain stores. While he says these businesses themselves won’t make a dent in the sales of behemoth retailers like Walmart, the big chains may be looking at a “death by a thousand cuts” as consumers explore these newer shopping options and suppliers grapple with pricing. “If your value proposition to the retailer is price and someone takes that away from you,” Peterson warns, “you’ve got a problem.”
Another variable is size. “The 1990s and early 2000s were defined by the proliferation of supercenters,” Peterson observes. “Things in retail are cyclical; we’ve gone around to big big big and now we’re small small small. Something to keep an eye on is the move to smaller store formats.”
The Road Not Taken Lori Taylor, a.k.a. Indianapolis-based “The Produce Mom” believes some of the bigger generational family grower-shippers have begun to market themselves differently to compete in the smaller/local-emphasis market. “I’m thinking of Braga Fresh Family Farms and the Josie’s Organics line,” she explains. “Here’s a huge player in the game, land owners, farming over 100 years, and they rolled out an organics line named after their grandmother. I think you’re going to see more companies do this—storytelling and personal family heritage.”
Taylor has also seen the industry supporting local gardening projects and food initiatives like “Unbake Sales,” held for school fundraisers with watermelon cut in the shape of cupcakes and other fruit and vegetable edible ‘art’ forms. Other venues that have not previously tapped into the locally grown phenomenon are getting on board; one such example is the rooftop garden at Boston’s Fenway Park. As an environment known for mostly unhealthy food options such as hot dogs and beer, adding fruits and vegetables to the menu is a step in the right direction.
THE VICIOUS CIRCLE: WATER In revisiting California’s water shortage, there is little change. “The problem is acute and chronic in California,” confirms Julie Manes, director of government relations at United Fresh Produce Association, “and other parts in the West.”
Tom Nassif, president and CEO of the Western Growers Association, goes a step further and calls the drought “the number-one issue” for California, placing it above labor in terms of importance. “Without water, we’re not going to need much labor,” he says.
Nassif believes a lack of understanding may prevent the right solutions from being pursued at a government level. “Most of us are worried that El Niño and excess rainfall will be considered a solution, rather than as short-term help.” The first step is prioritizing the crisis—realistically. “Food and water supply should be considered national security imperatives,” he asserts, revisiting one of California’s more controversial environmental edicts. “One of the biggest stumbling blocks is that when we do have sufficient or excess water, there’s no way of recapturing it because of the Endangered Species Act. We’re working at both the federal level and state level to come up with fixes.”
Looking to technology, Western Growers has taken a bold step for 2016 by founding the Center for Innovation and Technology, which will not only finance and facilitate new projects but work on adapting technology from other countries to meet needs in the United States. First and foremost is using technology to modernize water recycling methods and irrigation. A prime example is drip irrigation: “Drone photos have shown us the entire field doesn’t need to be irrigated, only parts,” Nassif explains, as remote sensors can point out ‘hot spots’ where care and water are necessary.
Although desalination has been considered too expensive, Nassif sees hope on this front. “Every day, we’re reducing the cost of desalination plants. It has to happen at a more rapid pace though, because of the length of time for construction.”
As the new Center for Innovation works to harness technology, Nassif looks to Mother Nature. “Our hope is that the rainfall ends up being beneficial and not just destructive; that we get rainfall in central California and in the Sierra Nevadas where we need ‘cool rain’—snow pack on the mountain, rather than ‘warm rain’ that ends up flooding the land and being washed out to sea.”
TRACEABILITY, FOOD SAFETY & INEVITABILITY While traceability and the Food Safety Modernization Act (FSMA) are on everyone’s mind, both continue to move forward very slowly. Washington-state based Dan Vaché, vice president of supply chain management at the United Fresh Produce Association, calls progress on traceability “a little disappointing.”
While Vaché says the industry has made great progress on the supply side, it’s not enough. “When you have a recall, it’s just so simple to go back to the grower-shipper and say ‘you must be the problem’—but this is not necessarily the case.”
Peterson still sees too much inconsistency when it comes to food safety. “Walmart has their protocols, Kroger has their protocols, but they don’t have the same protocols.”
Vaché finds it is beneficial that larger chains like Walmart and Whole Foods have implemented traceability, but is concerned about the others “not coming to the table yet”—many independent chains with twenty or thirty stores, waiting on FSMA’s final rules and protocols.
Both believe FSMA’s implementation will spur traceability, at least a bit. Although Peterson says it draws needed attention to the issue, “will it lead to a more aggressive approach to traceability? I don’t think so, but it will cause people to see where they have gaps and begin to plug them. It doesn’t say ‘this is how to become compliant,’ but there are options on how to do so.”
Vaché agrees there will be surprises for many who have been waiting for FSMA, because “it won’t be prescriptive.” And though the final FSMA rules will come out in 2016, most won’t take effect immediately, but will be phased in depending on the size of the business.
Future Shock? Looking to the future, Peterson believes the industry is at serious risk each day it goes without comprehensive food safety reform. He is particularly concerned about exceptions for local produce and organics, which are often sourced from small growers. “If a serious food safety issue comes from the organic side of the industry, that’s really going to give the industry a black eye.”
Anthony Totta, a cofounding member of the Fresh Xperts, LLC consulting group in Lees Summit, MO emphasizes that the inequities in food safety could lead to the wrong kind of regulation. While he believes there should be government oversight, he fears “the government will try to do a one-size-fits-all solution for all commodities and make it very difficult.”
“Pathogens don’t just pick on the big guys,” Vaché agrees, predicting “the buy side is going to say, ‘even though you’re small, you have to be able to tell us lot number, etc. if you’re going to sell to us.’
If you’re Walmart, even though you want to support local growers, you can’t throw away the rulebook.” Further, he adds, “It’s going to be self-correcting; there may be an exemption from the law, but there’s no exemption from your trading partners. Quite honestly, it’s just the right thing to do,” Vaché says.
This correction can’t come soon enough for Peterson. “Someday, maybe 2016 or maybe 2026, there’s going to be a food safety crisis that will hit this industry in a way it’s never been hit before. There’s still time to do something about this in a meaningful way,” he insists, but presages, “it’s going to be Darwinian, not strategic.”
IMMIGRATION & REFORM: LOST HORIZON Predictions for 2016 immigration reform are not optimistic. “I foresee it being a serious challenge into 2016 because of the presidential election,” Manes observes. “I wish I could tell you we’re just about to cross the finish line, but I can’t.” She says United Fresh has been pushing hard, not only to get legislators to see the urgency of the issue, but to provide more education about the issue itself.
Although some federal offices are very well informed, Manes says, “others fail to understand why the specialty crop industry relies so heavily on foreign labor.” Both politically and ideologically, the terrain remains problematic. “The rhetoric tends to be dramatic and outrageous instead of calm and rational.”
In the meantime, even though growers have trouble finding workers, they’re managing to get the job done “but not without a great deal of difficulty and added strain and challenge,” stresses Manes. “Just because you can go to the grocery store and get apples, doesn’t mean there wasn’t a whole lot of difficulty. I think you’re going to see a continued challenge for growers in terms of getting the workers they need.”
If the reform package isn’t passed, there may be a shift in 2016 to win smaller legislative victories. “Perhaps there are changes to the H-2A temporary worker system that might make it work more effectively,” Manes suggests, “to get something done and bring some relief.” But as for comprehensive reform, she says, “the odds don’t look good right now.”
“We don’t see any legislation on the horizon for immigration reform,” agrees Nassif. “Compromise seems nearly impossible in an election year.” Although the search for compromises is ongoing, Western Growers is already brainstorming possible solutions for 2017. Nassif predicts continued consequences for 2016 due to the lack of government action. “What I see not changing but continuing at an accelerated pace is more importing by U.S. shippers and packers, grown in foreign regions by U.S. companies, taking all these jobs offshore and generating economic benefits in foreign countries—rather than the United States.”
REGULATION & SCARCITY: ROAD WARS Congress’ habit of passing short-term policy extensions instead of a long-term fix seems to be over for now, as federal transportation legislation was passed in the House and Senate and signed by President Obama. The delays may not have been all bad, however, as a few of the temporary extensions allowed the trucking sector some breathing room.
Kenny Lund, vice president of support operations at Allen Lund Company and ALC Logistics in Los Angeles, says the hours of service rollback and delayed electronic logging implementation helped the industry along, with the unforeseen bonus of lower fuel prices.
But these are minor wins, Lund warns, and could have a big impact down the road. Lower diesel prices and reduced drilling or fracking may have shifted some drivers in those industries to produce loads, but only in the short term. Lund predicts the new legislation will be good for the industry particularly in the area of allowing for “significant infrastructure investment: this will get the projects going that have been held off. That’s good for jobs, carriers, ports, and everything.”
Hoped for truck weight increases were not approved in the final bill, and Lund sees little hope for change in the future. The legislation also did not include a new national hiring standard, but there are regulatory requirements for electronic logging devices. The latter is a very contentious issue, as many truckers see them as inhibiting their ability to do their job. “It takes away flexibility,” Lund explains, saying that this can be a problem, particularly for a smaller truck line carrying highly perishable loads.
Ed Treacy, vice president of supply chain efficiencies at the Produce Marketing Association, views it a little differently. “I fully support electronic log books, but I can see how people could interpret them as being counter to getting more people to take up the profession.”
Easing the Driver Shortage Lund believes California’s increasingly regulatory atmosphere is driving business out of the state. “It’s not as much the drought affecting California,” he claims, but “the lack of a stable workforce and an abundance of overregulation.” Instead of spending money to fix roads or make trucking more efficient, Lund explains, the state continues to pass laws that make it even more expensive to operate.
A rollout of “driverless” trucks and platooning could help with the driver shortage, though it’s unclear when such technology would be available for use.
“We had the range from five years or less to never,” comments Lund, who believes a move to platoon convoys (comprised of a lead truck and several driverless trucks behind it, with drivers who are either on off-hours or sleeping) is on the horizon in a few years, with military tests already meeting with success.
Treacy is more skeptical. “People are going to allow a 100,000-pound truck to get on the road without a driver in it? That’s what trains are for—I’m not sure society is ready.”
COMMODITIES & INNOVATION: CREATING DEMAND Like last year, organics are poised for growth in 2016 and may be coming down in price. Park sees Whole Foods continuing to try and change its image and pricing, to make organics more affordable.
Sprouts Farmers Market, on the other hand, is an up-and-comer whose market strategy is to sell organics at lower prices, making them available to a larger, less exclusive customer base. “Other retailers are also moving in this direction,” Park notes, due in part to better production practices and higher yields.
Roger Riehm, president of Blue Creek Produce, LLC in the Chicago area, says organics are definitely getting more space in grocery stores and also predicts a price drop. “As it gets closer to conventional pricing, people will fit it into their budget a little more.” He also sees an increase in aisle space for locally grown produce. “It tells you that people are demanding if not organic, then locally grown, which is why farmers’ markets are growing in each city.”
The emphasis on so-called ‘superfoods’ is still on the rise for 2016, according to Totta, who says kale, blueberries, and sweet potatoes continue to be “on fire” with no signs of slowing down. Edamame and kale sprouts (a kale/Brussels sprouts hybrid) are gaining exposure too. Totta likens the emergence of kale sprouts to baby carrots, when the industry turned less than perfect and broken whole carrots into a bite-sized phenomenon, actually creating demand for a new product.
For Caplan, the new go-to fruit will be an old favorite: citrus. “It seems as if 2016 will be the year of citrus—I think it will also be a big ‘comeback’ year for grapefruit. When Wonderful Citrus LLC (formerly Paramount Citrus) invests big into a commodity like Texas grapefruit, our industry better pay attention.”
Flavor, Color, Size & Shape The other big trend, according to Totta, is single-serve fruit and vegetable snacks in vending machines and school lunches. These foods fit the “pace of people working and running around with children” who want convenient, yet still healthy food. “Single-sized servings of fruits and vegetables are going to become more available.”
Other innovations include fruits or vegetables marketed specifically for their enhanced and/or distinctive flavor profiles. “Some commodities have definitely been moving in this direction—melons with wonderful flavor, new apple varieties with tang and sweetness,” comments Park. “Retailers use their produce departments to compete, looking for the next ‘wow flavor’ in a product to attract and keep their customers.”
Flavor goes hand in hand with appearance and Riehm sees more emphasis on not just taste, but color and shape too. “We’re looking for a lot more color in the tomato world, new seeds for better taste and appearance. There are many different shapes and colors, but the way it looks and the way it tastes are the key factors in terms of price.”
Sustainability: Waste Not, Want Not On the flip side of attractiveness, Taylor says sustainability is still a factor for many people including more eco-friendly packaging and marketing of “wonky” or “ugly” produce with no internal problems, only outward blemishes or sizing. Caplan predicted wider acceptance of these edible oddities in our feature last year and a number of prominent supermarket chains are no longer rejecting misshapen or ugly produce, offering these items in special displays, some with significantly lower price points.
“No disease, no scarring, but they’re misshaped,” points out Taylor. “Growers and shippers are really embracing the thought that American households don’t want to be wasteful. As an industry, we’re sustainably minded—if you’re not a sustainable player, you’re simply not in the game anymore.”
Totta predicts more movement toward proprietary seeds and special product varieties grown in the buy-local movement, particularly as it relates to the hydroponic greenhouse industry, along with an increased use of LED lighting to grow without sunlight in warehouses. “There are so many ‘niche’ things going on in our industry. Eight years ago, had you ever heard of a mini sweet pepper? Now people are buying them in big bags and using them as snacks. These are the types of things I think we’ll see more of.”
Just One Word? So if our contributors had to sum up or describe the produce industry in 2016 in just one word, what would it be? Caplan chose “channels,” as in new venues and ways to sell food and value-added products to consumers. “Think Aldi, Lidl, Kroger, Walmart, delivery service like Fresh Direct, and meal kits like Blue Apron.”
For Jerry Butt, president and CEO of Glendale, CA-based recruiter Mixtec Group, the word is “globalization” and our increasingly small world. “Trade agreements, consumers demanding wider and healthier selections, seasonality, costs, emerging economies, and greater world food demand are rapidly erasing all boundaries.”
For those at the helm of today’s produce suppliers, it’s imperative to have a global perspective. “Doing business outside the United States to satisfy expansion of American companies is a priority,” Butt says. “Additionally, growers from all over the world are rushing to sell in the United States, and imports are on the rise. Global-savvy leaders are in high demand as the international fresh produce marketplace continues to grow and thrive.”
CHANGE IS THE ONLY CONSTANT It’s impossible to know what the future will bring, but our experts see more positives than negatives for 2016. Of course, a few of the negatives—ongoing drought, labor shortages, food safety, and various regulations—have the potential to significantly and negatively affect the produce and greater food industries.
The good news is growing awareness and communication are a step in the right direction to find solutions. And there is much to celebrate: people eating healthier, seeking out new varieties and flavors, and innovations in packaging are not only keeping fruits and vegetables fresher longer, but having less impact on the environment. So, yes, there’s plenty of excitement on the horizon.
And although changes and concerns will always exist, the industry is ready to tackle whatever may come.
Nassif sums it up well: “This industry is extraordinarily creative and flexible,” he notes, and suppliers won’t “give up because they don’t have enough water; instead they find better ways of growing, packing, and shipping our produce. They look for new technology, they adapt it to the industry, and they move forward.”
