A recent study caught my attention stating that over the past four years, produce sales at retail in California grew 14 percent. And over the same period, the average checkout receipt rose 22 percent in dollar amount, driven principally by higher-priced organic and processed items (including fresh juice). On the surface, these numbers would be received quite positively, especially at retail. Sales and margin are key matrices by which a buyer’s performance is measured. Each year, a buyer compares his/her performance to the same period the previous year.
While I’m certain this data is being received quite well, as I considered it, a thought occurred to me: if sales are up 14 percent and average receipt is up 22 percent, then unit volume (or tonnage) is down—as the increase in total tonnage is not keeping pace with the increase in sales. And if certain categories are increasing, i.e. organic, processed, and juice, then other categories are actually declining. So what’s taking the ‘hit’? Clearly, it must be in the conventionally produced fruit and vegetable space, or what we would historically call ‘fresh produce’—and this has both near- and long-term ramifications.
In the near term, this information suggests organic producers will continue to see good returns. Organically produced fruits and vegetables remain in a ‘demand-exceeds’ market, with buyers scrambling for limited supply. Not only does this bode well for market pricing, but it provides some degree of isolation from the logistics requirements many retailers are trying to impose on suppliers.
In many respects, buyers approach the organic industry in much the same way as they approach locally grown produce, in that they are willing to withhold certain requirements they might otherwise like to impose to secure the supply they need. This suggests there may be some variance in requirements, depending upon the product itself.
Regarding further processed items and fresh juice, these segments should continue to see growth. As more consumers demonstrate a comfort level with a packaged or juiced form of fruits and vegetables, these items lend themselves more readily to online shopping. Produce in a processed or juiced format provides a more consistent consumer experience, albeit one could argue they do not provide the same eating experience as their fresh counterparts.