The Year Ahead
Preparing for the future and saying goodbye to a year of dramatic events
If there’s a theme to this roundup of predictions for the year ahead, it is “efficiency.” From hands-free growing and picking to real-time monitoring and data-driven marketing, the produce industry is looking for ways to lower costs, discover problems quickly, make informed decisions, and reduce the time from harvest to shelf.
Reengineering, Sensors, Transparency
Innovation will play a key role in the perishables industry in 2018, continuing the progress of the last few years. As more crop processes can be mechanized, it will not only alleviate the labor crunch but speed up the supply chain from field to fork. But mechanization isn’t always the answer—there is also room for ingenuity and science to work together, providing new solutions to old problems.
“There’s been a little bit of a shift, if you will, forcing attention to the supply side,” observes Don Goforth, director of marketing for Family Tree Farms Marketing, LLC in Reedley, CA. “It’s caused by the overall strain on agribusiness as a whole.”
In response, Family Tree Farms wanted to reduce costs in the field. “On tree fruit, 70 to 80 percent of the expense is labor,” Goforth explains, noting that most labor hours are related to the use of ladders for pickers. A way around ladders is shorter trees, so the grower began dwarfing root stock to develop ‘pedestrian’ orchards where fruit could be picked from the ground. Smaller trees also allowed for greater orchard density, increasing yields. The result? Faster harvests and higher yields on the same acreage, but at a lower cost.
Ed Treacy, vice president of supply chain efficiencies at the Produce Marketing Association in Newark, DE, says technologies that save labor are a big focus for industry research and development, citing as examples robotics for harvesting, planting, and thinning in the field, as well as warehouse voice pick systems.
“Labor is the number-one controllable cost in most operations,” Treacy says, and there is a lot being offered out there to help.”
Robotic harvesting, to name one area of interest, range from multiple-arm apple harvesting machines from Abundant Robotics to a patented automated strawberry picker from Harvest CROO, a company founded by Florida strawberry and blueberry supplier Wish Farms.
“Automation is not about robots replacing a person, it’s about better systems, and this requires new sets of skills,” stresses Treacy.
He also points out the importance of attracting new talent into the industry, especially students in STEM (science, technology, engineering, and math) fields to modernize operations and the supply chain.
Michael Kauzlaric, technology scout and grower outreach liaison for the Vineland Research & Innovation Centre in Ontario, is on the same page and watching the rise of a number of technologies including artificial intelligence, predictive modeling, augmented reality, and virtual reality. All of these innovations allow for speedy and often remote decision making. “It’s all about hands-free farming,” Kauzlaric says.
The quest for better quality has also spurred research to prevent the one-and-done experience in stores. If a shopper has a bad experience with an overly ripe piece of fruit, in many cases, he or she will not purchase the item a second time.
Kauzlaric says suppliers are pouring research dollars into better preconditioning processes and ripening rooms to ensure fruit is in optimal form when it leaves the packer.
Another facet of providing a better customer experience is monitoring temperatures from field to truck to retail shelf. Tracking temperatures is not new, but better tools for real-time data availability continue to progress.
“There’s been a shift in our customers wanting access to data in real time and to make adjustments on demand,” says Amy Childress, vice president of marketing for cargo solutions at Emerson Commercial & Residential Solutions in Boise, ID.
This need is addressed with cellular-based technologies in which data is stored in the cloud, enabling not only immediate access but proactive alerts. “It’s an expectation that customers will have access to temperature data anytime, anywhere,” Childress asserts.
Cold chain capabilities as a whole are also evolving. “The customer is really starting to look at the cold chain holistically,” she explains. “Customers recognize that freshness is cumulative, and they’re starting to sew together the different segments of the cold chain. There are seven to eight distinct segments, and they’re all linked, all monitored, and all equally important to the delivery of safe and fresh produce to the customer.”
With the rise of produce delivery, from AmazonFresh and supermarkets, has come a need for extended monitoring—right to the customer’s door.
“You can maintain the perfect temperature all along the cold chain, but then the delivery sits on the doorstep and isn’t put into the fridge for four hours—[so] you’re relying on the integrity of the insulated container,” contends Childress. For these situations, Emerson developed a small label that can monitor temperatures and send an alert if they go above or below a specified range.
Traceability and blockchain
With the movement of product, especially perishables, comes the need for “supply chain visibility and transparency, right through the entire supply chain,” says Treacy.
One trend of particular interest is the use of blockchain technology to enable traceability with Walmart, Costco, Wegmans, and Kroger, alongside companies such as Driscoll’s, Dole, and IBM, currently conducting pilot programs.
The technology enables a block of data to track an item as it moves through the supply chain, allowing real-time access to inputs, growing/packing information, trucking time stamps, refrigeration data, and so on. Treacy cites an example from Walmart, when a shipment of mangos from Mexico spent four days at the border. “Blockchain gave [Walmart] powerful insights about what was happening, and more importantly, what wasn’t happening along the supply chain,” he says.
Tracebacks in the pilot program are taking 2.2 seconds, as opposed to more than six days using traditional methods. And because blockchain data is housed on many different computers, it is believed to be incorruptible, eliminating the need for third parties to authenticate the data.
All told, early results show blockchain improves safety, speed, transparency, quality, and efficiency. Although Treacy says users are still “sort of feeling their way in the dark right now, the results are so powerful we should all pay attention.”
He predicts adoption of blockchain will be sooner, not later. “The industry will be using blockchain in the near- to mid-term.”
It’s no surprise immigration and labor remain a thorny issue. “Labor is shorter, the border is tighter, and there are fewer workers available,” asserts Goforth, noting that some cherry orchards were not picked at all in 2017 because growers couldn’t find a crew. “It will be tougher and tougher until there is a solid worker program where they can come here, work, be paid, and go home,” he says.
“We’re seeing changes in migration patterns,” agrees Matt McInerney, senior executive vice president at Western Growers Association in Irvine, CA. “The economy in Mexico is growing, we’ve heard anecdotally that it’s more dangerous to cross the border, and we have an aging population. It’s sort of a perfect storm.”
The goal of Western Growers and other industry groups is to create a bridge under the H-2A temporary agricultural visa program that will lead to a stable agricultural workforce. “Our food is harvested by foreign workers,” McInerney points out. “The question is do we want that to happen here or in another country?”
Robert Guenther, senior vice president of public policy for United Fresh Produce Association in Washington DC, believes negotiations related to the Deferred Action for Childhood Arrivals program (known as DACA) and border enforcement give the industry an opportunity to bring the conversation around to aspects of immigration policy that affect the produce industry, such as the Agricultural Guestworker Act proposed in October 2017. Given the current political climate, few are able to confidently predict the outcome.
The more things change…the more they stay the same. Well, in some respects, at least when it comes to California and water: from long-term drought and record rain to dry conditions and devastating wildfires—all in the span of a year.
“The rains were wonderful; they filled the reservoirs, helped with surface water, and gave us great snowpack,” confirms Goforth. “But it takes more than one year of rain to replenish the aquifer beneath our feet.”
McInerney agrees, noting that despite last year’s El Niño-driven wet winter, big challenges remain, especially with how water moves through the chokepoint of the Delta. Environmental issues continue to restrict water flow from north to south at certain times of year, resulting in excess water flowing out under the Golden Gate Bridge.
“We came out of the drought, but the question now is how to go forward with a plan for groundwater management and to find an equitable way to do it from the point of view of the environment, cities, and growers,” McInerney explains. “It’s important to not let one wet winter stop the momentum and lead us to complacency.”
There have been discussions about a federal infrastructure bill being discussed in 2018, although no schedule has been set. “We will push hard to include water infrastructure in any bill,” promises Guenther.
NAFTA & the Farm Bill
In spite of tough talk from the Trump administration, many experts in the produce industry believe the North American Free Trade Agreement (NAFTA) will remain in place, hopefully with some modernization in the areas of sanitary issues, access to markets and the like.
“We’ve pleaded with [the Trump administration] not to withdraw unilater-ally,” McInerney says, pointing out how NAFTA and other trade pacts such as the South Korean Free Trade Agreement have benefitted the industry, despite needing a few tweaks.
“The United States has been a beacon for how to negotiate and comply with trade agreements,” he adds. “To unilaterally drop out is a big change and it could have unexpected consequences with other trading partners.”
Trade is also a component of the Farm Bill, which is up for reauthorization in 2018. It also contains key programs and backing for research, testing, and access to fresh fruit and vegetables, and funds state block grants for the produce industry.
“The Farm Bill has become the largest set of resources the federal government gives to our industry,” Guenther says, noting that United Fresh and other groups will be working to maintain and increase those targeted resources.
New Rules, Recalls & DNA Sequencing
With the arrival of the latest round of compliance deadlines for the Food Safety Modernization Act (FSMA), there are still some grey areas like between the Produce Safety rule, which covers growers, and the Preventative Controls for Humans rule, which covers processing, packing, and warehousing facilities. Water-testing protocols are among the other issues not yet resolved.
One aspect of FSMA to watch in 2018, according to Mike Bentel, a food safety specialist and founder of Food Safety Management Advisors, involves importers that fall under the Foreign Supplier Verification Program.
“The industry has been overly dependent on audits as a safety tool, but they’re based on global standards and do not necessarily encompass U.S. food safety laws,” Bentel explains. “People are under the impression that if they score 90 percent on a food safety audit, they’re in compliance with the law—but that’s not true—or untrue. One does not parallel the other.”
Bart Botta, partner at the law firm of Rynn & Janowsky, LLP in Newport Beach, CA, says one of the big changes is the power of the U.S. Food and Drug Administration (FDA) to issue mandatory recalls when a problem occurs. Recalls can improve public security, he notes, and so does the FDA’s enforcement authority.
Bentel concurs and says the FDA is improving its ability to hold specific growers, packers, and others accountable for safety problems, thanks to the expansion of DNA sequencing to identify foodborne pathogens and trace them to their source.
There’s even a database to link illnesses to a particular pathogen and connect disparate cases across the country.
While the technology has been around for a decade, it has become less expensive and the FDA has been expanding the program to include more pathogens. “This will have a significant impact on the industry as it expands,” predicts Bentel.
ELDs & Hours of Service
The Federal Motor Carrier Safety Administration (FMCSA) requirement for electronic logging devices (ELDs) to replace paper logbooks went into effect in December, though a 90-day waiver was granted for drivers of agricultural loads.
Many await the impact ELDs will have on hours of service and travel time. Previous short hauls—400 to 500 miles in one day—will likely turn into two-day trips due to delays and required layovers.
“We’ll all have to change how we do loadings,” explains Debra Sanford, vice president of controlled logistics sales at Wheels Clipper in Woodridge, IL, near Chicago. Both “shippers and receivers will have to change their ways and practices.”
The same is true with four-day runs turning into five days, says Kenny Lund, vice president for operations at Allen Lund Company, headquartered in La Canada, CA near Los Angeles.
For highly perishable commodities like raspberries or strawberries, an extra day can have a major impact—reducing retail shelf life from four to three days, slashing selling time by 25 percent.
Additionally, Lund believes the traditional first-come, first-served method of handling transfers cannot be sustained in the new environment. Loading and unloading delays will significantly impact hours of service.
To help streamline the process, the Allen Lund Company created its own dock scheduling program, which it sells to interested shippers.
Western Growers and its transportation partner C.H. Robinson, meanwhile, are looking into the creation of service centers or strategically located forward distribution hubs. This would allow long-haul truckers to deliver to a central point then coordinate the last miles with local short-run truckers, which will help keep produce moving while complying with hours of service rules
Engagement, Size & Online Sales
On the sales and marketing side, one of the themes going into 2018 is ‘retail engagement.’
“There’s a much higher level of partnership, and really transparent partnership, between supplier and customer,” says Family Tree’s Goforth. “You’re doing more business with fewer customers, and you’re talking to your customers pretty bluntly about pricing and quality. Anything you do has to fit the needs of both.”
Mike Kienzlen, principal of Retail Profit Solutions, puts it this way: “The relationship is key—it can get to the point where produce growers [decide] how many plants to grow based on retailer feedback.”
New varieties are prime partnership material, notes Kristen Park, extension associate at Cornell University’s Food Industry Management Program, and often a win-win for both growers and retailers.
She cites a 2017 Walmart venture in which growers were given a specific Bayer cantaloupe seed for the upcoming winter crop. “That’s an example of a retailer engaging directly, working with vendors and suppliers about what to grow for them on the production side,” Park says.
Changing retail landscape
The ramifications of Amazon’s purchase of Whole Foods, the strength of Lidl as a disruptor, and small retail footprints are all topics for 2018.
“I believe the fresh produce industry will benefit from the many innovative and hybrid concepts starting to emerge, be it Amazon buying Whole Foods and making organic produce more affordable and accessible, or conventional retailers experimenting with a different store layout putting more emphasis on fresh,” says Anne-Marie Roerink, principal of 210 Analytics in San Antonio, TX, and author of The Power of Produce 2017.
Some believe Lidl will have an uphill battle to wrest customers away from Aldi, at least in the short term.
“The Aldi business model is hard to beat for traditional players from a financial output perspective,” notes Roerink. “The smaller footprint, assortment of some 1,500 SKUs versus 43,000 for the average grocery store, and avoiding large investments in personnel or décor means Aldi has a completely different margin model than most U.S. retailers.”
To battle Aldi, Lidl, and specialty retailers, traditional supermarkets have been opening smaller formats to compete. “Small box and dollar stores will keep coming,” observes Kienzlen. “Consumers don’t need 10 varieties of organic mustard to choose from.”
After a somewhat slow start, Roerink believes online produce sales will continue to climb. “If retailers can show they pick fresh produce better than the customers themselves, they’ll have loyal followers.”
More importantly, Roerink notes, “millennials and Gen Z are not as knowledgeable in picking and preparing many fruits and vegetables, whereas older shoppers often can’t imagine anyone else selecting their produce. A millennial is more likely to trust an expert.”
As the new year progresses, 2018 promises to be one filled with competition, driving everyone along the produce supply chain to be more efficient and imaginative in sourcing, packaging, and selling.
This is where successful marketing and ‘storytelling’ come into play, a recurring theme from last year’s article.
“Unlike many consumer product goods categories, we already have an inherently good story to tell,” explains Dan’l Mackey Almy, CEO of Dallas, TX-based DMA Solutions. “We just need to commit to articulating and creating a thoughtful plan for sharing our story on social media, in consumer media, on our own websites and blogs, and with infuencers so it’s accessible to everyone.”
How a company tells its story, however, must be compelling as well as cost effective.
Goforth agrees with the need for careful spending. “The pressures in the produce industry are unprecedented,” he contends, requiring buyers and sellers to make tough decisions and have difficult conversations with customers. “Every dollar has to be a good spend; every business decision has to have a purpose.”
For Wendy Reinhardt Kapsak, CEO of the Produce for Better Health Foundation in Wilmington, DE, it’s simple—give consumers plenty of information and they will spend more, and on a wider variety of fresh produce. “Consumers are interested in knowing about their produce from seed to supermarket to sauté pan, and everything between.”
All images Shutterstock unless stated otherwise.