While the European fruit and vegetable sector is in good health, the industry is facing a number of unforeseen challenges. This article first appeared in ESM Issue 3 2020.
As recent history can tell us, a lot can happen in a short period of time. While it’s been just a few months since ESM’s last Fresh Produce report (published in Issue 6 – 2019), the topics discussed therein, such as supply chain efficiency and adapting to changing consumer demands, while still relevant, have been dramatically overshadowed by recent events.
Now, more than ever, the industry needs to rise to the challenge.
Supply Chain Concerns
In late March, Europe’s biggest farming and agri-cooperative group, Copa-Cogeca, highlighted a number of potentially devastating consequences from the spread of COVID-19 across Europe, which have had “dramatic consequences in the most affected rural areas of the EU,” according to secretary general Pekka Pesonen.
‘In fruit and vegetables, after an initial spike in prices, the market has weakened and prices are falling, with particular concern over the future viability of cross-continental supply chains and seasonal harvest work.
‘The bloc must keep its trade flowing, both internally and externally, while monitoring the developments in each of the EU agricultural product sectors,’ Copa-Cogeca stated in a March paper issued to European agriculture ministers.
The agri-food sector is already experiencing ‘major employment challenges’, which have been exacerbated over recent weeks, as tighter restrictions have been introduced with regard to border crossings and ‘lockdown’ instructions.
‘There will most likely be labour shortages due to restrictions on the movement of people, the closure of national borders, and the indirect consequences of non-coordinated national measures,’ the group added. ‘EU farmers are increasingly dependent on seasonal workers, who provide valuable assistance during peak planting, pruning and harvesting periods or for other farm-related work.’
Products sourced from outside the European Union are also likely to face significant supply pressures. Kenya, for example is a major supplier of peas and green beans to Europe, but the sector there has been ravaged by staff shortages, with mandatory leave implemented due to the sector’s inability to ship orders. Shipments from South Africa are also challenged due to increased air freight prices and a government-imposed lockdown, which is only now coming to an end.
A New Normal
The Produce Marketing Association (PMA), a global trade organisation covering the complete fresh-produce supply chain, recently held a ‘virtual town hall’ to discuss ways in which the industry can work together to address an increasingly unsettling ‘new normal’.
With members from the EU, Mexico, China, the US, Colombia, Peru and Singapore contributing to the meeting, it was clear that the response to coronavirus from retailers, suppliers and consumers was, in many ways, being echoed from country to country – an initial spurt of panic buying, which throws traditional forecasting models into disarray, followed by a stabilisation period in which future logistics challenges will need to be addressed.
PMA members from the retail trade reported similar challenges: impacts to supply chain reliability, certain categories seeing a boost at the expense of others, staff availability, and a significant drop-off in categories deemed non-essential, such as flowers and plants. As the retailers reported, bananas, potatoes, carrots and onions were among the most in-demand products as the coronavirus spread, accounting for the majority of purchases.
“As we adjust to our new reality, we know the role we play in making our world better by providing consumers with fresh fruits, vegetables, flowers, and plants,” commented PMA chief executive Cathy Burns, “and we’ll be reinforcing this role through efforts to reassure shoppers that fresh-produce and floral products are available and safe during this crisis.”
Top Priority
Belgian-based Freshfel Europe, the European Fresh Produce Association, has stated that ‘all possible measures’ to ensure the continued supply of high-quality fresh produce to retail channels need to be considered, particularly in light of the closure of much of the HoReCa sector in the midst of the coronavirus crisis.
The group stated that the fresh fruit-and-vegetable sector is in discussions with public authorities to guarantee a ‘fresh corridor’, which would fast-track trucks carrying perishable fruit and vegetables across the Continent. This includes securing vehicles and drivers in a timely manner, in the right locations, and introducing protocols to ensure trade flows.
Freshfel Europe also stated that discussions are under way to ensure resources for the upcoming picking season, ensuring that the sector has enough employees picking in orchards, working in packing stations, and fulfilling roles further down the supply chain.
‘This is a critical matter for the fresh fruit-and-vegetable sector’s immediate future,’ the group said. ‘There is an urgent need for workers for many vegetable products, as well as for other highly demanded products, such as asparagus and strawberries. The fruit season is also beginning, which requires a complete seasonal workforce. This is an urgent matter to resolve, as for some products, the season is advanced by a number of weeks due to weather conditions over the past months.’
Should obstacles be in place on the availability of seasonal workers, or on the travel of said workers between member states, this would ‘deeply undermine the ability of growers to harvest fresh produce’, leading to an acceleration of food waste at source and putting supply to European supermarket shelves at risk.
This cause has been taken up by the International Road Transport Union (IRU), which has called for ‘urgent measures’ to address the impact on essential goods and passenger transport, both within and across EU member states.
“With every day that passes, the need for swift, decisive action becomes more pressing,” commented IRU secretary general Umberto de Pretto. “European challenges require concerted European measures and coordination worldwide.”
In the UK, meanwhile, the Fresh Produce Consortium, a trade association for the fruit-and-vegetable and fresh-cut flower sectors, has sought to address supply chain concerns with the development of ‘On Your Doorstep’, an online platform that connects fresh-produce suppliers with customers in their local area, to ensure that the fresh-produce supply chain keeps on moving.
Production Impact
Leading producers are also keeping a close eye on coronavirus developments. In March, the Dole Food Company issued a statement on its website to assure businesses and consumers that all its fresh-produce supply chain and production facilities remain operational, with the majority of the company’s products sourced from the US, Latin America and South America.
‘As an employer, we want to be a responsible member of the communities in which we operate and follow all advice coming from public health organisations,’ Dole stated.
Irish-based Total Produce, meanwhile, which owns 45% of the Dole Food Company, stated in March that, due to the ‘unprecedented nature’ of the outbreak, it is not yet possible to determine the impact of coronavirus on its full-year performance, adding that it expects earnings to be lower than in FY19. Total Produce added that it expects ‘satisfactory’ results for the year, noting that the ‘diverse structure’ of the business means that it is capable of responding to current challenges in the marketplace.
One thing that Total Produce does have on its side, however, is a strong leverage towards the retail trade. As analyst Patrick Higgins of Goodbody Stockbrokers noted, “While the group has experienced reduced demand from the foodservice sector – [approximately] 20% of direct and indirect sales – demand from retailers – 80% – has been robust, as consumers’ buying patterns shift. Note: we estimate that Dole retail exposure is closer to 90%.”
Fresh Del Monte Produce, too, has sought to be proactive, assuring customers of ‘uninterrupted access’ to fruit and vegetables during this challenging time. The business stated that it has activated its global executive crisis management team, as well as regional response teams, to monitor and adjust businesses processes and procedures as necessary.
“We are proud of the role we are playing to keep the world fed, and the 43,000 members of the global Fresh Del Monte Produce family remain committed to meet this very important objective,” commented Fresh Del Monte Produce president Youssef Zakharia.
Brexit Concerns
Aside from the coronavirus-related ‘elephant in the room’, much of the discussion towards the end of this year (or early next year) is expected to focus on the future trading agreement between the European Union and the UK, following the latter’s departure from the bloc this past January.
The UK is a key consumer of European fruit and vegetables, and with little visibility to date on whether tariffs will apply to goods traded across the English Channel, fruit and vegetable producers are, once again, playing a waiting game, as Freshfel Europe general delegate Philippe Binard explains.
“As usual with this Brexit story, it will all depend what is in the deal, and we are still struggling to anticipate […] the ambition of the UK in these negotiations,” Binard explains. “The UK is an important part of the internal market – some 10% of the total movement of fruit and vegetables in Europe goes to the UK, so that’s roughly three million tonnes. Any disruption could be problematic in terms of the flow of a sizeable amount of products.
“This could have tremendous implications in terms of resources from the public sector, but also from the private sector, to cope with any potential additional administrative burdens,” he adds.
According to Binard, the growing coronavirus epidemic appears to have put discussions on ice for the moment, despite UK Prime Minister Boris Johnson previously stating that if he sees little progress by June, he will halt negotiations and push for a no-deal scenario.
“I don’t see a lot of things happening,” says Binard. “Everything is focused on the management of the coronavirus at the moment. There have just been two or three meetings between Michel Barnier and his counterpart from the UK.
“It’s true that the ideal situation will be a no-duty agreement, but that’s no guarantee. No deal would be very detrimental to the EU, so we would be hopeful for a good free trade agreement with the maximum […] alignment between EU rules and UK rules,” he added.
European Green Deal
Trade agreements aside, the global fresh-produce industry has made great strides in terms of embracing sustainability, with Freshfel Europe calling on the sector to take up the challenges outlined in the recently announced European Green Deal, and embrace zero-pollution production, carbon-neutral supply chains, increased digital trading, alternative packaging solutions, and other environmentally focused measures.
“The fruit-and-vegetable sector has a fantastic record, both in terms of a very low environmental impact and the very positive health benefits of the sector,” says Binard. “The Green Deal is very much about these points.”
With everything, though, there will be a cost, and Binard believes that more visibility is required on where this will apply, if the aims of the Green Deal are to be realised.
“European Commission president Ursula von der Leyen described the Green Deal as ‘Europe’s man-on-the-moon moment’, but let’s not forget that putting a man on the moon cost a huge amount of money. Who is going to bear the cost of that?
“The Commission is saying that they don’t want any industry to be left behind and is investing in sectors that need financial assistance. There will be an impact on our sector, and we will need to adjust in terms of emissions, in terms of water usage, reduction of pesticides, and other things like that,” says Binard.
Snacking Advantage
Aside from the socio-political challenges, several of the trends evident in the fresh-produce sector in recent years continue to grow apace. Fruit and vegetables are playing an increasingly important role in the snacking industry, for example, as consumers seek out daily treats that also offer nutritional benefits.
According to research by FMCG Gurus, 90% of consumers typically snack during the day, while one in five (20%) states that s/he snacks for health reasons, such as to load up on vitamins and minerals. With this in mind, two thirds of European shoppers (67%) tend to snack on fruit during the day, FMCG Gurus’ research found, while 16% snack on vegetables. While shoppers also typically snack on more indulgent treats – 60% snack on chocolate – there is an impetus towards healthier options that also taste good.
FMCG Gurus’ analysis suggests that brands and manufacturers can target proactive health consumers by offering new snacking alternatives, utilising fruit and vegetables in new-product development. Consumers are not willing to sacrifice on taste, meaning that innovation in this area should be as satisfying as it is nutritious, appealing to both health-minded and indulgence-seeking shoppers.
Do The Right Thing (Right)
Elsewhere, the fresh-produce industry is well positioned to benefit from the drive for sustainability, as was highlighted in a recent report by Rabobank, revealed at Fruit Logistica in Berlin earlier this year.
The report, Do the Right Thing (Right), found that the fruit-and-vegetable sector finds itself in a ‘great position’ to improve the health of the overall global food system, as well as become a benchmark-setter for the circular economy and other sustainability initiatives.
As the report discusses, the coming together of the biological and technological worlds can offer solutions to sustainability challenges – closed-greenhouse production systems, precision agriculture technology, weeding robots, and heat generation from geothermal sources are all cited as examples of how the fresh-produce sector can be a driver of positive change.
In addition, the report suggests that ‘more radical’ innovations may be required in order to make larger leaps forward, with the sustainability-led solutions of tomorrow likely to be different from those employed today.
‘There is no one-size-fits-all strategy when it comes to harnessing the value of sustainability or circularity,’ the report reads, ‘but certain steps are relevant, regardless of scale, company type, market focus and sphere of activity.
Managing the sustainability impact for your company, making choices, measuring the performance and monitoring are all vital steps in managing your transparency plans.’
Most of all, the report states that transparency is ‘essential’ in terms of enabling businesses to incorporate the values associated with sustainability, and that consumers will increasingly look for evidence-based examples to support any ethical claims.
If producers and other fresh-produce businesses can develop structures that reinforce their sustainability credentials, this could, in turn, boost their competitive standpoint and give them an advantage over their peers.
‘It seems the greatest opportunity to get a return on your investment in sustainability may lie in the long-term strategic value associated with being a trusted source of sustainably produced fruit or vegetables,’ the report reads. ‘Without transparency, there is no trust, and without trust, nothing is sustainable.’
As the world of fresh produce continues to change, such advantages could be crucial to the sector’s success in the long run.
Main picture: Fresh produce display at La Grande Épicerie Rive Droite, Paris
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
