Building Prosperous Industry Future May Conflict with Desire to Increase Consumption

Jim Prevor - The Fruits of Thought

Originally printed in the April 2022 issue of Produce Business.

There have always been many pathways to success in produce. Indeed, one of the things that has made the produce industry an extraordinary place for those of us who have long toiled in the industry is the enormous range of opportunities the industry presents. We have our share of MBAs from Harvard and Stanford, but some of the most successful people in the business toil at night on terminal markets, and some never graduated high school.

The virtually universal knowledge of the product, combined with its short shelf life, have made retailing produce a portal for immigrants. To stock and sell items in an appliance store may require holding millions of dollars in inventory and the ability to explain complex differences between product lines. Produce can often be bought daily, and there is no need, and no desire, to hold lots of inventory, and, in general, deep explanation as to the use of the products is not required. So, produce has always been a portal to prosperity for new immigrants without capital or English language skills.

If you survey the industry, one thing becomes clear: Industry members want to see efforts to promote produce consumption.

To the extent that these thoughts are motivated by a desire to help the poor, by a desire to increase public health and people’s understanding of nutrition and the variety of produce out there, they, of course, deserve praise. It will take decades, however, before we have strong knowledge of how various term-limited interventions impact produce consumption later in life.

There is another issue though. Many of the outreach programs currently in existence depend on giving away free fruits and vegetables. The hope, of course, is that people, exposed and accustomed to eating fruits and vegetables when young, will develop the taste for them and will continue to eat higher levels throughout their lives and will introduce their own children to produce-rich diets as well.

It is all devoutly to be wished but increasingly seems divorced from the actual sources of prosperity for the produce industry.

Increasingly, a prosperous industry future seems to derive from five avenues:

First, you have superior or differentiated varieties. Sometimes these are low-profile, such as Duda’s proprietary varieties which are not typically promoted to consumers but are widely known among the celery-buying community.

Second, you have consumer-marketed varieties. These can be differentiated in flavor or appearance, such as Cotton Candy grapes from International Fruit Genetics or Fresh Del Monte’s PinkGlow pineapple. They can also be backed up by branding, such as Driscoll’s, or co-branding, such as the Sun World varieties, where various shippers use the proprietary varieties and brands.

Third, you have distinct value-added products. These can run the gamut from culinary combinations of unique blends of vegetables from such companies as Dole, Taylor Farms, Ready Pac, etc., or the augmentation of plain produce into something special, such as Love Beets selling its “Perfectly Pickled Sliced Beets.”

Fourth, the explosion in many forms of controlled atmosphere agriculture. Vertical farms, new items such as greenhouse strawberries, use of sea water and other innovations. So far, these newer growing environments are almost never profitable, but they bring a lot of investment into the industry.

Fifth, year-round availability. Like a dumbbell with two weights on either end, the steady growth in imported produce combines with a boom in local produce to make locale matter.

All in all, there is much evidence that these avenues to building consumption are often met with higher consumer expenditure on each unit of produce purchased. As these avenues grow, we may well see sales go up. The evidence is skimpy, however, that any of this innovation leads to more produce consumption. What it does lead to, though, is higher-value produce with consumers willing to spend more on each item to get things they prefer.

Basically, the industry is bifurcated. Those with innovative varieties, branding, cuts and flavorings, and with the ability to leverage hyper-local and global supply chains are motivated to push consumption of their individual products, especially when they are able to attract investment from outside interests. Those who rely on the old and conventional are struggling.

Selling “more produce” isn’t really the goal if you are selling an item at a premium price. Ferrari, Aston Martin or Rolls Royce don’t worry much about whether total car sales are up; they worry about the prosperity and inclinations of the sector of the consumer base that is willing and able to spend a quarter million dollars on a car.

Although many produce executives want to sell more produce, my discussions with top retail executives show that this inclination is low priority and, maybe, even perceived to be counterproductive. The problem is that if you replace sales of high-margin and high-value varieties and blends with low margin standard varieties, you may triple sales, but you may find profits flat, especially when you consider labor and lost sales from dedicating so much space.

Sure, a blow-out sale of potatoes, for example, is still an exciting event for a while. But you are selling less engaging product and probably not building customer loyalty. In fact, you just may be attracting “cherry-picking” customers who will flee to whichever item is on ad that week.

That is probably not the way to maximize profits. Is centering around the cheapest available item actually the way to build long term consumption?