The broadening landscape of greenhouse produce offers buyers and marketers the next wave to expanding production.
Protected agriculture is a broad term applied to growing in a controlled environment and encompasses everything from “hard” greenhouses, to shade houses, to numerous variable structures in between. Regardless of the construction, benefits reaped from all forms of protected production continue to explode in the market.
“The shift to more products grown in a protected environment is important to all customers based on consistency of supply, taste and minimized use of harmful sprays,” says Mike Reed, chief business development officer for SunSelect Produce in Aldergrove, British Columbia, Canada. “Over the past two decades, we saw substantial growth in volume, the diversification of product mix and year-round supply.”
Redner’s Markets in Reading, PA, reports increased availability of protected ag products favors its business. “The rise of volumes in protected ag gives us advantages in quality and price,” says Richard Stiles, director of produce and floral. “We also capitalize on local greenhouse products such as lettuces.”
Bristol Farms in Carson, CA, with 15 stores, attributes growth to consistency in quality and reliable volumes. “This allows us to market more competitively within our marketplace and offer our customer base exceptional unique itemization,” says Raul Gallegos, senior director of produce, meat, seafood, sushi and floral.
One major factor of protected ag is consistency. “Product grown in a protected environment is more consistent in quality and supply,” explains Fried De Schouwer, president of Greenhouse Produce Company in Vero Beach, FL. “The product is harvested by hand at a mature stage, so product is more flavorful.”
The production method fulfills multiple buyer demands. “The protected ag environment allows grocers to offer locally produced, high quality, premium product, all while supporting sustainable growing practices,” says Ryan Mazzuca, hydroponic commodity manager for Tanimura & Antle in Salinas, CA.
Given increasing scrutiny on where and how produce is grown, protected ag marketers count on this advantage as well. “In recent years, food safety has become a major concern for your average consumer,” explains Alfredo Diaz Belmontes, chief executive of AMHPAC (the Mexican protected ag growers association) in Culiacan, Sinaloa, Mexico. “Protected agriculture yields high-quality produce grown in an environment safeguarding the product from contaminants and pathogens.”
Stiles notes Redner’s customers favor the notion of products grown in greenhouses. “They perceive protected production as having a better handle on growing conditions and better control of contamination, insets and disease,” he relates. Hollandia Produce L.P. in Carpinteria, CA, promotes the high level of transparency for its hydroponic greenhouse system. “It gives our retailers peace of mind,” shares Renee Cooper, marketing manager. “Produce departments appreciate that protected ag typically delivers longer lasting, better protected, cleaner, and more uniform produce.”
Evolution And Expansion
Protected production evolved significantly and creatively in the past two decades. “What started as greenhouse imports from Europe 20 years ago — and then moved to Canadian glasshouses — shifted to major Mexican operations under shade and greenhouse schemes,” says De Schouwer. “As the production methods evolved, so have volumes, pricing and variety.”
A few decades ago, less than 2 percent of all fresh tomatoes sold at retail in the U.S. were greenhouse grown, according to Doug Kling, senior vice president and chief marketing officer for Village Farms in Delta, British Columbia, Canada. “Today, greenhouse tomatoes at retail represent more than 60 percent of the total revenue and more than 50 percent of the volume according to the most recent Nielsen data,” he says.
In the forefront of the hothouse tomato trend, Canada still holds market share, but it faces increasing competition. In 2014, Canada’s greenhouse sector, comprising tomatoes, cucumbers, peppers and lettuce, rose by 1.4 percent in harvested area over the previous year as reported in Agriculture and Agri-Food Canada government statistics. Production grew from approximately 586,000 tons in 2013 to 591,000 tons in 2014. “Today, Mexico complements Canada but will eventually surpass it,” cautions De Schouwer.
Mexico currently accounts for significant volume in protected ag products, particularly tomatoes and peppers according to AMHPAC. “Volume skyrocketed since the development of protected agriculture technologies in Mexico,” says Guillermo Martinez, general manager at Kingdom Fresh in Donna, TX.
Mexico now ranks seventh among countries with the most protected surface and has 23,251 hectares as reported by Mexico´s Secretary of Agriculture (SAGARPA) in 2015. “The average annual growth of protected agriculture in Mexico has been 1,500 hectares for the past 15 years,” says Diaz Belmontes. “We estimate that the value of the installed infrastructure is more than $3.5 billion dollars.”
According to AMHPAC, one of the most notable changes in Mexican protected agriculture is investment in greenhouses with automation and climate control technologies in the Central Region of the country as producers look to take full advantage of Mexico’s favorable location. “The transition to Mexico is not as much about cold weather as it is about day-length and sunlight,” explains Alejandro Canelos, chief executive at Apache Produce Imports in Nogales, AZ. “Being closer to the equator gives Mexico greater ability to grow year-round.”
A New Focus
Initially, protected ag blossomed, because it brought new products to consumers at times of the year when those products weren’t available, but the motivation is changing. “Now, it evolved to a greater focus on sustainable production and resource conservation,” says Paul Lightfoot, chief executive of BrightFarms, Inc. in New York City. “Local protected ag production is a game changer, bringing a new set of benefits to the equation.”
Hollandia reports seeing a number of new entrants in the category recently. “We’ve seen more indoor vertical gardens or rooftop greenhouses popping up inside retailers or in close proximity,” explains Cooper. “In terms of marketability, I think we’ll continue to see evolutionary and revolutionary changes continue in the scope of how protected ag is used to support retail growth.”
Technological advances support development of these unique schemes. “As greenhouse technology improved, more builds have been occurring in strategic locations and flavor has truly come to the forefront,” reports Jim DiMenna, president and chief executive at Red Sun Farms in Kingsville, Ontario, Canada.
Village Farms links technology to production impact. “It enables greenhouse growers to harvest in challenging climates and allows for better yields, safer growing methods, indoor and high-tech conditions for workers, as well as highly sustainable practices regarding water usage and safety,” states Kling.
BrightFarms currently has three greenhouse operations in three states (Pennsylvania, Illinois and Virginia) totaling 366,000 square feet. The company emphasizes the importance of energy improvement technologies. “This is an important part of the developing trend in greenhouse production,” says Lightfoot. “For example, our Pennsylvania greenhouse uses all wind energy.” Tanimura & Antle operates 16.5 acres of hydroponic greenhouses producing Boston lettuce and a handpicked selection of artisan head lettuces. “Through additional investment, infrastructure, and overall innovations, Tanimura & Antle’s farms will increase our placement in the category by 35 percent this year,” reports Mazzuca.
In Irvine, CA, Urban Produce’s patented High Density Vertical Growing System has the ability to produce 1 million pounds of produce annually. “Urban Produce grows 16 acres of organic living produce on one eighth an acre while using 93 percent less water than a traditional farm producing a similar yield,” explains Danielle Horton, marketing director. “Our flagship farm began growing microgreens, but we expanded our product line to offer beets, radishes, and other root vegetables. Within the next few years, we plan to build five more growing units in highly urbanized areas. Our other growing systems will offer larger format produce — including chilis and berries.”
As volume in protected ag has grown, so has innovation in variety. “Products shifted from traditional beefsteak tomatoes, bell peppers and English cucumbers to specialty tomatoes including cocktails, grapes, and cherries,” says SunSelect’s Reed. “Mini and long sweet peppers, mini and cocktail cucumbers, lettuce, eggplants, and living herbs are just a few of the additions to the protected category over the past 20 years.”
Marketers are also upping the ante with packaging. “We’re seeing packaging featuring usage of products for snacking and cooking in new appealing ways for consumers,” reports Kling of Village Farms.
The Oppenheimer Group (Oppy) in Vancouver, British Columbia, Canada, believes greenhouse vegetables lend themselves well to packaging innovations. “Top-seal clamshells, pouch bags, and other delivery vehicles enable retailers to differentiate on the shelf,” explains Karin Gardner, marketing communications manager. “We’re particularly excited about the new Outrageously Fresh snacking line from Divemex and SunSelect.”
SunSelect invested significant effort in developing innovative packaging solutions to drive additional sales and consumption. “We constantly look to bring new products and packages to market each year as well as improve our current offering,” explains Reed. “Our new Outrageously Fresh jar bags offer the consumer new colorful packaging with the goal of emphasizing the snack-ability of many of our products.”
Outrageously Fresh items encompass a variety of packaging, including top-sealed clamshells and the innovative “jar” bags. “In January, Oppy will bring mini cucumbers, mini peppers and grape, cherry and gourmet medley tomatoes to market in the Outrageously Fresh mason ‘jar’ pack for the first time,” says Gardner. “The pack is very stable on the shelf, and capitalizes on the popularity of mason jars.”
Hollandia’s “Squircle” clamshell-design packaging, which incorporates a square and circle, serves as a mini-greenhouse, extending shelf-life and protecting its produce from damage or contaminants. “We continue to evaluate packaging options to reduce our carbon footprint and support our commitment to sustainability,” relates Cooper.
Marketing and consumer education play a key role in driving growth. “Differentiating protected ag products in the market using strategic packaging, marketing, and consumer awareness will increase the financial sustainability of indoor farming,” claims Mazzuca of Tanimura & Antle.
Products produced in a controlled environment offer broad market potential. “There’s a greenhouse-grown item for every demographic out there,” says DiMenna of Red Sun Farms. “Great-tasting food shouldn’t be exclusive. We are very conscientious of this when developing our go-to-market strategies for each item we introduce.”
Retailers can promote broadly and throughout mainstream categories. “Merchandising was done previously as a separate category, because it was such a small percentage. But with today’s higher volume and variety, it doesn’t make sense to separate it,” suggests Apache’s Canelos. “The goal is to provide the best product out there in every category.”
The proven tool of cross-merchandising holds true for protected ag products as well. “Place tomatoes with avocadoes or tomatoes and peppers near salads,” advises Reed of SunSelect. “With the addition of value-added clamshells and bags, the ability for out-of-section, endcap displays also increased sales.”
Hollandia does recommend particular displays to draw attention to special greenhouse products merchandised as such. “Create a refrigerated endcap or free-standing island for high-velocity impact,” suggests Cooper. “Establish a Protected Ag or Living Produce destination within the produce department.”
Urban Produce advocates using in-store representatives to share product samples and information with shoppers. “Educate them about what makes the product different,” says Horton. “When it comes to our product, we like to highlight what sets us apart — most importantly the fact that our product is living.”
Tapping Into Sustainability
The unique social and environmental attributes of particular protected ag methods present opportunities for reaching today’s consumer. “Retailers can highlight the socially responsible working conditions with reasonable wages and benefits,” suggests Kling of Village Farms. “Also, greenhouses conserve water by recycling it four to five times and using 84 to 86 percent less. Integrated pest management programs require limited or no use of pesticides versus other farming methods.”
BrightFarms recommends focusing on the local aspect of protected ag. “Promoting the fact that the product was produced within a certain amount of time or a few miles away is powerful,” says Lightfoot. “We talk about being a local producer first. The consumer doesn’t really think about whether the produce is protected. The consumer wakes up saying, ‘I want food that is fresh, consistent and safe.’”
Millennials, especially, represent a significant market for these messages. “Appealing to Millennials with relevant stories is essential for success in the next 10 years,” relays Lightfoot. Redner’s Stiles concurs how Millennial interest in food sourcing presents opportunity for education in protected production. “They’re not as inclined to just pick whatever off the shelf,” he explains. “They’re looking for the backstory including environmental, food safety, sustainability and social responsibility considerations.”
Protected Produce: Premium Or Mainstream?
Debate lingers over the return on investment in the marketplace for high-technology production methods, and whether higher pricing should be the result. Jim DiMenna, president and chief executive at Red Sun Farms in Kingsville, Ontario, Canada, notes a high-tech greenhouse grower has higher costs of production than other field-grown and low/mid tech operators. “We feel the significant investment in our infrastructure, stringent food safety protocols, integrated pest management programs, and other aspects related to greenhouse production should command a premium in the marketplace when compared to other producers who simply don’t face the production costs we do,” he says.
Some protected ag proponents recommend focusing on the results rather than the production method. “The product itself should speak for its quality, and the market should price it accordingly,” advises Alejandro Canelos, chief executive at Apache Produce Imports in Nogales, AZ. “It shouldn’t be about the money spent on assets. The market doesn’t care about how much you spent on assets; it cares about what you produce. In reality, there generally is a premium for protected ag products, because they are better quality. The premium shouldn’t be because of production method; it should be about final quality.”
In the living lettuce and leafy greens categories where Hollandia Produce L.P. of Carpinteria, CA, competes, its products do command a slightly higher price point. “Our customers are willing to pay extra for the added-value our produce delivers,” says Renee Cooper, marketing manager. “In the long run, they’re saving with longer shelf-life, fewer labor inputs, better quality and consistently available product.”
AMHPAC in Culiacan, Sinaloa, Mexico, reports an analysis of USDA´s Agricultural Marketing Service (AMS) prices shows a slight increase in Shipping Point prices for produce reported as protected agriculture. “So, importers sometimes do pay a little more for protected produce,” says Alfredo Diaz Belmontes, AMHPAC chief executive. “But that price increase is based on the higher quality and the delegated food safety certifications of those products.”
Diaz Belmontes further reports terminal market prices and retail prices reflect an additional price difference between protected and open-field produce. “This could be attributed to the marketing strategies distributers and supermarkets use to differentiate the best quality produce,” he speculates.
Buyers are encouraged to recognize the unique proposition of protected product. “There is constant production year-round but higher costs of production,” says Guillermo Martinez, general manager at Kingdom Fresh in Donna, TX. “This must be taken into consideration when establishing contracts or dealing with growers.”