Within the global fresh produce sector, the U.S. is considered to be one of the most dominant players. It was the third largest producer of fruit and vegetables last year, behind China and India with a production volume of about 61 million tonnes. In trade terms, it sits within some of the key fresh produce nations as both a leading importer and exporter.
There is an abundance of potential market opportunities around the world in Asia, Central America and the Middle East for the U.S. in terms of fresh produce, but despite exports to the EU falling during recent years, there still remains a number of opportunities and the size of the potential prize remains large. And while the EU market presented a number of challenges to the U.S. fruit sector in the past, there is evidence there is now also some light at the end of the tunnel.
The talks on the development of a free trade agreement are ongoing between the EU and the U.S. and this might act as a spark for renewed business in the fresh produce sector. The very recent decision of the U.K. to leave the EU has many implications, most of which are still unclear, but it could be that a separate trade agreement between the U.S. and the U.K. is also negotiated.
The EU itself is a large importing nation, with about 91 million tonnes of fruit and vegetables imported on an annual basis. Key products imported include bananas, potatoes, apples, tomatoes and oranges. These are all dominant fresh produce export categories for the U.S., particularly in terms of apples and oranges. As such, the question is raised as to why fresh produce trade volumes have fallen between the U.S. and Europe over the years, if there ‘appears’ to be an overlap in supply and demand.
The ever-changing nature of the European market has its part to play in this situation, and the following factors need to be considered:
There is increasingly strong competition for U.S. suppliers from locally based EU producers. A resurgence in local and seasonal fresh produce means many modern retailers are promoting their locally grown items in order to try and compete with niche routes to market such as farmers markets and artisanal producers. Working with, and being seen to support, the local horticultural and wider agricultural sector also fits their local social and corporate responsibility agendas.
The retail sector in Europe has become heavily focused upon price and value.
Until recently, as an example, the four largest supermarkets in the U.K. were all promoting their own ‘brand match’ schemes to highlight their low prices and compete with the big named discounters like Aldi and Lidl.
There has been a move in Europe toward retailers owning integrated and dedicated supply chains. With a number of food scandals and scares over the past few years having such a deep and negative impact, retailers are keen to ensure they have full traceability and control of the products they are selling.
Doing business in Europe is really only for those that are prepared to hold out for the long term gain. The development of the EU-U.S. Free Trade Agreement (FTA) will potentially be a boost to trade development across the board — if put into place — but as mentioned above, might be complicated by the decision of the U.K. to leave the EU in the recent referendum.
Historically, the European market has been difficult for U.S. suppliers, particularly when the Common Agricultural Policy (CAP) worked against them at times in terms of both tariff and non-tariff barriers. The CAP will be subject to ongoing reform; however, regardless of progress made in the EU/US free trade talks, there will — over a period of time — be more companies open to non-EU-based suppliers. This will take time.
It can often be felt that other developing markets such as India, China and Latin America — while all still challenging markets — can present quicker returns and better opportunities for U.S. exporters. It’s important to remember that as well as being an important import market in its own right, there are key European countries, such as the Netherlands, that support high levels of re-exporting to other international markets that the U.S. is interested in, and this presents further opportunities and new markets for U.S. produce.
The key point to note is trying to enter into a new export market takes a lot of time and investment. The U.S. has been a recognised supplier to the EU market, especially to the U.K. and Scandinavia over a long period of time. Losing an export market, and then trying to reclaim it, though, takes considerably more effort.
As I mentioned, Europe is still a large-scale fruit and vegetable importer. Many of the markets in the EU still rely upon these imports in order to provide customers with the vast variety of fresh produce items they have become accustomed to and demand. Whether that be in the scorching summer months or the depth of winter, the majority of consumers want access to fruit and vegetables without being restricted by local seasonality issues.
The sheer diversity of Europe (27 countries, more than 500 million consumers, varying fruit and vegetable preferences, the growth of online and convenience markets, etc.), means there are wide and varying opportunities out there for U.S. exporters. It will never be a short-term process, but the size of the prize will remain strong for those willing to play the game.
Emma Gough is a senior consultant at Promar International, a leading value chain consulting firm and a subsidiary of Genus plc. Gough has worked on a range of international fresh produce projects across Europe, as well as in Southeast Asia. She is a committee member of the UK Chartered Institute of Marketing Food, Drink and Agriculture Group.