As fresh-cut suppliers aim to expand their foodservice business, they’re pinning hopes on the restaurant and school markets. But restaurants are sending mixed signals, even as opportunities continue there.

“One of the big changes we’ve seen is that many fast-casual restaurant chains enjoying a lot of growth right now are chopping vegetables in house,” said Bob Swartwout, vice president of sales for Denton, Texas-based processor, re-packer and wholesaler R.S. Hanline & Co. Inc.

“They’re not buying fresh-cut items. Some of the gourmet burger chains are a good example. They’re doing fresh-cut potato fries, sliced tomatoes and onions in-house. It’s changed the dynamic a little.”

That’s happening even as fresh-cut suppliers are finding success offering more vegetable and fruit varieties, cuts and pack sizes.

“You’ve got a trend going both ways,” said Swartwout, who’s also a member of the United Fresh Produce Association’s Fresh-Cut Processor Board.

“You’ve got more people buying fresh-cut items in quick-service, fine dining and everything in between, while at the same time you’ve got recent entries to the foodservice business that are doing quite well with cutting vegetables in house.”

“Foodservice is funny because a lot of people still pay close attention to the cost,” said Noel Brigido, vice president of operations for Canadian processor Freshline Foods, Mississauga, Ontario.

“I don’t think the independent foodservice operator understands the costs of preparing fruits and vegetables in their kitchens or back rooms. The corporate and chain accounts do.

“The independents and the smaller chains still don’t seem to grasp the benefits — the food safety, the convenience, the consistency. But they’re starting to come around.”

Kathy Means, vice president of public relations and government affairs for the Produce Marketing Association, Newark, Del., said she remains confident in demand for fresh-cut.

“It started in foodservice more than anywhere else,” Means said.

“By having fresh-cut they have no waste, because they use everything that comes in. High-end restaurants and chefs may want to be choosing their own produce and cutting it up themselves. But mainstream foodservice needs not just the convenience, but the labor savings, the savings in waste and even in storage area.”

Tony Freytag, marketing director for Cashmere, Wash.-based Crunch Pak, saw continuing interest from restaurants in his company’s sliced apples at the Southern Exposure trade show Feb. 28 to March 2 in Orlando, Fla.

“They’re all talking about the desire to become more health-conscious in their menu offerings,” Freytag said.

“Some are already way down the road on that but others are not, so they’re trying to get up to speed. There’s opportunity in foodservice to say the least.”

About 15% of Crunch Pak’s business is in foodservice.

“Our goal is to have 30% to 40% in foodservice over the coming years,” Freytag said.

“It won’t happen overnight because we’re so heavily in retail. We always have been. Foodservice is a completely different market. You have to run a separate sales business to accomplish anything in foodservice. You can’t just dabble in it.”

HMC Group Marketing Inc., Kingsburg, Calif., is seeing strong growth in the school market for HMC Farms washed and destemmed grapes, said Steve Kenfield, vice president of sales and marketing.

“The U.S. (Department of Agriculture) school lunch, breakfast and after-school guidelines are calling for more fresh fruits and vegetables to be served, and we’re seeing some drive in that direction,” Kenfield said.

Crunch Pak is also eyeing schools.

“Foodservice grows on itself as people become aware of products they can put through their systems,” Freytag said.

“At a school system, it’s about what can we put through that works, that meets the cold chain they can manage. Apples need refrigeration, but they have a longer shelf life than many of the cut fruit items, so it’s a plus to have that luxury at times for the foodservice operators.”

Idaho Falls, Idaho-based Wada Farms sees modest growth in the school market, but continues to focus most of its energies on retail for its value-added potatoes, said Kevin Stanger, senior vice president of sales and marketing.

“Schools and institutions maybe don’t need to bake 400 potatoes all at once, but may need some small amount of microwave-ready or quick-baked potatoes. That area is just getting going, but it is slowly growing,” he said.