#1 story of 2009: Produce industry weathers recession

01/04/2010 01:15:26 PM
Dan Galbraith

While reports varied and some in the fresh produce industry downplayed their losses attributable to the recession compared to other business sectors, The Packer’s editorial board ranked the economy’s effects on produce business as the top story of 2009.

The Packer published numerous articles throughout the year detailing how the recession hurt sales of fresh produce at restaurants because traffic was down, and how, even at retail, specialty and organic items suffered financial hits, almost across the board.

While the foodservice industry has suffered arguably the most by the U.S. economy’s downturn, the change in business has also led to opportunities for values at restaurants and at retail.

But, even within prepared foods, value items seem to be what consumers are looking for and savvy produce retailers marketed value whenever possible.

Despite the economic woes, however, October brought a sign of recovery when the Produce Marketing Association’s Fresh Summit enjoyed record attendance, with 19,000 people from 58 countries descending on the Anaheim Convention Center for the nation’s largest produce trade show.

The previous record Fresh Summit attendance of 18,670 was set in 2006 in San Diego.

The four-day 2009 event, running Oct. 2-5, also had more than 800 exhibitors spread throughout more than 2,500 booths.

Comparing October 2009 survey results to those from the previous year, it’s clear the dark economy lowered expectations of new business generated at this year’s show.

Results indicated Fresh Summit attendees placed a higher importance on networking than signing business deals in 2009.

In August, the number of restaurant closings in the U.S. rose, with independent and fine dining restaurants taking the worst hit.

Chicago-based NPD Group’s latest ReCount, a census of commercial restaurant locations done by the consumer research firm, reported 4,000 fewer restaurants in the U.S. compared to August 2008.

Chains with more than 500 units broke the trend, gaining 1% over the last year in total restaurant locations. Smaller chains and independent restaurant numbers declined.

While most fresh produce company-related business failures in 2009 did not appear to be a direct result of the recession but instead more a result of tight credit conditions, the closing of Red Zoo Marketing, a large Canadian grower-shipper of greenhouse tomatoes and other vegetables, was attributed at least partially to the poor economy.

Jay Colasanti, president and co-owner of the Ruthven, Ontario-based company said its last shipment of tomatoes from growers arrived May 1.

“We’ve had some difficulties with some investments in Mexico,” Colasanti said.

“The salmonella issues from last year really broke our back. Then we’ve had issues this season with the bad markets … In this economy, nobody wants to take on that much debt.”

In April, The Packer reported the economic downturn was forcing tropical fruit suppliers to adjust.

Some are adjusting to greater efficiencies and stronger sales, while others sought to provide greater value to customers.

Earlier in 2009, analysts warned grocers that consumers would likely trade down to cheaper produce, a trend that appeared to ring true, even in late 2009, with the exception being locally grown produce.

In February, produce industry officials reported similar business numbers in 2008 as they did in 2007 but also, almost across the board, indicated they didn’t think their businesses were getting hit as hard by the recession as many other industries have.

In the most even distribution of results across five multiple choice replies in the two-year history of Produce Pulse, respondents rated the 2007/2008 comparison as basically a wash, mostly saying that while sales conditions didn’t improve in 2008, they didn’t worsen either.

Twenty percent said their produce business was much better in 2007 than in 2008 and 21% rated their business as “somewhat better” in 2007, but 22% said their numbers crunched out about the same in the two years.

Meanwhile, 23% said their business improved somewhat in 2008, and 15% experienced tremendous improvement from 2007 to 2008.

In response to a separate question asking respondents to compare their company’s 2008 business to the overall U.S. economy, 20% said their businesses fared much better than the overall economy, 45% said their business fared somewhat better, 31% said it was about a wash, and only 3% said their produce business dropped off somewhat more severely than did the overall economy.



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