Produce operators must stay nimble, but big opportunities ahead

Only produce operators who are prepared to make adjustments to a changing market can expect to thrive, but there is much optimism about higher-trending consumer demand for fresh fruits and vegetables.

Those were some key observations from a panel of produce industry consultants at The Packer’s virtual West Coast Produce Expo on Nov. 10.

The keynote session, moderated by The Packer’s editor Tom Karst, explored the adjustments the fresh produce supply chain has undertaken in the wake of the COVID-19 pandemic. 

With the growth of online grocery sales, retailers must be prepared to adjust store size, produce assortment and other variables, said Dick Spezzano, with Spezzano Consulting Service.

“I think the store square footage will come down,” Spezzano said. Declines in produce assortment at brick and mortar stores to cut shrink may be countered rising SKUs offered for online sale.

Instead of a 55,000 square foot store, grocery stores may slim down to 35,000 square feet and perhaps recruit a non-food retailer to share the extra store space.

Retail stores may move to create more prepared food options for consumers who tire of cooking at home, said Cindy Jewell, president of Jewell Marketing,

The produce industry is recession-resistant by nature, said Julie Krivanek, president of Krivanek Consulting, said The old saying that “people have got to eat” is still true, she said, and that is combined with the fact that more and more consumers are paying attention to boosting their immune system by eating fresh fruits and vegetables. 

“The number one trend (now) is health building,” she said. With 70% of Americans overweight or obese, the motivation to eat better for better health should be very widespread, she said. 

“We are absolutely, finally, at the beginning of what I think is a complete golden era (for fresh produce),” she said. “I think we are on the right side,  and we have got the wind at our back.”

Mike O’Brien, president of O’Brien Innovations, echoed that optimism but said there is work to be done.

O’Brien said the stresses of the COVID-19 pandemic caused operators to reduce costs and increase operational efficiency and that has to continue.

“This pandemic exposed some fat in our system, and we’ve learned from that and came back stronger,” he said, noting that cost savings should be reinvested in lower prices for consumers.

In addition, O’Brien said work on labor-saving technology and automation must continue in the face of labor shortages.

Organic produce has been performing above-trend at retail, and O’Brien said that should continue.

“The millennials are now shopping in supermarkets rather than eating out, so I think you’ll see that trend (toward organic) continue.”

For online and omni-channel sales, Bruce Peterson, president of Peterson Insights, said fresh produce marketers must invest in creating a successful digital environment to spur fresh produce sales.

“Buying fresh fruits and vegetables from a consumer standpoint has always been what you might call a sensory experience,” he said. That is changing into a more intellectual and objective decision.

“How the supply chain and the retailers deal with that will ultimately (determine) how successful produce departments continue to be in the future,” Peterson said.