Foodservice begins upward climb
It’s been nearly two years since the COVID-19 pandemic burst onto the scene, and produce distributors like those in Nogales, Ariz., embarked on what many likened to one long rollercoaster ride.
But while retail business had its ups and downs, the foodservice side seemed to experience mostly “downs.”
Foodservice business was nearly non-existent during the pandemic, said Raquel Espinoza, director of sales and marketing at Nogales-based Produce House.
“It just fell off the face of the earth.”
The produce industry is its own ecosystem, she said.
“You need everybody.”
When one segment, like foodservice, falls out, there’s a major imbalance, she said.
Produce House experienced a short-term boost in retail business, but there’s a limit to how much product supermarkets can take, she said.
As foodservice business starts to make a comeback, Espinoza believes that the category has a “beautiful, bright future.”
“They’re chomping at the bit, and so are we,” she said. “I’m excited that they’re back.”
During the pandemic, sales were definitely more retail focused, said Steve Spence, director of sales for Earth Blend LLC in Nogales.
“The foodservice business really took a beating,” he said.
Cruise lines were completely shut down, and many restaurants permanently closed.
But this season is different.
It’s too soon to say that business is back to pre-pandemic levels, he said, but sales at Earth Blend are “definitely up” from last season.
On average, f.o.b. prices across the board were 20% less during the pandemic than they were before, said Jose Luis Obregon, president of IPR Fresh, Rio Rico, Ariz.
That wasn’t the case at first, when panic buying led to higher prices, he said.
But since the summer of 2020, prices have fallen.
“We have had the same number of cases sold at a 20% lower price,” he said.
At the same time, grocery store prices have gone up, Obregon said.
“Unfortunately, for us and for the growers, that hasn’t happened.”
And that’s bad news for growers and distributors.
“Everything is costing more – cartons, transportation, labor, everything is going up, and the grower has to pay that,” Obregon said.
“The buyers want to pay the same price for a case.”
Foodservice sales dropped 35%, he said, but volume seems to be slowly edging upward.
Corey Calixtro, sales coordinator for Calixtro Distributing Inc. in Rio Rico, was optimistic in early November.
“Foodservice basically is coming back,” he said.
Restaurants are open once again, hotels are thriving and cruise ships are sailing.
Foodservice business at Calixtro Distributing was off by 50% as schools and restaurants shut down during the pandemic, and few people patronized hotels, he said.
“The lockdown ruined a lot of people’s foodservice business.”
But as foodservice sales plummeted, supermarket business almost doubled.
“People needed to go to the grocery store, so a lot of supermarkets were falling short of product and they were buying more than they were before,” he said.
As the pandemic begins to fade, at least for the moment, foodservice business is bouncing back, Calixtro said.
“Schools are open again and restaurants are as well. People are traveling the world again.”
Chris Ciruli, partner at Rio Rico-based Ciruli Bros., said business took a bumpy ride during the pandemic, but he’s optimistic about the winter season.
“We definitely think the first quarter of 2022 is going to be a better quarter volumewise than it was last year,” he said.
Sasha Lewton, director of sales and marketing for Farmer’s Best International LLC, Rio Rico, said he noticed changes in buying patterns during the pandemic, like a boost in demand for specific sizes of round tomatoes.
Retailers tend to prefer the large 4-4s and 4-5s while foodservice operators ask for smaller 5-5s and 5-6s, he said.
“There wasn’t a big market when COVID hit for 5-5s, 5-6s and some of the smaller sizes, but there was a lot of demand placed on the bigger fruit,” he said.
That’s changing as the pandemic appears to be winding down and restaurants are back in business.
“Our foodservice customers seem to be back and alive and well,” Lewton said.
One change he saw on the retail side was an increase in requests for Price Look-Up stickers as curbside pick-up and self-checkout gained popularity.
“It helps them track everything and get the right flow through their systems,” he said.
