An Industry Transformed:
At The New York Produce Show And Conference, Global Trade Symposium Speaker Tony Reynolds To Illuminate The Rapid Growth Of Unrecognized Opportunities For The Produce Trade In The UK Foodservice Sector
Jim Prevor’s Perishable Pundit, November 23, 2014
The intersection of the produce industry and the foodservice industry has long been a contentious place:
* Major shippers looking to build their brands have resisted the commoditization that most foodservice involves.
* Many shippers, who would love to sell to foodservice, haven’t the capability to develop menu items and persuade operators to use produce items they don’t already use.
* The time frames foodservice operators work with, where from concept through testing, through franchisee trials, through rollout… can often be measured in years, doesn’t fit with the time frames most shippers operate under.
* There is also the dilemma of what is still mostly a commodity business — if a shipper does invest in the culinary expertise and sales program to get, say, apples on the menu at some chain, what assurance does that shipper have that the restaurant chain won’t decide to buy the apples from someone else who can be cheaper because they don’t carry all that R&D and sales overhead?
Here in the US, a major industry effort to double produce use in foodservice, jointly conducted by the Produce Marketing Association (PMA), the National Restaurant Association (NRA) and the International Foodservice Distributors Association (IFDA) — which we wrote about here, here, here, here, and here — has simply collapsed, partly because there is very little data available as to what foodservice usage of produce actually is, and partly because the NRA was interested more in political protection from being attacked for causing obesity than its members are interested in changing America’s eating habits.
Chefs and executives at foodservice operators have many a concern over produce as well. Years ago, Jim Ratliff became chairman of PMA while working for Hilton. When we asked him why he decided to be active in a produce association, as his purchasing included so many different foods, he explained that produce accounted for about 10% of his purchases and about 90% of his headaches!
Be that as it may, foodservice is the future: one of the longest-running trends in the food industry is that a larger and larger percentage of food dollars is being spent on food outside the home. This is not only traditional restaurants, but schools, corporate cafeterias, nursing homes, hospitals, etc. In the US today food purchased outside the home exceeds 50% of dollars spent on food, but the volume is smaller — perhaps 25% smaller because food in restaurants etc., often incorporates a lot of services and so is more expensive.
Restaurants are also often the way new foods become popular; many a person sampled kiwi tart at a fancy restaurant before they ever saw a kiwi.
For producers, this means that a mind-shift is required to access markets, especially more mature markets. Innovative producers have to look for points of entry, and the very fact that foodservice is growing and changing means opportunities exist.
That is why we are so pleased that Tony Reynolds is joining us from the United Kingdom. His company is right at the epicenter of these issues. He will be participating on the “Thought Leaders” panel and in our “Ideation Fresh” Foodservice Forum, but he will kick off his time in New York with a presentation at The Global Trade Symposium, which will point to the transformational UK foodservice/catering scene as a portal for entry into a UK market that is now presenting significant opportunities.
We asked Pundit UK editor Gill McShane to find out more:
Waltham Cross, Herts
Q: Many global exporters have a perception of the United Kingdom’s produce market that is 20 years out of date, and, as such, believe their only option is to sell to the four major retailers. What would you say as a major force in the UK foodservice sector? What does your industry have to offer international suppliers of fresh fruits and vegetables?
A: Interestingly, just this week it was announced that traditional grocery retail sales in the UK have fallen for the first time in 20 years. So, growth at the big retail players is certainly stagnating, whereas there is definitely growth within foodservice for the foreseeable future.
To put that into context, the total eating-out market in the UK has grown by 2.4% on average per year over the past three years, according to statistics from foodservice insight provider Allegra. Looking forward, the total UK eating-out market in the UK is set to grow by around 3.2% per year for the next three years. Within that, the branded restaurant sector and branded fast food chains are both set to grow by around 5.9%, whilst branded and managed pubs are forecast for even greater growth of around 7.2% – all at the expense of the independent sector.
The statistics are pretty bullish. Within all areas of foodservice, there will be winners and losers because the marketplace is so competitive, but we believe that because our core business is around the larger branded chains, Reynolds is well placed for the future.
Q: For what reasons should global exporters tap into the foodservice channel in the UK? In other words, what are they missing out on by not exploring opportunities in UK foodservice?
A: In foodservice, there are potentially opportunities to sell a much more diverse range of products than perhaps in the traditional retail channels. For instance, the Asian and Mexican restaurant businesses are growing phenomenally well in the UK, which is quite exciting. So there’s a fantastic opportunity for anyone supplying products suitable for these markets.
Also, the eating-out market in the UK is always looking for the new, latest thing. There’s a breed of modern chefs in the UK that like to experiment with food and introduce new ideas to their menus. And it’s not just in the Michelin-starred restaurants, although that’s where a lot of these trends start. London has such a vibrant eating-out scene, and these new trends spread quickly, so it’s not long before the national chains roll out the trends in their operations too.
There are real opportunities in UK foodservice for global suppliers to bring something new or different to the UK and demonstrate innovation with new varieties or fresh produce items. It’s also an opportunity to spread risk. Foodservice is certainly another supply avenue for any exporters looking at the UK.
Q: What would you say to those who believe the UK foodservice industry to be focused only on local and seasonal produce? What role does and can international produce play?
A: There’s an expectation from consumers to eat local or British produce when they visit restaurants. But as a country, we have limitations around what we can grow, so what we produce in the UK will only ever make up an element of operators’ menus, and they will always have to be supported by imported produce. But, according to the UK Department for Environment, Food and Rural Affairs (Defra), produce grown in the UK only makes up 23% of what we eat, so there is a huge opportunity for imports.
Also, some UK produce is over-subscribed. Take apples, for example, the UK volume is eagerly gobbled up by the big retailers. That means UK produce is often more expensive than imported alternatives, even at the height of the domestic growing season, such as UK asparagus versus Peruvian asparagus.
Ultimately, we have to offer our customers a choice whether they want provenance or a better price, and, of course, we want to sell more British produce where we can – we believe it's the right thing to do. But it depends on where their business sits and what their offer is. If they are more price-competitive, then the likelihood is that price will be king, whereas if their positioning in the market is more about premium quality, provenance and sustainability, then they will probably want British produce. Importantly, we let our customers decide.
Q: You mention ethnic restaurants as an area of opportunity for international exporters. Are there any other specific opportunities? For instance, is the UK foodservice industry looking to fill any gaps in supply or looking for more volume of any particular fruits or vegetables?
A: There’s a real big buzz around healthy eating in the UK. So, there’s been an emergence of quite a few fast food operators focused specifically around healthy eating, many of whom Reynolds supplies. These are particularly popular in and around London. That’s certainly an opportunity for foreign exporters to supply functional foods with specific nutritional qualities, so the operators can sell and market the benefits to their consumers in the form of a superfood or detox salad for example. It’s certainly a growth area, and fresh in general is very much a big buzzword in the UK – fresh is definitely considered best!
Q: With fresh produce playing such a big role in the healthy eating drive within the UK, are you seeing an active approach among foodservice players, such as restaurants, hotels and schools, to increase their orders and availability of fresh fruits and vegetables?
A: Firstly, we work with many fast-growing and emerging brands, and this outlet growth is driving some of the increase in demand for produce supplied by Reynolds. There have also been a number of recent initiatives and changes to legislation in the UK that are helping to drive the consumption of fresh produce, which is great news for the industry. Since September 2014, primary school children in the UK receive free school meals for the first three years of education, so the uptake of hot school dinners has increased significantly. In general, school meals are now more balanced, and children are eating more fresh and seasonal food.
The Soil Association also runs a Food for Life award that is primarily aimed at the education sector, but we’re seeing it being used more and more in business and industry catering as it gains momentum. A key element of the certification is promoting seasonal and fresh produce to diners, as well as promoting provenance, which is great news for Reynolds.
At the same time, we all know that food prices have been increasing in recent years, and against a backdrop of rising costs in other areas, such as energy prices and rent, foodservice operators have been looking to reduce their food bills. Many have used a degree of menu re-engineering as a strategy, which basically means reducing the size of the expensive component of a dish to save costs. For example, they’re offering a smaller steak and adding more salad or vegetables instead. That is positive news for our industry, too, while it still offers value for money for the customer because the plate still remains full. Our food development team has been able to help customers with this process, which helps us add real value to our service.
Q: Can you describe how the foodservice scene has changed in the UK over the years with the explosion of variety, the growth of national chains, ethnic diversity, etc.?
A: There have been a number of key trends in recent years with the explosion of large restaurant brands that have grown quite quickly at the expense of independent operators to a large extent. That’s been the same across the restaurant, pub and hotel industries as consumers generally seem quite comfortable with brands and, of course, economies of scale help, especially in a recession.
The variety of eating-out establishments has increased immensely, particularly in London. London now has perhaps the most diverse food offer of anywhere in the world. You really can eat pretty much any cuisine type you can imagine and some you probably couldn't imagine! The trend has partly been driven by population diversity in London, I believe.
It’s a very competitive landscape, and some believe that bubble will burst at some point but right now the eating-out market is thriving. Food quality has also improved beyond recognition, because there's nowhere to hide with the increasing popularity of social media, and consumers are more savvy than ever about what food should look and taste like, because they are better traveled. But it's not just restaurants – general standards in UK foodservice have improved massively and the quality of food on offer is getting better and better.
Q: How does the foodservice supply chain work today?
A: Typically, supply is no longer sent to the major food markets like 10 or 20 years ago. Most wholesalers and importers manage their own warehouses today, and the majority of produce is contracted directly. It’s all about having a secure and robust supply chain and not leaving things to chance.
Reynolds sources directly and all of our produce is contracted. It’s the only way to be really. Security of supply is really important to us, as is food security. It’s absolutely critical because we can’t afford to let our customers down. For international supply, we may work with cooperatives or specialists rather than directly with the growers themselves, but it depends on the category. It’s fair to say there is a move towards sourcing more directly from growers, much like in the UK retail industry.
Q: What is required in terms of quality, audits etc.? In other words, what are you looking for in a supplier?
A: It goes without saying that everything has to be legal, safe and of appropriate quality. All of our suppliers work to farm-assured or GlobalGAP standards. Reynolds is also fully accredited to British Retail Consortium (BRC) standards. Traceability is really important to us, so these standards are essential. We also require consistent sizes, quality and specification week in week out because our customers demand it and both their and our reputations demands it. We contract prices and volume with our suppliers for a six-month period so they know where they stand. We then pass the stable price onto our customers so they can fix their menu prices for the same period, guaranteeing their margins.
Q: So, would you say that UK foodservice operators are looking for the same standard and quality of food as UK retailers?
A: Certainly, and for some products we are perhaps looking for even higher quality. Take avocados, for example. Our customers need to know that the avocados are really ready to use because they’re using them to serve to customers that day, and an unripe avocado simply won't do. Produce also needs to be ultra-consistent, and everything is checked by our technical team when it comes into our warehouse.
Our supply needs to turn around really quickly too – 24 hours is the absolute longest turnaround time, so produce has to be just in time and fit for purpose. In that sense, some customers come to us because we are specialist greengrocers. For instance, they might want a particular sized and shaped strawberry to go on top of a cake or gateau. We work with our customers to a specific brief so we need suppliers that can act accordingly.
Q: As one of the UK's leading fresh fruit and vegetable distributors and fresh produce suppliers to the foodservice industry, what is Reynolds doing to encourage more global exporters to work with you? Are you looking to attract any country suppliers and/or produce items in particular?
A: We’re keen to speak with any growers with the sufficient scale to supply the UK – providing they have the appropriate accreditations, of course. Our doors are open, and we’re always keen to make new relationships. The foodservice industry is growing, and essentially we offer an avenue for a larger basket of products and different products. So, there are certainly opportunities for growth. As a business, Reynolds is also looking to forge long-term relationships rather than working to the general trading mentality that you might see elsewhere.
Q: What do you see as the next steps for the UK foodservice industry? Where does the sector go from here?
A: On the supply side, we are seeing a reasonable amount of consolidation. Some of the large operators are looking for consolidated offers for their deliveries of food and drink. For some, it’s all about driving efficiencies and reducing costs. However, there are still huge opportunities for specialized fresh suppliers who are able to offer more than just the cheapest, whether it’s fresh produce, meat, fish or dairy. It’s about being able to offer knowledge expertise in your field, the best customer service and bespoke [customized] solutions. That’s very much where we see Reynolds – it's my family heritage!
It wasn’t all that long ago that talk about the food scene in the UK was an oxymoron. There was fish and chips, bangers and mash, shepherd’s pie and, in general, a limited assortment that appealed mostly to those who took it in with mother’s milk. Today, however, the food scene in London rivals any in the world, and each block seems to have a new restaurant, a new take on a cuisine and a new level of interest and excitement.
Part of this is that London has changed, and the ethnic diversity now represents people from all corners of the globe and, they, of course, bring their culinary delights and demands with them.
Tony also refers to the growth of chains and a professionalization of the industry, which creates volume opportunities.
All together this speaks to new points of entry into traditional markets, new opportunities to see produce, to boost consumption and to build business opportunities.
We hope you will join us at The Global Trade Symposium to discuss how foodservice can be an opportunity to enter new markets and grow your business.
If you are already registered and would like to add a Global Trade Symposium registration, please let us know here.
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Also remember, Thursday is the “Ideation Fresh” Foodservice Forum and we have fantastic panelists to talk about the latest trends in foodservice. We can get you info here.
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Looking forward to seeing you in New York.