What do you do when you have a superstar who both brings in the box office and wins critical acclaim each film that gets made? You sign her up for the sequel of course!
So, when we had the chance to get Roberta Cook to do an in-depth research project on fresh berries and reveal a European Perspective in Amsterdam and an American twist at The Global Trade Symposium in New York, we committed quickly.
Roberta has given incisive data-rich presentations that not only wowed the attendees but turned out to be deeply useful. We chronicled these presentations in pieces such as these:
Superstar Roberta Cook Guides London Produce Show Attendees On NAFTA, The Impact Of Trade And The Perils That Lie Ahead
Will Amazon Outgrow Tesco And Carrefour? Dr. Roberta Cook Will Present Comprehensive Data And Analyze Worldwide Retail And Produce Trends All At The London Produce Show And Conference
The Intersection Of Technology And Trade: At Global Trade Symposium Roberta Cook Of UC Davis Talks About Mexico’s Broadening Role In A Diversified Global Market
Dr. Roberta Cook Will Talk About Increasing Produce Consumption At Global Trade Symposium
Riding The Roller Coaster: Roberta Cook Of UC Davis Explains How Economic Fluctuations Create Marketing Opportunities.
We asked Pundit Investigator and Special Projects Editor Mira Slott to find out what Roberta had in store for us in Amsterdam:
Roberta Cook, PhD
Founder, Fresh Produce Marketing Consulting,
Cooperative Extension Marketing Economist Emerita
Department of Agricultural and
University of California, Davis
Q: At the Amsterdam Produce Show, you will be presenting a powerful assessment of the international berry market, and, in particular, how new emerging sources for blueberries will significantly disrupt traditional market supply, and in turn, retail shelves.
As global competition heats up, will you be steering retailers to realign buying strategies to maximize opportunities and returns in their produce departments? How will this rile production/supply channels? What changes could occur in product availability, quality, and varietal options to satisfy consumer demand of this popular category?
A: I am excited about this topic for all these points and questions you raise. As we all know, berry consumption is growing globally, and there’s a lot of interest in it. Since I’ve worked on the topic in the past (just not with respect to the European market), I’ve been able to work up a good story that probably hasn’t been summarized before.
I’m preparing my talk targeted to European retail buyers and suppliers to the European Market in attendance at the Show. A few weeks ago, I got the latest IRI scanner data for the berry category in the Netherlands. It shows rapid growth, which is helpful to demonstrate the trend that is happening throughout Europe.
Q: Familiar with your intense research and information-packed talks, as well as our pre-Show interviews for our New York and London venues, I know there will much to absorb.
So let’s dive right in…You have chosen to hone in on the global dynamics of a specific commodity — Highbush fresh blueberries, and within that, potential impacts to the European market. I imagine the domino effects that ripple across the entire supply chain create a phenomenon that is not unique to blueberries, and attendees will have many lessons to glean from your talk as always...
A: I am providing some topline highlights of berry category trends in key production regions like Spain, Chile, Morocco, Peru, South Africa, Argentina, Mexico and the U.S. At the same time, I am excluding countries with large production but who are not servicing Europe; for example, Turkey, which is a huge player in strawberries, but sends the product mainly to Russia.
Blueberries will be a main focus, since they are the most internationally traded berry, and new sources of supply are emerging, such as in Peru and Mexico. But I decided to start my initial work on this from the broader berry perspective and see where it would take me.
Q: Where did it take you?
A: Right away, I reached out to industry experts seeking data to try to firm up the story. It is very challenging because the various data systems can be quirky, and the numbers are not always consistent when comparing different sources or the codes don’t match up. The trends are there, but trying to put the data into the charts like I normally do has been extra challenging.
Q: So, this information you’ll be revealing in your talk has never been presented in this way before? This exemplifies why you bring such exceptional value to the industry…
A: Through my extensive research, I’ve learned a lot about looking at the global berry market, and I think it will be useful to people. There are four main berries with all different markets and sources of supply around the world. Berries are challenging from a data perspective, because they are relatively new in many countries, and so therefore, there have not been official data sources.
Even in the U.S., the data we have for blackberries and raspberries has never been very good, while the data for strawberries is much better. The Foreign Agriculture Service (FAS) of the USDA produces these annual GAIN reports for crops important in exports to U.S. markets, looking in detail at what is going on in that country. Recently it started one for Peru, which shows how new the market is, and a year ago FAS did the first one for Spain, but I’m not very confident in the data because it hasn’t been updated since…
The general point is that it shows the newness of some of these export industries because it’s only recently that people have started to take a look at them.
Q: Are there reports you can point to with confidence on the data sets?
A: On blueberries, there is a big exception because there is this powerful international blueberry organization, IBO. IBO really respects the understanding that many blueberry industry players have on so many continents that this is an expanding market, and supply is increasing very rapidly because of large plantings in areas like Peru. Therefore, they have to get a handle on what is happening with the rate of expansion of supply relative to demand. The IBO is a great example to cite. It would be wonderful if something similar existed for strawberries and blackberries and raspberries.
Q: So the IBO conducts its own research?
A: It’s called the Global Blueberries Statistics and Intelligence Report and comes out annually, most recently in April 2017, with data for 2016. Cort Brazelton does the report, and there are two other authors. Cort runs Fall Creek Farm & Nursery in Eugene, Oregon, and they are producing many of the blueberry plants that are planted internationally. The company is developing many of the plant materials people need to put all this new acreage in the ground.
They have tremendous knowledge on production and contacts with grower organizations that are being created. Their report is true market intelligence, from people on the ground, as opposed to just relying on some third party data source you can’t verify. IBO funds the report. The board of the organization made the decision to make the investment a few years ago.
However, production statistics are often unreliable and not accurate for blueberries because production is still relatively small. It’s not a perfect process, even on the ground. It is good to highlight that this report involves a tremendous investment; I’m sure it costs a lot to produce it, but it is really important to producers and marketers.
It makes sense now that raspberries and blackberries are more internationally traded to make a similar investment to monitor the evolution of their industries.
Q: What has come out of your investigative digging that will be of most interest to Amsterdam Produce Show attendees?
A: I want to give an overview of the U.S. fresh berry industry, because it’s one of the biggest in the world in terms of bulk production and consumption. Consumption of berries in Europe is lagging compared to the U.S. and also consumption in Asia and other parts of the world is lagging compared to the U.S.
Q: Will the U.S. gain more of a stake in the European berry market?
A: The U.S. tends to focus more on the domestic market than exports for berries. Because demand is increasing in other parts of world, you would think there might be opportunity for U.S. exporters. European retail chains are interested in U.S. berries, and I have gotten inquiries on that as they’ve tried to increase their supply. I’m not sure how much opportunity the U.S. will have in the expanding market in the EU because of the positions of their regions, but I’ll go into more detail on that later.
Europe is supplied much more within its own hemisphere. Obviously, Spain is the leader in supplying the European market, and then Morocco and South Africa are developing markets as well.
The good news is berry demand is increasing fast globally for all the berries. Since most attendees will be European retailers, I will be focusing on what will be of most interest to them, highlighting the fact that berries are growing very rapidly in the EU, but this is happening not just in Europe but in Asia and other global regions as well.
European production of blueberries and blackberries is still small relative to what we produce in the U.S. market, but blueberries and blackberries are not an important supply currently to Europe. In terms of North America, Mexico is becoming a much more important player in all berries, including in blueberries, which is very recent. And it is also starting to export higher volumes of strawberries to the U.S., whereas previously Mexico was focused on exports of raspberries and blackberries. The change is Mexico has always had strawberries for domestic consumption, but now we’re seeing more investment by California farms for the export markets.
Q: How could this impact Europe?
A: To date, Mexico has been almost entirely focused on the U.S. market. With regard to the European market, one has to ask the question, will Mexico become a more significant player to the European market in various berries.
Q: Doesn’t that answer depend on a plethora of variables…
A: That leads me to changes occurring in other parts of the world with blueberries. Rapid expansion in the global highbush fresh blueberry market means abundant supply for the EU. The supply situation is such that a lot of investments are going into a lot of expensive plantings in various countries.
Then there’s the question of who is supplying and the seasonality. It is expensive to put in blueberries as a permanent crop. One country in addition to Mexico is Peru, which is quickly becoming a powerhouse. Three years ago, Peru had almost no blueberry exports. It’s an amazing development how Peru will challenge both Argentina and Chile for both markets in the U.S. and Europe. The other emerging country important to blueberries is South Africa, and that’s developing extremely rapidly as well.
I won’t have time in my presentation, but China is growing extremely rapidly in all berries, although so far it seems to be focused on domestic demand because there is so much potential in terms of consumption. It’s a massive development, but I want to focus this presentation on what’s important to the European buyers.
Q: Excellent plan. It seems there is never enough time for you to get through the wealth of data and invaluable analyses you’ve amassed…
A: I always feel that way! I want to discuss the Peruvian industry today, but it’s useful to take you through what the blueberry industry looks like globally.
The first thing important to understand is terminology. There are wild blueberries and highbush blueberries. I’m excluding the wild industry, which is almost exclusively for processed, and North America is a major producer of wild. It is important to make that distinction when people discuss statistics. The numbers will look totally wrong if you don’t.
Q: Do the statistics sometimes conflate wild and highbush?
A: Fortunately, the IBO does a good job on that distinction. It’s amazing… you really have to give tremendous credit to the Brazeltons for their vision in sharing with the blueberry industry what’s happening around the globe.
Let’s look at where fresh Highbush blueberries are produced; 41 percent are grown in North America, mainly the U.S.; and 29 percent in South America, led by Chile. The second most important player there is Argentina. Now you have Peru and most of the rapid growth is coming from Peru. That 41 percent share in North America is changing because Mexico is playing a role, and now Peru is a real game-changer and disrupter.
Q: This fluid, fast-changing dynamic, and who will gain the upper hand, will be intriguing to watch as it plays out. I feel like I’m listening to a brilliant commentator during the playoffs of a well-matched world sports tournament. Leave it to you, Roberta, to make charts and statistics exciting…
A: It is intriguing. Then you have 17 percent production in Europe of Highbush blueberries. And within Europe, leading is Spain, and then the next most important player is Poland. The expectation is that expansion will continue in Spain. This is because of the fact the fresh produce industry in southern Spain, which is most important for greenhouse and protected agriculture of tomatoes, green peppers and other vegetables to the European Union, is facing saturated markets.
So, there is interest by southern Spain producers to expand to other products that are less mature and offer higher margin potential. Within berries, strawberries really dominated southern Spain, which they still do, but producers are shifting to blueberries and more profitable crops.
Asia Pacific, China, Australia, and a little New Zealand represent 9 percent, with the big growth in China but that’s primarily domestic market.
Two segments are really small, the Mediterranean/North Africa (Morocco is included in that), and then sub-Saharan Africa is under 1 percent. And that reflects how new the industry is in Africa, which, other than Morocco, is almost entirely South Africa, and a little in Zimbabwe, but expansion is rapid.
European buyers are looking at South Africa as a more important source for fall buying. South Africa has primarily private genetics versus public varieties. Part are from Australia, with a few exporter marketers that control the genetics. That means the industry should evolve there in a relatively consolidated fashion and will be very market-driven based on European preferences.
Even though it is a tiny player, and the U.S. is a huge player in blueberries, you would expect more blueberry export opportunity in Europe, but we’re producing at the same time of year as Spain produces, and there is this fall supply developing in South Africa with very close ties to retailers.
Q: I recently did an interview at Ahold Delhaize headquarters with Michiel van Zanten, senior sourcing manager, strategic sourcing fresh for Albert Heijn, and he was pointing out the chain’s strong programs and connections with South African growers.
A: Yes, European retailers are well connected. They should delve in quickly for fall supply.
Now, a point about the U.S. market for blueberries as it relates to Europe. One of the things I learned talking to someone in a major blueberry firm, when exporting from the U.S. to Europe, you have to be global-GAP certified with different requirements and maximum residue levels have to be considered, so firms in the blueberry industry wanting to export to Europe need to think about it with a more long-term approach, setting up operations so they have dedicated relationship with buyers, because now it’s in and out. They need to make commitments and think long-term opportunity. That’s the way the U.S. could potentially develop more exports to Europe to capitalize on the demand.
Now that we’ve looked at how production is currently of Highbush blueberries for fresh markets, the top 10 producers are the U.S., Chile, British Columbia, Spain, China, Argentina, Poland, Mexico, Peru, and Morocco.
I’m getting different numbers for production from Mexico, which I’m trying to verify, so Mexico might be bigger than Poland, but they are similar in size. Peru by next year is supposed to be bigger than Mexico. We’re seeing shifts in relative importance of these players.
Argentina is currently bigger than Poland, but that may change very quickly. Argentina has had a long-time role in exports to both the U.S. and Europe, and Argentina has been the leader in the fall window. We have said competition is evolving from South Africa in the fall window. Competition is also evolving from Peru and Mexico in the fall window. The big point here is that the fall window will become much more competitive in even the next two years. It’s happening really quickly.
Q: Who is best positioned in this competitive battle and why?
A: Argentina typically has focused on air shipments, because of the fact they had a window between when the Northern Hemisphere ended and Chile started, and they needed to get to market quickly, and that’s expensive. Argentina has focused 65 percent of its exports typically going to the U.S. and then a combined 30 percent going into Continental Europe and the UK. That’s significant.
Mexico has the great advantage of shipping overland. The question is, where is that product going to go? Argentina will have a challenge keeping market share in the U.S. and in Europe. Fortunately, if there’s growth in the overall market, it might be OK.
Q: What about quality issues?
A: Argentina hasn’t had to focus as much on quality as would be desired in these competitive markets because they had the market. Berries can require fumigation which can reduce quality, and the fact Argentina ships by air, it has had to fumigate.
Whereas Chile ships by boat and there’s a cold treatment, if berries are held for a certain number of days at a certain temperature, they will meet APHIS requirements, controlled atmosphere, post-harvest practices for good arrival quality for the U.S.
Mexico doesn’t have to fumigate.
You see that Argentina is one of the countries most challenged by the new competitors and their impact on its window.
I want to make a couple of comments on Mexico, and then go to Peru. Mexico’s industry originally evolved for the fall market; however, it has the ability to prune plants to produce in the winter time and into the early spring. And Mexico can hit those high prices when there is not a lot of Chilean fruit left in the market and before the major production has started in the U.S.
That is something that makes Mexico an important player for the U.S. The question is how it will fair in the EU. Its exports currently go almost entirely to the U.S. — 94 percent of Mexican exports go to the U.S.
Q: What would be the incentive to change that percentage?
A: That’s a good question. We have the biggest import market in the world. And Mexico is adjacent with an overland border. I’m sure the U.S. market will remain the primary market. But I saw some data on the higher prices they receive when they go into these other markets. If the U.S. market becomes saturated, that may be an incentive.
Q: And then there are unknowns with possible renegotiation of NAFTA…
A: Who knows what will happen with NAFTA. It isn’t clear if NAFTA will be renegotiated and if that happens how that will affect incentive for Mexico to diversify some of those exports. Would there be a tariff or duty high enough to slow U.S. import demand?
What I would assume barring anything negative with NAFTA, as the Mexican blueberry industry grows, it will be a more and more important supplier to U.S. market, and Mexico will be the most important fall and spring supplier to the U.S. market, more important than Peru. It has already taken sizeable market share away from Argentina. And I would expect expanding volume from Mexico to continue to erode Argentina.
That leaves us with Peru. There is a feeling that Peru will be an impact because it’s such a formidable player.
Q: Why is Peru such a formidable player? Does it avoid some of the issues you brought up earlier with Argentina?
A: I want to talk about that, but first, I’ve been tracking numbers to demonstrate the shift. Already, I’ve observed we now import more berries from Mexico than Argentina for all our berry supply. The numbers equalized in about 2014, and just barely surpassed in 2015, and now imports to the U.S. are definitely growing from Mexico and no longer growing from Argentina.
And, of course, Chile is the most important supplier to the U.S., followed by Canada. But the battle is taking place between Mexico and Argentina, and Peru is just starting to make its presence known. In 2016, we imported 14,626 metric tons of blueberries from Peru, and one year earlier, only 5,274 in 2015.
Q: That’s a dramatic increase.
A: An almost three-fold difference. In my slide, Peru is included in the “other” category, because three years ago there was almost nothing. It’s that quick of a change.
It’s already surpassed Argentina, and about equal to Mexico. It’s unbelievable. Here you would think, you have this expanding export industry in Mexico and already Peru is about equal. If you combine Mexico and Peru, they are way bigger than Argentina.
Q: How notable is this turn of events?
A: In looking at changing market shares in various commodities over the years, I very rarely see such important shifts in sources of supply in a two-to-three-year timeframe.
Now were going to talk about Peru. It’s one of the few countries where we see it impacting markets quickly. Peru developed a sizeable asparagus export industry, and a mango export industry, and a very important avocado industry; what we’ve seen with avocados is Peru has displaced Chile in the U.S. market in a relatively short time frame. Although Mexico is still the dominate avocado player in the U.S.
To answer your question, one of the reasons Peru is such a formidable player is that it does have the climate that it can produce any fresh produce crop efficiently. They have abundant water, land, a government supportive of agriculture, large export farms, capital, large growers, and are able to manage the production process for those corps to produce over time, depending on the amount of demand. For asparagus, they could essentially produce all year-round but it wouldn’t be profitable. For blueberries, it could essentially produce year-round, like in several produce commodities.
When you get so many crops where you have organized histories — and they are very organized with their trade associations, with each crop having their own — and they keep a handle on production areas and how they are developing… when you have producers growing more than one of these crops, they become knowledgeable of export markets and can negotiate better freight rates. It just makes them a very attractive source of supply.
Q: It will be fascinating to stay on top of what happens…
A: You asked about quality. On quality with Peru, because it is just developing, they haven’t had to have as much of a quality focus, because they are getting plants in the ground and getting production growing, now using open varieties, but the learning curve is happening quickly. This is over the past five years. Within a couple years they have significant production and they are already getting a payback.
That’s why they are expanding so quickly. What I understand is that if the plants were available, they’d be putting them into the ground, so the delay is on the materials side, and what it takes to produce the proper genetics. That’s true for many crops I’ve run across in my research.
Q: Earlier you referenced strategizing based on European preferences. Is that related to taste?
A: Some varieties may have better flavor than others. That leads us to how Chile is trying to position itself in light of these changes in Peru. One of the things Chile is doing is focusing on private genetics like South Africa has, and flavor attributes that premium buyers desire.
Chileans are very astute in determining the best places in the world to produce blueberries, led by Hortifrut, which is one of the owners of Naturipe Farms. It has been important in developing in Mexico and also in Peru. Hortifrut merged with Talsa, a Peruvian blueberry firm and significantly expanded their operation in Peru with that acquisition. It says that brings the company to 2,200 hectors in Peru with the combined firm, giving it a very important position.
The other important player is Camposol, which started with asparagus, mangos, and avocados. These are astute firms, and innovative, seeing opportunities and making investments in blueberries. It doesn’t take long to make changes in how they produce.
A couple of players are leading this evolution in Peru to make growth more rapid. I don’t know all the names of the firms, but many growers are producing. These big firms are very well capitalized to increase rate of expansion.
On that point, Camposol recently launched, “The berry that cares,” campaign.
Q: Our company has reported on that news in a couple of our publishing venues.
A: I follow freshfruitportal.com, now one of the sister publications to the Perishable Pundit, all the time and I saw it reported there. And I get PortalFruticola.com as well.
It goes to show the level of sophistication — not to say other berry players are not sophisticated too — but Camposol recognizes consumers care where their brand comes from. Social responsibility drives that campaign. Not only is Peru developing rapidly but with this sophistication on the marketing side.
I should mention what is happening on the Mexico side, another essential part of my presentation. It is important for the whole berry supply for all of North America and considered as a potential source of supply for Europe.
Q: You point to the strength of these multi-national companies in building this global expansion. Could you elaborate on that?
A: Driscoll’s is truly a global player with an important role. It has operations in many places, including in Australia and China. They were newcomers to blueberries about 15 years ago, originally focused on strawberries and raspberries in California, and then the next expansion was blackberries in Mexico.
Hortifrut helped to kick off the blackberry industry. Hortifrut helped find the Tupi variety and develop the market in the U.S. through Costco. And then other retailers observed consumers buying blackberries in clamshells, which were not really available in the U.S., and then blackberries became year-round from Mexico. Driscoll's had already been there in Mexico with raspberries, and Driscoll’s actually has a larger market in blackberries from Mexico than Hortifrut.
Q: Was it an easy sell to get Costco to buy into Tupi blueberries?
A: Hortifrut found the Tupi variety, helped develop it and convinced Costco to take it. Costco was reticent because they were not confident there would be sufficient sweetness with blackberries. Sales were very robust and other retailers started looking at Tupi blackberries out of Mexico; there were only a few blackberries in the U.S.
Hortifrut was a blueberry firm, whereas Driscoll's was a raspberry and strawberry firm. As the blueberry market expanded in the U.S., Driscoll needed to be a full berry supplier, and Hortifrut needed to get into strawberries and raspberries. Hortifrut and Driscoll’s are competitors, but their positions in the berry industry developed very differently. Now Driscoll’s is a major player in blueberries.
We need to make the point… one of the reasons the berry industry is evolving rapidly internationally is because leading firms are looking at all the berries as a global opportunity. This is not like what you have for other commodities. The leafy greens industry is not looking at producing and supplying in all these different continents.
Q: How important is branding?
A: Branding, as you know in produce, has not played a major role in the U.S. It does vary internationally; in China, for instance, brands are very important. In the U.S., typically if you ask consumers how important is the brand, they don’t show strong preference for one brand over another. Having said that some brands are gaining traction, Driscoll’s for berries has strong recognition and is expanding on that brand internationally. You see that in Europe, Australia and China,
Leading players in the industry are trying to place more emphasize on consumer branding. I can’t comment on buying preference on chains in Europe for brand differentiation. UK retailers are very focused on that kind of thing working very closely with suppliers, and they have a heavy private brand to make connections with consumers.
Q: At Albert Heijn, according to Michiel van Zanten, a great majority of items are private label, with targeted supplier branding…
A: I find it valuable to read his insights, and am glad he will be on the Thought Leader Panel at the Show What is unique and special about the event, is the select high-level positioning and targeted identification of market needs. Of course, I also read your interview with Ed McLaughlin, who will be the keynote speaker on the topic of retail disruption. Everything is changing every day with my topic as well. And just like Ed, I will be working on my topic right up to the Show. I don’t feel comfortable presenting these numbers unless I can put meat on the bone.
So, to wrap up a few comments on Mexico, here we have another example of an industry changing so rapidly, looking at the berry industry globally. For me, it’s all about context. I’m so interested in art history, which is all about context. Rembrandt, thinking of the Netherlands… why did the Dutch Masters come as they did?
Q: Historical context is critical to that understanding…
A: Argentina is focusing on blueberries, where Mexico has the whole berry line, and, of course, the U.S. does as well. We’re the biggest producer when you combine all berries, although not a lot of blackberries. In the past, Mexico was exporting blackberries and raspberries, now big companies are developing there, with the big Chilean and Peruvian firms, and leading marketing firms like Driscoll’s. Now Mexico is emerging with a whole berry line, where Peru is just developing blueberries, not the others. That is important to think about in Mexico’s relative market positioning. European buyers could be buying their entire berry line, but not from Peru, Chile, Argentina or South Africa.
Q: Economies of scale, one-stop shopping?
A: Both of those advantages. We’ve gone to whole-line shippers, all shippers want full berry lines. It enables one stop shopping. That’s important when thinking about the whole berry sector.
Expect Mexico to continue to export to the U.S. as its biggest market, barring unforeseen NAFTA developments. Simultaneously, look at the other producer, Spain, servicing the European market. Spain produces during parts of the year that Northern Europe does not. Spain is to Europe like what Mexico is to the U.S. And Spain is increasing its blueberry production because of other berry markets becoming saturated.
I see a lot of analogies with Mexico and Spain. Mexico does have long shipping seasons for many of the berries and can play with certain windows when prices incentivize to increase imports. This makes Mexico interesting from the perspective of Northern Europe, because Spain doesn’t have the same opportunity to supply just from a climactic perspective. They are off-season supply for northern Europe, but their location doesn’t give them as much flexibility as Mexico. Madrid is the same latitude as Detroit.
I also want to present a slide showing size of production of berries in Mexico. So far, we discussed blueberries, but the total of measured tons of production in 2016 was 858,000 metric tons, led by strawberries.
Q: That’s huge…
A: Over half of that is strawberries, and a major amount of strawberries is going to their domestic market because the U.S. is so efficient in strawberries. But now, these California firms are investing in global export that will change overtime. Simultaneously, Mexico has huge volume of blackberries.
Mexico has 238,000 metric tons of blackberries, then 112,000 metric tons of raspberries. It’s blueberry production is only 29,000 tons, and Peru and Mexico are similar in size in blueberries, and that’s not very much in comparison. I want to put in this in context for people how big the Mexican berry production is… There is a huge powerhouse region in Mexico, and one would think it will become more important for supply in the future.
Q: Once again, you’ve put together a thought-provoking, head-spinning presentation.
A: It’s been a lot of work with the research challenges. Just like the presentation I did for the London Produce Show, I worked on it for weeks. I want to talk about something that is relevant and very useful to the attendees.
Q: You’ve certainly accomplished that.
A: There is so much more that I’ve pulled together than I have time to present in the Netherlands.
Q: That is always the case with you! What are the biggest takeaways for attendees?
A: First off, we know that demand is rapidly expanding for all varieties because consumers are more interested in health and wellness profiles. It’s not often where you see a category with all the benefits, easy to consume and tastes good; the convenience and flavor factors are very important in produce.
Let me make a contrast to kiwis. The kiwi has tremendous health and wellness benefits. Cornell published a study showing kiwis as one of the most nutrient-rich, but it didn’t get traction because it is difficult for consumers to prepare and consume. Berries are easy to consume and have many different uses, snacks, salads, baking, so many factors in favor of a growing demand for berries.
Expansion and demand should be phenomenal over the next 20 years. In Europe, overall there is a mature market for produce, but the scan data for Holland berry sales, just like the U.S., shows a very important share of fresh produce sales in the Netherlands. Berries are a star and that’s one of the important takeaways.
Then the question, will supply be there... for blueberries we can certainly say yes, is supply developing more rapidly than demand? At this point we don’t know. But IBO is projecting we could be at 2 billion pounds by 2021.
Here we have the case of blueberries expanding rapidly and competition for the same fall winter windows. In the next five years, one would imagine even if there is a boom period, firms need to be focused on quality and servicing customers to be competitive.
Firms that are successful will be thinking globally in markets they’re servicing. Fortunately, we have companies in the berry industry that are visionary, and we have firms on the retail side that can invest in the berry category quite confidently.
On some of the berries, it will take more investment in marketing than others, for example, blackberries are not very well known in Europe, and blueberries are much lesser known in Europe.
One final thing I’d say: I didn’t discuss U.S. and North America that much but it’s important, even though most are consumed in the U.S. Blueberries in the U.S. have grown rapidly but growth rates are growing more slowly because it’s a more mature market, which hasn’t happened in Europe. This contributes to consolidation, so for the North American market, one would expect consolidation on the supply side.
Well, Roberta will be pleased to learn that the three seminar stages at The Amsterdam Produce Show and Conference are not numbered in a banal fashion -- say one, two and three. Instead, in line with her question about the derivation of the Dutch masters, these stages have been christened Rembrandt, Vermeer and van Gogh, so as we elevate industry discussions we can feel ourselves surrounded by pinnacles of Dutch culture.
The analysis of the berry category combines many key trends in produce today.
• Health and wellness seem to be driving demand;
• Globalization of the industry is well represented in the strategic plantings of berries in locations where they’re expected to enter the global trade of berries,
• Proprietary varieties and branding are playing a part, and the vulnerability of the whole system to political disruption is obvious.
So, come and gather round, be exposed to incredible research done by an incredible mind. Come to Amsterdam!
You can check out the website right here.
Register for the event here.
Book a hotel room -- where the action is -- at the Headquarters Hilton Amsterdam right here.
And if you would like to exhibit or sponsor, please let us know here.
And, of course, we are happy to answer questions right here.
We look forward to seeing you in Amsterdam!
Coming off another highly successful PMA convention in New Orleans and with the association sure to succeed this year under the joint stewardship of Cathy Burns as CEO and Jin Ju Wilder of LA and SF Specialty as Chairman of the Board, it is worth considering what the future for this incredible industry resource is likely to be.
PMA is unique in a way unlikely to survive industry changes. It was built back from near bankruptcy on the strength of a simple insight: Create an association where the buyers felt at home and the vendors would follow. Thus developed a vertically integrated association unlike any produce association in the world.
In most of the world, there are grower/shipper/marketer groups and there are retail groups; even when there is nominal retail membership in the vendor group, those buyers don’t drive the agenda.
PMA was different. It entered its period of flourishing at a time when regional, often family-owned, chains dominated the landscape, and produce directors or VPs, typically deeply committed both personally and professionally to the industry, dominated the board and drove the agenda of the association and, thus, the industry.
Names like Harold Alston of Stop & Shop, Tony Misasi of Grand Union, Bob DiPiazza at Dominick’s and Dick Spezzano at Vons were the heart and soul of the association, and their collective procurement heft, coupled with their acknowledged dedication to the produce industry, let them create an agenda that led to the most successful produce association in the world.
Things have changed. PMA once had a rule that the majority of the board of directors had to be from the buy-side of the industry. On the new board of directors, there are 33 people. Of those, not one officer is from the retail or foodservice operator side. And even on the broader board, only Shawn Baldwin, who works for Wal-Mart but Wal-Mart announced would transition from the produce side to lead an Hispanic initiative, Robin Fisher of P.F. Chang’s from the foodservice side, Bernadette Hamel of Metro Richelieu in Canada, Ruth McClennan, Southeastern Grocers, Scot Olson at Grocery Outlet, and Joe Don Zetzsche, who runs floral for HEB, are on the board. So, six people out of a 33-person board. Only three who are US produce retail executives. In the old days, the majority buyer rule would have called for at least 11 more buy-side executives on the board.
But we are unlikely to see people like that or an institution driven in that way again for several reasons:
First, the individuals growing up in retail today, though in many ways far more sophisticated than those giants of yore, are not really produce people. They went to better schools, have more degrees and credentials, maybe even have higher IQs, but as the fresh component of food retailing has grown in importance, it has led retailers to adopt formal or informal policies that time spent in produce and perishables is a wise career investment.
In other words, just as some companies have long had a requirement that to obtain a certain executive level, say to become a VP, one must spend time overseas, so, in food retailing it is a big plus to have experience with perishables.
This is in many ways a plus for the industry. It used to be that grocery CEOs came up through grocery, accounting or, once in a while, front-end. There was almost never a supermarket CEO who had much experience with produce. Soon experience with produce or, at least, a perishable department, will be much more common.
But feeling one needs to punch the card that says “I did my three years on perishables” is very different from self-identifying oneself as a produce person. Although Harold Alston and Tony Misasi have passed, both Bob DiPiazza and Dick Spezzano are still in the produce industry. It was assumed that most of these retired produce VPs, if they didn’t continue as produce retailers in another company, would move to the supply side. This idea that produce defined their career led them to want to enhance their knowledge and network in produce.
Many of today’s generation of young retail executives — and of course, there are exceptions, with Dave Corsi coming to mind — enter the business in their 20’s and expect to do a few years in produce and then are thrilled to be offered a raise and a promotion to handle the frozen food category.
This doesn’t mean these young executives will run the department poorly; it means they will run them differently. Instead of relying on their personal knowledge, they will rely on data.
And, fortunately, we have more and better data than ever before, with more and better tools to help analyze it. It is quite possible that subjecting decisions to this kind of data-driven world will result in better decision-making than relying on one’s gut — no matter how knowledgeable and experienced that gut might be.
But even if produce departments thrive at retail, it is hard to see these retail executives being very motivated to guide a produce trade association.
Second, even if these individuals wanted to do the job, structural changes in the industry may well make it impossible. People like Alston, Misasi, Spezzano, DiPiazza could all serve on the board because they didn’t compete and were highly unlikely to do so. As a result, they could share quite freely and didn’t have much worry about anti-trust concerns.
But today, the chains everyone want to sell are increasingly national concepts, Aldi, Lidl, Dollar General, Whole Foods, Amazon Fresh, Costco, Wal-Mart, Trader Joe’s. Even Kroger is now in 34 states.
There was a time that the old A&P company, having been attacked for alleged antitrust violation, declined to participate in trade associations.
Today, with cell phone cameras ubiquitous, is Lidl really going to risk having its executives in a venue where they could be perceived as fixing prices with their industry colleagues from Aldi? Even assuming everyone is an angel, the optics are terrible.
So, the need to rotate individuals through different retail departments, combined with the growth of national chains, lead to a world where we can’t expect retailers to engage in leadership in the produce industry as much as in the past.
Is this a problem? Some would say no. They have always questioned why retailers should have such influence in an association paid for by producers. This is part of the issue that led to merger talks between United and PMA over the years.
But we would say yes. Here is dirty little secret: The produce industry is to a not-insignificant degree a retail creation. A papaya grower in Hawaii and a potato grower in Maine are mainly united by the fact that both of their products are sold in the retail produce department. And only the influence of buy-side customers can lead to the kind of industry unity that makes PLUs and standardization likely.
An industry association not driven by the buying end will find consensus on priorities and methods more difficult to obtain.
This may be better, or it may be worse, but it is most certainly a sea change in industry organization.
As the global produce trade pivots its attention to the Dutch industry and The Amsterdam Produce Show and Conference, the world looks at the products, the infrastructure and, of course, the people who buy and sell vast quantities of fruit and vegetables.
SFI Rotterdam, owned by the Schulz family, is celebrating its 40th anniversary this year with a celebration at The Amsterdam Produce Show and Conference. The Pundit remembers, as a teenager, going into the Hunts Point office with the Pundit Poppa and offering — via Telex! — Florida grapefruit each week to importers all over Europe. Among the firms on that list was SFI Rotterdam. They even occasionally bought a load.
The industry has changed, and whoever has survived those changes must have a story to tell and lessons worth learning. We asked Pundit Investigator and Special Projects Editor Mira Slott to see what 40 years of business could teach the broader produce industry:
As SFI Rotterdam, an independent family-owned business, celebrates its 40th anniversary, what lessons could be drawn that would be of interest to our broader industry readership and the notably astute senior level Amsterdam Produce Show attendees? Dirk Schulz, company founder, who handed the reigns over to his son, Jan Marc, about six ago, still comes into the office periodically, so I was honored to have the chance to visit with them together to find out.
On this brisk October afternoon, fluctuating intermittingly between sun and rain, I was sure to first capture a family photo outside at the Rotterdam port area before we settled in for our interview.
The endearing, respectful interaction between father and son was evident from the start, but it was also clear this was not going to be a public-relations fluff piece. Dirk Schulz, distinguished company founder, was tenderly nostalgic, but also pulled no punches in assessing changes in the industry.
“I’m not afraid at all,” he says of me writing his occasionally biting industry pronouncements, intertwined with playful banter. But also with the caveat that his comments might sometimes be misinterpreted due to the language barrier (English not being his first language, and alas, English being my only language). And the fact our readership and attendance at the Amsterdam Produce Show is global and multilingual.
Illuminating answers unfolded in a warm, informal back-and-forth discussion with father and son, each elaborating on the other’s thoughts, side by side.
Jan Marc Schultz, Logistics / Dirk Schulz, Founder
SFI Rotterdam BV, Rotterdam, The Netherlands
Q: As you celebrate this momentous time at your company, could you walk us through your history, and how you’ve evolved. How have the dynamics of the industry changed and how are you accommodating to that change?
Jan Marc: Well the history you can do, you’re the founder.
Dirk: I started the company 14 November 1977; that was SFI’s foundation date. I had worked for a Swedish grower group, which I purchased in a management buyout in 1982. This is what I looked like back then… [Editor’s note, Dirk shows me a copy of an old article announcing the buyout news, with his photo].
Q: That’s a nice photo. You look similar today; not much has changed in that regard. [The article reported:
“Dirk Schulz has bought the shares of SFI Rotterdam from SABA Continent in a transaction effected on 1st January. SFI has been operating as a transit company with Rotterdam as a base. It has also been involved in the import of citrus and exotics mainly from the USA and South America.
In recent years, however, it has on occasions been difficult to coordinate these activities with the group’s other import programme, and the board of directors of Saba Continent decided that in order not to restrict a natural development of SFI Rotterdam, it would sell its shares.
Dirk Schulz started the company on behalf of J.S. SABA AB Sweden in November 1977, and has built up a good organization with a substantial turnover and produced good financial results over the years. The company will continue to be known as SFI Rotterdam, but this abbreviation will now stand for Schulz Fruit Import.”]
Dirk: I was in Holland and worked for a German company, and then I separated and the Swedes asked me to build up their company, so that’s the history. From then on, this company has always operated under the slogan: independent and reliable.
As of first of January 2011, I handed the company over to the next generation. And now Jan Marc has been running the company quite successfully.
Q: What are the key changes that have occurred in the industry since you’ve started?
Dirk: The disappearance of reefer vessels to containers.
Q: What is the significance of that? How has that affected your business?
Dirk: With the traditional reefer ships, you could be a big importer, and there was less competition on one ship. The container allows every wholesaler to do his own imports, so I hate them.
Jan Marc: In addition, the cargo is not as well transported in the containers as it used to be on the reefer ships. It’s a different type of ventilation, and more than once you get containers where the reefer unit has failed, or you’ve had a bad setting so the food comes in adverse conditions. In a reefer vessel, there were all these backup systems.
Dirk: Looking back, we have been quite an important importer. [Editor’s note: Dirk reminisces, pulling out some timeworn pictures of reefer vessels filled with his fruit]. Here you see only pears, just ours, 200,000 cartons, and here you can have a few ships only for us with grapefruit. I only show you to make the point — that was a time when I was an importer of fruit and it was all us.
Now the ships are gone; nobody builds them, because a reefer ship costs three times as much as a container ship, and the container lines are dictators and monopolists. You have no service; they control the terms.
Q: What you describe sounds dire for you…What is the solution?
Dirk: The time will come when Brussels looks into those situations. The solution is free competition. The problem now is that the container ships don’t give you the possibility of any special deals.
Jan Marc: It’s a known fact there have been so-called conferences amongst the big shipper lines, and they agree on the freight rates for reefer. During the crisis, containers were suffering because of low freight rates; that is true for dry-box containers, but they were recollecting all those losses with the reefer. We are dealing with perishables, and they need to be transported.
Dirk: I explain my frustration, and you ask what the changes are in the last years. Of course, in the produce business, there are always changes, as to production areas, new varieties, etc.…
Jan Marc: But the containerization of cargo also has effects for locations. Right here in Rotterdam, you had a huge company Seabrex Rotterdam B.V., which used to be able to discharge up to five reefer vessels at the same time with the shore-based cranes and warehouses right behind it. It went broke.
Dirk: The conflict is there. There’s nothing left.
Jan Marc: And the container lines, since those vessels are bigger, they have to discharge on the outskirts of Rotterdam, and from there you have to truck them container for container from ports of discharge to the warehouses, causing congestion on the highways and separation of availability of the cargo. In the old days, there was a reefer ship, and all customers knew it was to be loaded right here. Now the customers have to call maybe five different warehouses in order to collect their goods.
Q: So you’re managing all this. That sounds complicated.
Jan Marc: We needed an extra employee in logistics only for this change.
Q: Does it affect the cold chain?
Jan Marc: Of course, we are maintaining the technology of the cold chain as well as we can, but the technology of the reefer vessels was by far better, stronger and more reliable than what these small units on the container can provide. We’re definitely facing more challenges with fruit that has been carried to high temperature.
Dirk: In a few words, we have been a major oversees importer, and the biggest change we had to live with was the disappearance of the reefer ships to containerization, which allowed every wholesaler to make their own imports. So, competition is stronger.
Q: Do you find retail consolidation impacting your business?
Dirk: As for retailers, there are only a few left and they dictate the terms, for certifications and so on.
Q: Are you dealing with these retailers directly?
Jan Marc: We have supermarkets and other retailers we supply directly, but we also supply to wholesale markets, and have specialized in serving these businesses.
Q: What would you say differentiates you from other companies?
Jan Marc: Independent is an important word. We’re a family-owned business with no shareholders only interested in their stocks. We run this business in a traditional way. It gives us flexibility, and we don’t have to call for a board meeting before we can make a change.
Q: Could you give examples of where this independence and flexibility has benefited you? Is it because you can come in with a new product quickly, for instance?
Jan Marc: New products definitely. Every year there are new products presented to us. But then it depends on whether a customer is asking for it. Say there is a volume retailer interested in a new type of berry. You have to decide fast and move fast to provide it in the timeframe they need. And there we have the connections with growers oversees, so we know where to source it.
Dirk: There are so many demands from supermarkets… all suppliers have to be certified; then you have to send them all the paperwork and the numbers. I’ve always been a big importer from overseas, and during the conversion into the container shipments, the business has to be structured in a different way.
Jan Marc. It helps that we import more direct from grower/packer/exporters. We don’t do imports through agents. All of our contacts are personal.
Q: So you’ve developed long-term relationships with growers.
Jan Marc: Absolutely,
Dirk: Once a year, we visit all our growers.
Q: With sustainability ever-present in the produce industry, are you working with your suppliers on that front?
Jan Marc: That is something in the hands of our suppliers. We encourage them to be involved with social projects, for instance, to provide better circumstances for their labor force. We as an organization don’t have a huge labor force. We’ve always kept our operation very lean and we rely on our suppliers doing the utmost for sustainability, and they are.
I visited a field irrigating without pipes using gravity, as reservoirs are placed higher than the fields. In India, we work with a packer that has built a school room next to the pack house so workers can leave their children there during the day and get a good education.
Dirk: We just sponsored a kindergarten. We do these things, but we are not giants.
Q: You’re being humble and understating your contributions, and not doing marketing campaigns to promote your good deeds.
Jan Marc: That is typical greenwashing of some other companies we don’t want to take part in.
Dirk: We do it low key.
Q: For people reading this story, what do you think is at the heart of your company’s success? And is that what will take you to the next milestone?
Jan Marc: We are definitely maintaining the traditions of a family-owned business, standing for long-term personal relationships.
Dirk: We say we are independent and reliable, which means, if we say yes, it’s yes, if we say no, it’s no, and there’s no maybe. We’re lifting these traditions towards the future. The young team we have is used to the modern equipment we have. We have to get used to the modern certificates and all the paper work that comes with that, but still maintaining the reliability of tradition.
My accountant has said that since the foundation of the company, I always adjusted well to new situations, which was a big compliment in my eyes.
Jan Marc: My father could make adjustments more easily by not having to deal with a big bureaucracy. We still do it. We add new products, which we can supply year-round, not dependent on just peak season. As for customers, we are very flexible. We supply supermarkets, or service companies that supply supermarkets, and wholesalers, you name it, from north to south.
Q: How is the competitive retail landscape in your markets affecting your business?
Jan Marc: One has to be quick and adapt to it, of course. We’ve been supplying both discounters and full assortment supermarkets directly, and the moment you see market share going to one or another, you have to play along.
In terms of the U.S. or the UK, only recently the discounters have taken away a lot of market share. In their markets, part of the coziness has disappeared. For example, there were category managers who knew for the next five years they were the only suppliers for Tesco for a certain variety. They could just do the logistics and everything was settled by Tesco.
Now they have to get up and work. We have been supplying these discounters in Germany, where the (phenomenon) originated with Aldi being one of the first ones in the 60’s. So, we were used to meeting the demands and supplying them. It was not something new. But even then, there are always changes requiring you to adapt.
Dirk: What is changing from supermarkets… they want to appear like they are the importer. They ask for their own private label. We have had three brands pre-picked with our own label but that is no longer wanted. It’s a pity for us. Our customers, whether supermarkets or the service company, want pre-picked without a label, and they put their own on themselves, so the supermarket appears to be the importer. Private label is one of the biggest changes in the past few years.
Q: These retailers are trying to differentiate themselves through their own branding. In the U.S., at least, supplier branding is gaining new life…
Jan Marc: It depends on the market and how you are able to approach it. In the U.S., the Halos brand is an enormous success. It appeals to children, and they can take Halos for a snack to school. In Europe, 70 to 80 percent of produce is provided to consumers by the big retailers, so if they dictate they want their store name on it, the whole branding from the producer-packer side disappears. The kid says your mother is buying at Aldi’s; my mother is buying at Tesco, for example.
Q: This is where your ability to be flexible serves you well…
Jan Marc: One of our own strengths is the broad spectrum of our clients, being retailers on one side but also packing stations and wholesale markets on the other side. It allows us to be able to sell almost any category of fruit and finding the best possible market for each, for the different specifications they might have.
If the customer base would only consist of retailers, the world’s food waste would be somewhere around 50 percent, I would imagine. We’re trying to do our part to reduce that.
Dirk: The consumer knows an apple is an apple. She doesn’t know if it’s already been six months in the storage. She buys by the eye.
Jan Marc: One of the big challenges for the future is consumer education, and maybe one should say consumer re-education. The generation of our grandparents knew how to make use of 100 percent of what they were provided with, whether this was produce or meat. My grandmother would make a nice stew out of chicken leftovers. These days what people throw away is just a disgrace. Why peel an apple if can wash it and eat the skin with it?
We have to re-educate consumers to go for taste and quality rather than cosmetics. Retailers over the past decades have spoiled consumers with stronger and stronger requirements only focusing on cosmetics. which have eradicated a lot of tasty fruits from the shelves.
Grapefruit is a good example. In the U.S., you’ve had a better position because of the local crop. But if you look at markets here, in the supermarkets you’ll find Turkish grapefruits, which taste terrible or Spanish ones which are only sour, but you will hardly find any Florida grapefruits anymore because they’ve gotten very expensive on one side, but also the skin was not as perfect as from the Mediterranean fruits, so the supermarkets wouldn’t take them anymore.
Q: But isn’t that short-sighted? If the consumers don’t like the taste, they won’t buy it again.
Jan Marc: Exactly, which has diminished the consumption of grapefruits dramatically, and it won’t come back anymore. Today’s generation associates grapefruit with sour, so they’d rather go for oranges.
Q: Lifestyle changes and eating habits with Millennials have probably impacted that shift as well…
Dirk: Also, having a great product is not enough. What’s not on the shelf consumers won’t know. And the consumer has no power. The only power a consumer has is not to buy.
Q: In the U.S., many years ago, the focus on cosmetics hit extremes, where an apple could be beautiful, big and shiny but taste like cardboard. There’s been a major trend away from that to drive taste/flavor profiles and promote other characteristics such as local and sustainable.
Jan Marc: Consciousness has come from a certain focus from media on wasted fruit. I hope through this strong media attention, consumers would rather buy what is tasteful and not look at size or deformations the fruit might have. Even though it looks not perfect, it still has the perfect nutritional values.
Q: In the U.S., at least, the local phenomenon is in full swing.
Dirk: In Germany, you’ll see a reference, in region.
Jan Marc: There must be better consumer awareness that the local apple in July is still harvested in September the year before, whereas the not-local apple from overseas was harvested in March, so even though it has done a voyage overseas, it’s still a fresh apple.
But then you get these NGO’s talking about food miles and speaking against this, not considering all the Co2 required to store those local apples for an extended amount of time.
Q: There are fascinating studies assessing the lifecycle costs of products. In certain cases, it is more environmentally friendly and socially responsible bringing in products overseas versus the local alternatives…
Jan Marc: There are two studies I know of. In the one that looked at New Zealand onions versus UK onions, New Zealand won it with by far a smaller carbon footprint despite the distance. The other study for the flower industry showed roses air-flown in from Kenya more environmentally friendly than the ones produced in the glasshouses in the Netherlands.
Q: And in that study, I recall there was also the social aspect, helping impoverished farmers and their families in developing countries.
Jan Marc: Yes. In bringing in products from overseas, we’re helping those economies to prosper. Given the fact that overseas fruit is better than some NGO’s try to claim, we, via Rotterdam, consider ourselves one of the links enabling smaller economies of the second and third world to build up their branches of agriculture providing jobs and income.
Q: As you’re celebrating your 40th anniversary, what things bring you the most pride?
Dirk: I get tears in my eyes reminiscing: 100,000 boxes all mine that I shipped. That was my time, today’s not my time. I look back. All this was for Aldi, 143,000 boxes of pears… 200,000 cartons of Florida grapefruit on the biggest reefer ship in the world. It could have loaded 600,000 cartons.
I got it cheap because it needed to return. All my big competitors at that time are all gone. The companies don’t exist or have been sold, but I’m still here.
Q: You seem melancholy when you’ve achieved so much, and also positioned your company to withstand and take on the new challenges and continue to thrive…
Dirk: We have always adjusted to the needs of the market. And even the new generation is doing it. Your word was your word. Today, you make an invoice to have it in writing, and two months later they deduct money. What do you do, call your lawyer? We have these disputes.
Q: What kinds of disputes. Is it a quality issue?
Dirk: No, that would be manageable. They send product back to the supplier because they require zero spoilage. A produce company comes with 4 percent spoilage, but today it must be zero.
Q: You also need to determine where the spoilage occurred.
Jan Marc: That’s another thing. We’re asked to maintain a cold chain, but that stops the minute it is delivered to the warehouse center. But we’re still responsible for any spoilage in the shops. There’s an imbalance there.
Q: In some ways, it’s ironic. You would think with the more advanced technology, you’d have less spoilage and fewer issues.
Jan Marc: But technology requires large investments…
Dirk: For me, it’s not fun any longer. If you ask others in produce, they will tell you the same. It’s just business; you have to sell and obey and suffer.
Q: OK, that’s not going to be an inspiring headline! Those edicts you describe don’t jive with the philosophy of your company as an independent.
Jan Marc: That’s the way the supermarkets want it.
Q: I interview supermarket chain executives and I don’t get that negative perspective.
Jan Marc: Because they’re in charge.
Q: Produce as an industry is such a low margin business, there’s not a lot of leeway for error.
Dirk: Profit margin is tiny. If you have two or three severe claims or you lose an account or two, you can become bankrupt.
Q: That is why the produce business demands well-honed expertise and resourcefulness…
Dirk: It’s a living product, it’s interesting. You have to be fast and feel the market. All these things you don’t have in other professions. You have to make decisions right away. If you go into the produce business for making money, that’s another question. You have to have passion to be in this business.
Q: I’ve been at our company, Phoenix Media Network, for 18 years, so I have a ways to go before I celebrate my 40th anniversary! But I’ve written for other industries, and there’s something unique and special about the produce industry because of its perishable nature.
Interrelationships between the companies become necessary to survive and prosper. Often you have to partner up with people and work together, even though you may be competing at times. We’ve talked about your strong relationships with your growers, but what about with your rivals?
Jan Marc: There is a lot of competition and competitors but amongst them you get to know their personalities, and with the right ones you are also able to cooperate. We’re all aware given this is a living product, both the supplier and market need to have the fruit moving on. It would be a mistake to say I’m not going help my competitor who at the moment has the right sale, and to think that his customer would directly come to me.
Q: It’s a small world in this business too. Well, in your case you’re truly a family. But a lot of people move around. You might be competing with someone in one instance but then at another time you’re on the same team.
Dirk: We believe in that larger family philosophy at SFI. I hope I don’t come across as too critical.
Q: You just speak your mind. It’s refreshing, and I’m sure our readers will appreciate it. I think it’s also part of the Dutch culture — directness and getting right to the point… One of our goals is to share your insights to help others.
A mantra at our company is to do things to improve the industry (Initiating Industry Improvement). It might be necessary to tell an unpleasant reality that might be hampering the industry from hitting new plateaus.
Dirk: The container situation sits really deep in my soul. You know we have a global drug problem. The container enables people to smuggle drugs. The authorities say this container needs to be scanned. So, we get it three days later and have to pay the cost.
It is not my responsibility that the industry uses equipment that invites fraud. I spent more than 30,000 Euros against the container lines, but I could never win a legal fight to get that money back. I could tell you so many stories...
Q: It seems like you’ve done well to work around these problems, despite the challenges.
Jan Marc: Our new slogan is: We’re ready for the next decade.
Q: Amsterdam Produce Show attendees will be gathering from around the world. What are the commonalities in strategizing for the next decade? Does a U.S. produce executive see the world much differently from a Netherland’s produce executive? For instance, how are shifting global dynamics shaking up import/export tactics?
Dirk: The influence from the U.S. is not that big any more. We have stopped importing from the U.S. entirely, except for a few grapefruits because most commodities don’t meet the residue level requirements, so we can’t import. It’s difficult to meet the European requirements.
The U.S. market for us is lost. A lot of things are changing thanks to the climate. A country really coming up strongly is Peru. You will be surprised what they do in the next five years.
The supply chain is changing entirely in the world. This makes the produce industry so interesting, not only new varieties but growing conditions. The other important thing is the exchange rate. It influences the entire world’s supply-demand dynamic and where product gets shipped.
Q: And because you’re independent and flexible, you can capitalize on these fluctuations...
Jan Marc: I just came back from Peru. For fresh produce, the fair was small but definitely a good meeting place. I took advantage of seeing some new production areas.
Dirk: Then there are new markets in Asia, such as cherries. The Chileans started producing cherries seven or eight years ago in big volumes. Then they came to Europe and prices weren’t nice. Then Hong Kong was there, and all of a sudden, no cherries for Christmas, with all the cherries going to Asia.
The produce business is permanently in a change, and you have to adapt. And that makes it interesting and keeps you very, very busy because you have to stay with the new developments.
Q: We look forward to following you into the next decade.
Jan Marc: What’s nice to see with many of our suppliers and also with some of our customers, generations of my father have worked together, and now it continues with the sons.
Q: At the same time, you noted there are less and less family businesses.
Jan Marc: Unfortunately, as companies grow, people tend to sell out, take a few shares, and you don’t have continuation of family member being at the helm.
Q: It takes a lot of dedication to be in the produce industry.
Dirk: The handicap of the produce business is you do 100 percent or you don’t do at all. Over 40 years, we have a good reputation; we’ve always fulfilled our promises. We don’t have friends, we have respect. And my personal enemies are all dead!
Q: I can’t imagine you had enemies…
Dirk: When I started as a German in Holland in 1977, I had enemies because I did things against the produce rules. Everyone who imported was obliged to give the fruit to the auction; that was the rule in the Netherlands. And I broke that. I went direct. In two or three years, they couldn’t hold the system.
Q: You bucked the system and had good instincts. That sounds like part of your personality…
Dirk: My personality is I’ve been married 49 years, and I have two children, a son and a daughter.
Q: So you have one daughter, as well, but she’s not involved with the company.
Dirk: That’s right. And one wife!
Q: And your one son will surely carry on your legacy at SFI, with many more milestones… You express a touching sentiment; that as generations of your father have worked together, now it continues with the sons… Looking to the future, Jan Marc, do you have children and do you anticipate they will follow in your footsteps as you have done with your father?
Jan Marc: My two sons are too young to think that far ahead. They are five and eight, still at the consumption stage!
Q: I appreciate your insights as well as your wit and candor…
Dirk: You can be aggressive with my comments, and I’m not afraid at all, as long as people keep in mind any language barriers.
Q: Jan Marc, what are some of your memories growing up in the produce industry. Did you always have interest in your father’s business? Did you start working at SFI at an early age? Could you share a few of your experiences…
Jan Marc: Growing up in a family business in overseas imports meant that at a very early age, I learned about different countries of origin and species or varieties of fruits that my classmates had never heard about nor seen or tasted. I learned my first words of English prior to school to be able to kindly welcome visitors to our house, some of which are on my own annual visit list up to today.
Carrying crates of fruit from my father’s car into the house was always exciting, as to see what he brought home this time. And it is quite sentimental to see my sons cheering on the samples that I bring home today. For their young age, however, it is still too early to predict if one of them would enter the business later, but on the other side, I am still having contact with a lot of sons in business of my father’s business relatives.
Q: Have you had any mentors along the way? Could you revisit a touching moment or funny story that celebrates these generational ties?
Jan Marc: Whilst a silver dollar coin that was given to me by one of the late seniors of Pandol Brothers is still amongst my childhood treasures, I have hilarious memories of a 1997 road trip to Mexico with John Pandol, son of Matt senior, and we are still in friendly contact today, 20 years later.
In fact, my start into representing SFI was with Pandol Brothers in fall 1997 to witness harvest, packaging and cooling techniques, and that took me to an almost full year in South America directly afterwards to again witness harvests, but also to build up new relations and strengthen existing ones.
Many of these new friends are still suppliers of SFI today, which is what I specifically like about our business. It is the human touch, the personal relations, the history one builds up together. And all of this around a beautiful line of products that are all born out of nature. It is what makes our daily efforts well worthwhile.
Q: Thank you for sharing these wonderful memories. I’m genuinely touched. Your stories add further perspective to the reasons behind SFI’s success as you celebrate your 40th anniversary and journey into the next decade.
Dirk Schulz identifies ten large industry changes during his four decades of engagement:
1) The switch from break bulk reefer vessels to containers.
2) The rise of shipping conferences that allow shipping lines to set fixed prices.
3) The rise of discounters at retail.
4) Growth in private label.
5) Decline in consumer knowledge about produce, cooking skills, etc., and a lack of consumer understanding on contemporary issues, such as food miles and carbon footprints.
6) Decline in business standards — from your word is your bond to powerful buyers who feel free to clip bills.
7) Unreasonable standards resulting in spoilage, shrink, etc.
8) A lack of fun – too much “sell, obey and suffer.”
9 Decline of the U.S. as a supply source/Rise of Peru as a supply source.
10) Rise of Asian markets as competitors for produce
There is no question that Dirk is correct, and we have often discussed these issues. At the inaugural Global Trade Symposium, held in conjunction with The New York Produce Show and Conference, we highlighted a presentation focused on some of these very same issues:
Richard Bright, Editor of Reefer Trends, To Speak Out At The Global Trade Symposium: Confluence Of Containerization, Direct Buying And Private Label Will Change The International Produce Trade
The Pundit’s family used to have an operation in Puerto Rico, and for many years it imported produce onto the island on the old break-bulk ships of the Grace Line. It was in many ways a great business. We would issue pick-up tickets to all of our customers, they would come to the pier and collect the fruit we had sold them, and if something was short, the shipping line was responsible.
When the move was made to containers, we had to build our own warehouse; in effect we had to become wholesalers in addition to importers. And, of course, all substantial wholesalers quickly became importers themselves.
To us, of course, it was a loss. Now we had to operate a very complex business, and we were responsible for any shorts.
But, to others, they could cut out the importer and import themselves. And although it is, of course, true that the cold stores of the reefer ships were stronger and more secure than those of a single container, it is also true that damage can be done in transferring produce onto trucks. Today a container often can be loaded at the production point, travel across the world and then be delivered into a retail or wholesale cold store without the cold chain being disrupted for a minute.
Some things you don’t know where blame actually lies. Yes, retailers have moved to private label, but doesn’t this also imply that branded offers weren’t delivering the kind of value that would make consumers switch stores to get the brand they want?
Sustainability is such a big component at retail today, yet one wonders if in the sustainability metrics there is a place to record the agita that comes from a work environment that feels oppressive, where people lack autonomy and have to “sell, obey and suffer.” That is quite an indictment of present trading relations and probably not the kind of environment that is, in fact, sustainable.
Please join us on the floor of The Amsterdam Produce Show and Conference and raise a glass to 40 years of achievement. Come and shake hands with Dirk and Jan Marc, reminisce about the past… and with all of us at the show, help build the future.
Many thanks to Dirk and Jan Marc for sharing the fruits of their experience.
You can check out the website right here.
Register for the event here.
Book a hotel room -- where the action is -- at the Headquarters Hilton Amsterdam right here.
And if you would like to exhibit or sponsor, please let us know here.
And, of course, we are happy to answer questions right here.
We look forward to seeing you in Amsterdam!
We have been honored to have John Stanton address our events previously with talks such as these:
Promotional Optimization Used To Ramp Up Produce Sales... At The Amsterdam Produce Show And Conference, Professor John Stanton Will Reveal Techniques From Grocery That Can Boost Produce Sales
Branding And In-Store Marketing: Perfect Together... St. Joseph’s Superstar Professor John Stanton To Present At London Produce Show And Conference
Bringing Produce To New Markets: Opportunities And Obstacles In The New Retail Environment...St. Joseph Food Marketing Guru John Stanton Gives Featured Presentation At The New York Produce Show And Conference
WHAT IS IN A LABEL? Does Promoting No-GMOs Impact Perception Of The Rest Of The Department? Would A Positive Message Smell As Sweet? St. Joe’s John Stanton To Address The London Produce Show And Conference
Research To Be Unveiled At The New York Produce Show And Conference Shows ‘Local’ Preference Versus Organic
So, when Pundit sister publication PRODUCE BUSINESS is running a cover story with a title The Great Retail Explosion of 2017 and Professor Stanton wanted to present on the convulsions going on in the retailing of produce, it was really no-brainer.
We asked John Aiello, Contributing Editor at PRODUCE BUSINESS, to find out more:
Dr. John Stanton
Professor and Chairman
Food Marketing Department
Saint Joseph’s University
Q: How long have you been in food marketing and what drew you to this area of study?
A: I have been in food marketing for 42 years. I attended Syracuse University and eventually obtained my PhD. And by chance, as a newly minted PhD, I got the opportunity to do some consulting for Campbell Soup. The project lasted 13 years. I was in a Consumers Insights Group while at Campbell, working on a variety of things.
Q: Your topic in Amsterdam is going to be the changing retail market for produce, and food in general. Can you provide an overview?
A: The point of the presentation will be to show that things have changed so much in retail in the last five years that the traditional method of selling produce to supermarkets and restaurants is now becoming outdated. The reason for this is that everyone is selling food. Dollar Stores and pharmacies are selling produce now. So is the Home Shopping Network.
You have subscription services entering the market as well. I think, even more importantly, Blue Apron is selling meal kits. The typical question I hear about this is: “OK, but how much are they really selling?” Well the answer to that is Blue Apron alone is a billion-dollar business. And Blue Apron sells a lot of produce. And it's produce that people didn't go to a supermarket to buy.
Right now, more places than ever are selling food.
Q: It's obviously opened the door to countless options....
A: Yes! Delivery options. Plus, online shopping venues, which have had a major impact. It's important to realize that these changes came about because these are the things customers wanted and demanded. Right now, 30% of the households in the United States are single-person households. And this single-person household is having a big impact on the industry.
Q: As are the Millennials...
A: Absolutely. Food suppliers didn't have to change all that much for the Baby Boomers. But the Millennials are very different. How they shop and what they value is quite different from previous generations.
Q: What are three of the most significant changes to the retail sector?
A: Well, the most significant changes have taken place in the past five years. And the biggest change, as far as I am concerned, is that Millennials are becoming primary shoppers. Millennials use online services routinely and, like I said, they have much different values than my generation had. Things like “sustainability” and “food waste” really mean something to them. The Millennials are happy to pay more for a half of a melon [rather than the whole melon] because they know they'd waste the whole piece of fruit.
The second major change is convenience. Convenience has always been important, but it's really important now. People want ultra convenience today. This is why subscription services and home delivery options have become so popular. My mother and grandmother would never have given up buying their tomatoes at the store themselves. But today's consumers are willing to give this up to save more time. Older Millennials are basically saying that the people in the store know more about the process [of picking a good tomato] than they do.
Finally, the third major change is technology. We can do so much now with data analysis, and we have so much more knowledge today. Marketing basically comes down to selling what people want to buy. And technology is helping us do a better job at finding out what people want to buy. Let's take potatoes as an example. When I was young, there were just a couple kinds of potatoes to buy. But today there are 20 different varieties for sale. People are looking for this variability, and stores can now give it to them through better management systems.
Q: What are the greatest factors that have influenced these changes in the retail schematic?
A: The primary factors are the population change; technology; and changes to the channel of distribution. By this I mean to say that ten years ago, we didn't have Dollar Stores or pharmacies or online venues selling produce. But now we do.
Q: How has this impacted food safety, if at all?
A: That's an interesting question. I don't think food safety has been an issue in terms of the points we have been discussing. You know, there's always going to be situations with occasional safety issues no matter how hard companies try to be perfect.
But the reality is that the United States has the safest food supply in the world. Yes, there are occasional problems. But some issues also come from the consumers through improper handling of products. Getting back to your question, though – none of the changes I've identified have had a direct impact on food safety.
Q: Have these changes in retail protocols been better or worse for the consumer?
A: They have definitely been better because they've given people more choices. And these choices have allowed them to choose just what approach they want [to undertake]. If you still want to go to the grocery store, there are obvious alternatives. If you're so busy that you want to stop at a convenience store to buy food, they are there. And if you want something waiting for you on your door step when you get home, you can have that, too. We have so many more choices than we did when I was younger. So, it's not a little better for the consumer, it is a lot better.
Q: Inflation affects food and produce market price almost immediately. Given this fact, can retailers do anything to hold consumers in place?
A: In my opinion, price has never really been that important. The basic economic theory is that if you give people two choices, all other things being equal, they will pick the cheapest alternative. But as marketers, we're not trying to give people two equal choices. And there are specific things we can do in terms of what is offered. For example, some stores offer products that are not available elsewhere. There's this obsession with price, but the most successful grocery store right now is not necessarily the cheapest
You will always have a segment of the population that will go to Aldi and Wal-Mart to save money. Let's take eggs as an example: The price of a dozen eggs is basically the same as it was 20 years ago in real dollars. So, I think stores today must be focused on much more than price. They need to focus on knowledge - of the store and its products.
They also need to promote strong customer service. Having knowledgeable people in the store really matters. As does making the store different in some way. But back to your original question: Price is most important only when people have two identical choices from which to choose.
Q: What produce items are most susceptible to price spikes at the retail end of the spectrum?
A: I think that local seasonal products have the most price variation. You can get asparagus all year around, but you will pay more in the off-season. When it's locally produced, you often can get it at the cheapest price. When produce is imported, it is generally higher to buy. Locally grown crops aren't usually shipped long distances, so farmers don't have to worry that products will be damaged, bruised or compromised in the shipping and distribution channel.
Where I live, in New Jersey, you pay a certain price for tomatoes, and they come from all over. But when the Jersey tomatoes come available, they are much less expensive. But this local-is-cheapest trend is not always the case. Sometimes producers realize they can command a higher price for the locally grown item because quality has substantially increased.
Q: Has the increased awareness in diet and the focus on better cardiovascular health practices been a catalyst to the changing landscape of the retail market?
A: No, I don't believe it has. It all comes back to convenience and the desire for variety. Actually, convenience more than anything. Let's look at bagged salad as an example. People used to go out and buy a head of lettuce. But somebody finally got the idea to pre-bag it. At first, the industry fought it every step of the way. The question was: “Who is going to pay one-and-a-half to two times the cost for the same product [that's just been pre-packaged]?”
Again, it comes down to that obsession with price. But for the consumer, it was better – the lettuce lasted longer, with little to no waste. Yet, the industry still fought it all along the way. Today, we have bagged salad, and it comes with dressing and croutons too. You can see the change taking place in society, and it correlates with what's happened with salad. Today's college student doesn't say put lettuce on my sandwich. They say put salad on it. They say that because it's what's they know.
Q: So you think the health considerations are effectually meaningless?
A: With respect to health, telling people to change their behavior does not work. Some people will listen, but most Americans don't do this. Most Americans give lip-service and say they are eating healthier, rather than actually doing it.
Q: I understand you're a member of the European Retail Academy Hall of Fame. Can you tell me a bit about this organization?
A: It's a group [made up] of primarily college professors in Europe who focus attention on the retail industry. We get together annually at the time of ANUGA [a general trade and food exhibition]; it's one of the major food conferences in the world. As I said, we meet to discuss issues and problems in the industry and to collaborate with each other on research.
The basic idea is to share knowledge of retail regardless of sector and to also be able to find the commonality [in the changes taking place]. I actually think I am in the Hall of Fame because I'm the oldest one (laughing)...
Q: In our discussion, you've identified several factors that are changing the face of retail as we have known it. But are these changes ultimately going to be good for the country, and for the society as a whole? Are we sacrificing something vital just for the sake of sweet convenience?
A: Well, the existing food industry is looking at the Millennials. And they are so different; they behave so differently. We look at them and ask: “What kind of world is this going to be?” This generation doesn't shop. They live on their phones.
But it's actually the same question my dad's generation asked years ago when they looked at the Hippies. But things turned out fine. And the answer today is going to be the same. We're going to be alright with these people who are our new consumers. Personally, I don't understand them. I am totally different. Their work habits are totally different from mine. But I nonetheless have complete faith that they'll do a good job moving forward.
Q: As we move into the 2020s, where are things going? Do you foresee any other radical changes in the future which will further alter the retail experience for the consumer?
A: Yes, I do. I believe we will see more technology going forward. And I think that each produce item will include a flavor or freshness label that will signal to the consumer just how fresh it is.
I also believe that robots using the equivalent of facial recognition will be involved in locating product on the shelf that does not look fresh. But I also think that some of these efforts at reducing food waste will lead consumers to buy more "less than perfect" fruits and vegetables.
Millennials, Convenience and Technology – the great trinity driving change and, in truth, we have little certainty on which way they are going to drive it!
We know what Millennials say moves them, but how those attitudes will survive the collision with having to save for their kid’s college is completely unclear.
Convenience is king, but what is convenient? Is a 200,000-square-foot store that offers true one-stop shopping convenient, or is an easily navigable 35,000 square foot store that is nearby but also might means going to other stores to get everything you want? Is home delivery convenient or a drive-through where you can pick up your order?
We’ve run pieces about how young people are transforming the world:
Making Produce Marketing Everything It’s Not: Creative, Innovative, In-your-face, Non-conventional, Digitally Driven, Attitude- And Adventure-oriented… Nic Jooste Of Cool Fresh Guides The Trade On How To Capture Gen Z And, Next, Gen Alpha!
PRODUCE AND GENERATION Z Can We Make Our Pitch Effective In Eight Seconds Or Less?
The Disruption Of Established Markets: How Four Strategies Can Help Transcend Today’s Dilemmas Can Retailers Show A Little Love For Produce Marketing? Dutch Marketer Nic Jooste Will Share His Thoughts On Swimming Upstream At The Global Trade Symposium
Now come and join the discussion with one of the world’s pre-eminent food marketing experts, and let’s think through what this all means for produce and for us.
You can check out the website right here.
Register for the event here.
Book a hotel room -- where the action is -- at the Headquarters Hilton Amsterdam right here.
And if you would like to exhibit or sponsor, please let us know here.
And, of course, we are happy to answer questions right here.
We look forward to seeing you in Amsterdam!
There is often a “sweet spot” when it comes to listening to an industry speaker. Oftentimes, those who are gainfully employed are restricted in what they can talk about. Those who have been retired too long may have dated perceptions about the business.
Sometimes, though, you get someone who has been actively engaged and really knows the score and just recently went freelance. So, they are freer to talk and still up-to-date. Dan Kass has attended The London Produce Show and Conference and The Amsterdam Produce Show and Conference, so he knows well our high-level audience and, having just embarked on a freelance approach, he comes straight from industry battles.
As soon as we heard he was available, we snapped him up. We asked John Aiello, Contributing Editor at Pundit sister publication PRODUCE BUSINESS, to find out more:
Former Managing Director, International Sales
Q: We are delighted to have you as a speaker at the Amsterdam Produce Show and to learn from your insights. Can you provide a brief outline of your background and how you started in the industry?
A: Yes, I was born in Hartford, Connecticut. My family moved to Chicago when I was very young, and I spent my formative years there, eventually attending the University of Illinois and taking my degree in Business. After college graduation, I followed my folks when they moved to Florida and actually landed my first job in produce there; it was in the grapefruit industry working for Blue Goose Growers [which was a large grower but now mainly provides services to the citrus industry].
Right after I joined with them, they became Dole Citrus. I was hired to work with the exporting of grapefruits. This was in the 1980s during a growth movement in the industry — it was an exciting time. I also earned my MBA when I was in Florida, attending night school at the Florida Institute of Technology. I stayed in Florida until 1993, when Dole relocated its citrus headquarters to Bakersfield, and I moved to California to take over International Marketing and Sales for Dole Citrus. I worked there until 1999. There was a big freeze in 1998 and Dole sold off its citrus operations after that freeze.
After taking some time off, I joined Intermas — a Spanish plastics company, which also had applications in the agricultural industry. I spent two years at Intermas and then went to Market Gardeners in 2002. Market Gardeners is a New Zealand company — a co-op devoted to the fruit and vegetable trade. I was there until 2006, when I took a job with Paramount/Wonderful as the Director of Export Sales.
Compared to what the business looks like today, Wonderful was a tiny company at that time. Today it is a significant player in the fresh citrus industry. I stayed with Wonderful 11 years, managing all the international sales for the citrus we grew in the United States and Mexico.
Q: And what are you doing now?
A: I left Wonderful Citrus in August of 2017 to take some time off. I specifically wanted to spend some time with my family and my daughter. I missed a lot of that with work, and I travelled for work. So, I wanted to get some time with her.
In addition, I've been doing product consulting with some of my overseas customers, making introductions for them to growers and suppliers. But right now, I haven't finalized or formalized plans for a consulting business. I am freelancing right now while I explore new opportunities on the grower-shipper side of the industry.
Q: What topic do you intend to address at the Amsterdam Produce Show?
A: I will speak on the “Global Citrus Trade,” including the changing supply dynamics that have occurred since 1987, when I first started in the industry out of college.
Q: After some 30 years in produce, you are regarded as one of the leading citrus experts in the industry. Given that, can you provide some examples of changes in supply dynamics that have taken place since the 1980s when you started?
A: Well, on a global basis, citrus production has increased. Interestingly, there has been a great shift in production to “easy peel” fruit like mandarins and tangerines, of which there are many different varieties. So, the first major change has been seeded products being replaced by seedless products; it's what the consumers want on the table. Mandarins have actually become the leading citrus crop, replacing oranges. Oranges are now ranked number two.
The second major change is with the orange category, which has changed tremendously. Back when I started, seeded Valencia juice-oranges dominated. But these varieties slowly came to be replaced by seedless Navel oranges. Again, the change is driven by consumer preference — people want products with more consistent quality, which the Navels provide.
The third major change I would cite is with the Florida grapefruit industry; it used to dominate. However, because of pests and disease, it's basically been driven out of business. Grapefruit production is dominated by Spain and Turkey now. These countries have taken over the shelf space Florida used to occupy in Europe and other markets around the world.
Q: What are the leading areas of production for each of the leading citrus crops, beginning with oranges?
A: I can list the top five in each category for you.
For oranges, Brazil is ranked #1 (mainly for juice processing); #2 India (with most of the production quantity used domestically); #3 is China; #4 the United States; and #5 Mexico. These top five producers account for 54% of the total global orange production.
For the Tangerines/Mandarin category, China leads the way at #1 — China actually accounts for 66% of world production! These are mainly seeded varieties for the canning industry. Spain is #2; Morocco #3. Turkey #4. And Japan #5. The United States is number 6 here. These top five producers account for 84% of the total global Tangerines/Mandarin production.
For the Lemon/Lime category, India is ranked #1 (mainly for local hybrid lemon/lime varieties). Mexico is #2 (+/- 95% limes, 5% lemons). Argentina is #3. Spain is #4. And Brazil #5. Again, the United States comes in at 6 in the category. These top five producers account for 53% of the total global lemon/lime production. As an aside, in 1980, the United States led in the production of lemons globally. Italy was ranked #2 at the time. Today, Italy barely registers on the list, having been replaced by Mexico.
For the Grapefruit category, China again leads the way at #1, and even though there is no data available, I estimate 90%-plus are pummelos, not grapefruits. (Pummelos are a crop closely related to the grapefruit.) The United States is #2 here. Mexico is #3. South Africa is #4. And Turkey #5. These top five producers account for 72% of the total global production.
Q: Can you provide any rankings in terms of over-all citrus production?
A: Yes, for total citrus production, China is ranked #1. Brazil #2. India #3 (Indian citrus production is often overlooked since it is almost exclusively for local consumption and not for export). United States # 4. Mexico #5. Spain #6. Egypt #7. Turkey # 8. Italy #9. And Argentina #10. The top five producers account for 57% of the global production.
It's interesting to note that there are 195 countries in the world, and citrus grows in some capacity in 140 of these countries. It's the most over-produced commodity because so many countries can produce it on some scale, ranging from tiny to enormous...
Q: Where does this data come from?
A: My data is sourced from both USDA and FAO databases, and comes from 2015/2016.
Q: Turkey has apparently emerged as leader in grapefruit production, while Egypt has begun exporting large amounts of oranges. Is this conductive to the climate and soil in these regions? Or are there other reasons for this dynamic?
A: Certainly, the climate in these countries is conducive to strong citrus production. But there is also a natural drive to find lower-cost products to support the economic part of the equation. Basically, there is a big demand globally for these products, and these countries can produce them by controlling the costs of production. This has allowed them to expand their operations proportionally.
Q: Which European countries are the biggest consumers of citrus and why?
A: Well, France is really the only outlier — they lead the way in terms of grapefruit consumption. But insofar as other varieties, no country jumps out as being a particular heavy consumer for any one variety. They are all pretty even.
Q: In what climate does citrus thrive?
A: That's a good question. Citrus can actually thrive in a number of different climates. But, the first rule to understand is that the global “citrus belt” is between 40 degrees North Latitude and 40 degrees South Latitude. You cannot grow citrus further North than 40 degrees North Latitude. It's simply too cold and the trees will freeze; they just will never sustain themselves.
Nonetheless, you can grow citrus crops in tropical (Hawaii), sub-tropical (Florida), and arid (California, Spain) climates. There will be different production characteristics based on where the fruit is grown. For example, Florida's subtropical climate produces sweet and juicy fruit, but the outside skin has more blemishes. Bugs and various pests can affect the peel. Conversely, Turkey, a Mediterranean producer, has fruit that looks beautiful on the outside, but inside, the quality can be poor, with less eating qualities.
Q: You mentioned easy peelers earlier in our discussion. I understand Europe countries are expanding production of easy peelers. Why do you think these varieties have become so popular there?
A: Basically, it's for all the reasons I just addressed — it has a nice size and a good, consistent flavor. You get an eating experience without seeds. On the other hand, Navel oranges are much harder to peel, and the eating quality can vary, going up and down. And consumers don't really like this, which is why they are now gravitating toward mandarins and tangerines.
Q: Can you describe how the marketing of citrus from the retail end has changed since the 1980s, when you started in the industry?
A: Prior to the 90s, there were many more "regional" supermarkets than national or even international supermarkets. But there has been a lot of consolidation since that time period, to the point where the top 10 retailers (traditional, supercenter and club) now control somewhere around 55% of the US market. In the United States, through the late 90s and early 2000s, many retailers continued to work with wholesalers and broker/jobber networks to meet their needs. But today, there is a strong emphasis on direct relationships — retailers buying direct from suppliers.
This has thus necessitated consolidation on the supply-side of things. An overseas retailer once told me — “elephants sleep with elephants.” It means that huge demand for products from retailers requires large-scale suppliers.
Looking closer at the retail side, while Price Club (now owned by Costco) opened in the 70s, the explosion of club stores and their handling of produce didn't really take off until the early 90s, with Costco, Sam's and BJ's being the main club stores in the US.
Walmart Supercenters and their earnest handling of produce didn't begin until the late 80s and really took off in the 90s. More and more regional and national chains have attempted to open "supercenter" store formats to compete with Walmart since those early days. As we are fond of saying in America: “Competition makes us better and gives consumers more choices.”
Q: What about retail in Europe?
A: The supercenter or “hypermarket,” as they are often called overseas, were actually born in Europe. I think Carrefour in France was the very first to launch the concept. Similar to what we've seen in the US, there has been consolidation in Europe among retailers, although formats tend to be smaller due to the urban nature of the region and the space limitations in these areas. There are also more mom-and-pop-type stores compared to the US.
In recent years, driven by German discounters such as Aldi and Lidl, there has been fierce competition for consumer dollars, and this is especially true in the UK market. The European market has been saturated and stagnant for a while now, and these large scale European retailers are looking to the US and also Asia for expansion and growth.
Both Aldi and Lidl have recently entered the US market. Some are succeeding, but many are finding overseas expansion to be difficult and expensive — a loss rather than a profit right now. While there are many reasons for this, I believe a largely overlooked reason is the cultural differences between the countries. I think there has been a failure to understand these differences, coupled perhaps with a poorly reasoned belief that "we can take our way and make it work somewhere else."
Q: And the state of retail in Asia?
A: While Hong Kong, Japan and Korea have a strong and well-developed retail market, many other Asian countries are still developing their retail sectors. Even more so than Europe, there is still a strong presence of mom-and-pop-type stores in these places, but this is changing. Again, I think the dense urban populations, combined with cultural differences in how people shop, help contribute to the strength of mom-and-pop stores.
Hong Kong has long been dominated by two major retailers. Japan and Korea, meanwhile, have seen consolidation at the retail level during the 2000s. For many reasons, there are challenges for suppliers to directly reach retailers in these markets. Probably the biggest reasons are distribution and logistics.
China, meanwhile, is seeing a boom in the development of the retail sector. Some of the most impressive formats I have visited are now located in China. These big retailers are hungry for knowledge on category management and merchandising, and they are seeking the expertise of foreign retailers.
In some cases, foreign retailers are entering the market with their own name as well as through partnerships with local retailers. In China, retailers rely heavily on wholesale markets for their supplies, but as infrastructure improves and the scale of retailers increases, I would expect more direct business to be established.
Q: How do global politics impact the citrus market, and specifically, product pricing?
A: Certainly, free trade agreements are a benefit to the citrus market. In turn, political instability can impact these trade agreements in a negative fashion. In times of instability, countries are more likely to minimize the risk of introducing new pests and diseases to their regions. Therefore, market access during periods of instability is more difficult.
In stable times, countries work together to minimize these risks. But if there is instability, the process can be adversely affected. Pricing is a secondary issue and of lesser impact — basically this all comes down to supply and demand factors.
Q: Can you speak about the greatest challenges you see affecting the citrus market going forward?
A: The biggest thing I see is pest and disease pressure on a global basis. There are always different pests that come along. But right now, the number one problem is “citrus greening.”
Q: Can you expand on Citrus Greening?
A: This phenomenon is thought to have originated in China in the early 1900s. And now, it has traveled around the world, even spreading to the United States and Mexico in recent years. Essentially, it's a bacterial disease that attacks the vascular system of trees and eventually kills them. Think of it in terms of a blocked artery in your heart. Initially, the greening compromises the fruit, which does not reach full maturity. The disease is spread by bugs when they feed, and it's been quite the challenge to come up with a solution for it.
Q: Is it common for citrus growers to take part in the distribution of their own products as a means to control a bigger slice of the market share?
A: A typical grower is not involved with distribution. A typical grower has a relationship with a packinghouse, and the packinghouse has its own marketing process. A grower usually deals directly with a packinghouse, but what we are seeing today is much more consolidation among growers, with corporate investors creating large grower-associations. It's vertical integration —they control the whole production process from field to shelf.
Q: Is there a big gulf between conventional and organic citrus in terms of market sales?
A: Yes, for sure. Organic is actually a very small part of citrus. I think this is because citrus is a permanent crop, and it takes a significant amount of time to covert a conventional grove to organic. There's a big drawback to doing it as well —the cost of production with organic increases while the yield decreases greatly.
Organic is harder to grow with less volume being produced per tree. Organic is more conducive to the leafy vegetables because of these factors. Actually, I don't see organic ever really taking off in citrus. If it made strong sense growers would have naturally already made the move there.
Q: Where do you see citrus prices going in the next 5 years?
A: Everything is cyclical. Right now, the global citrus industry is in a real up-swing cycle. There's good demand, and strong pricing. But if more producers enter the market, this will eventually lead to a downturn — production will begin to exceed demand.
In the middle of the 1990s, there was a big down-swing in citrus. And it lasted until about 2005. But during the past 5-7 years, things have shot back up. This will continue until the economics and supply-and-demand change. But I have to believe that at some point the industry will experience a down-turn again.
A boom in citrus consumption, led by the rise in easy-peelers, has created a renaissance of branding with Cuties and Halos duking it out!
Recently, Wonderful acquired the DNE company, which was headed up for a long time by Bernie Egan, who was a good friend of the Pundit’s grandfather, Harry Prevor. Not too long after we started PRODUCE BUSINESS magazine, we wrote a column mentioning that though the French loved Florida’s red grapefruit, Florida was lucky to have the Japanese market, as that was the only place in the world that really wanted Florida’s white grapefruit.
Bernie called the Pundit to complain about the story and specifically the part about the Japanese being the only market for Florida white grapefruit. When we asked if we had written something incorrect, Bernie assured us we were 100% correct. When we asked what the problem was, Bernie explained: “You didn’t have to tell them!”
Well, in Amsterdam we will be having a no-holds barred conversation with Dan about global citrus markets: How does one manage such a far-flung operation? How does one grasp so many diverse cultures? How do logistics play into this?
There is plenty of history… In the early 1960s, Sunkist was shipping eight million cartons a year into Europe; today, almost nothing. What made this happen? Was it inevitable? Who in the world will it happen to next?
There is also hope. What produce item has more successfully won the hearts and minds of children? From Cuties at McDonalds to lunch-box snacks… from early imports from Morocco and Spain… to important Southern Hemisphere and US production. Was the US late to the easy-peeler game? Can we sell other items in large boxes and bags?
Come to Amsterdam where Dan is determined to tell it all!
You can check out the website right here.
Register for the event here.
Book a hotel room -- where the action is -- at the Headquarters Hilton Amsterdam right here.
And if you would like to exhibit or sponsor, please let us know here.
And, of course, we are happy to answer questions right here.
We look forward to seeing you in Amsterdam!
So, Oprah Winfrey has long issued a Holiday Favorite Things list. This year there is a produce item, albeit frozen, on the list:
Josh Pond Blueberries
My new definition of everyday luxury: a five-pound box of organic wild blueberries frozen within 24 hours of harvest from Josh Pond Farm in Maine. Add them to yogurt, pancakes, or salads, or turn them into sorbet, because (1) wild blueberries are sky-high in antioxidants and (2) they’re zero Weight Watchers points! – Oprah
We find it interesting in several aspects:
First, it is an example of how luxury can be redefined. The produce industry is often way too focused on reducing price rather than increasing perception of value. Of course, this is a different market than the Mom at Walmart scrambling to feed the kids. It is a market, nonetheless, and other venues, such as Harry & David (roughly $10 a pound of pears for 4 lbs plus $10.99 shipping to Florida), are in the market.
Pricing is actually very interesting in this category. If you buy through the Amazon link that Oprah promotes, the cost is $70, plus $4.99 shipping:
But if you buy directly on the Josh Pond website, the price is $50, plus $35.00 shipping!
Second, for both good and bad, it raises the importance of marketing. Note that Oprah, who is an investor and spokesperson for Weight Watchers, mentions that they a zero on the Weight Watchers program, which means people following the program may eat all they wish of this product. This is a powerful marketing tool to woo people who are depriving themselves of foods they would like to eat in order to lose weight. But most fruits and vegetables are zeros on Weight Watchers, and on packaging and in-store, there is very little marketing to followers of Weight Watchers or other diets. Although the data is weak, it appears that many tens of millions of Americans, maybe more, are on diets at any given time. So, tying into specific diets, as opposed to just general healthfulness, probably has an upside.
The other interesting thing is how words, such as organic and antioxidant, have become kind of slogans for “good for you.” The truth is that the actual evidence the antioxidants in cultivated blueberries are somehow inadequate and that people need to eat wild blueberries to get more antioxidants is non-existent.
Indeed, it is not clear that more antioxidants are always a good thing. Scientific American ran a piece titled Antioxidants May Make Cancer Worse that pointed out:
Antioxidants are supposed to keep your cells healthy. That is why millions of people gobble supplements like vitamin E and beta-carotene each year. Today, however, a new study adds to a growing body of research suggesting these supplements actually have a harmful effect in one serious disease: cancer.
The work, conducted in mice, shows that antioxidants can change cells in ways that fuel the spread of malignant melanoma—the most serious skin cancer—to different parts of the body. The progression makes the disease even more deadly. Earlier studies of antioxidant supplement use by people have also hinted at a cancer-promoting effect. A large trial reported in 1994 that daily megadoses of the antioxidant beta-carotene increased the risk of lung cancer in male smokers by 18 percent and a 1996 trial was stopped early after researchers discovered that high-dose beta-carotene and retinol, another form of vitamin A, increased lung cancer risk by 28 percent in smokers and workers exposed to asbestos. More recently, a 2011 trial involving more than 35,500 men over 50 found that large doses of vitamin E increased the risk of prostate cancer by 17 percent. These findings had puzzled researchers because the conventional wisdom is that antioxidants should lower cancer risk by neutralizing cell-damaging, cancer-causing free radicals.
But scientists now think that antioxidants, at high enough levels, also protect cancer cells from these same free radicals. “There now exists a sizable quantity of data suggesting that antioxidants can help cancer cells much like they help normal cells,” says Zachary Schafer, a biologist at the University of Notre Dame, who was not involved in the new study. Last year the scientists behind the melanoma study found that antioxidants fuel the growth of another type of malignancy, lung cancer.
Now there are so many caveats. Notably -- antioxidants consumed via food are not likely to be consumed in doses that would cause these effects. And there is the whole issue of weighing the positive impacts of reducing free radicals versus the negative.
Yet Oprah feels free to suggest this antioxidant boost as a reason for purchase. Unsupported as this may be, the very effectiveness of this annual list points to a key fact. Today, a nod from an appropriate party, such as Oprah, lets people avoid thinking. It is a kind of shortcut that, among her admirers, makes them feel the product has been vetted and thus makes the purchase lower risk. Perhaps President Obama became President because of this effect when she was an early endorser.
So, we have market segmentation in several ways:
1. There is a gift market and a consumption market, and within the consumption market, there is an upscale household for whom spending $15 a pound to have some blueberries delivered is not a big deal.
2. There is a branding market, where words such as organic and antioxidant and wild function much as brands would.
3. There is the use of reputational heft such as Orpah’s to simplify decision-making.
How many produce sellers –at shipper-level or at retail –have really thought through all this and have set up their own marketing efforts to utilize all the tools available, indeed required, to maximize sales and profits?