Soft Fruit Growers and Distributors Must Add Value

John Giles, Divisional Director, Promar International the UK and international soft fruit sector has already gone through a period of fundamental change over the last few years, but with the range of forces for change impacting on it in the future the industry will require further far reachingadjustment. In the future, the focus for fresh produce companies will shift away from meeting trade requirements, to the consumer and meeting very specific consumer demands. This will require a major change in the orientation for the majority of suppliers to the UK and other European soft fruit markets. For many, this will entail a re-evaluation of competencies, developing of sevice, communication and consumer intelligence.

In short, there have to be new, and developed bases of competition if soft fruit suppliers are to survive. These will be clustered aroun the following:
-Price plus...with added value products becoming more important in the market at the expense of commodity lines, prices as a base component will change subtly. With varying levels of added-value available in the marketplace, so pricing will become more dynamic.

- Product plus...Suppliers must be prepared to invest in varietal development, marketing and category management and meeting consumer needs. Soft fruit growers and distributors must share the vision and the mindset, with discipline and financial backing, and abandon the trader approach. Innovation must be taken beyond product, and extend across the entire business - markeint, distribution, organisation and culture. Essentially, meeting techenical quality standards (EUREPGAP etc) becomes a given and will not be a key part of product plus.

- Service plus...In the future, supermarkets across the EU will de-skill back to their suppliesr who will be expected to offer dedicated resources to the retailer. The retailer will increasingly expect its supplier to take an active role in category management activities. As the market becomes more crowded with new products, soft fruit companies will be expected to develop new services and products that differentiate the retailer from the competition.

- Consumer driven...Tomorrow is about udnerstanding the consumer on behalf of your customer. Fresh produce companies, including those in the soft fruit sector must behave like any other FMCG company, focussing on market research and innovation, and being consumer-led.
- Brand...With the advent of year-round supply, country of origin will have little meaning in the future, resulting in more brands such as Zespri and Jaffa. With the ability (and need) to add value to products and services, so other fresh produce companies will be able to develop their branding activities, having the option of supplying own label or regional brands.

- Solution provision...Basic technical assistance is a given. Not all retailers will follow categoy management techniques; but they will look for more and moer proactive solution development , and working in closer partnership with their supplier base in terms of New product development (NPD), or approach them with a task and let them come back with a solution.

Today, there are estimated to be around 50,000 commercial horticultural production and packaging units in the wold. The last five years has seen a quickening pack in the fallout from the sector for a number of reasons. The number of units in the global supply chain will be reduced dramatically to around half the current number. The fall in Europe's horticultural units will be especially severe, as the full impact of supply chain rationalisation begins to take effect over the next five year. Fresh produce suppliers, including those based in the soft fruit sector, will be forced down one of two clear directions:

- either use upscale activity through merger, acquisition or joint venture, to emerge as a key strategic supplier to a relatively small number of retail accounts;

- or explore the opportunities offered through growth in the foodservice sector and processing.

Whichever direction is pursued, soft fruit production will no longer be an amateur and fragmented industry. Over the next five years, fresh produce distribution will develop in relation to multiple retailes' strategic expansion plans and the demands of the consumer base. Consumers will no longer form part of an homogenous mass group. We will see the formation, and targeting on the part of food manufacturers and retailers, of much smaller groups of consumers and the development of fresh produce distribution will need to take into account the purchasing preferences of these smaller groups.

Whilst the great majority will continue to shop at the multiple retailer outletss, major retailers and the retail sector in general, already adapting formats to suit differing consumer needs (for example an increase in the number of forecourt retail outlets in Germany and Tesco Express in the UK). There will also be the development, albeit on a limited basis of alternative means of distribution such as e-commerce, vending or direct delivery.

Over the next five years, the mass market will decline, and become more defined in tems of category orientated players, price/volume orientated players and specialist players i.e. niche convenience.Fresh produce suppliers based in the soft fruit sector in the fitire will look to focus on key sectors of the market. This is necessary not only for survival as the mass market shrinks, but also to allow players to add value most appropriately. Being a "generalist" supplier to as much of the distribution base as possible will no longer be an option. Key to adding value is a knowledge not only of the demands of the consumer base, but also the needs and wants of this base.

Together with an understanding of the environment in whch the customer works. The speed at which major European market, including the UK will move towards an increased need for added value from the soft fruit industry will vary. Key fctors influencing this speed of change include the development and increasing sophistication of distribution (retail, foodservice and new alternatives to these), the developing demands of the consumer base and their level of available disposable income (plus the alternatives this income can be spent on). Such factors will influence the markets' demand for added value, and while customers (retailers and foodservice operators) will also be looking for added value service, the demand for added value will largely be driven by the developments at the consumer base.

From this we can see that two broad areas of added value will emerge across the UK and Europe over the next five years.

- Customer focused added value
- Consumer focused added value

As with many things, however the situation will not be as straightforward as it might first apprea; certain area where adding value is possible will cross both customer and consumer need. For example, adding value to a product may met both customer requirements for a differentiated product portfolio and consumer needs for a variety or conveniece. In this new market reality, factors such as in-depth market and consumer knowledge become increasingly important in gaining competitive advantage. Indeed, for some player groups particularly the Category Captains, they will be an essential building blockof marketing strategy. Decision making with regard to consumer needs and wants, will become more intuitive, based on this knowledge of the consumer. Key requirements of soft fruit growers and suppliers operating in a consumer focused marketplace will, through necessity centre far more on so called "soft" skills rather than traditional competencies of organisational control.

Just as company culture must change to meet the needs of evolving opertaing and market environments, so the traditional core comeptencies will need to develop to meet the requirement for a fast-paced rapidy changing organisation. Key to future success within the UK and European Fresh Produce Industry will be the need to focus on talented employees with intuitive marketing skills. Reflecting the changing nature of the company culture, so core competencies, too, must change to embrace the need for knowledge and understanding of customers and ultimately consumer needs. Consumers will drive the business whether you like it or not. The fundamental issue is the need to recognise the importance of the consumer in shaping both the products and services provided by soft fruit suppliers. From the largest glocal to the sm,allest local niche operators, meeting cunsomer needs will be paramount. Whether the consumer is accessed directly or through intermediaries (retailers and foodservice) adding value must become the norm. For intermediaries, adding value will be their way to differentiate and meet needs of an increasingly demanding consumer base. For soft fruit suppliers, adding value through the supply chain and the benefits it will bring, simply can not be ignored.

Autumn 2003