In the past five years, the entire food and beverage supply chain and industry has undergone a “truly historic transformation … that instead of our industry working from a push point-of-view, it is now working from a pull point-of-view,” Donald Meltzer, global head of mergers and acquisitions at Rabobank, told attendees at the financial institution’s annual conference in New York City.
As a result, he said, “the consumers are demanding variation that basically our supply chain was not originally set up to manage” and, therefore, it is creating pressure on merchandising and processing companies in the midstream, as well as increased opportunities for players at either end of the supply chain.
For example, farm-to-fork messaging about the health benefits and sustainability of fruits and vegetables helped drive up demand for produce by a “respectable 15% to 16%,” but a “look under the hood at some specific categories of fruits and vegetables” shows that consumer preference for convenience is influencing what specific produce is selling and how retailers are marketing it, said Roland Fumasi, senior analyst for Rabobank on fruit, vegetable and floriculture.
“When you look at the growth over the last five years in value-added fruits and vegetables it completely eclipses the general growth rates,” he said.
He added that while value-added fruits and vegetables are key, “when it comes to convenience we have to remember that some types of fruits and vegetables are just naturally more convenient. They just grow to be bite sized, less mess, require less prep. So, that is part of the convenience trend” that is influencing what retailers stock and what farmers in turn must provide in order to remain relevant.
High double-digit growth rates in the US on spend for organic fruits and vegetables is another “extremely impressive” example of how the consumer-driven fork-to-farm is influencing what is produced and stocked, Fumasi said.
He added that the increase also is driven by retailers who want more organic options on their shelves in part to meet consumer demand but also because it is a higher margin product.
Reflecting on what the about-face from farm-to-fork to fork-to-farm means for industry, Fumasi said, “the first take away is that these trends require greater amounts of collaboration” between producers, manufacturers and retailers because product diversity must be in a constant state of flux with certain types of produce increasing while others decrease.
“It is all about having the right cultivars and the right mix of conventional and organic product because that is what retailers and the consumers demand today,” he said.
Ecommerce and meal kits are a friend and foe to beef
The power reversal between producers and consumers also is creating challenges and opportunities in the animal protein space, Don Close, a Rabobank senior analyst for animal protein, said at the conference.
Specifically, he said, consumer desire for convenience that is pushing shoppers to ecommerce and meal kits will place pressure on beef and create new avenues for chicken and pork.
He explained that overcrowding in meal kits means many players are judged not on design or menu, but on price, with the bulk falling in the $9-$12 per plate range. This range prices out many beef options, but is a generous range for less expensive broilers and pork, he said.
“Just the opposite is true, however, when we go to ecommerce where we see incredible opportunity” for more expensive or exotic animal proteins because it enables producers to reach a broader audience, and service consumer demand for natural, antibiotic free, organic or lesser known animals that would be considered niche requests in brick and mortar stores, Close said.
“For the smaller producers and specialty producers that are looking to enter the marketplace, this can be a really good opportunity,” he said