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Trends in U.S. Fresh Produce Marketing

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					Trends in U.S. Fresh Produce
          Marketing

         DR. ROBERTA COOK
  Dept. of Ag and Resource Economics
       University of California Davis
Fresh Produce and Floral Council Luncheon
            September 2004
TOTAL 2003 U.S. FOOD* SYSTEM:
       $943.3 BILLION
 $498.3 billion food retailing (excluding
  non-food grocery store sales)
     53% of total
 $445 billion food service (including
  $17.8B foodservice sales made by food
  retailers)
     47% of total
     around 844,000 outlets
                     *Excludes alcoholic beverages and
                     other grocery
                     Sources: ERS/USDA and The Food
                     Institute
           U.S. FOOD EXPENDITURES as a SHARE
of DISPOSABLE PERSONAL INCOME, 1970-2003
 13.8     13.4
                                                                At-home        Away-from-home
            12.0 11.8 11.7 11.5 11.5 11.6 11.6
3.6                                            11.2 11.1 11.3 11.0 10.8 11.1 11.0
        4.3                                                                         10.3 10.1 10.2 10.1 10.1
            4.3 4.3 4.3
                            4.3 4.3 4.3 4.2 4.2
                                                   4.3 4.4 4.3 4.2 4.4 4.4
                                                                                4.1
                                                                                         4.7 4.7 4.7 4.7


10.2
    9.1
            7.7 7.5 7.4 7.2 7.2 7.3 7.4 7.0
                                                   6.8 6.9 6.7 6.6 6.7 6.6 6.2
                                                                                         5.4 5.5 5.4 5.4



 70          85        87       89        91        93        95       97           99      2001     2003


 Source: ERS/USDA
U.S. Grocery Industry New Product
Introductions, 1988-2003
                                                                                                                  Nonfood
                                                                                                                  Food
25,000                                                                                                                              23,181
                                                           22,572                                                         22,374
                                                 20,076              19,572                    19,458
20,000                                                                     19,331
                                  17,566                                        18,043
                             16,143                                                  16,695
                                                                                           16,562
15,000             13,244


                                                            16,863
          10,558                                  15,006
10,000

                                                                       13,266
                               12,398




                                                                                12,503
                                        12,893




                                                                                                                                    11,574
                                                                                         11,131
                    10,301




                                                                                                          9,417
                                                                                                                  9,699
                                                                                                                            9,632
                                                                                                  9,814
           8,183




 5,000

      0
           1988 1990 1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: The Food Institute Report, 2-2-04; Column totals in white represent combined
food and nonfood new product introductions.
Trends in US Food Expenditures
               1990-2000   2001-2010
CAGR
                       4.6% 4.3%
5%                                     3.8% 3.9%
         3.2% 3.4%
4%
3%
2%
1%
0%
     Food At Home Food Away            Total
                  From Home
 US Foodservice Segment Shares, 2003
                              4%
                         8%
                    3%
             6%
          1%
          4%
                                        36%
                                                  Fast-Food
Full-Service                  37%

Restaurant
     Fast-food                      Full-Service Restaurant

     Retail store                   Other Commercial

     Education                      Recreation                Source:
                                                              ERS/USDA
     Other Noncommercial            Hotel/motel
                                                              2004
FOODSERVICE OPPORTUNITIES FOR
        FRESH PRODUCE
 Since 1992 consumer spending at
  restaurants is up 56%
 Consumers are trading up, contributing to
  higher sales in full service restaurants and
  fast casual (like Baja Fresh, Chipotle, Panera)
 Consumers search for VALUE, 62% say they
  are “willing to spend more time and money
  for better quality food.”
 91% of consumers say “It’s worth it to wait a
  little for food customized to my liking.”
 Foodservice fresh produce and fresh-cut
  demand rising.
    Sources of Takeout* Food in the US,
    Supermarkets Gaining!
  1996                                                                    2004
                                                  10%
                                              5% 1%
                      48%                 1%                      Fast-food
    4%              Fast-food rest.                               rest. 35%
   1%
                                                  27%
  3%                                                           18%
                   12% 25%
                        Restaurant                         Restaurant
                Super-                 Supermarket
 6%             market
Source: FMI
                    Fast-food rest.            Restaurant
Trends in the       Supermarket                Other *Takeout only, not all foodservice
Supermarket
2003, 2004          Gourmet/specialty store    C-Store
                    Don't know
US Estimated Fresh-cut Produce Sales,
   All Marketing Channels, $ Billion
$ billion
 16                                                             15.0
 14                                                  11.8
 12
 10                                        9.0
  8                 6.0 7.1
  6
  4      3.3                                        $4 plus
  2                                                 at retail
  0

        1994 1997 1998 1999 2003 2005
Source: Dole estimated to be sold via foodservice channels   Sources: IFPA and IRI
 Over 60%
 U.S. Fresh Fruit and Vegetable Value Chain,
          2002 Estimated Billions of Dollars
                          institutional                $40.0
                          wholesalers               food service
                                                   establishments
  $5.9                     produce and
                           general-line
imports                    wholesalers
                                                           $39.7
                                                     supermarkets         $81
farms shippers                    integrated             and other     consumers
 $19.2                 $3.4       wholesale-          retail outlets
                    exports        retailers                  farm & public
                                                                 markets
Source: Estimated by Dr. Roberta Cook, UC Davis, based on        $1.3
numerous public and private sources
U.S. SUPERMARKET FRESH-CUT
    SALAD SALES, Million $
                                                      2,453
                                                 2,030
                                            1,671
                             1,1691,3281,477
               716 831 981
         415
   197
  93
  94
  95
  96
  97
  98
  99
  00
  01
  02
  03
19
19
19
19
19
19
19
20
20
20
20
Source: IRI
US Fresh-Cut Vegetable Facts
• Fresh-cut veggies represented 31% of all
  pre-packaged produce retail sales in
  2003.
• Carrots were about half the $1.3 billion
  fresh-cut veggie category, followed by
  spinach ($108 million), potatoes ($87
  million), celery ($85 million) and mixed
  vegetables ($69 million)
• 77% of consumers purchase fresh-cut
  veggies, but on average, only once every
  9 weeks           Source: IRI
  US Fresh-Cut Fruit Facts
• Fresh-cut fruit is still a small share of total fresh-
  cut sales, retail sales were estimated by IRI at
  $238 million in 2002, with total fresh-cut sales (incl.
  foodservice) estimated at at least $600 million.
  Forecast by IRI to reach $1 billion by 2008.
  Household penetration of only 17% in 2003.
• Great potential for fruit in both retail and
  foodservice channels
• McDonald’s offering apple slices as alternative to
  French Fries in Happy Meals
• Quick-service restaurants and fast casual segment
  keep adding fresh produce, including fresh-cut
     Supermarket Trips Per US Household
                  Per Year
     100
              85        83        78         75        73         72
      80

      60

      40

      20

       0
           1998 1999           2000 2001 2002 2003
Source: Coca-Cola Retailing Research Council of N. America 2004
    US Supermarket Share Continues to
    Decline for Key Grocery Categories
(% Shoppers Who Generally Buy That Item at the Supermarket)


 Nonprescription          23%
                               2004
      drug                  33%   2001

                              31%      2004
 Paper Products                         54%      2001
                                           62%      2004
             Cereal                                81%       2001
 Source: FMI Trends in the US, Consumer Attitudes and the Supermarket,
 2004
   Top Factors in US Consumer Selection
      of Primary Supermarkets, 2004
      Items on sale or specials           62%
      Store layout                         65%
      Fast Checkout                        65%
      Personal safety outside the store     66%
      Accurate shelf tags                       68%
      Use-before/sell-by-date marked              72%
      Convenient location                         73%
      Courteous/friendly employees                    74%
      Low prices                                        79%
      High-quality meat                                     80%
      High-quality fruit/veg.                                 85%
      Clean, neat store                                           88%
Source: FMI Trends 2004
  Quality of Shopping Experience by
 Channel, TRI*M Index (Differences of
                  3 or more are signficant)
                   Limited-Assortment, 106
                   Warehouse Club, 101
                   Dollar Store, 100
                   Mass Merchandiser, 93
                   Supercenter, 93
                   Supermarket, 91
                   Drug Store, 87
                   C-Store, 80
Source: Coca-Cola Retailing Research Council of N. America 2004
  Quality of Shopping Experience by
 SUPERMARKET TYPE, TRI*M Index
    (Differences of 3 or more are signficant)

                Total Supermarkets, 91

                 Natural/Organic, 109

                  Upscale, 100

                 Price-Oriented, 96

                 Main-Tier, 89
Source: Coca-Cola Retailing Research Council of N. America 2004
   US Store Format Growth Trends and
               2003 Sales*
                           2003 Sales      2003 #     2003 $ 2008 $
                            $Million       Stores     % Share % Share

Traditional                 $422,791       41,530         56.3         48.3
Nontraditional              $235,100       40,721         31.3         39.7
Total C-Stores               $93,518      129,000         12.4         12.0
GRAND TOTAL                 $754,408      213,981        100.0        100.0
•Grocery sales only, excludes electronics, prescription drugs, toys, jewelry,
 sporting goods, gas, clothing, footwear, knickknacks, and hardlines
Source: Competitive Edge, June 2004
US Store Format Growth Trends and 2003 Sales*
         Traditional Grocery Channel
                                  2003 Sales          2003 #        2003 $ 2008 $
                                   $Million           Stores        % Share % Share
Total Traditional                      $422,791           41,530            56.3           48.3
   Conventional                         $97,110           12,450            12.9           11.6
   Superstore                          $164,268            8,100            21.9           18.5
   Food/Drug Combo                     $114,400            5,000            15.2           13.1
  Limited Assortment                     $16,107           3,150             2.1             2.1
  Super Warehouse                        $14,331             530             1.9             1.6
  Other (Small
  Grocery)                               $16,575          12,500             2.2             1.5
* Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, etc.
Source: Competitive Edge, June 2004
     US Store Format Growth Trends and 2003 Sales*
                  Traditional Grocery Channel
                                                                      Average       Grocery &
                                   Total Store       Average          Weekly       Consumables
                                      Area          Total SKUs        Sales $       % of Sales

Total Traditional                                                      195,777           100
    Conventional                        25,800          22,000         150,000           100
    Superstore                          51,200          30,000         390,000           100
    Food/Drug Combo                     55,700          52,000         440,000           100
    Limited Assortment                  11,200            1,900         98,333           100
    Super Warehouse                     59,500          33,000         520,000           100
    Other (Small Grocery)                9,000            3,000         25,500           100

* Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, etc.
Source: Competitive Edge, June 2004
      US Store Format Growth Trends and 2003 Sales*
                  Nontraditional Grocery Channel
                     2003 Sales                       2003 # 2003 $ 2008 $
                      $Million                        Stores % Share % Share
Total Nontraditional   $235,100                        40,721   31.3    39.7
  Wholesale Club        $51,953                         1,030     6.9    8.7
  Supercenter           $85,155                         1,840    11.3   17.0
  Dollar Store          $10,686                        15,000     1.4    2.9
  Drug                  $33,189                        18,500     4.4    5.2
  Mass Merchandise      $49,873                         4,170     6.6    5.3
  Military               $4,243                           181     0.6    0.6
* Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, etc.
Source: Competitive Edge, June 2004
     US Store Format Growth Trends and 2003 Sales*
               Nontraditional Grocery Channel
                                                                      Average        Grocery &
                                    Total Store      Average          Weekly        Consumables
                                       Area         Total SKUs        Sales $        % of Sales
 Total Nontraditional                                                  124,466
    Wholesale Club                     135,000            5,500        970,000             59**
    Supercenter                        190,000         125,000         890,000             60**
    Dollar Store                          8,000           4,000          13,700            66
    Drug                                 12,000          20,000          34,500            34
    Mass Merchandise                   100,000           95,000        230,000             23**
    Military                             29,400          15,000        450,800            100

* Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, etc.
** Does not include gasoline sales
Source: Competitive Edge, June 2004
        SUPERCENTER INDUSTRY         SALES and UNITS, 1993-
        2007, (About 35-40% estimated to be grocery-equivalent)




                                                                                                       2,987
                                                                                                               Sales




                                                                                               2,712
                                                                                       2,457
                      Units                       Sales (billions)
    3,000                                                                                                      $250




                                                                               2,212
                                                                                                   $228




                                                                       1,971
    2,500




                                                                     1,777
                                                                                                               $200
                                                                                  $200




                                                             1,573
    2,000




                                                     1,301
                                                                               $175
units




                                                                                                               $150



                                             1,093
                                                                            $153
    1,500                                                                $132
                                            951                       $117                                     $100
                                      816
                                708



    1,000                                                    $98
                          592




                                                     $84
                    419




                                                  $72
              305




        500                                                                                                    $50
                                            $52
                                $34$41
          0 $13 $16$26                                                                                         $0
              93 94 95 96 97 98 99 00 01                              02 03* 04* 05* 06* 07*
    *forecast
    Source: The Food Institute’s Food Industry Review 2003
  Domestic and International U.S. Membership
  Club Sales and Unit Growth Slowing, 1993-
  2007, (61% estimated to be grocery-equivalent)

        1,600                                                                                   $120
                     Units          Sales (billions)                          1,3201,3701,420
        1,400
                                                                    1,2101,270                  $100
                                                               1,148                    105
        1,200                                          1,078                       101
                                                                          96
                                                                    87 91                       $80
units




        1,000                                932 989
                                    886
          800   728 786 805 822 845                     74 80                                   $60
                                             60   67
          600                           54
                          48                                                                    $40
          400 37 40 41 46
          200                                                                                   $20
            0                                                                                   $0
                93

                94

                95

                96

                97

                98

                99

                00

                01

                02

                 *

                 *

                 *

                 *

                 *
               03

               04

               05

               06

               07
             19

             19

             19

             19

             19

             19

             19

             20

             20

             20

            20

            20

            20

            20

            20
        *forecast
        Source: The Food Institute’s Food Industry Review 2003
Competing in a Value-Driven Market
 • Channel blurring has caused the retail
   landscape to be overstored.
 • Plus, foodservice channels compete with
   all forms of food retailing which tend to
   offer ingredients to prepare instead of
   meals to eat.
 • Retail Home Meal Replacement helping
   somewhat and fresh produce value-added
   products benefiting.
Competing in a Value-Driven Market
 • Grocery retailers have been losing share
   to foodservice for decades, now to value
   retailers
 • Conventional grocery retailers must
   identify value propositions they can own
   if they are to remain competitive! (fresh
   produce can be a point of differentiation)
 • Bottom line: more structural change
   expected in the US grocery industry and
   more pressure on suppliers!
 The Revealing Percentages
            Conven‟l Super Disc. Club
            Grocery Center Drug Store
Gross    25.3          25.0   20.0   11.0
Oper Exp 21.8          17.5   16.0    7.5

Net Margin 3.5          7.5    4.0    3.5
(Before taxes)
Source: Glen Terbeek
             U.S. FOOD BUSINESS
           MERGERS & ACQUISITIONS
                                             1981-2003
                                                                               813
                                                                                  753
                       724                                              734
 666             658               652
          645
       588                   599                                                        641
             583                     556
                                                                     538
                                                              522529
                                                        468485                                516
                                            415
                                                  365                                               413415




1981     1983   1985     1987        1989     1991        1993   1995   1997     1999     2001        2003
Source: The Food Institute’s Food Industry Review, 2003
   U.S. Grocery Retail Concentration*
             70
             60
             50                                                                   58
                                                                                             Top 4
Percent      40                                                                   47
                                                                                             Top 8
of U.S.      30                                                                   33
grocery      20                                                                              Top 20
  store      10
   sales      0
                  1987       1993      1995       1997      1999       2001      2003
                             *Includes grocery-equivalent supercenter sales ONLY. Excludes sales of
                             c-stores with gas. Excludes the portion of any grocery chain‟s sales
Source: Phil Kaufman,        corresponding to their drug store, jewelry store or other non-grocery store
ERS/USDA; US Retail Census   sales.
                U.S. Fruit and Vegetable Supply-Side
                Marketing Structure Becoming Less
                 Fragmented, 2002

   Fruit, berry and nut farms*        26,571
   Vegetable and melon farms*         15,355
   Number of fresh shippers            5,000
   Total chains, grocers, wholesalers 1,079
    Retail chains                        267
    Produce wholesalers                  188

*Selling over $50,000/yr.; Total of 107,707 fruit, berry, nut farms and
59,044 total vegetable and melon farms, all sizes – US 2002 Census of Ag
 Stock Price Performance, Top 5 US
         Grocery Retailers
           1/1/99 – 2/23/04
        Chain         % Change
Wal-Mart                + 48%
Kroger                  -32%
Safeway                 -61%
Albertson‟s             -57%
Ahold                   -75%
Dow                     +15%
Return on Asset Comparison, Top 4 US
          Grocery Retailers
              ROA = Profit/Sales X Sales/Assets
Wal-Mart      9.04%      3.48%        2.60

Kroger        5.18%      1.96%        2.64

Safeway       1.61%      0.78%        2.06

Albertson‟s   4.11%      1.74%        2.36
  Conventional Retail Chains Reconsidering their
                      Models
• The experience from the merger trend of the
  late 1990‟s has shown that getting bigger
  wasn‟t enough to meet the new competitive
  benchmark imposed by Wal-Mart‟s success in
  logistics, data management and cost reduction.
• President of Safeway just announced a move to
  net, net pricing, moving away from allowances,
  following on the Wal-Mart model. But, as
  always, fresh produce lags grocery.
  Conventional Retail Chains Reconsidering their
                      Models
• The challenge for retailers is to effectively
  utilize scanner, customer loyalty card and
  other data in order to identify the right
  product mixes at the individual store
  level.
• Food retailing is inherently local, and as
  retailers get larger and consumers more
  diverse, intensive data management is
  critical!
                   The Future
  Wal-Mart will be the mainstream retailer for the
  foreseeable future but there will also be lots of new
  winners.
New price driven retailers will increase competition for
  Wal-Mart and Wal-Mart‟s growth may slow as it
  tackles issues faced with expansion in urban areas
  (high land costs, unions, local regulatory policies).
Consumer research conducted by The Hartman Group
  indicates that consumers don‟t express excitement or
  devotion about shopping at Wal-Mart. Many just
  view it as a way to save on staples without taking over
  their shopping lives. Lukewarm support creates
  opportunities for competitors.
                      The Future
  The winners will compete on various
  dimensions of value: price, product,
  service, and selection.
There are a number of formats successfully defining “white space”
  market opportunities. Examples include Trader Joe‟s, Whole
  Foods, Dollar Stores, and conventional chains like Wegman‟s and
  HEB, as well as independents.
Retailers can deliver value to consumers at both the high and low
  ends of the price spectrum, depending on product selection and
  quality levels, and format design, by understanding the needs and
  wants of target segments for specific shopping occasions.
The middle, unclearly defined ground – retailers with no clear value
  proposition – will be increasingly challenged.
    Products Distinguishing Themselves More
  Through Aesthetics, Adding Emotional Value to
        Practical Use – Food Especially!
• “Quality is yesterday‟s news. Today we
  focus on the emotional impact of the
  product.” (Dilbert comic strip)
• Research from Cornell and U of Colo.
  show that income level is positively
  associated with experiential over material
  possessions. (Van Boven and Gilovich)
• Ego – Starbuck‟s – an affordable luxury
  for all income levels
      Products Distinguishing Themselves More
   Through Aesthetics, Adding Emotional Value to
           Practical Use – Food Especially!
• Travel; eating out, increasingly in restaurants
  providing more memorable experiences; and
  differentiated foods purchased at retail are
  gaining. “Upscale” positioning may be bundled
  with several perceived emotional values -
  organics benefit. Fresh produce is a part of the
  trend.
• But, to afford these “extras” people are often
  making a greater effort to economize in their
  routine grocery purchases, hence, growth in
  value retailers.
Consumers are Becoming More Eclectic:
Unabashed Wal-Mart Shopper Speaks
                      The writer found a brown
                      stretch top with a ruffle
                      drizzling down the V- neck,
                      for about $9, and jeans made
                      of two-inch-wide strips of
                      washed corduroy, denim and
                      a blue lace print, reminiscent
                      of Dolce & Gabbana, $17.98,
                      at Wal-Mart. She wore them
                      with Celine platforms, $420.

                  Value Propositions and Needs! This also
                  applies to food. Flavor Density re calories.
                  EATING OCCASIONS MATTER!
                  Adapted from Food Marketing Institute 2002
US PER CAPITA VEGETABLE CONSUMPTION,
         POUNDS, 1976-2004F
                    450
                                                                    438
Pounds per capita

                                                                               Processed
                    400 359
                                                                  126          Vegetables
                                                                             (Excl. potatoes)
                    350
                    300
                          119                                                 Processed

                    250                                            90         Potatoes

                    200   76                                       46         Fresh
                          49                                      176
                    150                                                       Potatoes
                                150
                          115
                    100
                                                                              Fresh
                     50                                                       Vegetables
                      0
                     1976 1987 1989 1991 1993 1995 1997 1999 2001 2003 „04

  Source: USDA/ERS, Vegetables and Specialties Outlook, July 2004
          US PER CAPITA FRUIT CONSUMPTION,
                  POUNDS 1976-2002
                    300
                          264                                                       283       Processed
Pounds per capita



                    250
                                                                                    87        Citrus
                          102
                    200                                                                       Processed
                                                                                     96       Noncitrus
                    150
                          78                                                                  Fresh
                    100
                                                                                              Citrus
                                                                                     24
                        29                                                           76       Fresh
                     50
                        55                                                                    Noncitrus
                      0
                      1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Source: USDA/ERS, Oct. 2003
Shoppers’ concern about nutritional content
          and evaluation of diet
     80%
     60%                                                            62
                                                                    45
     40%
     20%
      0%
                '96 '97 '98 '99 '00 '02 '03 '04
             very concerned about nutritional content
             my diet could be healthier
Source: FMI Trends in the US Consumer Attitudes and the Supermarket 2004
             Changes for healthier diet
100%                                                      more fruits/
                                                          vegetables

                                                          less fats/oils
 80%
                                                          less meats/red
 60%                                                      meats

                                                          less sugar
 40%
                                                          more poultry
 20%
                                                          more fish

  0%
                                                          more organic,
          '96 '97 '98 '99 '00 '02 '03 '04                 natural

Source: FMI US Consumer Trends and the Supermarket 2004
               U.S. DEMOGRAPHIC
               INDICATORS, 2002
   111.3 million households
   289 million inhabitants
   2.6 persons average household size
   Average household income of $57,852
   Median household income of $42,409
   Average household food spending of $5,375
    (including $3,099 at-home and $2,276
    away-from-home)
Sources: US Bureau of Census; Food Institute Demographics of Consumer
Spending 2004 for food spending only
SEGMENTATION/TARGET MARKETS
• Variables commonly used to categorize consumer
  differences to focus marketing activities
  – geographic
  – demographic
  – psychographic--based on attitudes & activities
     • STATUS SEEKERS, CHASE & GRABITS,
       ENVIRONMENTALISTS
           » Mass individualization!
           » Problem solving is key!
           » Understanding needs and constraints in
            individual eating occasions essential!
 US Household Composition, 2002
           Ave. Household Size: 2.5 People

    Other
                15%            50%
                                         Husband & Wife

                29%                                 Husband & Wife
                           6%                        with Children
                                                       under 18
       Single                                        19% of Total
                                Single               Households
                                Parent

Source: Demographics of Consumer Food Spending 2004, The Food Institute
U.S. Per Capita Food Expenditures, 2002,
  by household size – Small households
         spend more per capita!
   Food at home Food away from home
               $1,356
               $1,558




                                     $1,188
                                     $1,472


                                                $1,244
    $1,240




                          $1,199




                                                           $1,108
                                                $876
    $910




                          $855




                                                           $754

                                                                        $937
                                                                       $546
Average      One        Two Or     Two        Three      Four       Five Or
                         More                                        More
Source: Demographics of Consumer Food Spending 2004, The Food Institute
DISTRIBUTION of US HOUSEHOLDS, SHARE of TOTAL AT
 HOME FOOD EXPENDITURES/INCOME LEVEL and FRESH
          PRODUCE EXPENDITURES, 2002

    $520 /32%                                 $235 /13%
              Share of households
                $70,000+      <$15,000             Average fresh produce
                  23%           21%             expenditures per income group
                                                              $
$384 /16%
            $50,000-               $15,000-
                                    29,999
             69,999                                % of total at home food
                                     21%
              15%      $30,000-                expenditures contributed by each
                        49,999                           income group
                         22%
    $342/21%                                  $303 /18%


       Source: Demographics of Consumer Food Spending 2004, The Food Institute
Consumer Food Expenditures, by
 Household Income Level 2002
          $5,000
          $4,000
          $3,000
          $2,000
          $1,000
                $0               $15,000 - $20,000 - $30,000 - $40,000 - $50,000 -   $70,000
                      <$15,000
                                  $19,999 $29,999 $39,999 $49,999 $69,999             Plus
Food At Home:          2,116      $2,483    $2,768    $3,006    $3,241    $3,555     $4,524
Food Away From Home    1,034      $1,286    $1,581    $1,875    $2,261    $2,994     $4,350

  Source: Demographics of Consumer Food Spending 2004, The Food Institute
 US Fresh Produce Consumption by Race
        2002, $ Per Household

             Vegetables                                    $247
    Hispanic
             Fruits                                       $242

    African- Vegetables             $128
   American Fruits                   $136

            Vegetables                        $181
White/Other Fruits                            $184

Source: Demographics of Consumer Food Spending 2004, The Food Institute
               U.S. Hispanic
      Population Projections, Millions

     60         38.2          43.7    49.3
     40
     20
      0
              2005           2010    2015

Source:US Bureau of Census
 Hispanic Population Boom,
       2000                           2050
   (U.S. Census)                   (Projected)
     72%                     52%


                        1%
                                                 23%
1%                       10%
  4% 12%     11%                        Hispanic
                               14%      African-Amer
     Hispanic                           Asians
     African-Amer                       Other
     Asians                             Non-Hisp. Whites
     Other
     Non-Hisp. Whites
Conclusions
 Streamlining the Distribution Channel
  How best practice retailers are
  using information:
     Identifying and merchandising
      product affinities associated with
      popular items.
     Grooming vendor capability to
      provide useful insights.
Source:Willard Bishop Consulting, Ltd.
   Streamlining the Distribution Channel
  New tools using data-mining capabilities
  are entering the market to provide:

       Cost-effective consumer-centric
        business processes
          Customer purchase patterns
          Product promotions


Source:Willard Bishop Consulting, Ltd.
SHELF CAPTAINS
• Leading, technologically savvy
   vendors—sometimes brokers
• Take category interface
  responsibility for section
• May work in retailers’ headquarters
• Recommend shelf sets, product
  placement
• Very influential to category
  management
Basic Strategies for Shippers
• Low-cost grower/shipper
• Differentiated year-round grower/shipper
  marketing a premium product or product with
  identifiable preferred characteristics that are
  commercially perceived and valued
• First strategy increasingly difficult as buyers
  push more demands and services upstream to
  suppliers
• Increasingly shippers must add value and at
  the lowest cost – need strong core
  competencies!
CONCLUSIONS: The Future?
• More and more, large year-round
  grower-shippers may become the
  sourcing entities for retailers,
  procuring volume above and beyond
  their own via geographic
  diversification, including imports.
• Smaller seasonal players will need to
  find niche markets.
Fierce competition places multiple demands on fresh
   produce suppliers while product perishability
   continues to limit bargaining power... So more
       shipper/supplier consolidation to come!
Quality:
                                         Specific requirements
• taste!
• freshness       Quantity         Costs • packaging
                                         • pallets
• temperature
                                         • size
• shelf-life
                                         • tailor-made
• nutrition
  value                 Shippers
                                                         Tracking and
• consistency
                                                            tracing
    Flexibility
                   Safety: microbial                On-time delivery
                    and pesticides
                                                                    60
                  Source: Adapted from Rabobank Mexico

				
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