Although volume consumption is relatively
static, the UK fresh fruit and vegetables market is being driven forward by rising sales
of pre-packed products and more exotic produce which are commanding premium prices. The
pace of industry consolidation is also accelerating, allowing the successful players to
benefit from economies of scale and increased efficiencies.

Retail sales of fresh fruit and vegetables
fell by 1% last year to 6.7 million tonnes, according to Leatherhead Food RA, but value
sales rose by 7% to reach £6.67 billion. Of this total, fresh vegetables sales were
valued at £3.87 billion and fruit accounted for £2.8 billion.

Leatherhead Food RA points out that despite
the various retailer and Government initiatives to promote the consumption of fresh
produce, the market has only grown in volume by 2% over the past five years. However,
consumer demand for convenience and greater choice in the form of different packaging
formats and more expensive, exotic types of fresh produce have fuelled value sales, which
have increased by 25% over the same period.

However, the fruit and vegetables sectors
are exhibiting markedly different trends. While volume sales of vegetables have fallen by
2% since 1994 to 4.5 million tonnes, fruit sales are up by 12% during this time. In value
terms, the vegetable and fruit sectors have grown by 23% and 28% respectively during the
same five year period (see Tables One and Two).

As with the food market as a whole,
increasing sales of fresh produce are also being conducted through the food service
channel as consumption outside the home continues to increase. The sale of fruit and
vegetables to food processors is also a major source of revenue for suppliers.

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By GlobalData

Table One: Fresh Vegetables Market
by Volume and Value, 1994-98

Year Volume
Change Value Change
1994 4,619 -4% £3.15b +7%
1995 4,565 -5% £3.68b +17%
1996 4,669 +2% £3.55b -5%
1997 4,581 -2% £3.54b n/c
1998 4,502 -2% £3.87b +9%
Leatherhead Food RA.

 Table Two: Fresh Fruit Market
by Volume and Value, 1994-98

Year Volume
Change Value Change
1994 1,959 +5% £2.18b +8%
1995 2,048 +5% £2.31b +6%
1996 2,098 +2% £2.43b +5%
1997 2,184 +4% £2.67b +10%
1998 2,201 +1% £2.80b +5%
Leatherhead Food RA.

Industry Consolidation

The structure of the fresh produce industry
in the UK is changing as the inevitable process of consolidation gathers momentum.
Consolidation is leading to economies of scale and more cost effective businesses able to
meet the growing consumer demand for pre-packed fruit and vegetables and for more exotic

Geest has played a key role in this
transition as it scaled back its fresh produce business in order to refocus on chilled
prepared foods. Although it has substantially reduced its fresh produce activities, Geest
is still one of the largest players in the UK, where the market leader is Fyffes (see
Table Three).

Geest sold its banana business in 1995 to a
joint venture between Fyffes and the Windward Island Banana Development Company, which
gave Fyffes half of UK banana sales and 20% of the European market. The sale of
Geest’s UK wholesale business to a management buyout has paved the way for the
emergence of one of the UK’s largest privately owned fresh produce distributors –
Redbridge Holdings. The original MBO vehicle, Francis Nicholls acquired World Fresh
Organisation (including Frumar and World Fresh Marketing) in 1996 to create Redbridge as
the holding company. The deal combined the wholesaling skills of Fancis Nicholls with the
procurement and supermarket expertise of World Fresh. Redbridge has since further expanded
with the acquisitions of AFI and Cheshire Produce.

Table Three: Leading Fresh Produce
Companies in the UK

Company Turnover Ownership
Fyffes (UK and
£610m Irish plc
Mack £201m Independent
£200E Independent
Keelings £150m Irish independent
Geest (fresh
£125mE plc
Greencell £120m Albert Fisher
£100mE Independent
MBM £92m Hillsdown

Another management buy-out, of
Dalgety’s Produce operation, has seen the creation of Greenvale Produce, which is now
the UK’s largest independent integrated supplier of potatoes.

Hillsdown Holdings had also planned to
dispose of its potato operation but failure to obtain an adequate offer has caused the
shelving of the proposed sale. Instead the potato business has now become part of
Hillsdown’s canning operations. Hillsdown had earlier disposed of its Poupart fruit
business to a management buy-out (Argent Holdings) in 1997.


Suppliers are also restructuring their
existing businesses in response to the growth in ‘category management’ in the
retail trade, to target the fast growing food service business, and, of course, to reduce

Fyffes, for example, has streamlined its UK
distribution network from 25 to six sites within the past ten years. Redbridge
restructured its UK operations last year into four trading divisions – Redbridge Produce
Marketing, Redbridge Flower Marketing, Redbridge Produce & Flowers, and Redbridge

Albert Fisher has just merged its UK fresh
produce activities, previously encompassing three companies – Jacques Onona, Saphir
Produce and Wentworth Import and Export – into a single operation entitled Greencell.

Investment in Modern Facilities

Apart from acquisitions and mergers, a
number of UK fresh produce suppliers have also been investing heavily in new technology
and new facilities to improve customer service and operating efficiency. For instance,
Mack spent £5.57 million last year in expanding its Paddock Wood operation with the
addition of 55,000 sq ft of temperature controlled warehousing, which has increased the
company’s capacity to add value to its products through the ripening, selection and
packaging of fresh produce.

Hazlewood Foods, one of the largest
glasshouse horticultural growers in the world with 205 acres under glass, has been
investing in new capacity. Currently holding 95% of the UK pot growing herbs market,
Hazlewood is also responsible for 35% of all UK grown tomatoes.

Another recent expansion project involved
Fowler Welch opening two new consolidation centres in Kent and Hampshire.

International Developments

Just as the UK marketplace is undergoing a
major upheaval, the nature of the international fresh produce business is also being
transformed by a series of deals. In Holland, a number of leading Dutch auction houses
have merged to form Greenery International, which now handles about 70% of Dutch fresh
produce output. Similarly, Agrexo, the Israeli fresh produce exporter, has also been put
on a stronger footing.

More recently, Dublin-based Fyffes,
Europe’s leading produce importer and distributor, has entered a European alliance
with Capespan, South Africa’s largest exporter of fresh fruit. Fyffes has acquired a
50% stake in Capespan International, the exclusive European supplier of the well known
Cape and Outspan brands, which is head quartered in Buckinghamshire and has marketing and
logistics operations throughout Europe. Capespan International is the European export arm
of South African parent company Capespan Group Holdings, which was formed earlier this
year following the merger of the country’s two main produce sales and marketing
organisations – Unifruco and Outspan International. With annual sales approaching £400
million, Capespan International handles over 65 million cases annually, mainly of South
African apples, pears, grapes, citrus and soft fruits.

The move is in line with Fyffes’
strategy of expanding its operations in mainland Europe. The UK and Ireland still account
for about half of group turnover of Ir£1.5 billion (£1.3 billion) but this proportion
will reduce in the future as the company pursues its international aspirations. “The
arguments in favour of consolidation in our industry are compelling,” points out
Fyffes chairman Neil McCann. “Significant opportunities exist for further acquisition
and alliances in the produce sector and we intend to capitalise on our position as the
leading fresh produce company in Europe to take this process forward.”

Another Irish fresh produce company,
Keelings, has been expanding its interests in the UK. It has just acquired a majority
share in Janic, a major importer and distributor of winter melons and citrus, for an
undisclosed sum. The deal will broaden Keelings’ UK produce portfolio, which until
now was centred on bananas, and increases group sales to over £150 million.

Fowler Welch Establishes New
Southern Operations

Nationwide fresh produce and horticultural
products distributor Fowler Welch has raised its profile in the south of England with the
introduction of two new consolidation centres in Kent and Hampshire, to add to its
existing centres in other regions of the country at Spalding, Earith, Yaxley and Selby.
The move is designed to allow the company to tap into the huge potential offered from
imports through the southern and eastern ports as well as locally grown produce, flowers
and pot plants.

Fowler Welch’s consolidation work in
Kent is based at the Sheerness Produce Terminal site at Sittingbourne where it has teamed
up with Wakeley Brothers Distribution. According to Fowler Welch, the centre has the most
sophisticated facilities in the country, incorporating 300,000 sq ft of chilled
distribution, CA storage with nitrogen generators, pre-pack facilities for all products,
water flotation to ensure careful handling of bulk bin consignments and full facilities
for ripening, chill blasting and chilled rack storage for 5,000 pallets, complete with
full traceable computerisation.

Complementing the new Kent consolidation
centre is a brand new 40,000 sq ft distribution centre at Portsmouth, which has just been
brought on stream and will become Fowler Welch’s main horticultural consolidation

The two new centres will allow Fowler Welch
to offer a complete ‘field to shelf’ distribution service from the south coast.

Fowler Welch has recognised for some time
that Kent and Portsmouth are vital links in its transport and distribution chain, and has
been waiting for the right opportunity to establish a firm presence in these areas. Having
already developed strong links with major suppliers and supermarkets in the south east,
Fowler Welch is now in a position to attract substantial new business. Its European
service will also benefit from the close proximity of the Kent facility which can act as a
break-bulk and pre-packing centre for consignments of perishables arriving by road from
the continent. With the ENZA fruit season well under way, Fowler Welch has been handling
high volumes of produce arriving through Sheerness.