The major consumption drivers for horticultural markets are similar to those affecting many other food markets. Demand for quality and a positive taste experience with a keen interest in new and innovative products is prominent.  As populations in developed economies age, new consumers seek out the new, less traditional taste experience, reports Rabobank.

Economic development and with it, increased disposable income, is a major factor in consumption trends, particularly in developing economies.  Consumption of fruit and vegetables in developing economies tends to be affected by the culture of that country with consumption in some countries being well below recommended levels.  In developing economies, consumption is highest in those countries further down the development road (e.g. Malaysia in comparison with Indonesia). 

In Australia there has been an ongoing increase in consumption of fruit and vegetables. Fruit consumption has increased by 56% since the 1960’s and the consumption of vegetables has increased by approximately 40% since the 1950’s.

Rabobank believes the following key drivers are affecting horticultural markets around the world.

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Convenience is of key importance to consumers in view of changing lifestyles and has led to an increased demand for value added products. This market is likely to grow as consumers are willing to pay for convenience. The grazing and snacking desire of consumers has led to a growth in convenience outlets in places long considered obscure food outlets (e.g. railway station platforms). We are gradually beginning to see fruit being introduced into vending machines as technology relating to suitable packaging and extended shelf life of the product evolves.

The health trend which could be expected to increase fruit consumption has not had as significant an effect as may have been anticipated. One of the reasons for this may be that there is hardly any advertising for fruit even though the nutritional value and intrinsic properties of fruits need to be promoted to encourage consumption.  It may also be that consumers are simply substituting new fruits for varieties that tended to be consumed in the past and as a result total consumption is not being affected.

Interest in the environment and processes used to achieve a market ready state (food safety concerns, storage properties and production techniques) are increasingly prominent.  The challenge for producers/exporters is to satisfy this array of consumption issues in an economically viable manner, ahead of the competition.

The range of distribution systems for fruit and vegetables is considerable and often regionally specific. The desire for convenience and increased product selection options manifests itself in the form of food retailers coming under increasing pressure to provide a larger product range at competitive prices. The market share of supermarkets is growing in line with consumers’ desire for:

– low prices
– one stop shopping
– convenient hours
– improved variety, quality, service

The competitive food retailers, seeking economies of scale, have resorted to mergers and acquisitions as the means to achieve larger product ranges at competitive prices.  In the European Union the top 5 supermarkets are responsible for 50% of all fresh produce sales and this is indicative of other developed countries.

The increased retailing power this provides when negotiating supply contracts is significant and these retailers prefer to deal with fewer, larger suppliers.  The loss of bargaining power is a very real issue for producers as, increasingly, they become price takers.  The major issue facing suppliers in many countries is how to maintain, or in some cases regain, a measure of control over their destiny. 

In order for suppliers to be successful in these changing times they need to look for ways to differentiate their product and consider developing brands to ensure their product is uppermost in the consumer’s mind. They need to educate consumers and ensure they understand what the benefits of their particular product are and how it can meet the needs of the consumer.

Suppliers also need to explore opportunities to form alliances to achieve economies of scale and improve their bargaining power. Rather than seeing the retailers as the enemy they need to look at establishing new relationships focussed on presenting retailers with solutions to their issues. This may possibly involve bypassing links in the traditional chain.

One of the most important aspects, however, is to ensure they provide a consistent supply of a quality product.

By Deborah Perkins, Head of Rabobank Agribusiness Consulting and Research Services (ACRS), based in Sydney.

Deborah may be contacted on email at: