SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019

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SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
SURPRISES IN STORE

FRUIT LOGISTICA TREND REPORT 2019

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SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
PREFACE
IMPRESSUM                                                                                  Dear members of the fresh produce trade,

FRUIT LOGISTICA TREND REPORT 2019                                                          Welcome to our third annual FRUIT LOGISTICA Trend Report.
SURPRISES IN STORE                                                                         As we continue to do our best to provide all of our exhibitors and
                                                                                           visitors with useful business information, our intention with this
A special trend report for the international fresh produce business,                       year’s publication Surprises in Store is to paint a detailed picture of
commissioned by Fruit Logistica and produced by Oliver Wyman.                              the international fresh produce market and in particular two of its
                                                                                           leading protagonists, namely shoppers and retailers.
REPORT AUTHORS @ OLIVER WYMAN
Rainer Münch                                                                               Understanding why people purchase fresh fruit and vegetables in
Alexander Pöhl                                                                             the way they do is not always easy, so with the help of Oliver Wyman
Germain Terreaux                                                                           we have conducted one of the most in-depth consumer surveys ever
Jens Torchalla                                                                             undertaken in Europe and North America. The analysis contained
                                                                                           in this report goes beyond a summary of consumer behaviour in
EDITORIAL & DESIGN @ FRUITNET MEDIA INTERNATIONAL                                          relation to fresh food, however; what it also does is to explore in
Mike Knowles                                                                               detail the various ways in which the world’s major grocery retail
Simon Spreckley                                                                            chains are attempting to keep pace with those consumer trends. In
                                                                                           addition, it provides valuable insight into how companies can best
PRODUCTION                                                                                 approach the opportunities and challenges that such trends and
Oliver Wyman                                                                               reactions will inevitably create.
www.oliverwyman.com
Tel +49 (0)89 939 490                                                                      The report’s findings will be presented at FRUIT LOGISTICA 2019
                                                                                           and then be made available to all as a free download from the
PUBLISHER                                                                                  event’s official website. We hope that the information it contains
Messe Berlin GmbH                                                                          will be helpful to all of our customers and partners in the fresh
Messedamm 22, 14055 Berlin                                                                 produce sector, who together have enabled FRUIT LOGISTICA to
fruitlogistica@messe-berlin.com                                                            remain the leading global platform for the fresh fruit and vegetable
www.fruitlogistica.com                                                                     sector. As always, we want to keep sharing information with the
                                                                                           fresh produce industry and to maintain close ties with all of you.
Copyright © 2019 Oliver Wyman                                                              We therefore look forward to hearing your views on this new report
All rights reserved. Unauthorised publication or reuse in any form whatsoever of all or    and would welcome your suggestions for future studies.
part of the content of this publication is expressly forbidden without the prior written
permission of the publisher.                                                               With kind regards as always,
                                                                                           Your FRUIT LOGISTICA team
Printed in Germany

                                                                                                                                                                     FRUIT LOGISTICA TREND REPORT 2019   3
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
METHODOLOGY
CONTENTS
                                                                                                                                                                                Surprises in Store, the Fruit     FIGURE 1.
                                                                                                                                                                                Logistica Trend Report 2019,      SURVEY RESPONDENTS
                                                                                                                                                                                takes a detailed look at the
                                                                                                                                                                                critical role that fresh fruit    Europe
                                                                                                                                                                       PAGE     and vegetables play in grocery    Austria300
                                                                                                                                                                                retail. The report is based on    Belgium500
METHODOLOGY5
                                                                                                                                                                                an in-depth consumer survey       Czech Republic 300
                                                                                                                                                                                – examining the responses of      France1,000
INTRODUCTION7                                                                                                                                                                  6,850 customers in 14 different   Germany500
                                                                                                                                                                                markets across Europe and         Italy500
1. WHAT REALLY MAKES FRESH FOOD SHOPPERS HAPPY?                                                                                                                     8-15       North America (see Figure         Netherlands500
Consumer attitudes to fresh produce ���������������������������������������������������������������������������������������������������������������������������� 10            1) – combined with project        Poland300
The challenge at the heart of fresh produce ������������������������������������������������������������������������������������������������������������������ 12              experience at Oliver Wyman        Russia500
                                                                                                                                                                                and a series of 20 expert         Spain500
Revitalising fresh food ������������������������������������������������������������������������������������������������������������������������������������������������� 13
                                                                                                                                                                                interviews (see Figure 2).        Switzerland450
                                                                                                                                                                                                                  UK500
2. MAKING SENSE OF NEW CONSUMER DEMANDS                                                                                                                           16-25
Easy-healthy: more convenient and healthy ������������������������������������������������������������������������������������������������������������������ 18                                                  North America
Geographical difference: the power of fortified food ������������������������������������������������������������������������������������������������������� 19                                                  Canada500
Emotional connections: learning from the top brands ����������������������������������������������������������������������������������������������������� 21                                                     US500

Case Study: Passion for production on a smaller scale �������������������������������������������������������������������������������������������������� 23
                                                                                                                                                                                                                  Total6,850
Consumption with a clear conscience ��������������������������������������������������������������������������������������������������������������������������� 24

3. WHAT THIS ALL MEANS FOR RETAILERS                                                                                                                              26-33
Rethinking fresh produce retailing �������������������������������������������������������������������������������������������������������������������������������� 28         FIGURE 2.
Bulding local and seasonal ranges ������������������������������������������������������������������������������������������������������������������������������� 28           EXPERT INTERVIEWEES
Boosting producer-retailer collaboration ����������������������������������������������������������������������������������������������������������������������� 29
                                                                                                                                                                                Company                                   Interviewee               Role
Case Study: The right response ������������������������������������������������������������������������������������������������������������������������������������ 30
                                                                                                                                                                                Ecole et Académie du Fruit et Légume      Frederic Jaunault         Meilleur Ouvrier de France (Primeurs, 2011)
Promoting sustainable processes ��������������������������������������������������������������������������������������������������������������������������������� 30           Auchan France                             Philippe Beyaert          Head of Fruit and Vegetables
Introducing emotive store design ���������������������������������������������������������������������������������������������������������������������������������� 31         Colruyt                                   Annelies Middag           Category Manager, Fruit and Vegetables
Case Study: Tech-savvy retailing ���������������������������������������������������������������������������������������������������������������������������������� 32         Colruyt                                   Annick Mievis             Chief Buyer, Fresh
Investing to motivate passionate staff ��������������������������������������������������������������������������������������������������������������������������� 32          Coop CH                                   Andreas Allenspach        Category Manager, Fruit, Vegetables and Flowers
Creating an emotional connection �������������������������������������������������������������������������������������������������������������������������������� 33           Die Frischemanufaktur                     Dr Jenny Müller           Chief Executive Officer and Founder
                                                                                                                                                                                Dream Harvest Farming Company             Zain Shauk                Chief Executive Officer and Co-founder
                                                                                                                                                                                Edeka Nordbayern-Sachsen-Thüringen        Stefan Dittert            Lead Buyer, F&V, Plants, Convenience and Eggs
THE OPPORTUNITY IN FRUIT AND VEG                                                                                                                                       34      Globus                                    Tim Strübing              Assortment Manager, F&V, Flowers and Plants
                                                                                                                                                                                Migros Ostschweiz                         Dominique Lumpert         Head of Supermarkets
                                                                                                                                                                                PKHA                                      Dominique Barbet          Partner
                                                                                                                                                                                PKHA                                      Benoit Koutny             Partner
                                                                                                                                                                                PKHA                                      Gregoire Schellaert       Partner
                                                                                                                                                                                Selgros Cash & Carry (Transgourmet)       Kerstin Dalchau-Mettner   Head of Sales Germany
                                                                                                                                                                                Rewe International                        Bahar Akca                Lead Category Buyer, Convenience
                                                                                                                                                                                SanLucar Austria                          Alexander Thaller         Managing Director
                                                                                                                                                                                Selgros Russia                            Dr Michael Zipfel         Chief Executive Officer
                                                                                                                                                                                Selgros Russia                            Jens Frerichs             Chief Merchandising Officer
                                                                                                                                                                                Sonae MC                                  Tomás Lince Fernandes     Head of Fresh Commercial Department
                                                                                                                                                                                UNCGFL                                    Christian Berthe          President

                                                                                                                                                                                                                                                                               FRUIT LOGISTICA TREND REPORT 2019   5
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
INTRODUCTION
                                        The suggestion that fresh produce might play        from, how they were produced,
                                        a critical role in the retail trade should not      how fresh they really are: these
                                        surprise anyone in the industry. What might         are of increasing relevance to
                                        not be so readily apparent, however, is just        consumers in many markets.
                                        how quickly the market for fresh produce is         At the same time, healthy
                                        changing. Customers now expect good quality         eating and convenience are
                                        fresh produce in every store. As a result, while    extremely relevant concerns
                                        grocery retail is seeking to use fresh produce to   for many. As trends, they are
                                        achieve market advantage, doing so is proving       not as contradictory as they
                                        ever more challenging.                              might first appear: customers
                                                                                            in certain segments want to
                                        Within this changing environment, fresh fruit       eat healthily with the greatest
                                        and vegetables are becoming central to the          possible convenience. This is
                                         success of any retail store. Welcome news for      providing producers, suppliers
                                                the sector, but there is a catch: as last   and    retailers   with     new
                                                   year’s Fruit Logistica Trend Report      opportunities and challenges.
                                                     Disruption in Fruit and Vegetable
                                                       Distribution highlighted, supply     This year’s Fruit Logistica
                                                       chains are evolving in new           Trend Report Surprises in Store
                                                        directions; and perceptions         will explain more about these
                                                        of what matters in fruit and        challenges and opportunities,
                                                       vegetables are shifting, as are      offering suggestions as to
                                                      expectations about the range of       how producers, suppliers and
                                                    products on offer.                      retailers might best react.

                                            Consumers are generally becoming much
                                        more sophisticated in terms of how they
                                        shop. Not only are they more environmentally
                                        conscious, but they demand more information
                                        about the products they choose to buy. Just
                                        where their fresh fruit and vegetables come

6   FRUIT LOGISTICA TREND REPORT 2018                                                                                FRUIT LOGISTICA TREND REPORT 2019   7
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
1.
    WHAT REALLY
    MAKES FRESH FOOD
8
    SHOPPERS HAPPY?
    FRUIT LOGISTICA TREND REPORT 2018   FRUIT LOGISTICA TREND REPORT 2018   9
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
Consumer attitudes to fresh produce                                                                FIGURE 4.
                                                                                                                                            DETAILED SURVEY RESULTS BY COUNTRY
                                         The quality of a store’s fresh food plays a key role in determining where customers                Source: Oliver Wyman, Fresh Survey, August-September 2018
                                         choose to shop for their groceries. This is underlined in our consumer survey: 59
                                         per cent of our respondents told us quality in the fresh food department was the                                       Importance of product categories        Importance of satisfaction criteria   Best place to buy fresh products
                                         most important factor in determining their choice of store (see Figure 3).                                             for overall satisfaction with fresh     for F&V satisfaction
                                                                                                                                                                                                                                              Share of loyal customers rating
                                                                                                                                                                Correlation, fresh satisfaction         Correlation, category satisfaction    store as best store to buy Fresh
                                         Looking a bit deeper, our survey reveals that fresh food quality determines                                            vs category satisfaction                vs satisfaction criteria              products
                                         basket size as well as footfall. Customers satisfied with a store’s fresh food
                                                                                                                                                 Austria        1. F&V 28%                              1. Quality 48%                        1. Interspar 61%
                                         quality will visit it 7 per cent more frequently than those who are not. Even more
                                                                                                                                                                2. Meat and cold cuts 22%               2. Assortment 26%                     2. Merkur 61%
                                         significantly, their average basket is 24 per cent larger. Consider also the fact that                                 3. Cheese 17%                           3. Price and promotions 11%           3. Billa 48%
                                         47 per cent say they are willing to pay more for higher quality fresh food, and
                                         the importance of fresh fruit and vegetables to the profitability of a food retail                      Belgium        1. F&V 39%                              1. Quality 39%                        1. Delhaize 75%
                                                                                                                                                                2. Meat and cold cuts 22%               2. Assortment 26%                     2. Carrefour 60%
                                         business becomes crystal clear.                                                                                        3. Cheese 13%                           3. Product presentation 10%           3. Albert Heijn 60%

                                         Satisfaction with fresh food appears to have a more profound impact on shoppers                         Czech Rep      1. Meat and cold cuts 33%               1. Assortment 28%                     1. Globus 74%
                                                                                                                                                                2. F&V 24%                              2. Quality 20%                        2. Kaufland 59%
                                         with more money to spend, playing an even greater role in determining where                                            3. Bread and pastries 16%               3. Product availability 15%           3. Lidl 57%
                                         they shop in many of Europe’s more affluent market segments. In Germany, for
                                         example, around 68 per cent of high-income families say that fresh food is the                          France         1. F&V 41%                              1. Quality 43%                        1. Grand Frais
                                                                                                                                                                2. Meat and cold cuts 37%               2. Assortment 15%                     2. Auchan
                                         most important reason for choosing a store. Those families not only make 6 per
                                                                                                                                                                3. Cheese 10%                           3. Price and promotions 10%           3. Cora/ Match
                                         cent more visits than the average, they also spend 53 per cent more. In short, no
                                         store should ever neglect quality when it comes to fresh products.                                      Germany        1. F&V 31%                              1. Assortment 34%                     1. Globus 79%
                                                                                                                                                                2. Meat and cold cuts 29%               2. Quality 31%                        2. Edeka 70%
                                                                                                                                                                3. Cheese 14%                           3. Product presentation 11%           3. Kaufland 61%
                                         The crucial question, therefore, is what drives customer satisfaction within the
                                         fresh food department? The answer turns out to be surprisingly simple: the most                         Italy          1. Convenience food 23%                 1. Quality 38%                        1. Esselunga 70%
                                         important thing for consumers is quality itself. As Figure 3 shows, quality alone                                      2. Cheese 20%                           2. Assortment 24%                     2. Coop, Ipercoop 65%
                                                                                                                                                                3. F&V/Meat and cold cuts 19%           3. Environmental commitment 6%        3. Conad 65%
                                         accounts for 33 per cent of the total satisfaction (we will come to the second most-
                                         important factor, the range of products, later in this report). Although the idea of                    Netherlands 1. F&V 42%                                 1. Assortment 35%                     1. Albert Heijn 76%
                                         quality as shoppers’ top priority is by no means unexpected, a closer analysis of                                   2. Meat and cold cuts 17%                  2. Quality 33%                        2. Lidl 75%
                                                                                                                                                             3. Convenience food 12%                    3. Product presentation 7%            3. Emte 61%
                                         their attitudes to quality reveals a number of surprises. Behind this apparently
                                         simple answer, there have been some notable changes in expectation, shifts in                           Poland         1. F&V 28%                              1. Quality 36%                        1. Lidl 64%
                                         demand that are central to this report’s findings.                                             »                       2. Convenience food 19%                 2. Assortment 18%                     2. Kaufland 62%
                                                                                                                                                                3. Meat & cold cuts 15%                 3. Product presentation 14%           3. Delikatesy Centrum 60%

                                                                                                                                                 Russia         1. Meat and cold cuts 20%               1. Assortment 35%                     1. Metro 80%
                                         FIGURE 3.                                                                                                              2. Cheese/Convenience food 18%          2. Quality 15%                        2. Karusel 76%
                                         RELATIVE IMPORTANCE OF SATISFACTION CRITERIA FOR FRESH FOOD                                                            3. F&V 18%                              3. Product presentation 12%           3. Lenta 64%
                                         CORRELATION, FRESH PRODUCE SATISFACTION VS SATISFACTION CRITERIA                                        Spain          1. F&V 22%                              1. Quality 47%                        1. Bonpreu 83%
                                         Source: Oliver Wyman, Fresh Survey, August-September 2018, average across all 14 geographies                           2. Convenience food 18%                 2. Price and promotions 10%           2. Hipercor 80%
                                                                                                                                                                3. Meat and cold cuts 13%               3. Assortment 9%                      3. Carrefour 67%

                                                                                                                                                 Switzerland    1. F&V 38%                              1. Quality 42%                        1. Migros 66%
                                                                                                                                                                2. Meat and cold cuts 22%               2. Assortment 27%                     2. Coop 61%
                                                                                                                                                                3. Cheese 11%                           3. Product presentation 10%           3. Lidl 47%

                                                                                                                                                 UK             1. F&V 22%                              1. Quality 47%                        1. Waitrose 76%
                                                                                                                                                                2. Convenience food 18%                 2. Price and promotions 10%           2. Morrisons 65%
                                                                                                                                                                3. Meat and cold cuts 13%               3. Assortment 9%                      3. Tesco 63%

                                                                                                                                                 Canada         1. Cheese 24%                           1. Quality 32%                        1. Save-on-Foods 68%
                                                                                                                                                                2. F&V 16%                              2. Product presentation 23%           2. Super C 67%
                                                                                                                                                                3. Convenience food 14%                 3. Assortment 22%                     3. Loblaws 65%

                                                                                                                                                 US             1. F&V 32%                              1. Assortment 30%                     1. Whole Foods 86%
                                                                                                                                                                2. Meat and cold cuts 16%               2. Product presentation 22%           2. Wegmans 82%
                                                                                                                                                                3. Cheese 12%                           3. Quality 21%                        3. Meijer 77%

10   FRUIT LOGISTICA TREND REPORT 2019                                                                                                                                                                                                                 FRUIT LOGISTICA TREND REPORT 2019   11
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
The challenge at the heart of fresh produce                                                                                                                            Revitalising fresh food

                              Almost universally, fresh produce has come                                        fresh produce, across all markets covered by                                         Retailers are faced with something of a quandary. While the fresh food
                              to play a much more central role in retail. The                                   our survey the task seems even more difficult.                                       department is more important than ever before as a way of attracting customers,
                              days when space expansion and promotion                                           In Germany, for instance, whereas in 2012 some                                       and with quality continuing to be a major driver of sales in that arena, more and
                              share could be used to drive sales now seem                                       68 per cent of customers said they saw major                                         more shoppers are coming to expect quality as a matter of course, regarding it as
                              long gone. Store expansion has largely come                                       differences in the quality of fresh produce                                          merely something related to hygiene which they take for granted.
                              to an end in most mature markets, having                                          sold by different retailers, today this figure has
                              reached its natural limit. Likewise, promotions                                   dropped to only 31 per cent – less than half that                                    This is making the battle for differentiation in fresh quality an increasingly
                              are increasingly cannibalising other sales.                                       seen just a few years’ earlier.                                                      intense one, forcing retailers to search for new ways of standing out from an
                              Consequently, fresh food in general has                                                                                                                                increasingly competitive crowd. Our survey shows that, as far as customers are
                              assumed a new, more central importance.                                           This clearly reflects the market consolidation                                       concerned, all is not equal in the world of fresh. When ranking the fresh categories
                                                                                                                seen over the last few years. Weaker players                                         that are most important to them, it is the fruit and vegetable department that
                              Driving greater sales in this area is no simple                                   have been forced out of the market and                                               matters most, ahead of all others including meat and bakery (Figure 6).
                              matter, however. On the one hand, discounters                                     those remaining are developing more and
                                                                                                                                                                                                                                                                                                                    Portrait
                              are keeping up the pressure in terms of                                           more sophisticated operations. While quality
                              value for money, making further gains from                                        differences do continue to score higher in less                                      Exhibit 3: Importance of product categories
                              traditional vendors. On the other hand, online                                    consolidated grocery markets such as Russia                                          for fresh satisfaction
                                                                                                                                                                                                     FIGURE 6.
                              fresh food sales are chipping away at the edge                                    (see Figure 5), for most, quality has dropped                                        IMPORTANCE OF PRODUCT CATEGORIES FOR FRESH FOOD SATISFACTION
                              of the market, placing additional pressure on                                     below 40 per cent.                                                                   CORRELATION, CATEGORY SATISFACTION VS. FRESH SATISFACTION
                              bricks-and-mortar retailers.                                                                                                                                           Source: OliverofWyman,
                                                                                                                                                                                                     Importance             Fresh
                                                                                                                                                                                                                      product     Survey, August-September
                                                                                                                                                                                                                              categories                     2018, average across all 14 geographies
                                                                                                                                                                                                                                          for fresh satisfaction
                                                                                                                                                                                                     Correlation, category satisfaction vs. fresh satisfaction
                                                                                                                As already mentioned, this does not mean fresh
                              Quality as a means of differentiating a store’s                                   food is unimportant; far from it, as it remains
                              offer is not an easy answer either. Whereas                                       the most important differentiator. What it                                             1      F&V                                                                                         28%

                              once upon a time a retailer could have expected                                   highlights is that the field of fresh is becoming
                              to distinguish itself solely by the quality of its                                an increasingly competitive one.
                                                                                                                                                                     Portrait                          2      Meat & cold cuts                                                                      20%

                                            Exhibit 2: International comparison of perceived
                                            differences in fresh                                                                                                                                       3      Cheese                                                                     13%

                              FIGURE 5.                                                                                                                                                                4      Convenience food
                                                                                                                                                                                                              (fresh only)
                                                                                                                                                                                                                                                                                         13%
                              INTERNATIONAL     COMPARISON
                                            Perceived          OF PERCEIVED
                                                      differences               DIFFERENCES
                                                                   between retailers   in Fresh IN FRESH FOOD
                                            % of customers seeing big differences in the Fresh offer between the retailers in their country
                              Source: Oliver Wyman, Fresh Survey, August-September 2018
                                                                                                                                                                                                       5      Bread and pastries                                                    10%
                                    Russia                                                                       54%

                                                                                                          40%
                                    Spain                                                                                                                                                              6      Fish                                                              7%

                                    Poland                                                               39%
                                                                                                                                                                                                     Source: Oliver Wyman, Fresh Survey, August-September 2018, average across all 14 geographies

                                    Switzerland                                                          38%

                                    Austria                                                             36%

                                                                                                 32%                                                                                                 As all retailers are aware, shoppers tend to treat fresh fruits and vegetables
                                    Italy
                                                                                                                                                                                                     very differently depending on the category, type or variety. Some are regarded
                                    Germany                                                     31%
                                                                                                                                                                                                     very much as shopping list essentials, never missing from a customer’s basket.
                                                                                                                                                                                    © Oliver Wyman                                                                                                                             1
                                    US                                                      28%                                                                                                      Other varieties may be perceived as harder to come by but are increasingly being
                                                                                                                                                                                                     sought by lots of customers. Whenever these varieties are absent from a store’s
                                    Belgium                                             25%
                                                                                                                                                                                                     fresh produce department, they are the products most missed (see Figure 7).                                »
                                    Canada                                           23%

                                    Czech Rep                                       22%

                                    UK                                              22%

                                    Netherlands                                 19%

                                            Source: Oliver Wyman, Fresh Survey, August-September 2018

                 © Oliver Wyman                                                                                                                                                 1

12   FRUIT LOGISTICA TREND REPORT 2019                                                                                                                                                                                                                                                                               FRUIT LOGISTICA TREND REPORT 2019   13
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
FIGURE 7.                                                                                                                     In our consumer survey, the responses we had from higher-income customers
     CUSTOMER REFLECTIONS ON DIFFERENT F&V VARIETIES (SIZE = MENTIONS)                                                             might contain an important clue for beleaguered retailers. The data show
     Source: Oliver Wyman, Fresh Survey, August-September 2018, only F&V mentioned five times or more                              these customers care more about service, have a stronger commitment to the
                                                                                                                                   environment, and demand more specialised ranging than the average consumer.
     F&V never missing from the shopping basket                        F&V consumers miss in many retail stores                    With a little imagination, this has the potential to translate into the core of a
                                                                                                                                   strategy for potential differentiation in two distinct areas: first, product range;
                                                                                                                                   and second, shopping experience.

                                                                                                                                   Most retailers will of course be aware that both product range and shopping
                                                                                                                                   experience can be powerful points of difference: as Figure 6 showed, assortment,
                                                                                                                                   in particular, is an established driver of consumer satisfaction with fresh food,
                                                                                                                                   and this centres around three new and critical things that shoppers want:

                                                                                                                                   • Fresh produce that is both more convenient and healthier
                                                                                                                                   • Fruit and veg with an emotional connection, to which they can relate like brands
                                                                                                                                   • A clear conscience, with greater origin transparency and less environmental impact

                                                                                                                                   Each of these three consumer demands can considered in relation to both
                                                                                                                                   product range and shopping experience, revealing an array of different potential
     Digging a bit deeper into what it is that determines customer satisfaction with                                               responses (see Figure 9). While a few retailers and suppliers are beginning to
     regard to fruit and vegetables quality, our research reveals that the top three                                               respond to these new requirements, to our knowledge, none has yet done so fully.
     drivers are the appearance of the produce, its taste, and its size and shape
     (see Figure 8). Here customer preferences are also undergoing something of a                                                  In the remainder of this report, we first explore each of these areas in more detail
     change. Experts confirm that whereas consumers have long associated produce                                                   before examining what they mean in practice for the retailers themselves. _
     appearance with quality, taste is now playing an increasingly important role in
     how they assess quality. These changes are at the heart of dynamics rippling
     across the entire value chain.

                                                                                                                                   FIGURE 9.
     FIGURE 8.                                                                                                                     EMERGING DIFFERENTIATORS OF FRUIT AND VEGETABLE SATISFACTION
     QUALITY AS A DRIVER OF SATISFACTION WITH FRUIT AND VEGETABLES                                                                 Source: Oliver Wyman, Fresh Survey, August-September 2018
     Source: Oliver Wyman, Fresh Survey, August-September 2018, average across all 14 geographies

     Importance of satisfaction criteria for F&V                          Determining factors in F&V quality satisfaction          What are                                   The response we expect to see in stores…
     Correlation, satisfaction criteria vs F&V satisfaction               Correlation, satisfaction criteria vs F&V satisfaction   consumers
                                                                                                                                   asking for?
                                                                                                                                                     Assortment                                    Experience

                                                                                                                                   Faster, easier,   / Larger convenience range                    / Modular convenience, ‘putting your
                                                                                                                                   healthier                                                         meal together’
                                                                                                                                                     / New easier-to-cook varieties
                                                                                                                                                                                                   / Suggestions about ‘what to eat’
                                                                                                                                                     / More ready prepared (cut, peeled, etc.)
                                                                                                                                                                                                   / Quick and easy shopping
                                                                                                                                                     / Fortified vegetables
                                                                                                                                                                                                   / More information on health
                                                                                                                                                     / Re-discovery of Frozen
                                                                                                                                                                                                   / Encouragements to live a healthier life
                                                                                                                                   Emotional         / Better tasting varieties                    / ‘Theatrical’ presentations
                                                                                                                                   connection
                                                                                                                                                     / Brands that convey trust in their           / Increased interaction: advice, food
                                                                                                                                                       superior quality                              tastings, cooking classes, etc.
                                                                                                                                                                                                   / More in-store gastronomy and
                                                                                                                                                                                                     production

                                                                                                                                   Fruit and veg     / More local products                         / Greater transparency in the supply
                                                                                                                                   with a good                                                       chain
                                                                                                                                                     / More seasonal products
                                                                                                                                   conscience
                                                                                                                                                                                                   / Increased centrality of local and
                                                                                                                                                     / Environmentally friendly packaging
                                                                                                                                                                                                     seasonal fruit and vegetables
                                                                                                                                                                                                   / More information on sustainability of
                                                                                                                                                                                                     products and efforts to achieve this

14   FRUIT LOGISTICA TREND REPORT 2019                                                                                                                                                                                                         FRUIT LOGISTICA TREND REPORT 2019   15
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
2.
     MAKING SENSE OF
     NEW CONSUMER
16
     DEMANDS
     FRUIT LOGISTICA TREND REPORT 2018   FRUIT LOGISTICA TREND REPORT 2018   17
SURPRISES IN STORE - FRUIT LOGISTICA TREND REPORT 2019
GEOGRAPHICAL DIFFERENCE:
     Easy-healthy: more convenient and healthier

     In the past, convenience foods have not                                               fewer people regularly cook for themselves.

                                                                                                                                                                THE POWER OF FORTIFIED FOOD
     necessarily been associated with health                                               Those who do generally have less time to
     awareness. In that sense, convenient fresh                                            spend on cooking than they did in the past (see
     fruit and vegetables mentioned here have                                              Figure 10). The same is true of the amount of
     little or nothing to do with the majority of                                          time spent shopping. Yet simultaneously, the
     such products. The demand is for healthy                                              current generation has emerged as more health
     fresh produce that is packaged in a convenient                                        conscious than ever before, and this is driving
     format for people who are short of time and                                           consumers to seek out healthy and convenient                         Exactly how producers and          counter the impact of the
     often in a hurry, both when shopping in the                                           fresh foods – easy to prepare healthy foods that                     retailers respond to demands       country’s notoriously cloudy
     store and when cooking at home. Although                                              can be put on the table quickly but which the                        for easy-healthy foods will        winter days on the number of
     family mealtimes remain important to many,                                            consumer knows will do their family good.             Portrait       depend in part on the specific     sunlight hours.
                                                                                                                                                                geography involved. Outside
     Exhibit 6: Time pressures impinge on home cooking                                                                                                          Europe, there is already a         The challenge in Europe is
     FIGURE 10.                                                                                                                                                 growing retail trend involving     that extensive EU regulation
     EMERGING DIFFERENTIATORS OF FRUIT AND VEGETABLE SATISFACTION                                                                                               foods that deliver improved        limits the scope of such
     People with
     Source: GfK perceived stress/lack
                 ConsumerScan,         of time
                                  Bundesagentur                            “Why do you (2012)
                                                  für Arbeit, Euromonitor International purchase ready meals versus preparing a meal                            nutritional qualities – for        labelling, making it more
     Share within population group with time stress in % in Germany        from scratch?”¹
                                                                                                                                                                example, broccoli containing       difficult to promote health
     People with perceived stress / lack of time                                             “Why do you purchase ready meals instead of                        an increased number of             benefits    associated    with
     Share within population group in Germany                                                preparing a meal from scratch?”¹                                   antioxidant     elements,    or    such products. According
                                                                                                                                                                lettuce with higher vitamin        to a summary provided by
                                                                                                                      “I do not have
                                                                                                  45%
                                                                                                                                                                levels. In the US, for instance,   The Food Safety Authority
                                                                                                                       time to cook”                            Inventure has launched a           of Ireland, “the labelling,
                                                   48.6 %
                                                                                                                                                                fortified product made from        presentation and advertising
           44.3 %                                                                                                                                               frozen fruit berries with          of foods to which vitamins
                                                              40.8 %
                                                                                                                                                                added vitamins, sold as ‘fruit     and minerals have been added      or deceive the consumer as to the nutritional
                      36.8 %                                                                                                                                    plus vitamins’.                    must not include any mention      merit of a food that may result from the
                                                                                                                                                                                                   stating, or implying, that        addition of these nutrients.”
                                                                                                                                                                This type of food is already       a balanced and varied diet
                                                                                                                                                                generating         significant     cannot provide appropriate        Clearly this does not in itself prohibit the
                                                                                             Number of shopping trips per year and person                       revenue in Asia and the first      quantities    of    nutrients.”   advertising and sale of fortified products.
                                                                                             Total number in Germany                                            such products are now making       Furthermore, it says, “the        Tesco, for one, has found a way to comply
                                                                                                                                                                their way to Europe. In the UK,    labelling, presentation and       with these regulations, stating boldly in its
                                 9.0 %                                   9.1 %                                     -1,9% p.a.                                   for instance, Tesco is selling     advertising of foods to which     advertising that “mushrooms enriched with
                                                                                                241        235        231        228
                                                                                                                                                                mushrooms with additional          vitamins and minerals have        Vitamin D [can] help keep you healthy during
                                                                                                                                          223
                                                                                                                                                                Vitamin D that is said to help     been added must not mislead       the darker winter months”.
                       2011                                    2014

                     Young            Middle-aged              Old
                                                                                                2012       2013       2014       2015     2016                  seamless ways to keep customers informed             We expect these demands to play out in a
                                                                                                                                                                about what constitutes a healthy diet. Such          broader and more innovative easy-healthy
     1. Share of respondents agreeing with the statement below, global survey
     Source: GfK ConsumerScan, Bundesagentur für Arbeit, Euromnitor International (2012)                                                                        advice, necessarily, will have to be tailored to     convenience offer in stores. That evolution in
                                                                                           Number of shopping trips per year and person                         an individual’s needs; this could comprise a         terms of product range is likely to mirror the
                                                                                           Total number
                                                                                           hurry    within Germany
                                                                                                            as much convenience as possible.                    mixture of advice from knowledgeable staff
     The 2018 Fruit Logistica Trend report provided                                                                                                                                                                  following trends:
     insights into the continued growth of out-of-                                         This will require a trade-off with displays                      1   and the use of modern communication tools,
     home consumption. Simultaneously, that same                                           that encourage traditional store journeys,                           such as smartphone apps.                             • Easy-to-prepare fruit and vegetable
     trend will also lead to changes in the way people                                     because many consumers will be looking for                                                                                  varieties – such as Bimi / Tenderstem, a
     purchase fresh produce for home cooking, with                                         immediate access to the produce they need                            Similarly, trustworthiness will be at a premium –      convenient form of broccoli
     major implications for retailers. They will need                                      and will resist being led through the store to                       it is likely that consumers will look increasingly   • Ready-to-cook fruit and vegetables (pre-
     to devote as much effort to reinventing how                                           find it. Increasingly, customers will also be                        to the reassurance of trusted brands, branding         prepared, for example cut and peeled)
     they sell fresh produce as to what they sell.                                         looking for healthy foods that can sustain                           that can reassure the consumer about the             • Greater product choice, centred around
                                                                                           their health-conscious diets. Retailers and                          healthy, reliable nature of the fresh produce,         local and seasonal demand
     These changes begin at the store’s door. To                                           producers will need to respond to this demand,                       while at the same time making it possible for        • Modularity, meaning the sale of readily
     attract busy consumers, it will need to stock                                         without overloading their stores, finding                            them to quickly identify the exact product they        recognisable fruit and vegetable
     product ranges that provide shoppers in a                                                                                                                  are looking for, and in the quantity they need.        components for easy-to-assemble meals      »
18   FRUIT LOGISTICA TREND REPORT 2019                                                                                                                                                                                                                      FRUIT LOGISTICA TREND REPORT 2019   19
EMOTIONAL CONNECTIONS:
     Fresh fruit and vegetable producers and                                   Discounters like Aldi and Lidl are also
     retailers alike will need to stay one step ahead                          working to expand their fresh fruit and
     of emerging trends that are being driven by                               vegetable convenience ranges. Driven by

                                                                                                                                                                               LEARNING FROM TOP BRANDS
     so-called influencers. In the recent past, one                            the price point, their initial targeting is for
     such trend has been the highly influential and                            medium- to high-income customers, with
     widespread promotion of superfoods. While                                 the opportunity regarded as particularly
     the market for such products has been limited                             strong in urban stores. Time will tell if
     largely to specific countries and regions, a                              retailers can also reach the four in ten
                                                                                                                                                                Portrait
     number of these superfoods has made the                                   younger people with even less to spend.                                                         Beyond their physical and
     leap and become truly global.        Exhibit 7: Uptake in select superfood sales, Germany                                                                                 practical attributes, powerful
                                                                                                                                                                               brands go out of their
     This segment is being shaped                                      FIGURE 11.                                                                                              way to build an emotional
     in particular by influencers                        SALES OF SELECTED SUPERFOODS IN GERMANY (€ ,000)                                                                      connection with consumers,
     across all types of media,                          Source: IRI (Superfood)
                                          Revenues with selected Superfoods
                                                                                                                                                                               one that establishes trust –
     especially where the food is         in thousand EUR in Germany                                                                                                           and consequently customer
     highlighted in magazines by                                                                                                                                               loyalty, encouraging repeart
     celebrity chefs or by other                                                                                             12,392                                            purchases and creating a brand
                                                            Chia
     well-followed names on food                                                                                                            23,228                             premium. This can play well
     blogs and social media feeds.                                                                                                                                             for fresh foods, particularly for
                                                                                                             8,494
     On occasion, this has led to                      Quinoa                                                                                                                  the many fruit and vegetables
                                                                                                                              12,909
     impressive sales uptake (as                                                                                                                                               that appeal to so many of the
     highlighted by the examples                                                                                                                                               senses.      Bricks-and-mortar
                                                                                         2,763
     in Figure 11). However, as                 Matcha Tea                                                                                                                     retailers and produce brand
                                                                                                         7,006
     retailers are all too aware,                                                                                                                                              owners      are     increasingly
     there is a very real risk that                                              1,193
                                                                                                                                                                               concluding that such sensual
     such trends can disappear as                 Amaranth                                                                                                                     appeal is a particularly
                                                                                         2,961
     quickly as they arrived.                                                                                                                                                  important avenue, one that
                                                                         49                                                                                                    could potentially give them a       ABOVE—Making fresh produce departments more theatrical could help to underline the value of real stores
                                             Almond flour
     Not all the action is among                                          145                                                                                                  competitive advantage over
     high-end shoppers. A large                                                                                                                                                other channels. If customers        superior     quality.   German        supermarket              Pink Lady seal of approval – the
     number have to manage on                                            27                                                                                                    wish to see, touch, feel and        chain Globus, for example, selects fruit and                   pin heart-shaped sticker you
                                           Coconut fibres
     restricted budgets and are                                          76                                                                                                    smell fresh produce before          vegetables it believes meet particularly high                  find on every one of our apples.
     effectively prevented from                                                                                                                                                buying, what better place to do     standards of quality and taste to be sold under                It’s a symbol of authenticity and
                                                                                                           2015       2016
     eating the healthy foods             Source: IRI (Superfood)
                                                                                                                                                                               that than in the store?             its premium label Globus Gold. “We only work                   guarantees consistent quality.”
     they might otherwise wish to                                                                                                                    Portrait
                                                                                                                                                                                                                   with producers who want the best and who we
     consume. This is particularly                                                                                                                                             The sensual aspect of fresh         know personally,” the company comments. Its                    For branded products to work in
     true for younger age groups:                     Exhibit 8: Budget constraints restricting a healthier
                                                           FIGURE 11.                                                                                                          produce contains another            advertising also underlines an aspect that we                  fruit and vegetables, they have
     data from Statista        suggest
                      © Oliver Wyman                  diet SHARE OF RESPONDENTS SHORT OF MONEY TO PURSUE A HEALTHIER DIET                                                  1   emerging        trend:    while     will look at in further detail later in this report,           to deliver consistent quality
     that in Germany, four in ten                                       GERMANY, PERCENTAGE PER AGE BRACKET                                                                    consumers still associate the       the products’ seasonality. “Globus Gold fruit                  on each purchase occasion
     people below the age of 40                                         Source: Statista (2016)                                                                                fresh appearance of fruit and       and vegetable products are only available for a                and provide visible, additional
                                                       Share of respondents short of money to pursue a healthier diet
     would eat more healthy foods                      Per age bracket in %                                                                                                    vegetables with their quality,      limited time in the season – only when they are                value for the customer when
     if they could afford to do so                                                                                                                                             taste is becoming a far more        perfectly ripe.”                                               compared with the alternatives.
     (see Figure 12).                                                                            18–29                       38%
                                                                                                                                                                               important factor in a shopper’s                                                                    Some retailers have already
                                                                                                                                                                               purchasing decision. Experts        Adopting a slightly different approach, some                   achieved success in this area.
     The situation in those lower                                                        $                                                                                     tell us that in response to this    growers have marketed particular varieties of                  Germany’s largest supermarket
     income brackets suggests                                                                    30–39                                42%                                      trend they expect producers         produce under a universal brand, to ensure that                chain Edeka has been aware of
     there is a large untapped                                                                                                                                                 and retailers to focus much         consumers see the produce as distinctive. Pink                 the need for differentiation as
     market, a problem that                                                                                                                                                    of their future innovation on       Lady apples, for instance, include a number of                 it introduces consumer brands
     could be addressed through                                                                  40–49               34%                                                       delivering superior taste in        cultivars – the main one Cripps Pink was first                 to its fruit and vegetable offer.
     innovative and alternative                                                                                                                                                fresh produce. The key here         produced in 1973 in Western Australia – that are               For instance, unlike others,
     approaches. Frozen fruit and                                                                                                                                              is to build consumers’ trust        all marketed under the same umbrella brand.                    the limes it markets under
     vegetables, for instance, can                                                               50–59               32%                                                       in the superior quality of          Pink Lady apples are grown around the world,                   the Havana Club brand do
     provide a convenient and                                                                                                                                                  fresh produce. A number of          but careful marketing means that consumers still               not have waxed skins, making
     healthy alternative to fresh                                                                                                                                              producers and retailers have        get consistent appearance, flavour and quality.                them more suitable for use
     produce. Pricing is key for                                                                  60+                33%                                                       already succeeded in doing          As their advertising states: “Only the best of the             in drinks. They can be sliced
     this segment.                                                                                                                                                             so by consistently delivering       apples are selected, hand-picked and given the                 and dropped straight into                »
20   FRUIT LOGISTICA TREND REPORT 2019                Source: Statista (2016), Germany                                                                                                                                                                                                       FRUIT LOGISTICAFRUIT
                                                                                                                                                                                                                                                                                                             TRENDLOGISTICA        21
                                                                                                                                                                                                                                                                                                                            TREND REPORT
                                                                                                                                                                                                                                                                                                                    REPORT 2019          2019
a glass without having to be heat-scrubbed                                     unlikely that European retail will replicate the
        first. Elsewhere, Rewe’s fresh oranges are sold                                exuberance of American displays, the majority
        in supermarkets under the name Valensina, a                                    of the experts we interviewed said they
        well-known juice brand. The marketing strapline                                expected to see more focus on this kind of visual
        offers the customer a guarantee that the oranges                               merchandising for fresh fruit and vegetables
        have a superior taste and juice content,                                            in Europe. Appearance is of increasing
        encouraging customers to use the                                                         importance.
        fruit to make their own fresh juice.

                                                                                                                                                            PASSION FOR PRODUCTION
                                                                                                      As the major brands know, the secret
        Another way of creating a                                                                      to strong emotional connection
        stronger emotional connection                                                                   with consumers lies in the last of

                                                                                                                                                            ON A SMALLER SCALE
        with fruit and vegetable                                                                        three elements addressed here:
        consumers is to improve their                                                                    the store’s staff. Interaction
        appearance and presentation.                                                                     with a store employee can make
        A number of countries – the US                                                                  a vital difference to how the
        and Canada in particular – have                                                             customer perceives the produce itself.
        a long history of creating elaborate                                                  By personally introducing consumers to                        Cooperatives form a well-established alternative      for example, regularly arranges for customers
        and attractive in-store fresh produce displays.                                products, offering advice or suggesting appropriate                  to the more conventional food industry business       to meet its artisan partners in its stores in
        These almost theatrical displays are designed to                               recipes, members of staff can trigger positive                       model. According to PK Halstead Associates, a         Hauts-de-France and Ile-de-France, enabling
        captivate the consumer and elicit an emotional                                 emotions. A strong relationship established with                     Brussels-based food industry consultancy that         them to better understand how they produce
        reaction. A well-established element of North                                  the store can create trust that then transmits to                    specialises in design and identity, the present       their food, or simply to get more information
        American fruit and vegetable marketing, they are                               the produce itself.                                                  environment opens up new opportunities for            about what they are eating. Concerned about
        a bright, fun and stylised way of communicating                                                                                                     such ventures: “The cooperative model gives an        ensuring transparency with their customers, the
        quality.                                                                       Bricks-and-mortar retailers have a final card up                     alternative response to both new expectations         cooperative posts extensive information about
                                                                                       their sleeve: they can show people how great fresh                   of the consumer and the wishes of the producers       its partners on a dedicated website, including the
        Elsewhere, presentation has yet to play as                                     food is. A customer’s experiences in the store –                     to enhance their profession as custodians of the      prices the cooperative pays producers for each of
        an important role in determining overall                                       being shown how conveniently an easy-healthy                         earth.” This approach is exemplified in Belgium’s     their products.
        satisfaction as it does in North America. In                                   food fits with their busy lifestyle, or getting                      Paysans-Artisans. The cooperative focuses on
        most other markets, presentation accounts for                                  involved in a gastronomical tasting or cooking                       marketing artisanal and local food products,          A number of small-scale groups take this intimate
        around 10 per cent of customer satisfaction,                                   class to learn how to make use of a new product                      but defines itself as a citizen movement that         relationship one step further. To shop in Parisian
        whereas it registers double that figure in the US                              – will strengthen their emotional connection with     Portrait       brings together farmers, artisan-processors and       cooperative La Louve’s store, for example, a
        and Canada (see Figure 14). While it might appear                              the fresh produce itself and the retailer.       »                   consumers around a shared vision of agriculture       customer must first become a member. And it’s
                           Exhibit 10: Importance of F&V presentation                                                                                       and food. This echoes PK Halstead’s own vision;       not just in Europe that this kind of membership
        FIGURE 14.                                                                                                                                          by “rejecting gigantism and focusing on the           model is gaining currency. The same approach
        IMPORTANCE OF FRESH FRUIT AND VEGETABLE PRESENTATION IN STORE                                                                                       diversity and quality of the produce,” cooperatives   is taken by the Park Slope Food Coop in the
        Source: Oliver Wyman, Fresh Survey, August-September 2018                                                                                           can reinvigorate farming and restore passion to       US, which aims to maximise the provision of
                           Importance of F&V presentation                                                                                                   small producers, farmers and craftsmen, at the        foods that are grown organically, regionally or
                           Correlation, category satisfaction vs. satisfaction criteria
                                                                                                                                                            same time providing customers with healthy and        both, as well as ethical sourced and otherwise
                 Canada                                                                   23%                                                               sustainable food, and ensuring they are better        environmentally friendly. To this end, it avoids
                                                                                                                                                            informed about what they eat.                         products that involve the use of toxic substances
                 US                                                                      22%
                                                                                                                                                                                                                  such as chlorine bleach and petroleum, minimises
                                                                                                                                                            The heart of this approach is the localism that       the use of disposable products, and seeks out
                 Poland                                                          14%                                                                        supports close ties between the producer and the      those suppliers which use recycled containers
                                                                                                                                                            consumer. The French cooperative O’Tera du Sart,      and environmentally sound packaging.
                 Russia                                                    12%

                 Germany                                                11%

                 Belgium                                             10%

                 Switzerland                                         10%

                 Spain                                             9%

                 UK                                                9%

                 Netherlands                                7%

                 Italy                                   6%

                 Czech Rep                            5%

                           Source: Oliver Wyman, Fresh Survey, August-September 2018
  22    FRUIT LOGISTICA TREND REPORT 2019                                                                                                                                                                                                                    FRUIT LOGISTICA TREND REPORT 2019   23

© Oliver Wyman                                                                                                                                          1
Portrait

                                                                                                                                                              Exhibit 11: Increased environmental consciousness
                             Consumption with a clear conscience                                                                                               FIGURE 15.
                                                                                                                                                               INCREASING
                                                                                                                                                              Revenues         CONSUMER AWARENESS
                                                                                                                                                                         with “Bio”-certified                  OF FOOD’S IMPACT ONSurvey
                                                                                                                                                                                              food in retail stores                THE ENVIRONMENT
                                                                                                                                                                                                                                         results, 2018
                                                                                                                                                              In € BN in Germany                                                  Conducted by SPLENDID RESEARCH GmbH
                                                                                                                                                               Source: Agrarmarkt Informations – Arbeitskreis Biomarkt, European Commission (2017), Statista Survey (2016), Splendid Research (2018)
                             Consumers are changing. Slow food, farmers’             fresh produce thrown away and in terms of how
                             markets and street food are all trends that point       ecologically sound its packaging might be, is an                          Retail sales of organic-certified food                                                       Survey results
                             towards a different attitude to consumption,            increasing concern. By happy coincidence, this is as                      Germany, € bn                                                                                Conducted by Splendid Research
                             one which means that we expect whatever we              much a priority for retailers as it is for consumers.
                                                                                                                                                                                               +9.9% p.a.
                             eat to give us great enjoyment but at the same          Significantly, a survey carried out in April 2018 by
                             time to leave us with a clear conscience, secure        Splendid Research found that consumers were
                                                                                                                                                                                                    4.8             5.5            5.9                      >70%              Would consider buying unpackaged food
                             in the knowledge that we have not harmed the            willing to take action to back up these concerns.                               4.1            4.2

                             environment. This is consumption very much as           Around 90 per cent said they would be willing to
                                                                                                                                                                     2013          2014            2015            2016           2017
                             virtue, eating as identity.                             buy aesthetically imperfect fruit and vegetables
                                                                                     (so-called wonky or ugly produce). What’s more, 78                                                                                                                                       Would consider bringing their own
                             Environmental commitment, in particular, is             per cent of women and 72 per cent of men would                            “I am concerned about the impact of plastics in everyday                                        75%            containers to fill with food in the
                                                                                                                                                                                                                                                                              supermarket
                             becoming an important criterion in store selection      consider buying loose fresh food, especially when                         products on the environment“ EU, percentage share
                             in Europe. In the UK, for example, 43 per cent          it came to fruit and vegetables. Plastic packaging
                             of consumers say their choice is shaped by how          is seen as a major issue: 87 per cent of respondents
                                                                                                                                                                     45%           42%
                             environmentally sustainable they believe the
                             store to be. That figure is even higher for high-
                                                                                     said they were concerned about its impact on the
                                                                                     environment – particularly so with regard to the                                                               8%              3%             2%
                                                                                                                                                                                                                                                               73%            Hope to minimize the usage of packing

                             income families. As a result, all of the retailers we   plastics used in everyday products – and 73 per                            Fully agree       Tend to        Tend to          Fully          Unsure
                                                                                                                                                                                   agree         disagree       disagree
                             interviewed now see an emphasis on sustainability       cent said they hoped to minimise the amount of
                             as a high priority for their company.                   packaging they used. However, when it comes to                            Willingness to buy deformed vegetables or fruit
                                                                                     paying for this, the response was less assured: only                      EU, percentage share                                                                            72%            Would like to protect the environment

                             Sustainability plays into yet another aspect of food    half said they would be willing to pay more for
                             consumption, namely its seasonality and locality.       biodegradable packaging (see Figure 15).                                  Yes                                      90
                             As food becomes increasingly associated with
                             both identity and environmental sustainability,         Consumers want advice too                                                  No      10
                                                                                                                                                                                                                                                              50%             Are willing to pay more for biodegradable
                                                                                                                                                                                                                                                                              packed products
                             the specific questions of when and where food           While reducing the amount of plastic packaging
                             has been produced take on a new resonance.              remains a priority for most, this can also be at
                             Consumers are turning to foods with lower               odds with the primary aim of sustainability. Cheap                       Source: Agrarmarkt Informations-Gesellschaft mbH – Arbeitskreis Biomarkt, European Commission (2017), Statista Survey (2016), Splendid Research GmbH (2018)

                                                                                                                                                                                                                    “I am concerned about the impact of plastics in everyday
                             environmental impact from sustainable sources;          and effective, plastic packaging has done much                            The goal to
                                                                                                                                                              Willingness ofbuy
                                                                                                                                                                             reducing
                                                                                                                                                                                deformed plastic waste
                                                                                                                                                                                         vegetables or fruithas set many
                                                                                                                                                                                                                    productsretailers   and producers on the hunt for
                                                                                                                                                                                                                               on the environment“
                                                                                                                                                              Share among respondents in %                                                                                                                                                                      1
                             locally produced, grown in season. However, these       to increase the longevity of fresh produce, often       © Oliver Wyman    viable alternatives. While some are lookingShare        to biodegradable        plasticswith
                                                                                                                                                                                                                           of respondents in agreement  as the
                                                                                                                                                                                                                                                            anabove
                                                                                                                                                                                                                                                                 alternative
                                                                                                                                                                                                                                                                      statement
                                                                                                                                                                                                                    in % in the EU
                             demands are clearly not equally important to all        substantially prolonging product shelf-life and                           source of packaging material, others are using more traditional materials such as paper and
                             consumers in all markets. Customers in certain          protecting it against contamination and damage                            cardboard carton in order to avoid transforming food sources such as corn and rapeseed
                             countries such as the Netherlands, Belgium and          during transportation and display. Additionally,                          into packaging. These choices can lead to a complex matrix of outcomes, all of which are
                             Italy place a premium on the seasonality of their       it creates convenience in terms of handling and                           produce-specific. How each retailer resolves these challenges will be determined by what
                             fresh fruit and vegetables. For others, particularly    purchasing, producing standard units of purchase                          they perceive the balance to be between each competing objective. In Switzerland, Coop
                             those in countries like Germany and Switzerland         that customers readily recognise. For all these                           has investigated the impact of packaging on shelf-life and identified that it can eliminate
                             that have strong regional identities around food,       reasons, eliminating plastic packaging could                              packaging for root vegetables without any negative consequences. In contrast, the way
                             locality plays a far more critical role.                potentially lead to an increase in food waste.                            it packages broccoli has not changed. The retailer says it took the decision not to change
                                                                                                                                                               its packaging in this case because it believed that such a change would have an unduly
                             Connected to this is a further emotional aspect of      Those caveats aside, the amount of produce being                          negative impact on the product’s quality and increase food waste.
                             fresh fruit and vegetable consumption: customers        sold without packaging is increasing steadily,
                             want to know not only that their produce is fresh,      even if there are likely to be limits on how far                          This points to another lesson from the top brands: suppliers and retailers need to respond
                             but also that it is ephemeral and unique, located in    this can be extended. While it is a fairly simple                         to such challenges by building deeper relationships with their customers. The objective
                             a specific time and place and inherently linked to      matter to reduce the amount of plastic packaging                          should be to use communications to build trust and loyalty, two key facets of brand
                             the experience of producing it and consuming it.        used for certain varieties of fresh fruit and                             strength. The simple place to start is by interacting more with consumers to ensure that
                             For high-end consumers, particularly the young,         vegetables, instead selling much of it loose, any                         they are not only better informed but more actively involved. This can take many forms,
                             food’s identity and the purity of its supply are        major reduction for others like soft fruit and salad                      ranging from point-of-sale communication to interaction with knowledgeable staff and
                             becoming increasingly intertwined with a sense of       vegetables might well result in higher amounts                            mobile, interactive links online. The key here is for the retailer to see its communications
                             personal identity.                                      of waste and increased cost. In addition, easy-                           as being about building a relationship, all the while remembering that this rests as much
                                                                                     healthy foods demand convenience and prepared                             on its emotive content as the information it conveys. _
                             Greater awareness of the modern food industry’s         produced requires reliable packaging. This is one
                             environmental impact is affecting fresh fruit and       major reason why we expect that, for the short
                             vegetable retailing in other ways too. The avoidance    term at least, the amount of plastic in use is likely
                             of waste, both in terms of reducing the volume of       to continue rising.

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3.
     WHAT THIS ALL
     MEANS FOR THE
26
     RETAILERS
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SUSTAINABLE
                               Rethinking fresh produce retailing

                               At first sight, the ideas around improved                                  We believe that any retail chain that responds fully       There is no simple answer as to how retailers

                                                                                                                                                                                                                              SUPER-FRESH
                               assortment and greater emotional connection                                to these demands will not only need to change the          should tackle this emerging demand. Because of
                               that we have discussed in this report might appear                         way they think about fresh fruit and vegetables,           the segmentation discussed above, offer the same
                               to mean relatively little in terms of how a store                          but will also find that this leads to their stores being   range in every store is not an option, and even if
                               actually functions. However, we could not disagree                         redesigned from front to back (see Figure 16). In          space restrictions did not preclude this, the demand
                               more. To challenge such misconceptions, in this                            doing so, they will have to address six specific areas     in several stores would be insufficient, leading to
                               section we examine what it takes for a store to                            of store function: product range, collaboration            increased waste. Any solution, therefore, requires
                               meet customer demand for easy-healthy produce,                             with producers, packaging, store design, staff and         the retailer to respond to variations in demand at
                               for fresh fruit and vegetables that make an                                store communications. Over the next few pages,             a local level, tailoring its assortment accordingly in
                               emotional connection, and for produce that leaves                          we will examine each of these areas in turn.               order to meet the needs of a local customer base.
                               the consumer with a clear conscience.                                                                                    Portrait
                                                                                                                                                                     There are two potentially complementary
                               Table 5: Likely impact of initiatives to respond to                                                                                   ways to achieve this. First, the retailer might
                               emerging
                               FIGURE 16. demand                                                                                                                     give greater independence to its local store
                               LIKELY IMPACT OF INITIATIVES IN RESPONSE TO EMERGING DEMAND                                                                           management, trusting local partners to know their
                               Source: Oliver Wyman                                                                                                                  own customers and adapt their product range
                                                                                                                                                                     accordingly. This could potentially be guided by
                                                                         Faster, easier,           Emotional connection    Good conscience
                                                                           healthier                                                                                 central recommendations based on experience              Located in Houston, Texas, Dream Harvest is
                                1. Strengthen localisation and
                                   seasonality in the assortment                                                                                                     from stores in similar situations and locations.         involved in indoor, vertical hydroponic farming,
                                                                                                                                                                     The alternative would be for the retailer to adopt       an emerging industry in which layers of growing
                                2. Increase collaboration between
                                   producers and retailers                                                                                                           a fully automated solution based on statistical          racks are stacked one above each other within an
                                3. Promote sustainable packaging and                                                                                                 analysis and point-of-sale tools. This would enable      artificially lit growing chamber. The industry is on
                                   production process
                                                                                                                                                                     the retailer to create a local assortment planogram      the way to being profitable as the cost of lighting
                                4. Introduce emotive store and                                                                                                       for each store, following well-defined rules that are    systems comes down. For Dream Harvest, the
                                   furniture design
                                                                                                                                                                     based on consistent analytics.                           innovative technology enables it to produce very
                                5. Invest to motivate passionate staff                                                                                                                                                        sustainable green produce such as lettuce and kale
                                                                                                                                                                                                                              using just 1 per cent of the water used on a normal
                                6. Tailor communication to connect
                                   emotively with the customer
                                                                                                                                                                     Boosting producer-retailer collaboration                 farm. Its growing chambers are powered solely by
                                                                                                                                                                                                                              renewable, wind-generated energy and its farms
                                                                                     High impact        Medium impact     Low impact
                                                                                                                                                                     We expect the level of collaboration with producers      use zero pesticides.
                               Source: Oliver Wyman
                                                                                                                                                                     and growers to increase during the next few years
                                                                                                                                                                     because of the need for faster innovation and the        Chief executive Zain Shauk claims local has now
                               Building local and seasonal ranges                                                                                                    retailer’s desire to secure differentiated quality       surpassed organic as a relevant consumer trend.
                                                                                                                                                                     over the longer term. Retailers and producers make       “It has better freshness, better taste, better quality.
                               It would be misleading to give the impression that                         some segments of the population will be looking            a good partnership when it comes to achieving            Every chef in the world uses local ingredients.
                               the entire population of Europe is suddenly going                          for an emotive connection, alongside with others           faster-paced and more significant innovation.            People are looking past the brand name, looking at
                               to start consuming easy-healthy fresh produce,                             who are not. Some will require consumption with a          Typically, retailers are best placed to have an in-      what is important, the ingredients. More scrutiny
                               or indeed that they will consume this and this                             clear conscience, others will not give such concerns       depth understanding of the pattern of consumer           is going into what the brand represents. Quality
     © Oliver Wyman            alone. Instead, what we see is an emerging trend,                          much thought.                                     1        demand and how this is changing, while producers         has to underline the brand.” With vertically farmed
                               a trend we believe will make greater and greater                                                                                      are the experts in product development. The              produce comes the promise of longer shelf-life,
                               inroads into the fresh fruit and vegetable market                          So, who will consume according to the new                  challenge, however, is that it can currently take up     superior quality and greater nutritional value. Seven
                               in years to come. Even as it does so, we are likely to                     paradigm? Who will want the new easy-healthy               to nine months to introduce new products into a          days from harvest, salad greens have apparently
                               see uneven progress across different countries and                         varieties and look for greater convenience,                store. This lengthy lead time is largely the result      lost all their Vitamin C, while other nutrients are
                               segments.                                                                  emotional connection and sustainability? Our               of the fact that the development process is highly       degrading at a steady, albeit slower, rate. Once
                                                                                                          study suggests that all these trends are likely to         iterative. First, the retailer studies the customer      harvested, Dream Harvest greens are triple-washed
                               We expect some parts of the population to continue                         manifest most strongly in similar segments: the            figures and feedback as well as the competitive          and delivered to stores within hours of harvesting.
                               to demand and consume the traditional fresh fruit                          metropolitan and urban, high-income, younger               landscape in depth and develops suggestions
                               and vegetable offer for the foreseeable future.                            generations. These consumers will be looking for           within the category management team. These               Shauk believes the challenge for Dream Harvest
                               The majority of consumers will continue to buy                             ready-to-cook fresh foods – think particularly of          ideas are then communicated to the producers,            will be to reach people at a moment when they
                               bananas, apples and pears. In other words, even                            busy parents with young families to care for – and         who might or might not accept the challenge at           are willing to change. In-store demos have proved
                               in the target segments, it is likely that for some                         likewise, the ready-to-eat segment is more likely          this stage. Alternatively, they might turn down the      successful. “When people taste it, they immediately
                               time we will see the same customer consuming                               to involve single, young, urban professionals –            proposition due to, for example, potential technical     see the difference,” he says. But such breakthroughs
                               traditional fruit and vegetables and the new                               those with a higher disposable income and busy             issues, or suggest modifications or alternatives.        are only possible in store, so the company is using
                               produce from the emerging paradigm. Similarly,                             lifestyles but without family responsibilities.            This process is then repeated through a number      »    social media and messaging to reach its target group.

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