Can produce growers be hurt by overproduction?
As a result of globalization, fresh produce is more readily available than ever before. Out of season produce can be supplied from another region, 'bad' weather may not necessarily mean a product is completely unavailable and the advancements in growing solutions often lead to higher yields. But is there too much production? Is there an oversupply of fresh produce? This is what one supplier believes is happening in the industry.
Paul Manfre, of TopKatz in New York, has been in the fresh produce industry for over 40 years. He has seen how the industry has evolved and how the selling of produce is as important as the growing. He believes that many producers are growing too much, in the hope of capturing a slice of the market that, in his opinion, may or may not exist. He is also concerned about what he sees is unreasonable upmarking of fresh produce by large stores, that end up hurting both the consumer as well as the grower.
"I have been in the produce business for over 40 years and I have had the ability to see market changes well in advance over that time," Manfre said. "We have seen an explosion in technology in the past 10 years that has changed the way many commodities are grown. Protected agriculture structures such as greenhouses now cover what were once open field farms. Production has gone up, quality has gone up, areas that were once not suited for a crop are now grown in abundance. The landscape has changed in many ways. We grow a tremendous amount of wonderful produce in and out of season but the real question, are we able to sell it all?"
"It seems that growers are trying to out-grow each other with huge increases in production to be able to provide volume. They are relying on bad weather conditions or disease to wipe out an area and thus capture the higher prices," he continued. Hoping for something bad to happen to another is not the best business plan in my opinion. For example, there have been times when everything went right in the growing regions and there is a severe overabundance. For example, last winter in Mexico and the Southeastern United States, growing conditions were perfect and we had an overabundance of product that was sold at a deep discount or was dumped."
Are supermarkets part of the problem?
Manfre believes that supermarkets and large chains are the instigators of this cycle. He said the pressures on growers to have that volume readily available leads them producing more than they can hope to sell in a steady market. Adding to this, he observed that many stores sell produce at a much higher margin than consumers are aware of. He believes that they know they will sell produce no matter what price it is, and pointed to a more traditional way of marketing that will bring a closer relation between the grower and the consumer.
"The chain stores are terrible marketers of produce as related to production in this country," Manfre said. "When, for example, growers need to move product due to excess supply, the retail chains do not lower their prices for consumers accordingly to move that produce at lower prices. I have seen numerous times produce being sold for a few dollars FOB and could have retailed for example at $0.39 a pound or each and was literally being sold for $2.49 at maybe a 300%-400% markup. This does not help the growers help move the product, consumers who can buy the product and the stores that could have sold more product at a lower prices and most likely with less shrink and a better bottom line. Produce is truly a supply and demand market and when there is an overabundance, prices should be reasonable to the consumer, but more often than not, the stores do not trade this way."
"I believe when this overproduction all comes to fruition this may push major retailers to become part of the solution and start to decrease their ridiculous margins and help push volume," he added. "We can win the war on cheaply produced, ready-made food, with what is over produced or with in-season fruits and vegetables. Retailers, however, will have to stop with the 200% markups telling us they work on 40%. The economy is getting better, grocery margins are shrinking. It's time to sell fresh produce the way it was meant to be sold - fresh, fast, in volume, repeat."
For more information:
Top Katz LLC
Tel: +1 (718) 861-1933
Publication date: 11/20/2017
Author: Dennis M. Rettke
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