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Sector update ABN AMRO

More competition on European fruit and vegetable market

Exporting fruit and vegetables is extremely important for Dutch horticulture since the majority of produce ends up abroad. The Netherlands is one of the largest exporters in the world, they are also amongst the top 10 fruit exporters. While demand on the European vegetable market increases, consumption has fallen and the EU market shows saturation phenomena. Growth potential for fruit and vegetables lie in countries outside the EU, such as Russia.

Compared to the same period last year, Dutch fruit and vegetable export declined by 6% during the first nine months of 2013. There are a few reasons to explain the fall in exports; the less than favourable weather conditions in the spring resulted in a slower start to production and therefore less end product to export. Additionally a number of countries increased domestic production which resulted in requiring fewer imports. Finally Dutch vegetables were under more competition from Spanish products as the quality of Spanish product increased and they have improved their logistic efficiency.

Member states of the EU are the most important export destinations for Dutch produce and around 90% of produce is exported to these markets. During the first nine months of 2013 export to EU member states declined by 4% compared to the same period the previous year. Germany, Sweden and Italy have all imported less Dutch fruit and vegetables. Export to France has, however, significantly increased by 11%. Export to countries outside the EU during the first nine months of 2013 has decreased by nearly 20% which is largely due to Russia (-27%) closing borders because of alleged quality issues. In the long term Russian export continues to grow as Dutch entrepreneurs have increased awareness of their products to Russian retailers and the country has risen to the top 4 export destinations. Diplomatic differences between The Netherlands and Russia and the closing of the large wholesale market in Stupinsky in Moscow have placed exports under pressure. Remarkably, exports to most Eastern European destinations, such as the Czech Republic, Poland, Slovakia and the Baltic States has fallen as domestic production has grown. 

Tomato exports rise again
Export of the main vegetable types fell back in 2012. Not only was there decrease for fruiting tomatoes and peppers, but also mushrooms and the main fruit types, apples and pears. Positive exceptions are cucumbers and carrots. The growth of cucumber exports can be mainly attributed to a market recovery in major export markets after the EHEC crisis of 2011.

Export of fresh fruit and vegetables

Tomato exports recovered in the first three quarters of 2013 as the low price level increased demand. Pepper exports had remained the same since 2010 but Dutch peppers are increasingly undermined on the European markets with competition from Spain and locally grown peppers. The quality of Spanish peppers improves and distribution is more efficient. Dutch production has also seen cultivation area fall which created for less availability in the export market. The mushroom market suffered with the closure of a major supplier who had a market share of 25%, but with this major supply gone, operations have been continued by another company. There are also fewer Dutch mushrooms available for export because supermarkets buy them directly for the 'Fair Produce' brand, in place of foreign imports. 

The apple and pear harvest of 2012 was significantly reduced because of the severe frost damage at the start of 2012. Subsequently with less produce available there was less export possible and figures have declined considerably during the first quarter of 2013. 

Expectation
The European vegetable market is characterized by strong competition. Supply increases but there is a slight fall in consumption. Sales have risen within the supermarket sector where demand for a uniformly similar product at a low price and increasing quality requirements is expected by consumers. The Netherlands are recognised for their ability to produce in bulk. Suppliers continue to fulfil the demands of the chain despite the ever changing requirements of consumers to maximum efficiency. There are still possibilities for export growth to countries outside the EU and especially to Russia using the strong position of their product within the international market. 

Due to the strong impact of food scandals there is a move towards closed chains and vertical chain transparency within the fruit and vegetable sector. Product information is provided on all products on the shelves. All parties in the chain are given information on the product, sales figures, margins and profit. The potential from this development is great; more clarity, higher margins and lower losses for all links in the chain. In the long term it is important to enhance the distinctiveness of the product and to organise the market orientation. Delivering quality at a good price is no longer sufficient in today's international market; the product must stand out between all other products in appearance and with a underlying message. 

In the middle segment of the market there is space for higher positioned retail formulas, investment in new products, sales concepts, packaging, service, on-line service and strengthening social media and sales proposals. The sector should, therefore, make optimum use of the strong selling points of Dutch products, such as freshness, taste, sustainability, quality, the variety of the assortment, attention to food safety, the use of pesticides and fast and efficient logistics. 

Source: ABN Amro

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