THE supermarket price war could shift to fresh produce as major retailers hone in on the sector’s strong growth potential.
But they’ll continue their balancing act between public image and price positioning, according to horticulture industry analyst, Marc Soccio.
The senior analyst for Rabobank Food and Agribusiness Research Advisory conducted a speaking tour throughout Queensland in September stopping at major horticulture production areas.
His session in Bundaberg drew representatives from just about every local commodity keen to hear his thoughts on the changing habits of fresh produce retailers and consumers.
“Fresh is very much key to the strategy retailers are trying to execute in their businesses, so we are seeing more and more focus on fresh, and they really see that as a key element to their business growth and profitability into the future,” Mr Soccio said.
During his presentation, Mr Soccio displayed graphs showing Woolworths’ dominance of the sector, with Coles in second position and Aldi moving into third spot, overtaking IGA stores in fresh produce.
Another graph however showed that consumers still believe the best quality fruit and vegetables come from independent retailers, with Aldi the lowest for perceived quality.
Mr Soccio said the revenue importance given to fresh produce could be seen in the increasing trend of “partnership sourcing” where major retailers are bypassing wholesalers and going directly to producers.
“They are looking to go more and more to have suppliers go direct to them and not through central wholesale produce markets,” he said.
“By doing it that way, they can have a stronger control over quality and also try and reduce wastage in their supply chain by asking their suppliers to deliver it on demand.”
Embracing farmer contracts causes some conundrums though, according to Mr Soccio.
“I think they are a bit conflicted. In a lot of ways they want to put pressure on the supply chain and use imports, but in other ways they want to fly the flag of Aussie grown and put their farmers up on the telly to say what they’re doing and that sort of thing,” he said.
At the consumer end, supermarkets both drive and respond to the public’s interest in food.
Mr Soccio said Coles introduced more high value lines within their fresh produce as consumers become more educated and inspired through television shows such as MasterChef which Coles, in turn, sponsors.
“It’s obvious that in today’s community that consumers and households are more engaged with food and more interested in food,” he said.
But not every strategy has necessarily been seen as a winner.
Mr Soccio questioned Woolworths’ 12-month Fixed Price Guarantees on selected fruits and vegetables which ran from July 2011 to July 2012.
“I think a lot of people scratched their heads about how this would work given the volatility you see up the supply chain, at the farm gate, in production and so forth,” he said.
“Certainly that’s what we’ve seen- they’ve scrapped this program and they’re back to their old way of trying to market produce with much more flexibility in the retail price.”
Earlier this year, Woolworths said the campaign was successful in building its customers’ trust around the quality and price of fresh produce, despite the prices for the majority of the selected lines rising as soon as the strategy ended.
The seminar session also looked at what industry groups could do to improve their market positions.
Mr Soccio used the Banana Growers Industry Council (ABGC) industry as an example of a group that has invested heavily into getting its own information about consumers, giving them a target market for expansion.
Paying for such data is not cheap though, presenting challenges for smaller produce lines.
Any hope that increased produce consumption would be driven by consumers, may be further off than expected, Mr Soccio said.
The recent axing of the Victorian Government’s school program, Free Fruit Fridays, was used as an indicator of the battle fresh produce still had within the Australian public.
“There is still a long way to go before we as a community and you as an industry can say that you’ve succeeded at boosting consumption of fresh fruit and vegetables,” he said.
He also questioned how attuned consumers are with farmers and supply chains.
Addressing a question on exports, Mr Soccio said he believed the Australian dollar would currently remain high, and into the foreseeable future, or at least until the European financial crisis is sorted out.