Growers should take the time to visit their warehouse and learn more about how their fruit is being sold, Steve Lutz suggests.
Lutz, former president of the Washington Apple Commission and now vice president of The Perishables Group, said more fresh produce is being sold in places other than traditional outlets.
Ten years ago, 90 percent of foods were sold through grocery stores. Today, that’s down to 70 percent. This means marketing strategies need to change, too.
“The traditional f.o.b. sales desk, in my opinion, is dead,” he told growers at the Washington State Horticultural Association’s annual convention. “It may take ten years to bury it, but the way we conduct our business has changed and is changing fundamentally. Pushing 60 million boxes of Red Delicious through the pipeline is different from being part of a niche variety you’re trying to build a market for. The skills of our warehouses need to change.”
The produce industry is trying to entice different consumers than it has in the past. When Red Delicious dominated the Washington apple industry, it was all focused around the buyer—the retailer—rather than the consumer.
“Now, it’s more about the consumer,” Lutz said. “I think that’s a tremendous opportunity for all growers.”
Traditional mainstream apples are losing their space, and the newer mainstream varieties, such as Fuji and Gala, are losing their value as production increases.
Consumers have high expectations, and fresh is the most important purchase criterion, along with convenience.
Organic foods continue to move into the mainstream. The typical organic consumer is better educated and has a higher income level, and is making lifestyle choices.
“I think we have to be prepared for the fact that organics are going to see regular substantial growth,” Lutz said.
Who are they selling to?
Warehouses need to be able to exploit new opportunities, he said. “Warehouse selection is more important to you, as a grower, probably than it’s ever been. If you’re just doing Red Delicious, how important is your warehouse? Some might do better than another. But as you go into niche varieties, that warehouse selection becomes a very critical decision for you, as a grower. Warehouses need new kinds of marketing expertise to succeed in today’s market.
“Take a very hard look at your warehouse,” he advised. “Take a look at the customer list. Who are they selling to and who are they being successful with? Look at the top ten customers. That will give you a great clue on their marketing approach.”
Lutz foresees continued growth of nontraditional outlets for fresh produce. This is leaving traditional retailers struggling to find their niche in the evolving marketplace.
“Conventional retailers will continue to be under a lot of pressure until their stores evolve to match up with the consumer,” he observed. “Retail consolidation as a solution to customer erosion has not worked. The traditional retail format based on large, cookie-cutter stores is fading.”
Conventional retailers now see perishable foods as a key competitive tool, and perishables are how they are going to distinguish themselves from the competition, he added. “Grocers are looking for new tools to help them survive against Wal-Mart. Retailers, for probably the first time in twenty years, are looking across the perishables landscape, including apples, to see what is there that they can sell to differentiate their store.”
Lutz stressed that the tremendous changes the retail food business is going through have not happened suddenly. “The business is evolving all the time. It’s not a start-and-stop process. My observation is that change will continue, and that’s the nature of the business, and we have to be prepared to deal with that.
“It helps us to be able to focus on incremental changes we need to make to stay on course with where the trends seem to be going.”