Robust consumption drives fruit, vegetables

In recent years consumers have placed greater emphasis on health and diet while also wanting to spend less time shopping for food and preparing meals, says Edmund Estes, North Carolina State University economist.

“Federal agencies, private health organizations and industry trade associations have initiated several public education campaigns designed to inform consumers about the benefits of eating fruits and vegetables,” says Estes.

Greater consumer awareness about the health-positive benefits of eating fruits and vegetables as well as increased availability, greater convenience, and rising income levels have spurred fruit and vegetable consumption to record levels, he adds.

Since 1990, U.S. fruit and vegetable per capita consumption has increased by about 10 percent while fresh vegetable consumption has risen nearly 21 percent (USDA).

“While consumers eat increasing amounts of fruits and vegetables, they also desire better quality, improved taste, greater convenience, year-round availability, and greater assurances about the safety of food, particularly concerning pesticide residues and genetically modified crops,” says the economist.

The 2002 farm bill contains a country-of-origin provision that requires food — including fruits and vegetables — to have a country-of-origin label affixed effective in 2004. Surveys suggest that consumers often select a specific store on the basis of the freshness and availability of fresh produce. The typical grocery store carried 350 produce items in 2000, nearly double the number of items stocked in the mid-1980s, says Estes.

“American shoppers are buying more fruits and vegetables, but they also want the widest possible selection of traditional fruits and vegetables as well as exotic specialty items at the low competitive price,” he says.

Increased consumption has created new marketing opportunities for both new and existing fruit and vegetable growers, notes Estes. For example, most American shoppers can choose from a myriad of tomatoes for their salads, starting with the traditional mature green tomato and progressing to imported greenhouse tomatoes, Roma tomatoes, cherry and baby grape tomatoes, imported and domestic cluster tomatoes (stem attached), organically grown tomatoes, heirloom varieties, or even a yellow flesh tomato.

It's also commonplace, he says, for a supermarket to stock four different bell peppers, ranging in color from red and green to purple, plus an assortment of hot peppers.

“Consumers want fresh fruits and vegetables 52 weeks per year, so retailers must stock an assortment of fresh fruits and vegetables 52 weeks per year. In an effort to increase efficiency and lower procurement costs, supermarkets re-examined traditional ways to source fresh fruits and vegetables in the 1990s.”

Marketing and distribution gains were realized through mergers and acquisitions, expanded use of inventory replenishment programs, and enactment of contractual agreements, says Estes.

Mass merchants such as Wal-Mart and Target were able to transfer their efficient and effective drygood product handling systems to perishables.

“The increased importance of mass merchants and direct-store delivery sales coupled with the decline in importance of terminal markets resulted in lower handling costs, less waste, cost savings to retailers and lower retail prices.”

System gains encouraged even greater consolidation in the wholesale and retail sectors and has propelled Wal-Mart to become the leading low-cost merchandiser and food supplier in the United States, he continues.

The “everyday low price” approach pioneered by Wal-Mart was reconfigured, copied, and enhanced by other mass merchants. In addition, other food retailers recognized they could not succeed in a competitive price war with Wal-Mart, so they examined the high service, value-added approach to expand sales and profit.

“These stores attempted to appeal to shoppers who were willing to pay for superior produce quality, familiar name brands and convenience.

“In high-service food stores, grocers often competed with take-out restaurants and away-from-home eating establishments by offering fully prepared meals, salad bars, sandwiches, sliced fruit and fully cooked chickens as take-home goods. In addition, loyalty cards identified regular shoppers and offered frequent shoppers significant price discounts, special mailings and self-service checkout.”

It was evident during the 1990s, says Estes, that American shoppers broadened the definition of quality to include many non-traditional features such as nutrition content, country-of-origin labels, genetic composition, pesticide residues (organic) and traceback capability.

“While standard demand factors such as price, visual appearance, taste and maturity, and substitute availability remain important purchase criteria, value-added characteristics undeniably influenced family buying patterns. Purchase frequency rates, the array of items bought, and store selection are examples of the broader impacts that quality can have on individual spending patterns.”

Beyond dynamic demand considerations, grower price volatility and wide swings in supply availability also characterize the fruit and vegetable industries, says Estes.

Seasonal availability is influenced by weather conditions, the short shelf life of most crops, relatively few barriers to entry in production, and a desire to examine new and/or alternative sources of farm income.

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