Consolidation in produce industry has impact on produce buyers
“”The produce industry continuously evolves and more recently, inflation, consolidation, and sustainability have been important topics of discussion. While it’s often growers and shippers discussing these subjects, how are they received on the buying side?
Peirone Produce’s President Brent Shammo comments on the impact from a buyer’s perspective. Peirone is a produce distributor, servicing 170 independent grocery stores in the Pacific Northwest, operating in Washington, Idaho, Montana, and Oregon. “We supply co-ops under the Yoke’s, Rosauers, Super 1, Family Foods, and Harvest Foods banners,” says Shammo. Since the formats are different, varying from upscale to discount, perishable dominated, and limited assortment, the produce selection also differs per store. On average, the company’s warehouse in Spokane, WA holds between 2,300 and 2,500 SKUs.
“We source our produce as locally as we can, focusing on the growing regions of Washington, Idaho, Oregon, and Montana,” Shammo commented. Local offerings are supplemented with produce from California, Northern Mexico, and Texas to a limited extent. “Sourcing locally allows us to offer our customers produce with a better shelf-life. In addition, we’re limiting the carbon footprint. While it’s better for the environment, it’s also more cost effective,” he mentioned.
Relationships with suppliers
Changes in the produce industry are affecting the buying side of the spectrum. “Recently, there has been a lot of consolidation across many different commodities,” said Shammo. “It has really changed our way of buying as we don’t have as many sourcing options to choose from anymore. Where we had three options to buy a certain commodity in the past, we may only have one option now, which makes it harder to buy,” he commented. As a result, it is tougher to get produce quickly and relationships with suppliers have become increasingly important. On top of consolidation, weather events have had a major impact on produce buyers this year. “California grapes have been in short supply due to Hurricane Hilary and varietal berries have been hard to get due to wet weather in California. Recently, we had a 3-week gap on blueberries due to supply issues in Peru.”
Deflation and fear for recession
Another trend Shammo has been witnessing is deflation in the produce section. “People are buying more of the things that are less expensive, like apples and potatoes.” They are skipping higher value products like grapes. In fact, Peirone has sold fewer grapes this year as people switch to lower-margin items. In general, consumers are tightening their belts. “Their baskets are smaller, and they are turning away from buying fresh produce. We’re noticing a downtick in fresh produce sales as consumers are worried about a possible pending recession.”
Exotic produce gaining popularity
While each store offers a different produce selection, some trends are noticeable across all store formats. First of all, Shammo is witnessing consumers turning away from bagged items. “Covid drove the consumption of bagged produce as it was perceived to be safer. However, bagged products seem to have been over-indexed and the trend is correcting itself with consumers going back to buying more bulk.”
When it comes to packaging, consumers are increasingly interested in buying products in sustainable packaging that is recyclable and compostable. “If we give our customers a choice, they will gravitate towards sustainable packaging as long as the cost difference is not too big,” he said. Another trend at Peirone is the increased demand for tropical and exotic produce items. “During Covid, many people from bigger cities on the West Coast moved further East to our region. They were used to the availability of exotic produce in their local stores. As a result, the influx from the West has increased the demand for exotic produce with items like Maradol papayas and dragon fruit being big sellers today.””
*This article is excerpted from freshplaza.com website, published 9th November 2023
