Global produce sourcing is easier than ever.
Better quality, transportation and storage systems are simplifying buyer's lives

If you want a snapshot into the challenges of global produce sourcing, just ask Christian Bourbonnière, Metro's vice-president of fruit, vegetable and bakery operations, a simple question: where does the Quebec-based grocery retailer buy its grapes?

"Grapes? What kind of grapes?" quips Bourbonnière. "We've got all sorts. Black, red, green, champagne, with seeds and without. I don't even know how many kinds we buy."

Beneath Bourbonnière's joke lies a solid truth: Canada's produce buyers have never had it so good. Distribution channels are faster and more efficient than ever before. The number of available fruit and vegetable SKU's is sky-rocketing, as is the number of countries we import from. And product quality has never been better.

Take table grapes, Canada's largest produce import. Once a specialty item, grapes are now available in a vast range of shapes and sizes, year-round, with the country of origin depending on the season.

During December through April, Bourbonnière brings in grapes from Chile. As Chile's growing season draws to an end, the action moves North to Mexico, which supplies grapes during May. When Mexican farmers have fully harvested, California gets going, generating product between July and October. And when California winds up, its back to Chile again, the following year.

Shipping times have been drastically reduced as well, so produce gets to market faster, which means less waste. "In the old days you used to ship a lot of produce by train," said Bourbonnière. "Today, truck drivers working in teams of two, with sleeper cars, can bring a load from California in 60 hours."

While supply has been improving, so has product quality, helped by increasingly sophisticated farming, transportation, storage and coding technology as well as the ongoing implementation product traceability systems.

But it is in the physical characteristics of produce, that the advances are most apparent. Visit any major grocery retailer and you'll find close to visual perfection, in the colors, sizes and aesthetic layouts of the fruit and vegetables sections. Although Canadians tend to be far more concerned about produce's nutritional qualities, the fact is they insist that it looks good, and they are getting what they ask for.

In just one example of quality advances, Halifax based--Acadian Seaplants has developed a seaweed extract, used in fertilizers. The extract helps growers produce rounder, more consistent and colorful grapes. But the fact is, Acadian's extract is sold around the world, and many countries now produce exceptional quality grapes.

The bottom line is that global producing sourcing challenges are becoming more manageable in a variety of ways. "There's really more supply out there than (we) need," said Bourbonnière. "Transportation systems are better, and we have more choice."

James Milne, marketing director of the David Oppenheimer Group, which sources produce for major Canadian retailers such as Loblaws, Sobeys and Metro, agrees.

"The logistics of buying fruits and vegetables have become more refined," said Milne. "With newer and better third-party quality audits at the farm level, buyers can deal with growers in remote areas, yet be reasonably certain that the quality will be there."

Food safety is also improving. According to an Environics report, the number of Canadians indicating a concern about food safety increased from 35 per cent in 1999, to 42 per cent in 2000.

But if the Canadian Food Inspection Agency's watch list is any indication, consumers needn't worry too much about produce. Only two items are prohibited from entering the country: cantaloupes from Mexico, due to concerns about salmonella, and raspberries from Guatemala, because of parasite worries.

Indeed with the implementation of the NAFTA accord, U.S. and Mexican produce, (which comprise the bulk of produce imports) flows almost uninterrupted. The number of product categories inspected at the border for market-grading requirements, has dropped from 28 in 1995, to just three: apples, potatoes and onions.

These trends are creating new challenges for middlemen, as grocers ponder increasing direct contacts with the growers, or buying through large contracts. "We definitely have to add value," said Milne. "Otherwise there's no reason for us to be here." Conversely, other trends - notably a move among U.S. grocers toward consolidating purchases with select suppliers - are benefiting established players like the Oppenheimer Group.

Better margins, increasing demand

Produce is big business for Canada's grocers, comprising approximately 20% of their $22.8 billion of perishables' sales during 2001, according to CPMA tallies. Of that, three-quarters can be attributed to produce imports, a trend that is likely to continue. The increasing variety of available SKUs is good news, because fresh fruit and vegetable sections traditionally generate above average markups.

Increasing customer demand, as well as extra room allotted to produce sections (currently 10.6% of store space, for outlets with more than 35,000 square feet, and higher for smaller locations), means more money in grocers' pockets at the end of the year.

Spurred by an aging population, increasingly concerned about health, per capita fresh produce consumption has skyrocketed in Canada from 357 pounds in 1962, to close to 516 in 2000.

But demand is shifting too. "Recent immigration trends have created a far more diverse Canadian population," said Ron Lemaire, a marketing expert with the Canadian Produce Marketers Association. "That has increased the variety of fruit and vegetables customers are asking for. As a result, grocers are importing more specialty items from a much larger number of countries."

So if Canada's grocers have access to more varieties of produce, at a better price and quality than ever before, then executives like Bourbonnière can just sit back and relax right? Wrong. For one, competitors have access to those advantages too. And then there's those pesky shareholders, who want bigger profits each year to boost shareholder value.

Metro seems to have done a pretty good job on both fronts. During the year ended September 28th 2002, net earnings rose 17% to $143.7 million, producing the company's 48th consecutive quarter of year-over-year growth. Revenues during the period jumped 5.7 per cent to $5.1 billion. Not bad, in an environment where chief competitor Loblaws is on a massive building program in Quebec, Metro's home turf.

But in a highly competitive environment, being good is not good enough. Produce executives like Bourbonnière, are going to have to continue to get better.

"It's a continual challenge," said Bourbonnière, who visits close to 200 Metro and competitor stores each year to stay abreast of changing demand. "You have to balance the variety of produce you offer, with the inevitable waste that can arise."

Metro has close to 700 fresh produce and accessory SKUs at the warehouse level, and the typical store carries between 300 and 350. The key is choosing which ones.

"Convenience is playing a big part in determining consumer choice," said Bourbonnière. "People have less time, and that means items like packaged salads and pre-cut carrots are becoming more popular.

You could say that Bourbonnière has produce in his blood. His dad was a fruit and vegetable jobber, who owned a couple of produce stores. As a youngster he worked as a part-time wrapper at Dominion, later moving to the produce department on weekends.

And like so many food industry managers, he then began a long slow climb up the ladder, based more on his hard work and job performance than on any educational qualifications. From clerk he became a produce manager and then took his store manager training. He continued under the Provigo banner, when the company took over many of the Dominion stores, moving to Metro in 1997.

Today, he occupies a beautiful corner office on the top floor of Metro's 90,000 square foot distribution center on Pierre-de-Coubertin Street in Montreal's East End.

In addition to his work in promoting the importance of fresh fruits and vegetables within Metro's corporate structure and among its affiliated stores, Bourbonnière is also a big believer in industry wide activities to help build demand. During the past year as chairman of the CPMA he was a big booster of the industry's marketing campaign to convince Canadians to eat between five and 10 servings of fruits and vegetables per day.

In fact while Canadians consume a lot more fruits and vegetables than Americans, we still lag consumption rates in both Europe and some Asian countries. But according to James Milne, these consumption-boosting strategies are very important. "If you look at apple consumption, in Germany it's about 50 to 60 pounds per capita each year, and in Canada, it's only about 22 lbs," said Milne. "It's the same story in a lot of product categories. So we have a lot of room to grow."

Bourbonnière, whose one-year term as CPMA chairman is coming to an end, will turn over the reigns at the organization's February's, 2003 convention in Montreal. He acknowledges that building consumer demand is a long term struggle. "If we can increase the average Canadian fruit and vegetable consumption from four servings a day to five, that works out to a 25% increase," said Bourbonière. "That's not too bad."

Chart: Top Canadian produce imports (2001/ Statistics Canada)

Fruits

Fresh grapes $ 292 million
Bananas $ 231 million
Oranges $ 162 million
Apples $ 129 million
Mandarins/hybrids $ 125 million

Vegetables

Tomatoes $ 216 million
Peppers $ 160 million
Lettuce $ 141 million
Cabbages $ 110 million
Vegetables (NES) $ 109 million

 

peter@peterdiekmeyer.com

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