Demand Up

Demand Up

In line with growing health awareness and changing demographics, demand for fruits and vegetables is expected to increase in the long term, according to Rabobank’s recently published “North American Food & Agribusiness Outlook.”

“With consumers increasingly preparing meals at home, overall produce sales are on the rise,” says Rabobank Food and Agribusiness Research and Advisory (FAR) assistant vice president Marieke de Rijke. “However, in the short term, much of the growth will depend on the economy, which may temporarily drop demand for fresh-cut fruits and vegetables in favor of cheaper alternatives, such as canned and frozen produce.”

Demographics And Convenience

The Outlook chapter, “U.S. Fruits and Vegetables — Developments in the Processed Segment,” focuses on processed fruits and vegetables. Currently, this segment continues to make up a significant share of total fruit and vegetable consumption in the U.S. It accounts for approximately 50% of total produce consumption, but shares between categories have shifted over the years. 

Some of that change occurs as the ethnic composition of U.S. consumers changes. As the U.S. population grows more ethnically diverse within the next few decades, the volume and type of fruits and vegetables consumed in the U.S. is expected to change.

Additionally, convenience continues to play a large role in fruit and vegetable demand — especially considering that the average time to prepare a meal has dropped from 49 minutes to 31 minutes over the last decade. During that same time period, the increase in the number of single-person and double-income households, in combination with the increased desire to have more spare time, has resulted in a 50% increase in convenience food purchases.

Health Perceptions 

Health concerns have also driven demand for fruits and vegetables as consumers look for healthier and more nutritious options for their diets. The fresh-cut segment has been able to profit as consumers believe fresh-cut is the healthiest format for processed fruits and vegetables. However, frozen produce contains just as many vitamins as fresh even if consumers perceive it differently. Consumption of canned vegetables and juices, on the other hand, is declining as they have a less healthy image.

Competition Concerns

Conversely, while there are a number of elements driving increased demand of fruits and vegetables, there is also competition from low-cost producing countries; significant cost increases pressuring margins; and new requirements for tracing produce.

Labor-intensive industries are increasingly facing competition from countries with low production costs. As a result, for some processed fruits and vegetables, the U.S. has seen an increase in imports. “Over the past decade, imports of frozen vegetables have increased more than 90%,” says de Rijke.

“In order to be competitive, the processed fruit and vegetable segment could focus on niche markets and market its products as ‘grown in the U.S.,’ which also fits with increased consumer interest for local products,” says de Rijke.

Increased Costs

Additionally, fruit and vegetable producers — like all producers — have been faced with increased costs. To mitigate these increases, fruit and vegetable growers and processors have started to focus on restructuring operations to gain efficiency and reduce costs. They have also looked at improving yields, but have not made significant gains to offset price increases to consumers.

While adding costs, de Rijke says, “Traceability systems could be an opportunity for the U.S. produce sector since a nationwide traceability system could be used as a marketing tool and may result in consumer preference for U.S. produce rather than imported produce for food safety reasons.”

Information for this story was provided by Rabobank.

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