ORLANDO, Fla. -- The food-service industry is hungry for more fresh produce, and both broadline and produce distributors are seeking new ways to satisfy that demand, according to the latest FreshTrack survey conducted by Cornell University for the Produce Marketing Association.
Much of the growth will come from sales of fresh-cut, value-added items, according to the biannual poll of suppliers and operators. It's the first time researchers have examined the "other pillar" of the food industry since the PMA commissioned the FreshTrack series in 1997. The latest results were discussed during PMA's Fresh Summit conference and exposition here.
Broadliners, which supply both food and nonfood items, report that produce currently represents roughly 12% of their total sales, while produce distributors state 70% of their food-service sales come from fresh produce. The study noted the products and services both entities supply cross over into retail and food service, though broadliners are more closely allied with non-retail end users.
It's no secret that food service -- comprised of restaurants, hospitality, institutional feeding and business and industry -- has increasingly become a rival for consumers' food dollars. The latest FreshTrack snapshot reveals there exists a parallel competition in buying, particularly when it comes to certain commodities like lettuce and related basic items.
To that end, produce distributors participating in the survey said they expect their food-service-related sales to increase from 45% currently, to 48% in 2005 -- an indication that retailers will be getting less fruits and vegetables from this source.
A panel of industry veterans that had convened to discuss the findings said there are a number of factors at work to explain such increases. Peter Goulet, director of produce for Hannaford, Bros., Scarborough, Maine, said changes within the retail supermarket environment could explain the shift. "The percent of total store sales for produce has been growing consistently over the past few years, and total dollar sales are definitely on an upward trend," he said. "The percent of total store sales may be held in check [in the future] because of pharmacy, natural foods and other categories that are really going through a growth spurt right now."
Tim York, president, Markon Cooperative, Salinas, Calif., said the numbers reflect Americans' tendency to eat out more, and "more of the food dollar going to food consumed away from home."
Like the typical U.S. consumer, the food industry itself is looking for more convenient ways to prepare and serve food. FreshTrack revealed that fresh-cut will enjoy the biggest margin of growth, with both broadliners and produce distributors predicting sales increases in this category. The former expects the percentage of its fresh-produce stockkeeping units to jump from 15% this year to 25% in 2005; the latter foresees item counts increasing from 18% to 27%.
Panelists working in food service said fresh-cut solves a number of challenges facing today's operators, and are always looking for new ways to increase customer satisfaction and spur repeat visits.
"We tend to put our service [emphasis] more on the customer and less on labor," said Dave Murphy, produce manager for Yum! Brands, the Irvine, Calif.-based chain restaurant operator of such concepts as Pizza Hut, KFC and Taco Bell. Murphy said that it's also a simple matter of food safety. "The handling, the cutting and the packaging of produce is done under a more controlled environment by people who are trained to do that."
Joe Murphy (no relation), director of corporate produce operations for Ahold-owned U.S. Foodservice, agreed, saying his company's customers are looking for consistency and simplified operations that focus on service, not production. "They don't want to build a big kitchen. They want to build a big front end so they can get more patrons."
While operators said they are striving to streamline production, the sourcing of fresh produce remains a multi-channel affair. Broadliners and produce wholesalers get product from grower/shippers, other distributors, brokers, buying organizations and importers. Retailers buy their produce according to need -- and department, said Goulet. "Less than 10% of what we buy [in the produce department] comes from a distributor," he said. "Probably 75% is direct from grower/shippers and terminal markets, maybe 10% from a broker, and a little bit from the broadliner. But our deli department will definitely buy product from food-service wholesalers for the salad bar or other pre-cut items to make party platters and sandwich components."
Specifically, the section of FreshTrack focusing on supply chain factors found that today, produce distributors report they sell 55% of their fruits and vegetables to retailers, and the remainder to food service. Meanwhile, broadliners sell 94% of their fresh produce to food service, and only 6% to retail outlets.
"What we're finding is these [in-store] chefs looking for restaurant-quality products," said Murphy. "Even in packaging, they're buying a five-pound salad mix over an eight or 12-ounce bag at the retail. They don't want to mix the two SKUs and tie them in to their produce coolers."
Goulet agreed, adding that deli people are "not going to go to my produce department, and buy a 12-ounce broccoli for their salad bar. They're looking for a five-pound bag, pre-cut, to take labor out of deli. That's something we don't offer customers, so they go through wholesale."
The interest in fresh produce -- fresh-cut and otherwise -- will only grow in food service, including those items found at the supermarket deli and meals case. Some 83% of respondents said fresh produce will be "important" or "very important" to center-of-the-plate items by 2005, up from 69% this year. The supply chain will be pressured from the growing fields through the distribution center to transport products that are consistent in quality, competitively priced, and satisfy the consumer, panelists said.
"We look to the supply side to tell us what out there is different, and what might be a competitive edge to us," said Murphy.