June, 1999

Fruits of Thought

Foodservice Dedication

As important as it is to the produce industry, it remains a challenge for the trade – indeed a challenge for the food industry in general – to really get a handle on foodservice.

First we have those numbers often bandied about that we have now passed the 50 percent mark on the percentage of food dollars spent in foodservice as opposed to retail. Indeed these numbers seem roughly correct, but they mean less than they seem.

After all, we are speaking of dollars here – not volume of product. That means that, incorporated into the dollar-amount credited as a food purchase is the table cloth, the dish washing, indeed the strolling violinists that make eating out the experience it is. This means that in volume the business is still overwhelmingly retail.

The large foodservice expenditures are often portrayed as some kind of mortal threat to retail, which retailers must fight back against. Indeed the entire home meal replacement business is sometimes portrayed as retail’s opportunity to grab back “share of stomach” from foodservice. Yet those foodservice expenditures include an awful lot of meals served in prisons, hospitals and old-age homes – business that seems unlikely to ever be in the retail domain.

Besides all this, there is a real question of how much of the foodservice consumption is actually fresh product. Tremendous amounts of potatoes move through fast food operations – principally as frozen French fries. It is, in many cases, a whole different industry than fresh.

Now that is not to say that we don’t have some crossover. Jim Ratliff, director of corporate purchasing for Hilton and a former chairman of PMA, told me that he got involved in PMA because, although produce accounted for maybe 5 percent of his purchases, it accounted for 95 percent of his headaches.

Gadzooks, that’s a pitch for the produce trade – join for headache relief!

In fact, though, that is not far off the mark. The big distinction between retail and foodservice in relation to fresh produce is the paucity of dedicated produce buyers at the foodservice-operator level. Though virtually every supermarket chain of even the smallest size has a dedicated produce buyer, even large foodservice operators function with a food buyer responsible for procuring many different product categories. Though even a tiny supermarket has a produce manager, a giant hotel is unlikely to have a dedicated produce person on staff.

This impacts the nature of the business substantially. It becomes difficult to find people employed by foodservice operators who consider themselves part of the produce trade. This, in turn, means they are slow to join produce associations, read produce periodicals, or in general, learn very much about what they are doing.

In effect, they function as reorder clerks rather than true buyers with the buying function left to the distributor.

There is confusion here as well. Though some large distributors are dedicated to foodservice, an awful lot of product that goes through conventional produce wholesalers and terminal market operators winds up in foodservice operations as well.

And here’s a kicker. A not-insignificant portion of the produce that is sold to warehouse clubs and some that goes through regular supermarkets winds up in foodservice operations too. It turns out that produce does not have an inexpensive small-volume delivery system. So to avoid the mark-up of food service purveyors, the most efficient way for many small restaurants to get some kiwi for their kiwi tarts is to go down to the local warehouse club and buy a package of kiwi.

Many growers in the produce industry sometimes become enchanted with the lure of the big name and grand gesture. Perhaps the most common complaint I hear from executives at commodity promotion groups is that they feel pressured by members to spend money on television commercials when the budget is too small to have a real impact. Equally, the lure is strong to chase big-name chains that can shape consumer eating habits and move the consumption needle and, indeed, for those with the big budgets, such a strategy may make sense.

But it involves wooing and influencing people who don’t care any more for produce than they do for pork. In most cases an easier, less expensive and more effective strategy is to work through the distributors where lots of people have the word “produce” right on the business card, pretty close to their wallet and not far from the heart.   pb