May, 2009

Research Perspective and Comments & Analysis

Making Waves In Foodservice

In today’s difficult economy, it’s understandable to look out and see a vast, volatile sea tossing about your company’s ship. On the other hand, this is also an opportunity to embrace a positive mindset and chart a course for future, better waters. It is in that latter spirit that Produce Marketing Association (PMA) is working to help our members find the upside of this economic downturn. We believe produce offers a unique lifeline in today’s economy, for your customers and consumers alike. The foodservice sector offers an excellent example of that lifeline opportunity, contrarian as that might seem at this moment of shrinking restaurant share of market.

The foodservice sector has long been urged by many — PMA included — to consider expanding the traditional “chop mentality” of focusing menus on pricier and less sustainable animal proteins. Now especially, moving produce to the center of the plate is a winning solution for everyone — it reduces plate costs for operators and opens up many different cuisine opportunities, while satisfying guests’ demands for freshness and bold flavors. Produce entrees and side dishes satisfy appetites and add colorful eye appeal to the plate. The variety of fresh fruits and vegetables available lends greater versatility and more healthful choices than other food groups. And talk about the positive impact of healthier menus on our nation’s medical costs!

It isn’t just traditional foodservice either. For retailers, the produce department not only distinguishes the store from competitors, but produce can also help distinguish the growing foodservice offerings available in supermarkets. As tightening budgets cause consumers to forego restaurants for home cooking, many are finding they’ve lost their kitchen know-how. That helps explain the popularity of TV cooking shows: consumers need to be reintroduced to the delicious possibilities fresh produce offers, including selecting, storing and preparing that bounty to maximize their investment. This presents an opportunity for both the retailer’s produce department and its foodservice operation.

To help everyone in the foodservice sector put more produce on the menu, PMA is partnering with industry leaders, National Restaurant Association and International Foodservice Distributors Association (IFDA) to seek solutions that benefit everyone — consumers, operators and produce suppliers.

Our multi-phase project seeks to identify opportunities to increase fresh produce use in foodservice to promote healthy lifestyles. As often happens with such bold projects, we couldn’t have started without the financial support of an enlightened leader — in this case, Markon. Tim York, Markon’s president, had the foresight and selflessness to see that the industry needed the best and brightest minds to dig into the most current research and help chart a future course for all.

We began with comprehensive research — led by the restaurant association with assistance from PMA’s produce industry leaders — to examine opportunities and barriers for greater produce use in restaurants. We’re digging deep and asking them a variety of questions about their use of fresh produce in the past, present and future. Where do they source that produce from —- including locally? What influences their purchases? How satisfied do they think their customers are with the produce they serve? What are their attitudes about sourcing seasonally vs. year-round? What level of importance do they give to motivators like food safety, nutritional disclosure or daypart (time of day) in making produce decisions?

That research will be used to start facilitated discussions of a first-ever “Executive Invitational Think Tank” of senior operators, distributors and produce suppliers. That discussion will help expose opportunities for, and how to overcome barriers to, increasing foodservice produce use. We expect this will be an ongoing, high-level dialogue.

We know that this help is needed now, which is why this is a “shovel-ready” project. The research is already underway; the Think Tank is scheduled in conjunction with PMA’s annual Foodservice Conference and Exposition taking place July 24-26 in Monterey, California. Research findings and discussion highlights will be presented by project participants at the conference’s opening session. We will provide a summary report to the associations’ memberships later this summer.

With the brains involved in this project, it stands to make more waves, which is what one has to do in these turbulent times. That’s why I’m looking forward to this conference session.

In fact, the whole conference is designed to stimulate solutions by offering the latest information on the economy and consumer trends, plus the industry’s best relationship-building opportunities and the only produce-specific trade show in foodservice. Learn more at www.pma.com/foodservice.

The phrase “tough economic times” stirs a sinking feeling. Fresh produce is a solution to improved nutrition and enhanced profitability that can buoy our industry. Armed with the research and insight needed to make informed decisions and working together across the supply chain, we can — and will — all benefit enormously by learning together.

Issues To Digest

It is exciting news, indeed, that PMA will be partnering with the National Restaurant Association and the International Foodservice Distributors Association to seek ways to support healthy living through the use of more produce. More research, and kicking off an “Executive Invitational Think Tank” at the PMA Foodservice Conference can only help bolster this cause. Certainly Markon, along with its president, Tim York, deserve a hat tip for helping to fund this initiative.

Until the results are in, though, let this columnist take a stab at identifying five of the issues we need to work on.

 

1) Getting it on the menu.
Most growers produce product and then look to sell it. This is at least plausible at retail where major chains carry a very broad range. At restaurant chains, however, it matters not how sweet the peach or how low the price; if a restaurant chain doesn’t have peaches on the menu, it is not buying.

Yet very few produce marketers have the time horizon, the competence or the money to work with a chain for years in the hope of getting its product on the menu. It seems problematic for, say, a cantaloupe producer to invest a lot of money to convince McDonald’s to add a half cantaloupe to the breakfast menu. Even if McDonald’s does add it, the company may not buy the cantaloupes from our diligent marketer.

The challenge: Can we come up with an institutional mechanism that can assist in getting produce on the menu even in those industry segments where the producers are small and commodity-oriented?

 

2) Will operators help farmers?
Operators typically think the producers should find ways to accommodate them. But, farmers are an unusual type of producer, subject to many variables that factories are not subject to, and if we want to preserve a vibrant production sector, restaurants may have to do more.

Retailers traditionally receive many calls from producers who are struggling with a surplus and asking for help moving it. If the relationship is good, very often retailers will go on special, both because they can offer consumers a great value and because they can help their supply base.

Farmers need this kind of flexibility as often 100 percent of their annual profits can come from how these surpluses are handled.

Traditionally, restaurants have used produce as an ingredient, or offered it on the menu at a set price and have had very little ability to swing suddenly to absorb extra crop. Yet producers need this help.

The challenge: Can we get the foodservice community to do something special for the grower because they want to affiliate with fresh produce in the mind of the consumer? Perhaps a snack fruit bowl can be placed at the cash register of every McDonald’s with the offering based on what is at peak volumes.

 

3) Value for excellence
Most top produce marketers look to sell their produce at a price above the market average. When it comes to wooing growers, packer/shippers point to this ability to sell at above average prices as a reason for growers to affiliate.

Yet in foodservice, one consistently hears that most operators are only interested in price. To some degree this is understandable; after all, the consumers won’t see the brand on those produce items when they are cooked or served. But, if foodservice is going to be the least profitable market, it is simply not going to be the priority of the trade.

The challenge: Can we make foodservice sales sufficiently profitable that the produce production segment will be interested in pursuing this opportunity?

 

4) Fresh vs. Frozen/Canned
One hopes that in some combination of a desire to affiliate their foodservice operations with local, healthy and fresh, foodservice operators will decide to focus on fresh. Yet this may be the most difficult challenge of all. Frozen food has been improving, and white-table-cloth restaurants are only a tiny portion of the industry. For many chains, canned mushrooms or frozen broccoli are just fine.

The lower shrink, consistent availability, consistent product quality, consistent price, all lead operators to go canned and frozen, even though consumers often indicate a preference for fresh produce.

The challenge: Can we get operators to override their own logistical preferences in order to delight consumers with fresh produce?

 

5) Getting a sincere commitment to fresh produce
In recent years, many quick-serve operators have featured produce on their menus. Yet it is uncertain how much of this is a sincere commitment to sell fresh produce and how much is window dressing to impress government and consumer advocates.

The McDonald’s located near the Produce Business office offers late-night drive-through service. If you order a salad they’ll tell you it’s not available on the “night menu.” Once a week, this columnist’s children get to go to McDonald’s, along with their car pool friends after religious instruction. Though everyone gets an order of McDonald’s Apple Dippers, we would say they are out of stock 20 percent of the time. This is a company that is never out of a hamburger bun. We suspect if this franchisee was out of hamburgers or French fries, he would lose his franchise — being out of Apple Dippers is viewed with less concern.

The challenge: Can we get quick-serve restaurants to not view produce as window dressing for regulators, but as a core menu offering that must be available at all times?