Not a day passes now without rising food prices making headlines around the world, and produce is no exception. The latest Consumer Price Index data shows fresh produce prices up 6 percent from this time last year — that’s three percentage points higher than the normal year-to-year increase. Given the current produce marketing climate being anything but normal, historical data has become a poor predictor of what our industry and produce-buying consumers are facing in the months and years ahead. Produce Marketing Association (PMA) recently sought to learn how consumers feel about the rising price of produce.
Most surveyed consumers told us they consider food-cost increases extremely serious. If produce prices jump as much as 26¢ to 50¢ per pound, many say they would migrate away from fresh produce. Most consumers tell us they would move to less expensive produce or canned and frozen options. Nearly one in five — 19 percent — claim they would abandon produce purchases all together if prices reach an extra 51¢ to 75¢ per pound. These survey results underscore consumers’ alarm with rising food prices and reveal their readiness to alter purchase patterns should produce prices climb further. However, to what — and to what extent — they would migrate is another question, as other food categories are also headed up and one can’t look at produce in isolation.
You know and I know that shoppers aren’t the only ones alarmed. There’s no doubt that produce industry members in both retail and foodservice channels also wrangle with the impact of dramatically rising costs on consumer food prices. We must also continue to point out the health and other benefits of eating fresh produce. When our industry struggles not only with rising consumer prices but also with astronomical price increases of our own inputs ranging from fertilizer to fuel, normal business practices get even further pinched — and the produce supply chain cannot be expected to absorb the line on prices indefinitely. Plus, the cost is only one item on board a truckload of market disruptors currently being faced by the fresh produce industry.
Market disruption is defined as “situations causing markets to cease functioning in their traditional manner.” Price, the slowing economy, sustainability, the “locavore” movement, food safety — these are all disruptors of our traditional market paradigms that have merged into a perfect storm that I believe is changing our industry forever. Serious market forces we have never seen before at this level — and certainly not all at once — are advancing a brave but scary new world. To survive means finding opportunity amid challenges, and opportunity will come only when we challenge ourselves to question how we have done things in the past and why.
We have grown used to cheap everything, believing that most inputs will always be there for us because we have the dollars to pay for them: cheap water to grow; cheap labor to harvest, pack, and deliver; cheap packaging to protect; cheap fuel to drive. American consumers have benefited, too, by being treated to the lowest percentage of disposable income spent on food on this planet. Consider that in 1950 our grandfathers who farmed received an average of 41¢ for every dollar spent on food. Today, the average return to our growers is less than 17¢. Two generations later, we’re drowning in the realities of modern-day farm economics, trying to deal with costs for some inputs that have tripled in only a few years.
And so we see some members of our supply chain closing their doors or changing their business fundamentals. Producers are moving farms to Mexico or decentralizing production — in part to help tap into consumer interest in locally grown, in part to reduce transportation costs. Retailers are dramatically shifting their formats, such as the current explosion of small-store formats — think Tesco and Bloom, for example. Foodservice is doing everything possible to reduce plate costs (presenting an ever-greater opportunity for produce, by the way). Every link in the supply chain grapples with enhancing food safety and worries about the human and financial costs of an outbreak. Every link is getting its head around sustainability.
Is the lesson we’re starting to learn that the many privileges our businesses and lives have grown dependent upon have been undervalued and are unsustainable — whether for our farmers, for our environment, or for consumers? We’ve done so many things because we could. Isn’t it time to start asking ourselves the question: do we do things the way we do because we should?
I believe we have entered an era of intense questioning for our industry worldwide, perhaps a tipping point that will dictate our future for decades to come. The availability and cost of inputs, of land, of water, of labor, will have as much to say about our successes as anything that has gone before. Whether they present challenges or opportunities will be up to us.