Ever wonder why the first thing you come across in a newly opened grocery store is the produce section?
It's no accident, and according to Rick Alcocer of Tanimura & Antle, Inc., fruits and vegetables, in fact, set the image and reputation of a supermarket.
Alcocer, in charge of pricing products for the company with gross sales surpassing $500 million, talked about where the produce industry is headed during the recent Spring Ag Outlook Forum held in Sacramento by the California Chapter of the American Society of Farm Managers and Rural Appraisers.
The family-owned Tanimura & Antle, or T&A, was established in Salinas in 1982. It has become the largest independent, iceberg lettuce grower in the world and is fully integrated with its own seed and breeding, growing, harvesting, and processing divisions, plus an expanding organic operation.
The company also has eight other regional sales offices in the U.S. and Canada to serve retail outlets across the continent. During the past two years, T&A built two salad-mix processing plants, one in Atlanta and another in Montreal.
According to Alcocer, a 20-year veteran with the company and a predecessor, Bud Antle, Inc., it has 50 percent of the salad mix business in Canada, where per capita consumption of fruit and vegetables is almost twice that of the U.S. It is the largest exporter of vegetables into Japan.
One new wrinkle to propel produce sales is the stationing of knowledgeable employees in supermarkets to advise consumers on selection and preparation of fresh produce and perhaps encourage consumers to try something new. “The goal is to surpass our ‘5 A Day’ promotion with a ‘10 A Day’ program like Canada has,” he said.
Food service too is going through changes as restaurants strive to reduce costs, not to pass savings on to consumers or encourage a more healthy diet, but to enhance profit margins.
Consolidation of retail and food service entities continues, and as chains expand they also increasingly call the tune with the produce industry. Thirty years ago, the top 10 retailers controlled 30 percent of the produce business, but today the top five control 50 percent, Alcocer said.
The bigger the chains get, the more driven they become to force down their costs. One example is the movement toward use of returnable plastic containers, RPCs, for the entire route between field and consumer, with no handling of the individual pieces of produce between. Similar returnable containers made of corrugated cardboard are under study.
Another change, inspired by advanced technology to preserve produce quality, is labeling carrying not the shipper's logo but the retailer's. “Retailers finally have enough faith in packaging to be confident the produce will hold up,” he said.
The concept of bagged, ready-to-eat produce draws attention for reasons other than consumer convenience. Among supermarket handlers, the most frequent injuries are from knives used to prepare produce for displays.
Alcocer said once bagged salad mixes caught on with consumers, retailers anticipated a drop in sales of head lettuce. More subtle and not anticipated, however, was the drop in movement of tomatoes and other salad ingredients.
Consumers previously picked up tomatoes at the same time as head lettuce. With the popularity of convenient bags of lettuce, they tended to buy croutons and dressing and be on their way.
Retailers reacted with “category management” for produce departments to merchandise bagged lettuce more closely with other salad ingredients to boost sales.
T&A is busy with efforts to copy with California's energy crisis. It found ways to reduce energy used for irrigation, greenhouses, shipping, and processing by up to 50 percent. Other economies were found with fertilizers and packing materials. Hours of salad plant operation were shifted from daytime to lower electrical power demand times of 7 p.m. to 10 a.m.
Fearful of rolling blackouts, the company installed its own generators to power telephones and computers essential for its sales and shipping.
Like many other businesses, T&A placed an energy surcharge of 10 to 20 cents per carton on all produce. “It's our way of dealing with not only our own cost increases but also to help our growers recover some of theirs,” Alcocer said. Other Salinas Valley produce shippers, he added, tacked on surcharges ranging from seven to 50 cents per carton, depending on the energy costs for the produce concerned.
He said his retail accounts reacted sympathetically to the surcharge. Some, but not all, passed the costs on to consumers. At the consumer level, for a 24-count carton of lettuce, a 20-cent increase is less than a penny a head and isn't likely to cause much resistance.