Europe’s fruit and vegetable sector is facing radical change, according to a leading international horticultural analyst, with far-reaching consequences for fresh produce suppliers and retailers not only in Europe, but also Australia.
Rabobank’s senior fruit, vegetable and floriculture analyst Cindy van Rijswick, who is visiting Victoria and Tasmania this week from the bank’s global headquarters in the Netherlands, said many of the market trends taking place in Europe are being emulated in Australia.
Ms van Rijswick said changing market dynamics were presenting challenges and opportunities for the horticulture industry, with opportunities across the supply chain enhanced by advances in technology, innovation and logistics.
“Like Australia, European suppliers are operating in an increasingly complex and changing market, as they need to deliver product that caters to changing shoppers’ needs and behaviours,” she said.
“With consumers looking for ‘value’ over ‘volume’, they are often willing to pay more for convenient and sustainably-produced products.”
This premiumisation trend has seen particularly strong growth in the berry sector (both in the fresh and frozen categories) Ms van Rijswick said, with significant growth foreseen over the next five years. The health attributes of berries and their versatility as an ingredients in smoothies and dairy products is also behind the upswing in demand, she said.
“We are also forecasting a revival in the demand for stone fruit,” she said,” driven by investment in new varieties which is expected to ramp up demand for plums and peaches – from fairly stagnant levels over recent years.
“In contrast, ‘staple fruits’ and fresh vegetables are expected to exhibit stable and, in some cases, declining growth in the coming five years – as fresh-cut and frozen fruit and vegetables gain market-share from the whole fresh and preserved categories due to their ‘value’ proposition.
Ms van Rijswick said the increase in demand for frozen fruit was providing additional export opportunities for European produce.
“While demand out of Asia for fruit and vegetables is increasing, especially in the frozen berry category, Europe is not expected to become a significant supplier into the Asian market,” she said. “Distance to market and a different culture in doing business is proving to be an impediment for European fruit and vegetable exports into Asia. Trials to export apples, pears and bell peppers have not resulted in large export volumes yet.
Given Australia’s proximity to Asia however, it could certainly be a growing market for the Australian horticultural sector to tap into.”
Ms van Rijswick said European apple suppliers were looking for alternative markets due to the Russian import ban, however she didn’t expect Australian produce to compete directly with European produce given the different growing seasons.
“I don’t see Europe and Australia becoming fierce competitors in the fresh fruit and vegetable space, however the frozen and processed market will remain competitive – especially for frozen processed potatoes, which is Europe’s second largest fruit and vegetables export product,” she said.
Ms van Rijswick said fruit and vegetable suppliers not only had to keep abreast of new market dynamics, but also the “drastic change in the retail environment”.
“The ‘hard discounter’ has around 20 per cent of grocery market share in Europe (compared to approximately 10 per cent in the eastern states of Australia), which has polarised the food retail sector by putting pressure on existing retailers as well as suppliers,” she said.
“That said, there are some suppliers who like dealing with the ‘discounters’, with some larger growers selling their produce directly to the retailer (thereby shortening the supply chain) under contractual arrangements.”
The growth in the online retail model is also a ‘game changer’ for the value chain, Ms van Rijswick said, with 25 per cent of European fresh produce expected to be bought online by 2030 – up from rates of between two and five per cent across much of Western Europe.
Ms van Rijswick said online sales of organic fruit and vegetables were already proving popular, while Europe’s population density lent itself to the online retail model, as well as the consumer preference for convenience products.
“Europe is moving towards smarter supply chains that are not only shorter, but more transparent, and it is those retailers that are efficient and integrated that are likely to be successful,” she said.
“It is a similar story at the supplier level, with strong growth opportunities for high-tech greenhouses and urban farming, which have proven to reduce labour and energy costs and improve sustainability.”
New fruit and vegetable varieties, production systems (such as protected cropping technologies) and data use are also increasing in prominence, she said, and this has seen solid lifts in productivity and sustainability.
Ms van Rijswick has been analysing the EU fruit, vegetables and floriculture sectors for 15 years and has published reports on potato price volatility in Europe, rising EU berry consumption, sourcing complexity in the fresh produce business, the impact of online grocery retail on fresh produce suppliers and trends in the prepared produce sector.