Fresh Tomato Production And Marketing Trends In The N .
Fresh Tomato Production andMarketing Trends in the N.American MarketDR. ROBERTA COOKDept. of Ag and Resource EconomicsUniversity of California, DavisApril 2015
Agenda Fresh produce international trade and MexicoEffects of economic downturn on food marketsFresh tomato market supply and consumptionUpdate on US fresh tomato importsCanadian greenhouse tomato trendsUSA greenhouse sector trendsMexican tomato sector trendsConclusions
First, Some Definitions and Clarifications Protected culture (PC) refers to the production method andranges from plastic tunnels to shade houses to greenhouses.This is a movement along a continuum from more passive tomore active control of the growing environment.Mexican fresh tomato sector: includes both open-field and PCand within PC both shade house and GH. Most PC is shadehouse and in Sinaloa growers may produce using shade houses,GHs and open-field. In central Mexico, where most GHproduction is located, there are dedicated GH growers, manyof which are new to the tomato industry.The Canadian and US PC tomato industry is only GH (no shadehouse) and the growers are distinct from open-field growers.Canadian tomato production is almost all GH whereas in theUS most fresh tomato production is open-field (mainly roundmature greens but also round vine-ripes and romas).
First, Some Definitions and Clarifications Hothouse (HH) is a marketing term used by commercial buyersand consumers and refers more to the type of tomato vs theproduction method.The term HH will be used when referring to tomatoes sold atretail since scanner data includes two specific types of HHtomatoes, tomatoes-on-the-vine (TOVs or clusters) and roundHH (with the calyx on, also referred to as beefsteaks).The Canadian and US GH industries started with round HHtomatoes, then TOVS and more recently small snackingtomatoes.For technical production reasons, most TOVs grown in Mexicoare grown in GHs. However, round HH tomatoes (with calyx)are grown in both shade houses and greenhouses. Hence, inreferring to tomatoes grown in Mexico using PC, the broadermarketing term HH will be used.
Fresh Produce International Trade andMexico’s Changing and Growing Role
NAFTA Fresh Produce Trade N. American fresh veg trade mainly intraNAFTA! 77% of US fresh vegetable exports go toCanada, then 8% to Mexico. 2/3’s of US fresh veg imports come fromMexico; most of the remainder from Canada. Fresh fruit trade is diverse – beyond NAFTA. Typically Mexico was much more of a veg thana fruit exporter. This is changing.
Million ThousandsUS Imports of Fresh Fruit and Vegetables fromMexico, 1993-2014 (excludes canned, frozen, juice and dried)9,000 8.5 Source: USDA/FAS GATS.Fruit
ThousandsTotal US Fresh Produce Imports, by Key Category, Millions, 1994-2014, (all countries)18,00016,00014,000Imports: Fresh VegImports: Other Fresh Fruit12,00010,000Imports: Bananas/plantains8,0006,0004,0002,0000Source: USDA GATS online queries, BICO-10. 16.4
Value Shares of Total US Fresh Fruit Imports,by Product: Major Changes in Product erBerries Avocadostropical*37Citrus5432Apples & StonePears fruits*** includes pineapples, mangos, papayas, durians** includes apricots, cherries, peaches, plumsSource: Imports Contribute to Year-Round Fresh Fruit Availability, FTS-356-01, Dec. 2013, ERS/USDA
Value Shares of Total US Fresh Fruit Imports,by Region: Mexico rs* Equatorial countries include Costa Rica, Guatemala, Ecuador, Colombia, and Honduras** Southern Hemisphere countries include Chile, Argentina, Peru, New Zealand, Brazil, SouthAfrica, and AustraliaSource: Imports Contribute to Year-Round Fresh Fruit Availability, FTS-356-01, Dec. 2013, ERS/USDA
Fresh fruit and vegetable imports as a share of USfresh utilization/consumption, 2013/14* (despite risingimports most of US consumption is still produced here)Item%Vegetables, excl. melons and potatoesMelonsPotatoes28339Fruit, allExcluding Bananas5235*2014 for vegetables and potatoes; 2013 for melons and fruit.Source: Economic Research Service, USDA.
Mexican Fresh Produce Trade Mexico is a powerhouse fresh fruit and veg exporterand is an integral part of the North American freshproduce supply chain for many commodities. In 2013, Mexican fresh produce exports to the worldtotaled 8.743 billion including: 4.9B fresh veg, plus 3.9B fresh fruit. To put this in context, the USA exported 7.4billion of fresh produce in 2013. Nogales is losing market share in Mexico’s freshproduce exports as Texas crossings gain share!!
Shares of Total Mexican Exports of Fresh Produceby Key Country of Destination: Mexico has notsucceeded in market diversificationProduct200320138614928991991Fruit% US & Canada% OtherVegetables% US & Canada% OtherSource: Calculated by Cook based on SIAVI database from Secretaria de Economia, Mexico, 2014.
The Economic Downturn and its Effect onFood and Fresh Produce Retailing
Dollars Per HouseholdUS Average Annual Household Food Spending in Constant (2001)Dollars, by At Home and Away-From-Home, 2001-20126,000at homeaway-from-home5,0004,0003,0002,0001,00002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Sources: Demographics of Consumer Spending 2013 Edition, The Food Institute; and Food Industry Review2014, The Food Institute. Deflated by Cook.
The Economic Downturn and Consumer Food Behavior 2009, the quantity of food sold in food stores down. “I buy only what I need.” Waste a concern. Perception that produce costs more and may bewasted. Better shelf-life might help. 46.5 million people on food stamps (SNAP) inFY2014 (vs 17.3 in 2000) for cost of 73.9B. Consumption rates of fresh produce increasemarkedly with income level so more robust economicgrowth will help demand for fresh produce. Higher income and socially conscious foodies aredriving demand; their preferences lean to organic,“natural,” convenience (fresh-cut), flavor, local.
USA Select Supermarket* Fresh Produce Dept. PerformanceDuring the Economic Downturn/Recovery, % Change v. Prior Yr*As of 2013, includes Walmart Supercenters, Sam’s Club and Target.2008 0.2-3.6-2.520140.5-1.1Sources: Various sources of scanner data.Note: Not same store sales and the store universes change over time so exercise caution when making annual comparisons.
Fresh-cut, Organic and Total Fresh Fruit and VegetableSales in Key US Food Retailers, % Change 2014 vs2013Weekly sales/storeWeekly quantity sold/storeOrganicFruitOrganicVegFreshcutFresh Cut 17.3 17.2 17.2Fruit**Veg12.012.5Salads 10.9 10.7All9.7FruitVeg*7.85.03.20.5*Excludes other produce (such as salad dressings, toppings, etc.), which is 10% of produce dept sales dollars and 5% of quantity.** Excludes overwrap.Source: FreshFacts on Retail, Whole and Fresh Cut Produce Trends: 2014, United Fresh Produce Association and Nielsen, March 2015. Fresh Coverage Area (FCA) incl key retailers from food,mass/supercenter and club chains, or more than 18,000 stores. It includes UPC, random weight and retailer assigned codes.
Distribution of US Households by Income Level, Share of TotalFresh Produce Expenditures/Income Level & Ave. Fresh ProduceExpenditures/Income Level, 2012 254 8% 819 31% 100,000 19% 594 18% 70,000 99,99914% 478 14% 15,00015%Share ofHouseholds 50,000 69,99914%Source: Calculations byRoberta Cook from the FoodInstitute’s Demographics ofConsumer Food Spending,2014. Average freshproduce expendituresper income group 15,000 29,99918% 339 13% 30,000 49,99920% 409 17%% Percent oftotal freshproduceexpenditurescontributed byeach incomegroup
Copyright kCerealCATEGORIESMOSTRFeady- ‐to- PERSPOWERSHOPPERS TOP33%OFSHOPPERSWHOOVER- ategoriesSource:NielsenPerishablesGroupFreshFacts PoweredbySpire,aDatalogixCompany,dataending2013
The good news Economic growth improving and the retail quantity soldof fresh produce grew 2% in 2014 – finally somegrowth! High fresh produce consumers are often “foodies” andinterested in where and how products are grown andparticipate in social media. High knowledge andloyalty–if deliver flavor, unusual varieties, convenience. Opportunity for consumer engagement on premiumvarieties greater than ever. Foodservice industry under great pressure to add morenon-animal protein to menus, offer more center plateproduce options, increase the diversity of produceitems; movement to stealth health. Tomatoes mayhave opportunities.
The economic downturn accelerates pace ofchange in the food marketing system More than originating new trends, it intensified preexisting forces, such as channel blurring. Margin pressure at all levels of the food system! Many produce suppliers facing lower profits. Growing food safety, traceability and sustainabilityexpectations all increase costs. Need for major investments in info tech systems. Foodservice took a huge hit. Mergers are up (retailers, foodservice, shippers). More than ever it is necessary for firms to differentiate,get out of commodity trap or not be caught in the deadly“middle.”
US Food Industry Mergers & Acquisitions1981-2014: Fewer, Larger 91199019891988198719861985198419831982Sources: various Food Industry Reviews, including the 2014 Edition, The Food Institute; and The FoodInstitute Webinar Who's Buying Whom and What to Expect in the Future, March 3, 2015.
US Grocery Market Shares, by Key Channel,1998 vs. 2013: Market Transformation!Nontraditional2%199890%8%39%mass – club - drugsupercenter - dollarTraditionalconv supermarket,fresh format, ltdassortment, superwarehouse, otherConveniencewith and withoutgasSource: Willard Bishop, Competitive Edge, August 201446%15%2013
Forecast of Compound Annual Sales Growth Rate vs. Inflation2013-2018Fresh Formate-CommerceLtd Assortm.DollarWholesale ClubSuper WhseSupercenterConv. w/gasOther Sm GrocDrugConv. wo/gasMilitaryTradl .1%Food Inflation CompoundAnnual Rate: 3.0%2.1%2.0%1.9%1.7%Source: The Future0.4%of Food Retailing,Willard Bishop,June 2014
Emerging marketing channels for fresh produce Convenience store potential, drug stores, stores. E-commerce. Click ‘n collect, delivery, in-storepickup, various models emerging, Amazon Fresh. Major initiative to increase fresh produce onfoodservice menus despite the barriers. Growing international trade provides more redundancyin supply which may help large foodservice users toadd produce items to the menu. 27B fast casual segment (about 12% of limitedservice sales) very focused on fresh and creativeingredients; potential for hothouse tomatoes.
Fresh Tomato Market Supply andConsumption
U.S. Per Capita Vegetable Utilization/Consumption,Excluding Melons, 1976-2014P, (all channels, foodserviceand retail, includes freshcut), poundsPounds per capita450400350300379343Processed includes frozen, dried and canned.250200Processed includes frozen, dried and canned.150Fresh includes fresh-cut and bulk.100501197734148Processed Veg,Excl. PotatoesProcessedPotatoesFresh PotatoesFresh includes fresh-cut and 99820002002200420062008201020122014P0Fresh Veg, ExclMelon and PotatoSources: USDA/ERS, Vegetables and Melons Situation and Outlook Yearbook, May 30, 2014 through 2007; and for 2008-2014USDA/ERS, Vegetables and Pulses Yearbook Tables, posted online March 20, 2015. Figures compiled by Dr. Roberta Cook, UCDavis, fresh and processed sweet potato share of total sweet potatoes is estimated; processed vegetables includes lentils and drypeas, and excludes dry beans.
US Fresh Tomato Production, Consumption, Imports, andExports, 1990-2014p (includes hothouse)million 201120122013P2014P2000Source: USDA/ERS, Vegetables and Pulses Yearbook Tables, posted online March 20, 2015, nd-pulses-data/yearbook-tables.aspx.
US Fresh (not processed) Field Tomato Production, California andFlorida only, (excludes other states and greenhouse) 1982-2014million : various USDA/NASS Vegetable Annual Reports, including January 2015
US Fresh Tomato Imports from Mexico, in Value andVolume, 1991-93 vs. 2008-10, and 2012-14Value(million dollars)Crop2012-14Tomatoes1991-932292008-10 2012-141,2521,624Volume(thousand metric tons)1991-93 2008-103121,1381,383Between 1991-93 and 2012-14, value grew 609% vs 343% for volume. By themid-90’s, growers in Sinaloa had switched to new higher value long shelf-lifevarieties. This increased US import demand. Growers have continued toimprove quality and many have transitioned to hothouse production. Newhothouse producers in central Mexico have also contributed to the export ofpremium, high value tomatoes.Sources: USDA/ERS Outlook, “NAFTA at 17”, March 2011, and USDA/GATS trade data for2012-14, compiled by Cook.
Monthly FOB Prices for US Mature Green Fresh Tomatoes,January-August, 2008-2012 (low 2012 prices likely led to trade dispute)US Feb.Mar.Apr.MayJuneSource: USDA/ERS, Vegetables and Pulses Outlook Report, Sept. 27, 2012.JulyAug.
US Per Capita Utilization/Consumption of FreshTomatoes (1985-2014P)Pounds per capita2520151050P PreliminarySource: USDA/ERS, Vegetables and Pulses Yearbook Tables, posted online March 20, 2015, nd-pulses-data/yearbook-tables.aspx.
Fresh Tomato Types Proliferate as Firms PursueProduct Differentiation in a Mature MarketField-grown onlyMature green round tomatoes (harvested at stage 2 of 6)Vine-ripe round tomatoes (harvested at later stages)Tomatillos (green husked tomatoes)Protected culture onlyBeefsteak/round tomatoes with calyxTomatoes-on-the-vine (TOV)Campari (small snacking tomato on the vine)Both field-grown and protected cultureGrape tomatoes (snacking)RomasCherry (snacking)HeirloomOther specialty (some of which are snacking)
Specialty and Greenhouse TomatoesY.E.L.O. Youth, Energy, Life, Om
Specialty and Greenhouse Tomatoes
US Fresh Tomato Trends Over half of the quantity of tomatoes sold in the USA areestimated to be sold in foodservice channels. Foodservicerelies on round, field-grown mature green tomatoes,preferred for their firmness and slicing characteristics. Foodservice sales took a big hit during the economicdownturn, reducing sales of mature greens. Foodservicesales are now rebounding; this in turn should increase salesof mature greens. Hothouse tomatoes are just now starting to make someinroads in foodservice channels (not fast food). Remember – retail scanner data excludes foodservicetomatoes! So, scanner data only reflect trends in abouthalf of the total tomato market. There is no data on freshtomato sales in foodservice channels.
US Retail Fresh Tomato Trends and Caveatsin Interpreting Scanner Data Retail scanner data sets are not directly comparable, yearto year (stores may enter and exist the sample universe). As noted earlier, scanner data doesn’t indicate whethercertain tomato types are grown in PC or not, so HH vs fieldtomato shares are not definite; and firms purchasingscanner data may ask Nielsen or IRI for different producthierarchies creating different views of the tomato category. Nielsen and IRI report two general HH subcategories: TOVsand beefsteak/rounds – so we know these are definitely HH. Many romas exported from Mexico are HH (although notreported as such), and while snacking tomatoes, such asgrapes, can be either field-grown or HH, increasingly theyare HH.
US Retail Fresh Tomato Trends and Caveatsin Interpreting Scanner Data Given these limitations we can determine theminimum share of retail tomatoes sold which areHH, but not the maximum. Based on the followingPerishables Group Nielsen data, combined HHround and TOVs represent 36% and 39% of totaltomato category quantity and dollar sales,respectively. After accounting for estimated sales of roma andsnacking tomatoes grown in HHs (but not identifiedas HH), the HH shares should be over half oftotal tomato category quantity and dollar sales.
US Retail Fresh Tomato Trends and Caveats inInterpreting Scanner Data The tomato category was stagnant between2010-14 but with a major change in product mix.The growing subcategory is the small, convenientsnacking tomato, which cannibalizes other tomatoes,both HH and field, rather than stimulating growthin total tomato sales and volume. In quantity sold, TOVs peaked in 2011 and HHrounds in 2010. In 2014, the category was up 1.7% in dollars anddown .4% in quantity sold, with both snacking andromas gaining.
US Fresh Tomato Quantity Sold in Key Retailers, by KeyTomato Type, 2010-2014, Million PoundsTOVSnackingRomaField roundHH 10201120122013Source: Nielsen Perishables Group FreshFacts , Historical 2010-20142014
US Fresh Tomato Quantity Sold in Key Retailers, by KeyTomato Type, 2010-2014, Million DollarsTOV2,500Snacking2,173RomaField round2,2232,000HH 22013Source: Nielsen Perishables Group FreshFacts , Historical 2010-20142014
US Fresh Tomato Category Sales in Key Retailers:Shares in Quantity and Dollars, by Key Tomato Type,2014HH round13% round13%Roma17%HHround13%TOV26%Snacking 31%Meal Prep29%DollarsSource: Nielsen Perishables Group FreshFacts , Historical 2010-2014. Fresh Coverage Area (FCA) incl key retailers from food,mass/supercenter and club chains, or more than 18,000 stores. It includes UPC, random weight and retailer assigned codes.
Big Picture Note that field-grown round tomatoes can beeither mature greens or vine-ripes. Hence, themature green shares of the tomato category areeven lower than the field round shares of 14% ofquantity and 13% of dollar sales shown in theprior slide. 2013 IRI scanner data reported that only 1/3 ofthe round field tomato quantity sold were maturegreens (remainder vine-ripes). This highlights thedramatic loss in retail market share for maturegreens over the last 2 decades in the wake ofhothouse expansion.
Big Picture The mature green tomato industry, having lost most of itsretail market, is now facing potential future competition insome segments of the domain it has owned, foodservice(fast casual and full-service rather than large fast foodchains). Snacking tomatoes have growth potential in all segments offoodservice. This benefits HH more than field-grown. Facing a saturated retail market, HH producers have anincentive to get the right varieties of round tomatoes forfoodservice. Breeders may or may not deliver in the nearto mid-term and cost relative to field-grown is a majorbarrier. But already there are examples of regional chainswhich emphasize “local” and premium ingredients, and seeksupply and price
Fresh tomato market supply and consumption . production is located, there are dedicated GH growers, many of which are new to the tomato industry. . More than originating new trends, it intensified pre-existing forces, such as channel blurring.
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