Pricing Pressures and Consumer Expectations in the Produce Industry

As wholesalers, we are in a unique position to be able to say, “We feed people.” We have an incredible duty to our customers and consumers to ensure they receive the freshest, highest-quality produce.

The produce industry has always been a very price-sensitive market. Consumers are highly responsive to fluctuations in price, especially in a post-COVID world with increased inflation over the last few years.

At the same time, producers and retailers are facing rising costs due to supply chain issues, labor shortages and environmental challenges. This makes it difficult to navigate consumer expectations for affordable prices while managing the pressures of increasing operational costs.

RISING COSTS

• Increased labor costs: Labor shortages and wage inflations are particularly noticeable in the agricultural and logistics areas. Workers demand higher wages, so producers have to meet their needs.

• Rising fuel and transportation costs: Higher gas and diesel fuel costs over the years are directly reflected in delivery expenses. Also, the increased cost of shipping, particularly from international markets, is also making imported produce more expensive. All these costs have to be passed along to consumers at the end, leading to higher prices.

• Tropical storms and crop yields: A summer and fall of extreme weather events, such as droughts, floods, hurricanes and wildfires, are impacting crop yields, reducing supply and causing price spikes we have never seen last so long.

• Scarcity of some fruits and vegetables is leading to higher prices and poorer quality.

• Inflation: Inflation, in general, is affecting all markets, but particularly the produce and grocery aspect, as people are not used to and should not be paying the prices they are for fresh goods. Inflation needs to be controlled going into the new year and beyond.

CONSUMER EXPECTATIONS

As just stated, inflation is affecting all markets, which causes consumers to be more cautious about spending.

Fresh produce is essential in everyday life, and many consumers overlook the higher prices so they can feed their families with good products instead of processed foods. However, it is at the expense of other purchases from a ever-tightening disposable income.

Retailers also tend to offer low prices or discounts, and with the economic uncertainty, it could strain relationships with their suppliers, as they won’t be able to meet their price needs.

CHALLENGES

Producers and retailers are between a rock and a hard place. Consumers are looking for good value and high quality, and the rising costs are forcing lower quality at a higher price.

Some things companies can, or should, do:

• Start pricing certain items differently to reflect the inflation rates.

• Buy better quality product to at least guarantee quality at the higher price.

Offer value-added product like fresh-cut produce. Value-added on paper is usually pricier by the pound, but when compared to the overall cost — including the customer’s labor, time and safety put into making the product — the value-added product tends to be the better option, and the quality is always there. Value-added produce justifies higher prices when needed.

It has become increasingly difficult for produce companies to meet consumers’ demands, while dealing with inflation and supply chain issues.

It has become increasingly difficult for produce companies to meet consumers’ demands, while dealing with inflation and supply chain issues.

The effects of the weather and economic uncertainty are forcing these companies to start changing their buying methods while maintaining good relationships, with not only their consumers, but their suppliers, so that they can still offer a high-quality product and meet the consumer’s needs.

We hope things will turn for the better in the coming year. Maintaining the trust and relationship with the consumer stays at the forefront of the produce business, so we must adapt to, and offer, new products and methods of buying.

Johnny Karrat is the fourth generation of his family in the produce industry and is director of sales and operations for Capital City Produce, based in Troy, NY. His great-grandfather was a wholesaler, his grandfather was a broker, and his father worked at the brokerage and ran his own trucking company before eventually forming wholesaler Capital City Produce in 2012. Capital City Produce is a broker, wholesaler, re-packer and processor of fresh produce.