PMA's Joe Watson: There is optimism in the industry now that there wasn't a month ago
The U.S. produce industry has been experiencing enormous disruption since the onset of the Covid-19 pandemic in early March. FreshFruitPortal.com caught up with Joe Watson, the Produce Marketing Association's (PMA) VP of membership & engagement, to hear about what might happen with produce sales over the coming months, what changes may be here to stay, and the overall mood within the produce industry as the country slowly begins to return to normality.
This interview has been edited and condensed for clarity.
FFP: After a prolonged period of high volatility for fresh produce at U.S. retail, weekly growth levels seem to have stabilized somewhat at an elevated level. How do you see the situation evolving over the coming weeks?
JW: We've had a lot of conversations about what the short term looks like, through the summer period. I think it's fair to say that something around 10 to 15% of overall growth in terms of dollars would be achievable into July, and we'll see what happens after that.
There's a number of retailers that are reporting much higher numbers that - up to 40%. So you've got those that are up at around the average and others that are way above.
I think in every topic we're going to talk about, the wildcard has got to be foodservice. Because as foodservice dining opens back up, to 25%, 50% capacity - and even greater in some states - and as more dollars shift back to foodservice, how will that retail lift maintain where it's at now, and what are the impacts to that?
FFP: What could the impact be of potentially more shoppers going back into stores to buy fresh produce rather than buying online?
JW: We just had that conversation today on our breakout session about the challenges of that, because in the U.S., 40% of fresh produce sales are done through merchandising or impulse sales. So what we've gone through is consumers shopping with a list, and they're not buying with their eyes; they're focused on the six or eight or 10 out of their list, and then moving on to the next department.
Well, when they're not shopping and looking and seeing what else is available, you lose that opportunity for the impulse purchase. And so when you're on a digital piece, it's even more difficult because you don't have a connection.
So, it's getting consumers to look again and getting more engaged with what's available. And for the retailer, as they ramp up their promotions and get back into more merchandising to their customers, that will help protect that lift, even as restaurants open up and more foodservice options are available.
FFP: In some categories, like avocados, there's been a big gap between volume and dollars. What do you think is behind that?
JW: Some of that has to do with missed opportunities. The college basketball final four tournament, which is always the first weekend in April - that was totally missed. That's a huge avocado occasion. Avocados from Mexico usually has advertisements on TV promoting it. It's almost like the Super Bowl in the U.S.
So avocados had a miss there, and in the first weekend in May, we missed another big avocado event - Cinco de Mayo.
Then there have been other occasions where avocados would have been in huge demand. The volume is there, but the dollars aren't there because there was such an influx of product that the market was just not holding up, not to mention what happened in foodservice, from a processed side. So it just drove a lot of inventory into the market and you had fewer channels to go to with it.
FFP: In terms of percentage growth of weekly dollar sales, oranges have really stood out since mid-March. Is this mainly driven by people wanting to consume more Vitamin C?
JW: It's certainly the Vitamin C, with consumers trying to build up their immunity and eat more healthily through this whole pandemic period. But I also think of what retailers have told us and from what the growers have told us - the demand for bags.
When you think about, if I'm buying two loose oranges, it's typically about a pound and a half, but if I buy a two or three or four-pound bag, then I've increased my purchases, maybe two or three-fold by picking up a bag versus two oranges. And so we were hearing these reports of record numbers of bags being in demand from the retail side.
That's where the majority of the orange sales are going. Certainly, loose oranges are selling, but the bag is what's really making the category go during this past two month period.
FFP: What changes do you think will be here to stay once the pandemic has passed?
JW: There are a couple of things I've thought about. For one, salad bars. We've heard of some retailers who have pulled out some of their other self-service bars already, or are in the process of doing it. I think anything self-service is at risk right now at retail.
And the reason why that's important to produce is that the produce department can maximize on the ability within their fresh-cut program. In many retailers in the U.S., it's a very robust part of the produce department. So I see that as an opportunity for produce, depending on what happens in the self-service areas of the store.
One other piece is sampling. In fact, that's a project PMA is working on right now to provide resources to our members. Sampling, at least for now, is not coming back to what it was. However, it is critically important to get product into the consumer's mouth. Because again, back to the 40%, how you engage that customer figures largely into your total sales performance.
It will be interesting to see whether increased packaging is going to happen. There's a lot of debate on that right now. I think there's a lot to be learned still, but that certainly could play into permanent changes down the road.
And then lastly, I would say this. In the U.S., a lot of wholesaler and distributor businesses were weighted strongly toward foodservice. Well, like the restaurants, they were decimated, and they have pivoted. Many of them have developed new relationships with retailers, but they've also developed direct-to-consumer programs with produce boxes.
Whether or not that has legs to it - if you will - has yet to be determined. But from the conversations I've had with wholesalers or distributors, I've heard a number of them say: 'We're not going to be in that situation ever again. We're going to diversify our portfolio, better than we had before.'
So that's going to be another potential permanent change that has an indirect impact on retail.
FFP: How would you describe the general mood within the produce industry at present compared to earlier on during the pandemic?
JW: Let me talk about it from a grower standpoint. This is going to sound vague, but I think there's cautious optimism overall. I think a month ago, the sky was falling - I'd put it that way.
We heard just this week, one large broadline distributor here in the U.S. that's back to 70% of their business that it was pre-Covid. That is a very positive thing. Now, they also say that they don't think they're going to get back to more than 80%, at least for the near term, as they just don't know how many restaurants are going to reopen.
Overall, we're still too early to tell, but I would summarize it this way - there is optimism now that there wasn't as much of at the beginning of May.
FFP: Finally, what message would you give to the produce industry at this time?
JW: Well, I think that it's no secret that relationships are the backbone of our industry. If you think about it, so much business is done on the handshake in our industry. We can't connect in person right now, every event has been canceled from an in-person standpoint. A virtual event is great, it's a way to stay connected, but it's certainly not the same as being in the same room together.
So being able to connect with your current business relationships is important, but so is discovering new opportunities for products and services.
It's really important to understand what the challenges are at retail, as well as for the retailer to understand the challenges that the supply partners have.
Also, transparency is going to be critical. I've heard that term used numerous times over the past couple of months, and I think it can't be overstated how important it is.