Value produce puts strain on chain

Grocer, May 9, 2009 by Michael Barker

Fresh produce value lines are failing to keep pace with demand, causing chaos for producers--but allowing shoppers to buy quality produce at bargain prices.

Retailers have expanded their cheapest ranges to offer more affordable prices to shoppers. However, as consumer demand has soared, buyers have been unable to source sufficient lower-grade produce. This had led to gaps on shelf and forced suppliers to put class one fruit and veg into lines, claimed growers.

All the supermarkets are said to be having problems, though Tesco's Market Value and Sainsbury's Basics lines have been singled out as having availability issues across a number of items.

"The value lines are a nightmare for growers and retailers," said one supplier. "Sainsbury's Basics sales, for instance, soared as people realised you could pick up produce of the same quality for 40% of the price."

Margins were being eroded at both ends of the chain, the supplier added. "People are downgrading so retailers are getting much less margin," he said. "It doesn't work for retailers, and growers are getting paid a pittance for their produce."

Growers warned there was a danger of category devaluation if consumers were driven away from higher-margin premium lines. Shoppers would have little reason to trade back up if value no longer meant lower quality, they said.

Tesco had struggled to get volumes on a number of fruit and veg since establishing the Market Value range last year, according to one supplier.

"Market Value volumes are difficult to fulfil in an under-supplied market," he said. "It has to be treated as an opportunistic line and Tesco will continue to struggle to get the volumes. It just doesn't work for growers."

Suppliers had improved harvesting and become so used to meeting high supermarket specs that they were not growing much lower-quality produce, claimed another source. "They will drive growers out of business," he said. "If retailers only want to pay low prices for class one, they won't get supplies."

International growers, already hit by the weakening pound, were even reconsidering the viability of supplying UK multiples, said Gerry Hayman of the Tomato Growers' Association. "We are at a real crunch point in terms of supply and demand and it can't continue like that."

Tesco and Sainsbury's claimed value lines allowed growers to sell their entire crop and insisted suppliers' margins were not being damaged. They said the same standards were applied to value lines but with wider specs.

"There are occasions where class one may be packed in order to fulfil demand," a Sainsbury's spokeswoman said.

The retailer claimed sales of its Basics fresh produce had doubled year-on-year as shoppers increasingly used the range for cooking, while Tesco said Market Value sales were "extremely positive".