State of the Industry

Genetics key to future of sector

Rob Robson, the founder and CEO of leading Australian company Harvest FreshCuts, talks about the current state of the fresh-cut industry and the path on which it is headed.

The fresh-cut industry has grown rapidly in recent years. There is still much potential. What combination of factors is necessary to ensure the sector takes advantage of this potential?

RR: There are two or three factors. Firstly, we have to keep working at removing any food safety risk. We don’t want the industry to go through another US spinach crisis.
Secondly, we need to ensure that we continue to develop products that appeal to different demographic groups.  One size does not fit all!
Thirdly, we must be conscious of our pricing as we are competing with other convenience foods; not least frozen products.

Fresh-cut is also highly capital intensive. Now that money is tight and credit is short, surely it's not going to be so easy for newcomers to get into the sector?

RR: I would argue that it’s now easier than ever for newcomers to break into this sector in a small way. It’s cheaper than ever to get a small wash and dry line and the technology is freely available, so small processors will continue to invest. Where they will stall is if they cannot maintain the investment.
From our own company’s point of view, one of the key tenets for this category is continuous investment despite tough margins. The industry is continually investing in new technologies and the cold chain, so I am confident that while growth rates may slow, they will continue.

What impact do you see the economic downturn having on consumer demand for fresh-cut products? Is there a danger people will ditch convenience in favour of more basic products?

RR: While retailers and manufacturers continue to work at the demographic potential out there for fresh-cut, we’re confident that consumer won’t ditch convenience as long as the products deliver on freshness, flavour and value expectations.

To what extent have the big supermarkets been the key drivers of fresh-cut convenience? How do you think their strategies might change?

RR: Globally, the big driver of fresh-cut has been the food service sector, and retailers have followed on the coat tails of that. We don’t see the big retailers changing their strategies; they’ve hit good gross margins and the category has shown its continued ability to produce strong growth on a comparatively overhead requirement.

What role do food service and convenience retail formats such as restaurants, cafés, fast food outlets, railway station shops and petrol stations have to play in taking the fresh-cut sector forward?

RR: In Europe and the UK, these formats have been the drivers of freshcut.  There is good cold chain delivery to these smaller operators and this creates opportunities to get innovations started before moving products into the mainstream supermarkets.  The sector is very different here in Australia. 

European fresh-cut sales are advancing strongly, the US market has developed well, but where are things with fresh-cut in Asia? Is the investment going to come from outside Asia?

RR: Uptake across the whole of Asia is becoming quite strong, driven by QSR (Quick Serve Restaurants) The success of companies like Yum! Brands and McDonald’s are driving the need for fresh-cut supplies. Supermarkets are coming in on the back of this. We are seeing investment coming both from outside Asia, as evinced by the likes of Bakkavor’s investment in China, and from within the region.

Fresh-cut depends on innovation. What is the next new area for fresh-cut, do you think?

RR: Formats and product mixes will continue to change and develop – and vary greatly between countries and markets.  Overall, we see genetics as the one of the biggestopportunities for the next decade,
Genetics will be key to the sustainability of the sector in terms of reducing water usage, raising yield per hectare, lowering the cost of inputs such as fertilisers and pesticides and of course delivering on flavour. Flavour and freshness are still the main factors in the consumers’ mind.
We’ll see some interesting developments over the next decade. Already, we are seeing whole (lettuce) heads with different flavours and textures. In the US, they’ve produced an iceberg cross with a thick leaf; each leaf is the same size as a sandwich and it holds its crunch. This is just the start of where seed companies are taking us. We have seen heavy consolidation among the seed companies and we’re going to get down to half a dozen players with huge capabilities, so the next 10 years will be very exciting.

Which markets or countries are leading the way in terms of consumer demand for convenience?

RR: We see the UK market as the leader, even though companies are doing it tough there right now. Margins have been squeezed so some product innovation has been pared back.  This squeeze opens opportunity to innovate in the supply chain.