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In an uncertain economy, does fresh produce spoil revenue growth?

by Barb Renner, Brian Baker, Curt Fedder, Jagadish Upadhyaya
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    2 minute read 18 February 2020

    In an uncertain economy, does fresh produce spoil revenue growth? The future of fresh

    2 minute read 18 February 2020
    • Barb Renner United States
    • Brian Baker United States
    • Curt Fedder United States
    • Jagadish Upadhyaya India
    • Jagadish Upadhyaya India
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    ​Regardless of the economic cycle, people need to eat. As such, produce is a resilient fresh-food category.

    Currently, consumers are showing strong interest in fresh fruits and vegetables, thereby helping provide ample growth opportunities for companies in the fresh food ecosystem.1 But, with mixed economic signals heading into 2020, a question arises: Does fresh produce spoil revenue growth? In periods of economic expansion (as experienced in recent years), consumers tend to allocate more dollars to premium products. However, spending can wane due to economic uncertainty.


    Methodology: To address this question, we analyzed the US Consumer Expenditure Surveys data2 for produce. We compared it to processed food, alcohol, and nonfood categories (apparel and fashion, health care, and entertainment). We examined CAGR from 1995 to 2017, comparing growth during periods of economic expansion vs. recession.
     

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    Our analysis reveals a nuanced picture. Overall, from 1995 to 2017, consumer expenditures on produce grew 1 percent CAGR. Growth also occurred in alcohol, apparel and fashion, entertainment, and processed food. Of note, only health care (at 2 percent) exceeded these categories (see figure).3

    During the Great Recession of 2007–2010, only fresh fruits and vegetables and health care grew (1.4 percent each). Beginning in 2011, most categories rebounded to pre-Recession levels. However, produce and health care not only came back, but far exceeded pre-Recession levels (at 2.3 percent and 4 percent, respectively).

    During the 2000–2001 recession, all categories experienced similar fluctuations. And while fresh fruits and vegetables declined 3.1 percent, it was likely due to the nascency of health and wellness trends which became more prevalent starting in 2010.4

    Regardless of the economic cycle, people need to eat. Our analysis reveals that, people are not going to give up their fruits and vegetables during a downturn economy. Indeed, produce is more resilient than both the food and nonfood categories examined. In addition, the segment has kept pace with the health care sector.

    The solid growth of produce is likely supported by two factors. First, by evolving efficiencies in supply chain processes that have led to produce being offered at a lower cost to the consumer.5 Second, by consumers’ growing interest in health and wellness.

    Fresh foods are the primary driver of growth in retail stores, accounting for 49 percent of all dollar sales growth in the fast-moving consumer goods sector.6 Strong upside potential exists for fresh produce due to not only consumer demand, but also increased distribution in convenience stores,7 quick serve restaurants,8 retail pharmacies,9 and several hospital systems experimenting with “food pharmacies” that link the importance of diet with health. With projected growth of 2.4 percent through 2023,10 produce may represent an attractive proposition for everyone in the fresh food ecosystem as a hedge during periods of economic uncertainty.

    To learn more, please see our recent study, The future of fresh: Strategies to realize value in the fresh food category.

    Acknowledgments

    The authors would like to thank Kavita Saini, manager, Deloitte Support Services India Pvt. Ltd.

    Cover image by: Viktor Koen

    Endnotes
      1. Barb Renner et al., The future of fresh: Strategies to realize value in the fresh food category, Deloitte Insights, November 12, 2019. View in article

      2. US Bureau of Labor Statistics, “Consumer Expenditure Surveys,” accessed January 29, 2020. View in article

      3. Healthcare in the Consumer Expenditure Surveys includes expenses on health insurance, medical services, drugs, and medical supplies. See: US Bureau of Labor Statistics, “Healthcare,” accessed January 29, 2020. View in article

      4. Statista, “Per capita consumption of fresh fruit in the United States from 2000 to 2018 (in pounds),” accessed January 29, 2020. View in article

      5. The Network Effect, “Fixing the 5 big problems in the food supply chain,” September 4, 2018. View in article

      6. Russell Redman, “Fresh foods power growth in fast-moving consumer goods,” Supermarket News, June 15, 2018. View in article

      7. Nima Rajan, “Convenience stores that offer healthy food and drink options see strong sales growth,” Xtalks, July 18, 2018. View in article

      8. Carol M. Bareuther, “Five QSR menu trends: More fresh produce,” Produce Business, August 27, 2019. View in article

      9. Amanda Schupak, “New York City is giving out prescriptions for free fruits and vegetables,” HuffPost, August 13, 2019.   View in article

      10. US Bureau of Labor Statistics, “Consumer Expenditure Surveys.” View in article

    Show moreShow less

    Topics in this article

    Retail & Distribution , Revenue Growth , Customer & Marketing

    Consulting Services for Consumer Products

    ​The consumer products industry today faces virtually unprecedented challenges and opportunities. Eroding brand loyalty, increased merger and acquisition activity, enduring recessionary consumer attitudes and the rising influence of digital technologies on shopping behavior all threaten traditional business models–but also give rise to new and exciting ones. In the face of changing consumer needs and behaviors, Deloitte’s Consumer Products team is working with clients to strengthen analytics, improve internal operations and develop new market-facing capabilities and channels. With experience across a wide range of sectors–including food and beverage, personal and household goods, agribusiness, apparel and footwear, and household durables–we position our clients to lead in the face of change.

    Learn more
    Get in touch
    Contact
    • ​Barbara L. Renner
    • Partner
    • Deloitte Tax LLP
    • brenner@deloitte.com
    • +1 612 397 4705

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    Barb Renner

    Barb Renner

    Vice Chair & US Leader | Consumer Products

    Barb is vice chair and the US Consumer Products Leader, Deloitte LLP. She has more than 31 years of professional experience serving large multinational clients through a variety of leadership roles. Barb works directly with consumer and industrial product clients focusing on their regulatory environment, supply chain, technology and processes, and other issues and opportunities. She has also served in key leadership roles with Deloitte’s Women’s Initiatives and Junior Achievement.

    • brenner@deloitte.com
    • +1 612 397 4705
    Brian Baker

    Brian Baker

    Managing Director | Retail and Consumer Goods

    Brian is a managing director in Deloitte’s Retail and Consumer Goods practice, Deloitte Consulting LLP. His experience includes process design and evaluation, program assessments, systems implementation, managed services, and value delivery programs. Brian’s career experience covers multiple retail areas including: inventory management, procurement of both perishable and non-perishable goods, replenishment/allocation, promotional planning, pricing, third-party logistics, and import procurement. In addition, Brian has more than 15 years of store management experience, focusing on perishable departments. Brian has worked with leading national and regional grocery retailers in the areas of process redesign, supply chain solution implementation, SAP, and JDA software packages. He has additional experience with direct store delivery, scan-based-trading, open-to-buy management, hard lines, importing, and store operations.

    • brianbaker@deloitte.com
    • +1 785 580 8812
    Curt Fedder

    Curt Fedder

    Senior Manager | Deloitte Services LP

    Curt is a senior manager at Deloitte Services LP’s Center for Industry Insights and leads market research for consumer products. With expertise in consumer research, and a focus on brand equity, customer satisfaction, and advertising. Curt has led consumer research groups in consumer products and retail organizations. He has published articles in the Journal of Advertising Research and Quirks Marketing Research, and presented at market research industry conferences.

    • cfedder@deloitte.com
    • +1 312 486 3710
    Jagadish Upadhyaya

    Jagadish Upadhyaya

    Research & Insights Manager – Consumer Products | Deloitte

    Jagadish Upadhyaya is a manager at Deloitte Support Services' Consumer Industry Center and supports research for the consumer products sector. He has over 15 years of experience conceptualizing and designing research projects, project management, and advanced statistical analysis. Upadhyaya has rich experience writing high-impact thought leadership backed by detailed research and analytics. He has led client-specific multidisciplinary market research teams focusing on the analysis of real-time market data and identifying trends in the consumer products and retail space.

    • jupadhyaya@deloitte.com
    • +91 99890 22430

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