Vegetable Industry Development Program

Consumers and Markets Overview This C&M Overview Fact Sheet provides an introduction to the C&M sub-program products and the Australian vegetable market. It includes statistics on the volume and value of vegetables sold in the Australian market, the channels used to distribute vegetable products to consumers and vegetable product categories. This Fact Sheet also explains the meaning of some common market terms that will be frequently used throughout all C&M Resources.

“The Vegetable Industry Development Program is funded by HAL using the vegetable levy and matched funds from the Australian Government”.

Vegetable Industry Development Program

The C&M sub-program has developed a series of outputs under the Veginsights banner to meet these aims and the main outputs are: Weekly market variables: a headline summary of the primary market variables that are impacting on the vegetable market in the last week. This information is placed on the Ausveg website www.ausveg.com.au. Veginsights monthly, which is 6-8 page newsletter that quantifies vegetable sales, summarises major market activity, global and local news and innovations of relevance, and includes a detailed profile for a different vegetable product each month. Veginsights quarterly market report: consolidates all available market data into a series of tracking variables and profiles buyer behaviour and household vegetable consumption patterns for a defined set of household segments. This output also provides insights into a selected market or consumer issue.

 roducts of the Consumers and  P Market sub-program The C&M sub-program has developed a range of outputs to help vegetable growers and their supporting supply chains gain a better understanding of how vegetable markets work and the supply chain options that service these markets. The C&M sub-program products aim to: •

Provide an understanding of how the vegetable market is structured and what distribution channel options are available to vegetable producers

•

Raise awareness on what influences the vegetable markets and in particular inform growers about local and global news, events and food market innovations that have potential application in local vegetable markets

•

Inform growers about local market signals from consumers and commercial buyers of fresh vegetables, and

•

Build the capacity of vegetable producers to access, interpret and improve their businesses by applying market information.

“The Vegetable Industry Development Program is funded by HAL using the vegetable levy and matched funds from the Australian Government”.

Veginsights situation and outlook: explains and quantifies what has influenced and shaped the vegetable market for the previous 12 months and provides indicators on market conditions for the next year.

How the C&M products can be used The information can guide business planning and decisionmaking such as: •

Production planning to maximise the balance between meeting demand, economies of scale and generating income

•

Distribution channel selection – understanding the merits and requirements of different market channels and how they can be reached

•

Selecting and managing supply chain relationships to reach those markets, and

•

New product development plans to provide growth and meet new market needs.

Vegetable Industry Development Program

The Vegetable Market

The value of the Vegetable Market

About 3.2 billion tonnes of locally produced vegetables and 280,000 tonnes of imported vegetables are sold in the Australian market each year as fresh and processed product into retail and foodservice channels. About 63% of local vegetable production is sold as fresh product and the balance goes to processing (Figure 1). A high proportion (85%) of imported produce is sold as processed, while the rest is sold fresh.

Fresh product makes up 63% of the total volume of vegetable product sold in the market. Processed product makes up the remaining 37%, which consists of 23% frozen, 10% canned, 2% pickled and 2% sauce and puree products.

Proportion of Market Volumes by Product Form

Vegetable Market Values ($M)

3.2B tonnes annual volume

$7.05B annual value

The annual value of domestic retail sales of vegetables is $7.05 billion. Fresh product accounts for 83% of this total retail market and processed products account for 17% (Figure 1).

Fresh

63%

Fresh

$5,835

Canned

10%

Canned

$294

Sauce & Puree 2%

Sauce & Puree $215

Frozen

23%

Frozen

$603

Pickled

2%

Pickled

$113

Figure 1: Vegetable market volume proportions and values by product form (July 2009 - June 2010)

Vegetable Industry Development Program The Supply Chain and Market Channels Vegetables flow into the market in fresh, fresh cut, canned and frozen forms. There are three main channels which vegetables can pass through to reach the consumer; export (light blue), retail (dark blue) and foodservice (beige) (Figure 2). Direct marketing (Markets

Full Service Supermarkets

Broker Production Fresh Cut Processing

Independent Supermarkets

Import Fresh Food Wholesaler

Convenience/ Home Delivery Specialists (Greengrocer/ Fruiterer)

Export

Consumer

Takeaway Fresh Produce Distributor Dining Out

Export

Caterers

Retail

Events & Leisure

Food Service Figure 2: Example supply chain for the vegetable industry.

Institutional

The retail channels sell 73% of fresh vegetable volumes and 32% of all processed vegetable volumes. The foodservice channels use 21% of fresh products and 65% of processed vegetables (Figure 3).

Proportion of Processed Vegetables Sold in the Australian Market by Channel

Proportion of Fresh Vegetables Sold in the Australian Market by Channel

1.18B tonnes annual volume

2.02B tonnes annual volume

Export

3%

Export

5%

Retail

32%

Retail

73%

Food Service

65%

Food Service

21%

Figure 3: Proportion of fresh and processed vegetables sold in the Australian market by channel (July 2009 - June 2010)

Vegetable Industry Development Program

Retail Channels About 70% of the total household food expenditure is spent in retail food outlets. Retail channels in the Australian vegetable market are broken down into a further four sub channels, which are:

Table 1: Vegetable product category structure Product Categories Hard Cooked Vegetables

Soft Cooked Vegetables

Salad Components

Seasonings

Carrots

Asparagus

Capsicum

Chillies

•

Grocery channel (full service and independent supermarkets)

•

Specialist channel (fruiterers and greengrocers)

•

Convenience channels (convenience stores/home delivery), and

Parsnip

Asian Vegetables

Celery

Garlic

•

Direct marketing (farmers markets and roadside stalls).

Potato

Broccoli

Cucumber

Ginger

Pumpkin

Cabbage

Lettuce

Herbs

Cauliflower

Salad Mix

Onions

Mushroom

Spinach

Radish

Sweetcorn

Sprouts

Zucchini

Tomatoes

Foodservice Channels About 25-30% of the household food expenditure is spent on food prepared and typically eaten away from home and provided by foodservice operators. Foodservice operators combine the food and beverage ingredients they buy to make the meals, snacks, or drinks for consumers. Foodservice operators can be classified into a further four categories: •

Takeaway channel (provides quick service, convenience and everyday value)

•

Dining out channel (adds maximum value to the meals and beverages they provide)

•

Event and leisure channel (caters food for specific events, usually large gatherings), and

•

Institutional channel (provides large volumes of food for in-house residents).

Export Australia is considered a niche, high quality exporter of vegetables and has some supply advantages in the world market due to its ability to supply in the counter seasons to the northern hemisphere. The biggest market for Australian vegetable exports is Asia with the key markets being Japan, Hong Kong, Singapore and Malaysia. This is followed by New Zealand the USA and the EU.

Salad components and hard cooked vegetables make up the largest volume shares of the total market at 37% and 34% respectively (Figure 4).

Volume Share of Fresh Vegetable Product Categories 2.02B tonnes annual volume

Hard Cooked Vegetables 34% Soft Cooked Vegetables 20% Salad Components

37%

Seasonings

9%

Vegetable Product Categories There are four category groups of vegetable types that are used in the C&M analysis of the marketplace for Australian produce (Table 1). These category groups contain like or complimentary vegetable products.

Figure 4: Volume share of fresh vegetable product categories (July 2009 - June 2010)

Vegetable Industry Development Program

Definition of Some Common Market Terms Consumer vs. Customer A customer is the term used to describe any individual or enterprise that purchases goods or services. A consumer is the term used to describe any individuals that consume or use the goods and services. It is important to note that a customer may also be the consumer of a product. For example: In the vegetable industry, a grower produces fresh lettuce and supplies them to the major supermarkets. The customer for the grower is the supermarket and the consumer is the individual that in turn buys and eats the lettuce. It is important for the grower to understand the needs of both the customer and the consumer. The grower needs a strong understanding of the needs of the supermarkets in terms of their requirements for fresh lettuce (e.g. quality, packaging, price, delivery and trading performance). The grower also needs to understand the needs and wants of the consumer (e.g. are consumers satisfied with the taste/colour/quality and size of the lettuce?), especially if the grower is seeking to work with a supply chain that is responsive to consumer demands. Understanding the needs of customers and consumers can help to inform business decisions including those related to new product development, income forecasting and investments in marketing.

Supply chain Vegetable products require a number of inputs when being produced and are involved in several transactions when moved from the producer to the final consumer. These inputs and transactions are known as the supply chain. A supply chain typically consists of production input suppliers, growers, wholesaler/distributors, transporters and retailers that participate in the production, delivery and sale of a product to a consumer.

Understanding the supply chain and maintaining relationships with this network is important to ensure the vegetables grown are meeting the needs of the customers and consumers. When supply chains are actively managed they also have the potential to improve product quality, drive down costs and increase competitive advantage.

Product Development and Value Adding The concept of adding value is improving or enhancing a product so that customers are willing to pay more for it. The process requires an understanding of the handling requirements, nature of demand for the product and its intended uses. This understanding is then applied to define what the buyer will value, and whether and how it can be practically added. Adding value in the vegetable industry can be done in many different ways. Preparing a product for customer use, managing portion size, and conveying and delivering better quality have been shown to be successful ways to develop a product to add value.

Markets vs. Marketing A market is a system whereby sellers offer their goods and services to buyers in exchange for money. For a market to be competitive there must be more than one buyer or seller and this requirement is well accommodated in the vegetable industry. Marketing is the activity for creating, communicating, delivering and exchanging goods or services that have value for customers. Marketing is used to identify the customer, satisfy the customer and keep the customer. The adoption of marketing strategies requires businesses to shift their focus from production to the needs and wants of their customers as the means of staying profitable.

References Kneebone. M (2010), “Veginsights: The market – Q4 09”, Vegetable Industry Development Program, Horticulture Australia Limited

Further information Understanding consumers and markets can be difficult and sometimes reading about it just isn’t enough. Support is available to work through this information in small groups in your area. Please contact Anne-Maree Boland from the InnoVeg program on 03 9882 2670 or at [email protected] for further information.

“The Vegetable Industry Development Program is funded by HAL using the vegetable levy and matched funds from the Australian Government”.