The Covid-19 epidemic is shaking up the fresh produce industry, which has been built on an intensive and low-cost model. It reveals logistical weaknesses for the immediate future. But it also highlights new consumer trends already identified, which will in the longer term transform the organization of the sector's supply chain.
Less and less variety in available fresh produce and in some cases shelves that are empty or contain small quantities, continuously increasing prices since the beginning of the coronavirus outbreak, especially in the fruit and vegetable sector: a trip to the supermarket is all it takes to confirm these observations.
As in the health sector, the crisis is actually revealing that the risks of supply chain disruption have sometimes been underestimated. A weakened supply chain, the consequences of which are currently taking a heavy toll!
Production is dependent on Southern Europe and Africa
According to the panel studied by the Kantar Worldpanel for FranceAgrimer / Interfel / CNIPT, over the first ten months of 2019, purchases of vegetables by French households for their home consumption amounted to (only) 69 kg per household. This is a slight increase compared to 2018 (+ 1.8%) but shows stability compared to the 2016-2018 average. At the same time, purchases of fruit for home consumption reached 68 kg, up by 1.2% compared to 2018, and stable compared to the 2016-2018 average.
Where does this produce come from? Against all expectations, France is only the fourth European producer, far behind Spain, Italy and Poland.
- Spain is the sector's biggest player. It claims several number one spots as the world's biggest exporter, notably for oranges, strawberries, lettuces, mandarins, peaches, grapes and wine, olives and olive oil. It is the world's third biggest exporter of tomatoes with a production of more than 5 million tonnes.
- Italy ranks first in Europe in terms of higher quality produce (PDO, PGI or TSG). It is also one of the EU's leaders in organic farming. Italy is the 4th largest contributor to France's trade deficit (standing at 8% in 2017) in particular because of fresh agricultural produce with higher added value.
- Poland has become an agricultural power crowned by its success in the production of apples (5 million tonnes per year) which it exports throughout Europe following the Russian embargo.
Africa is also becoming an important partner. Morocco exports to Europe more than 1.3 million tonnes of fruit and vegetables and Egypt 0.4 million tonnes. South Africa also has a special relationship with the United Kingdom, where much of its produce is sold, as does Kenya with the Netherlands.
Rigorous logistical constraints
Short-term storage and transportation of fruit and vegetables are subject to a list of recommendations; rules for maintaining temperature, humidity, ventilation, avoiding exposure to light and mechanical shocks are recommended. Customers therefore use refrigerated transporters, which are subject to ATP regulations (Treaty on the Transport of Perishable Foodstuffs).
Refrigerated transport has experienced regular growth in turnover for years, higher than that of the rest of the profession. The transport of food is the main driving force. The increased demands concerning the quality of the produce (validation of the cold chain) and the lengthening of the distances traveled are the foundations of this growth.
Because Spain is a major exporting agricultural power, the Spanish fleet, of which more than 40% of the trailers are refrigerated, is the first European flag for refrigerated transport. Growth in the volume transported internationally jumped by more than 20% between 2017 and 2018, by more than 40% between 2016 and 2017 (see the Especial Transporte Frigorífico 2018 and 2019 publications).
Transportation costs are soaring
The Covid-19 crisis has hit the transport profession hard. Strong border restrictions have slowed the flow of traffic and immediately reduced capacity. Very early on, the profession demanded special modified conditions (extended hours, derogations, reduced controls) which the various Spanish authorities granted on an exceptional basis. For its part, the European Commission has introduced a series of measures in particular concerning the designation of reserved lanes and border posts where driver health checks must not exceed 15 minutes. Leniency towards drivers whose traffic permits have expired after the beginning of the crisis. Objective: to guarantee the supply of essential products to the European Union, including fresh produce.
The sudden shutdown of non-essential industries shattered the transport patterns of the entire refrigerated transport profession, which had no choice but to carry out deadheading runs. This new situation has had two major effects: an increase in rates which can in some cases exceed 40% and a decrease in capacity (some carriers, for fear of being unable to pass on the costs to their customers, have preferred to leave the trucks in the parking lot).
The situation is also critical in ports. The increase in administrative and customs processing times disrupts the routing of imports, which has an impact on product quality. The world's logistics have come to a standstill.
The system is devastated; it will remain so for some weeks to come until international traffic has regained sufficient volume and regularity.
Harvests lacking pickers
The fruit and vegetable sector is not only handicapped by transport issues. The question of manpower also arises acutely in the current context. Agriculture has always resorted to seasonal migrations, but the specialization of production, sometimes called the "Californianisation of agriculture", has accentuated this phenomenon. Farms have grown in size as they become more specialized and as such have had to hire more and more seasonal workers to meet a very high need for labor during a short period of time (picking).
It is estimated that over the 2018-2019 period, French agriculture hired 270,000 seasonal workers, 80% of whom are foreigners. This is certainly a figure that is underestimated, since it only concerns the officially declared contracts. In fact, according to the economist Jean-Pierre Berlan, the use of migrant workers may have favored the employment of a clandestine workforce to face unpredictable situations such as early or late ripening.
This phenomenon has largely developed in the south of Spain, before coming to settle in the south of France, where the foreign workforce is mainly Moroccan. It has also now become widespread. Seasonal workers from Romania, Bulgaria, Poland, Portugal and Africa, ready to work for less than local workers, become the adjustment variable for European farmers, who no longer control either the selling price of their production, or the cost of their inputs (phytosanitary products, energy, water, etc.).
So, in a market where borders both outside and inside of Europe are closed because of the Covid-19 epidemic, the system falters. Because if the fruit is not picked, vegetables not harvested, the supply of fresh produce collapses.
It's all hands on deck! Italy is ready to regularize the situation of thousands of migrants to save its agriculture; Spain is following suit by granting temporary work visas to all migrants between the ages of 18 and 21 in order to work on its farms; France has made a call to its students and job seekers; Germany has also decided to allow foreign workers into the country to help harvest fruit and vegetable crops on farms.
Highlighting local produce and local distribution
For years now, organic and local produce has been gaining ground on the fruit and vegetable market (Local food distribution - Yuna Chiffoleau). The local distribution system cannot replace mass production at short notice, but the current crisis undoubtedly has given a new boost to this trend. Today, supply cannot meet demand and some, like this German site, even refuses new customers.
Digitization helps the sector by linking producer and consumer. E-commerce sites, even market places, are increasingly present. The big players are fully aware of the situation. On Monday, April 20th, Carrefour announced that it had acquired Potager City, a start-up from Lyon, specialized in online delivery of baskets of fruit and vegetables from local producers.
The fresh produce Supply Chain therefore mirrors the major trends observed in the rest of the economy:
- A desire to reduce distances between producer and consumer
- Disintermediation made possible through digital technology
- An increasingly costly and complicated reassessment of supply chains
- Ever-increasing concerns about social responsibility by integrating social and environmental issues.