The Waste Side Effect
Another side effect of limited supply, particularly in the repack/prepack industry, is waste. “We had some real challenges this year,” comments Robert Chapman, vice president of sales and marketing at Pride Pak Canada, Ltd. “Precut includes a certain percentage of waste, say, for example, 30 percent with romaine lettuce. This year, not only did we have a drop in supply, but what was available was so low in quality that our waste ratio went up to 70 percent at times.”
Everyone, Chapman says, gets squeezed in such an environment. The costs are passed down to retailers and consumers, margins get compressed, and the lower sales volume at the consumer level trickles back up to hurt the wholesalers and growers. “I have been in this industry for 30 years,” he reflects, “and I never saw a winter this tough with such low supply and high prices.”
Bleak Buying Power
Adding to the mounting challenges is the exchange rate. Just a few years ago, the Canadian dollar was worth more than the U.S. dollar; today, it’s valued at about three-quarters of a U.S. dollar. That’s a 25 percent loss in buying power when sourcing from the United States. “Everything we do is in U.S. dollars,” says Larry Davidson, vice president at North American Produce Buyers, Ltd. “The drop in the Canadian dollar has increased some of our prices by 30 to 35 percent, and if you combine that with the weather last winter, it was a perfect storm.”
Flying Off The Shelves
Weather challenges aside, one of the strongest trends on both the wholesale and retail side is organics.
“The trends?” asks Chapman. “Number one is organics, organics, organics. The affordability is here, there are more growers taking on organic lines, and there is a general consumer trend to eat better. A few years ago we were shrugging our shoulders, wondering which direction this would go, but now we’re seeing amazing growth potential.”
The sense is that consumers are not just choosing organics here and there, when on sale, or as luxury items, but starting to shop for organics on a consistent basis. “Not only is there strong demand,” observes Legault, “but we’re noticing [the need] for consistency in availability and price. It is still challenging to provide a steady organic offering in all commodities, but sales are up, and we’re seeing continuing double-digit growth.”
“In response to the increased demand for organics, we’re trying to establish more of a consistent supply chain,” explains Formusa. “The gap in price between organic and conventional has narrowed, which is, in part, supporting increased demand. We had a Peruvian mango program where we used the slogan: ‘Organically grown at conventional pricing’—that worked well for a few years until we ran into supply issues with growers due to bad weather.”
