The Changing Marketplace for California Crops: Focus on Fresh Fruits and Vegetables Dr. Roberta Cook Dept. of Agricultural and Resource Economics UC Davis March 2005 Overview of Presentation US food industry size and structure Channel blurring and store format trends Bottom Line Examples of firm-level responses 1
TOTAL 2003 U.S. FOOD* SYSTEM: $943.3 BILLION $498.3 billion food retailing (excluding non-food grocery store sales) 53% of total $445 billion food service (including $17.8B foodservice sales made by food retailers) 47% of total around 844,000 outlets *Excludes alcoholic beverages and other grocery Sources: ERS/USDA and The Food Institute U.S. FOOD EXPENDITURES as a SHARE of DISPOSABLE PERSONAL INCOME, 1970-2003 13.8 13.4 At-home Away-from-home 12.0 11.8 3.6 11.7 11.5 11.5 11.6 11.6 11.2 11.1 11.3 4.3 11.0 10.8 11.1 11.0 10.3 10.1 10.2 10.1 10.1 4.3 4.3 4.3 4.3 4.3 4.3 4.2 4.2 4.3 4.4 4.3 4.24.44.4 4.1 4.7 4.7 4.7 4.7 10.2 9.1 7.7 7.5 7.4 7.2 7.2 7.3 7.4 7.0 6.8 6.9 6.7 6.66.76.6 6.2 5.4 5.5 5.4 5.4 70 85 87 89 91 93 95 97 99 2001 2003 Source: ERS/USDA 2
Trends in US Food Expenditures CAGR 5% 4% 3% 2% 1% 0% 3.2% 3.4% Food At Home 1990-2000 2001-2010 4.6% 4.3% 3.8% 3.9% Food Away From Home Total FOODSERVICE OPPORTUNITIES FOR FRESH PRODUCE Consumers are trading up, contributing to higher sales in full service restaurants and fast casual (like Baja Fresh, Chipotle, Panera) Consumers search for VALUE, 62% say they are willing to spend more time and money for better quality food. Foodservice fresh produce and fresh-cut demand rising. Subway s is the #1 buyer of fresh tomatoes, McDonald s now the top foodservice apple buyer and a top 5 foodservice buyer of spring salad mix and grape tomatoes. 3
Sources of Takeout* Food in the US, s Gaining! 1996 2004 4% 1% 3% 6% Source: FMI Trends in the 2003, 2004 48% Fast-food rest. 12% 25% Restaurant Fast-food rest. Gourmet/specialty store Don't know 10% 5% 1% 1% 27% Restaurant Other C-Store Fast-food rest. 35% 18% Restaurant *Takeout only, not all foodservice US Estimated Fresh-cut Produce Sales, All Marketing Channels, $ Billion $ billion 16 14 12 10 8 6 4 2 0 3.3 6.0 7.1 9.0 11.8 $4 plus at retail Source: Over Dole 60% estimated to be sold via foodservice channels 15.0 1994 1997 1998 1999 2003 2005 Sources: IFPA and IRI 4
Trips Per US Household Per Year 100 80 60 40 20 0 92 85 83 78 75 73 72 69 1995 1998 Source: ACNielsen 1999 2000 2001 2002 2003 2004 Quality of Shopping Experience by Channel, TRI*M Index (Differences of 3 or more are signficant) Limited-Assortment, 106 Warehouse Club, 101 Dollar Store, 100 Mass Merchandiser, 93 Supercenter, 93, 91 Drug Store, 87 C-Store, 80 Source: Coca-Cola Retailing Research Council of N. America 2004 5
Quality of Shopping Experience by SUPERMARKET TYPE, TRI*M Index (Differences of 3 or more are signficant) Total s, 91 Natural/Organic, 109 Upscale, 100 Price-Oriented, 96 Main-Tier, 89 Source: Coca-Cola Retailing Research Council of N. America 2004 Top Factors in US Consumer Selection of Primary s, 2004 Items on sale or specials Store layout Fast Checkout Personal safety outside the store Accurate shelf tags Use-before/sell-by-date marked Convenient location Courteous/friendly employees Low prices High-quality meat High-quality fruit/veg. Clean, neat store Source: FMI Trends 2004 62% 65% 65% 66% 68% 72% 73% 74% 79% 80% 85% 88% 6
US Store Format Growth Trends and 2003 Sales* 2003 Sales $Million 2003 # Stores 2003 $ 2008 $ Traditional Nontraditional Total C-Stores GRAND TOTAL $422,791 $235,100 $93,518 $754,408 41,530 40,721 129,000 213,981 56.3 31.3 12.4 100.0 48.3 39.7 12.0 100.0 Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, gas, clothing, footwear, knickknacks, and hardlines Source: Competitive Edge, June 2004 US Store Format Growth Trends and 2003 Sales* Nontraditional Grocery Channel Total Nontraditional Wholesale Club Supercenter Dollar Store Drug Mass Merchandise Military 2003 Sales $Million $235,100 $51,953 $85,155 $10,686 $33,189 $49,873 $4,243 2003 # Stores 40,721 1,030 1,840 15,000 18,500 4,170 181 2003 $ 31.3 6.9 11.3 1.4 4.4 6.6 0.6 2008 $ 39.7 8.7 17.0 * Grocery sales only, excludes electronics, prescription drugs, toys, jewelry, sporting goods, etc. Source: Competitive Edge, June 2004 2.9 5.2 5.3 0.6 7