Guatemala Agritrade Presentation

European Market Trends & Opportunities for
Guatemalan fresh produce

Steve Homer

© Bios Partners 2008

30 second profile....

• $500M turnover from • Former Ethical Trading Initiative Board
Member
– 1.5M packs of vegetables per
week
• Former GlobalGap Board of Directors and
– 1.5M bouquets of flowers per
technical committee chair
week
DFID/Chatham House Procurement Forum
• GlobalGap Africa Observer Project
• The Group has been built on
IIED/NRI Trends in private Agri-food standards

– Foundation New Business Models
IIED Gates Excellence in growing, marketing • NSF- CMI Agri-Certification Governing
and supply chain management. Board Member
Unilever standards benchmarking consultancy

UNIDO–Trade Standards by leading standards • Board member NPTC vocational
Supported Compliance Report
qualifications for the UK land based sector
of GAP, GMP, Environmental
Institute Of Development Studies Trade Credit report
protection and social and ethical
WTO STDF welfare
Private standards briefing


Content

• A look at the EU27
Eu Consumption trends 2007/8 • Who are the healthy eaters
• Who are the couch potatoes

• What is driving public opinion
Certification & market access • How that translates into market entry standards
• What that looks like in reality

• How does this affect consumer shopping patterns
The global credit crunch • What are the retailers doing about it

• A look at opportunities for Guatemala in a dynamic
Summary & opportunities EU market during difficult times


CONSUMPTION TRENDS
DEVELOPED FROM THE FRESHFEL CONSUMPTION MONITOR 2008


EU-27 Gross per capita fruit consumption (in kg)/year - 2007

Source 2009 Freshfel Europe

5%

Population in the EU-27, grew from 484.6 M in 2002 to 495.1 M in 2007


EU-27 Gross per capita veg consumption (in kg)/year - 2007


16.5%

Population in the EU-27, grew from 484.6 M in 2002 to 495.1 M in 2007


Total supply of fruit and vegetables (G/Capita/Day)


WHO/FAO
minimum intake
recommendation


Fruit consumption increase (G/Capita/Day)
• The eastern European countries that joined the EU in 2004 show the best
per capita consumption growth in 2007 in fruit and vegetables
2007 Average Fruit Fruit imports %
Rank Country Consumption (G/Capita/Day) increase 2007 EU membership
1 Hungary 301.15 35 2004
2 Poland 133.25 26 2004
3 Slovakia 126.22 20 2004
4 Lithuania 73.59 17 2004
5 Portugal 333.03 17
6 Greece 556.16 17
7 Bulgaria 149.11 14 2007
8 Spain 308.17 14
9 Netherlands 239.87 14
10 Slovenia 239 14 2004
11 Cyprus 524.33 12 2004
12 Latvia 166.87 12 2004
13 Ireland 114.06 10
Source Freshfel Europe


Vegetable consumption increase (G/Capita/Day)
• The eastern European countries that joined the EU in 2004 show the best
per capita consumption growth in 2007 in fruit and vegetables
2007 Average Vegetable Veg % imports
Rank Country Consumption (G/Capita/Day) increase 2007 EU membership
1 Estonia 163.16 230 2004
2 Bulgaria 203.9 80 2007
3 Poland 316.22 55 2004
4 Spain 333.92 52
5 Cyprus 303.98 34 2004
6 Lithuania 141.62 28 2004
7 Malta 350.35 22 2004
8 Ireland 164.95 21
9 Netherlands 177.94 18
10 Slovakia 151.33 10 2004
11 Latvia 192.13 10 2004


EU tries to boost consumption
• Rising obesity and falling consumption

• EU recommendations are being developed for fruit
and vegetable producers by a EUR13.8m
(US$17.8m) EU research project aiming to increase
produce consumption in Europe

• The ISAFRUIT scheme wants more Europeans to eat
www.isafruit.org
. their recommended minimum five portions of fresh
fruits and vegetables. It cites data saying that
consumers in Greece, Spain, Italy and the
Netherlands, eat the most fruit in Europe (70 to 100
kg per person), followed by Germany, Poland and the
UK at 40 to 60 kg, but that consumption generally is
not rising.


STANDARDS & MARKET ACCESS TRENDS


Drivers - Campaigns & media
• After testing 576 conventionally
grown fruits and vegetables
• Greenpeace Germany found that :
• 84% of goods sold in the country’s
leading supermarkets were
contaminated with toxic pesticides.

• In fact, 12% of the produce tested had
residue levels actually at or exceeding
legal pesticide limits.


Drivers - Campaigns & media
• “Tesco can say all good things, but the
truth is the people are not being
treated well here.”

• „Tesco is known to squeeze suppliers
and these pressures are passed on in
the form of low wages and precarious
employment‟ Report exposes: low
wages, exposure to pesticides, poor
housing and discrimination

• Action Aid report April 2005


Drivers - Campaigns & media…
• “To you it is a bag of salad,
dropped into the supermarket
trolley with the weekly
groceries”

• “The world is running out of
water and British supermarket
shoppers are contributing to
global drought”

• The Independent May 2006


Lifecycle of compliance drivers…
Drivers develop faster than most standards and decay over time

Drivers

PVS PVS PVS PVS PVS PVS PVS PVS
Niche Response

Multi stakeholder voluntary standards & consumer labels emerge

Farmers and growers do not have enough time to finish one before the
next one emerges !

Model developed with David Richardson NSF-CMi



Drivers

Niche Response

Slow to respond creating ‘assurance lag’
Public Response

Industry Response Expands behind drivers & specialist standards




Drivers

Niche Response

Slow to respond creating ‘assurance lag’
Public Response

Industry Response Expands behind drivers & specialist standards

Corporate Response Legal Compliance Market Compliance Industry Leader
SPS Private Standard Niche Standard



Ten years of standards...

Integrity Provenance
B2B B2C

Good Social & Environmental
Good Business Equity
Agricultural Ethical
Manufacturing
Practice Practice
Fair Trade
Eurepgap ETI ISO 14001
BRC
SA8000 Carbon
ISO 22000 Water
Energy

2003 2008


The combination private standard – The future ?

• Environmental and Pesticides
– Our unique approach with 'Nurture'
offers us the fantastic opportunity to
pioneer standards around the use of
pesticides, reducing energy usage and
allows us to break new ground
improving and enhancing the local
environment.

• Social and Ethical
– Working in partnership with the ETI we
ensure our suppliers are annually risk
How does Nurture work?
assessed on ethical standards and
Each grower is audited on an annual basis to
worker welfare to ensure that all
ensure they meet the required high standard Tesco
standards are achieved. Our dedicated
has set. No matter where in the world we source
technical team also visit suppliers to
our fruit and vegetables from and who we work in
ensure continuous conformance. This is
partnership with we use one standard this is
evaluated and monitored using SEDEX,
Nurture.
the Supplier Ethical Data Exchange.


M&S Plan ‘A’
• Field to fork

• Climate Change

• Waste

• Sustainability

• Fair Partner

• Health

• Partnership with Oxfam


EU: Food industry opposes quality label
• 16 March 2009 | Source: Keith Nuthall

• Strong opposition has been lodged to the idea of an EU-wide food quality
label based on EU production standards.

• CIAA said existing EU laws mandating food/feed safety, environment and
animal welfare standards were sufficient. … too much information could
distract…consumers from essential information on safety,quot; CIAA said.

• COPA-COGECA opposed the idea of allowing non-EU food producers and
manufacturers to use such a logo, this could confuse consumers about
the origin of such foods, it warned.


THE CREDIT CRUNCH


Which? report angers industry
• The research from consumer group Which?,
entitled Hungry For Change?, reported that
around 28 million UK adults say that price has
become more important when choosing foods
since the financial downturn.

“Fresh produce is
• Nearly three in five agreed that they would
the main focus of
buy more fruit and vegetables if they were
promotions as
cheaper. retailers battle it out
to offer customers
the best possible
• Almost a quarter said that the economic crisis
value.“
had made healthier eating less of a priority.
BRC food policy director
Andrew Opie
FPJ – 16/03/09


Tough times ahead ....
• Sir Terry Leahy has told suppliers that they will have to bring
down prices to help cash-strapped consumers.

• Leahy has made it clear that he believes supplier prices
would have to come down on the back of falling commodity
prices. “These lower prices need to be fed into the supply
chain and passed on to consumers who are under growing
financial pressure,”

• Waitrose has written to 1,000 of its suppliers to request a
two per cent cut in its prices.

• Mark Price, Waitrose's managing director, said that a fall in
commodity prices meant that suppliers' raw material costs
are cheaper and the supermarket saw this as an
opportunity. – Fresh info news 12 Mar 09


Shopper Anticipated Responses to Household Budget
Squeeze
Response Percent
Increase spend on budget brands 33
Cut back on treats 26
Shop around for offers 25
Cut back on convenience food 22
Switch from brands to own labels 21
Change to discount retailer 13
Cut back on ethical buying 6
Spend same on food, cut back elsewhere 15

Source, IGD, UK, 2008


IGD - Reasons for paying more for food and drink
Thinking about food and drink that you are willing to pay more for, what are the most important reasons for doing so?

2%
I Want To Impress My Friends

3%
Religious Beliefs Eg Halal, Kosher

4%
Endorsed By A Brand Or An Organisation I Like And Trust

6%
Special Dietary Needs E.G Gluten Free

7%
I Will Spend More On Food For My Children

9%
They Are Better For The Environment

10%
More Ethically Produced

14%
Organic/ Natural Ingredients

21%
I Know I Will Like Them

22%
They Are For Special Occasions

25%
I Can Afford Them

27%
They Are A Treat

36%
Healthier

41%
They Are Better Quality

Source, IGD, UK, 2007 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%


Drivers – credit crunch…
• Further research from sector specialist IGD
showed that organic sales have been the
only ethical food sector to fall in 2008,
according to their survey of 1,000 consumers
the % buying organic has dropped from 24%
to 19%.

• At the beginning of October, it emerged that
sales of Tesco's Finest and Organics ranges
had stopped growing as shoppers rein in
their spending. Chief executive Sir Terry
Leahy said that while customers still wanted
to buy the products,

quot;they don't feel they can with the economic
pressuresquot;.

Source Retail Week, & IGD UK, 2008

Drivers - campaigns & media…

Steve Homer – Brighton Feb 09

Own brands and budget lines
• Supermarkets bring in simple budget lines.

“WAITROSE is launching a budget range aimed at shoppers who are seeking
cheaper alternatives in the recession. More than 1,400 items, including fruit
and vegetables” - 9 Mar 2009 Daily Mail UK

• Claims of same product – no reduction in quality

• Deeper cut and more frequent promotions

• Consumers are trading down to heavy discounter
supermarkets, Lidl, Aldi, Netto.


Own brands and budget lines
• Aldi, Lidl the discount supermarkets, are forecast to
increase their share of Britain's grocery market by 60
per cent over the next four years as the middle
classes trade down because of the credit crunch.

• A new report claims that the discount chains will
generate nearly £7.5billion of sales in 2012,
compared with £4.5 billion last year

• The IGD forecasts that Aldi will have at least 530
stores in the UK by 2012, compared with 373 today,
while Lidl will have 610.


Eating out at home ...
• Restaurant eating out has fallen. A survey of 500 families, by media
agency MPG, found that 64% are dining out less frequently, while 46%
have cut back on the amount they tip when eating out

• Retailers creating combination meals for home consumption

• MPG’s research also found that more than two-thirds (67%) of families
are now spending more nights at home, with 63% saying they favour a
night at home to spending on leisure activity, such as eating out or the
cinema.

• Opportunities for premium fruit and vegetables may increase or be
protected from any downturn if this is true.

Steve Homer – UNCTAD April 2008

THE OPPORTUNITIES


Eastern Europe Vs Western Europe
• Western Europe
– Fruit and vegetable consumption is static or slightly declining
– EU and trade organisations trying to improve consumption
– Market access is highly regulated by PVS
– Retailers have a strong market share
– Prices are being forced down by the credit crunch

• Eastern Europe
– Consumption rising since EU accession
– Aspirational consumers – many young people working in the west
– Comparatively light market regulation – SPS / EU
– Still wholesale based – but changing as retailers arrive
– Fruits and roots are the big consumption items – can you change this
– Finance and local transparency is a challenge


Celebrity Chefs
• Latvia - Elmars Tannis
• Latvia - Martin Blunos
• Estonia - Imre Kose

• Jamie Oliver has inspired a new campaign to promote the
2008 British Asparagus season among young men aged Who is this man ?
Elmars Tannis
between 25 and 40.

• The British Asparagus Growers Association, are investing
£35,000 to increase sales of the vegetable, which have been
on an upward trend for the last three years. They have seen
penetration rise from 2.7% to 14.3% during the British
season while volume sales increased by 25% last year and
double the number of households bought asparagus in
2007 versus 2004.
Who is this man ?
Jamie Oliver


Make a story – tick the boxes
• Retailers need great stories

– Why Guatemala ?

– ECO ?

– SOCIAL ?

– SUSTAINABLE ?

– You must tick the boxes and tell your story ......


THANK YOU


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