The COVID-19 pandemic has exacerbated both the positive and negative trends already shaping the fruit market in the years preceding it, according to our latest trend report. With newly updated information for 2020, our analysts examined the data of the top 500 fruit & vegetable (F&V) companies in Western Europe focusing on growth, profitability and returns over the years 2015-2020.
These indicators provide valuable insights into how fruit companies, and the F&V market as a whole, are developing. Below we provide a brief snapshot of some of the key findings.
Focus on health drives consumption
Before the onset of the pandemic, the fruit industry was enjoying significant growth on the back of increasing health consciousness among consumers. The pandemic has accelerated this trend, with an even greater focus on health leading to significant consumption-driven growth in the fruit industry during 2020.
Yet our data reveals that most food industries recorded a sales drop during the year. This is largely due to national lockdowns, which slowed or stopped the flow of materials and goods, taking existing problems in the supply chain to new levels while also creating additional disruptions for routes to market.
Margins under increasing pressure
Problems around increased complexity and compliance in the value chain were also heightened by the pandemic, putting even more pressure on profit margins for all value chain links in the fruit industry (with an average of 4.6% EBIT across the F&V industry). In 2020, these were partially mitigated by savings from a fall in expenses, particularly for globally-active companies, which had lower expenses given the lack of travel and the cancellation of sales events and conferences.
Suppliers receive temporary growth boost
Overall, suppliers (seed breeders) listed the highest growth rates in 2020, benefiting from hoarding towards the start of the pandemic. This hoarding effect provided only temporary support for sales, however, with the effects tailing off in 2021.
Retail focus pays off
Meanwhile, retail-focused players across the entire value-chain were able to capitalize on growing retail demand, with sales up by more than 5% overall. Companies that focus on supplying the major UK food retailers, benefited from increased demand for apples, ripened pears, and other healthy products from the first lockdown onwards. These companies were among the fastest growing F&V companies in 2020.
Our data suggests that retail bargaining power is the key to resolving long-term margin pressure in the fruit industry. Traders, increasingly on fixed contracts with retailers, are particularly squeezed within the value chain. It will be interesting to see how this dynamic is affected by the increasing consolidation of existing players, and by the entrance of large conglomerates from outside the industry.
Preserved and frozen back in fashion
Similarly, sales in preserved and frozen fruit grew significantly faster than fresh as consumers sought to stock up on these items while they were stuck at home during lockdowns. Although these segments generate a healthy profit in 2020 this was, again, only a temporary breach to the trend. Fresh will remain the main source of growth in the industry.
New entrants intensify competition
Favorable market dynamics are bringing new entrants to the fruit industry. Add this to the rising problems around increased complexity and compliance in the value chain and it is clear why it is becoming increasingly difficult for existing fruit players to retain their position.
Fruit companies must seek ways to add value in order to survive, adding smart process steps, creating new concepts or diversifying into more exclusive segments (such as exotic fruits and ‘superfoods’) to tap into the opportunities emerging from the increasing wealth of consumers and their desire for healthy food.
For the detailed analysis and the top perfomers in the industry, download our trend report on the fruit & vegetable industry via the link below.