The partnership between the produce industry and the retail grocery sector is more critical than ever. While fresh produce typically accounts for 10-15% of total grocery sales, it drives a disproportionately high 15-20% of a store’s profitability.
A Food Industry Association (FMI) study underscores this point, revealing that 68% of shoppers consider the quality of fresh produce a key factor in choosing where to shop. Simply put, if retailers don’t get produce right, their broader business will suffer. The same FMI study highlighted that produce is the most frequently purchased department in grocery stores, with 89% of shoppers visiting the section on each trip.
This presents a clear opportunity for growers to collaborate with retailers, ensuring that the produce offered is of top quality, fresh, and consistently available. But internal and external forces are reshaping this vital partnership, requiring a fresh approach to traditional relationships.
Internal Pressures
One significant internal shift is the declining knowledge gap among buyers. A recent Blue Book Services study revealed that 95% of senior merchants think “a lack of experience is a meaningful issue” and 100% agreed it’s a problem that needs solving.
Growers — often multigenerational family farms — possess deep commodity expertise. Conversely, retail buyers have intimate knowledge of consumer behavior, including shopping habits, frequency, and basket data. This divide creates both opportunities and challenges.
A recent job posting for a senior produce buyer, prioritizing data analytics and profit and loss management over produce background, exemplifies the industry’s growing emphasis on data-driven decision-making for profit maximization.
Coupled with declining category- specific experience, ongoing cost and margin pressures have spurred a “race to the bottom” — prioritizing the cheapest price.
External Pressures
External factors also play a pivotal role. Retailer consolidation, as illustrated by the attempted Kroger and Albertsons merger, reflects an attempt to streamline operations and gain economies of scale.
These consolidations can alter produce sourcing, negotiation, and management, potentially challenging growers facing larger, more corporate buyers. This trend concentrates market power, demanding that growers meet stringent standards, lower costs, and adapt to centralized purchasing strategies.
At the same time, inflation has led to shifting consumer spending patterns. Food prices have increased by 25% on average over the past few years, with some commodities seeing much higher prices. Fresh produce, often more expensive than processed alternatives, is frequently the first category cut from shopping lists.
Simultaneously, the “Make America Healthy Again” movement is gaining momentum, challenging the dominance of established CPG companies and promoting healthier food choices.
This shift presents an opportunity for growers and retailers to align with rising consumer interest in health and wellness, touting freshness over processed foods.
Creating Stronger Partnerships
For years, fresh produce buying has been a race to the bottom. Buyers chase the lowest price while hidden costs — shrink, spoilage, quality issues, and out-of-stocks — silently destroy margins and customer trust.
Shoppers judge a store by its produce section. If quality slips or shelves go empty, they don’t just stop buying bananas — they stop shopping at the store. The smartest buyers know total value beats lowest price.
A supplier’s performance, quality, and capabilities are crucial investments, yielding benefits that often outweigh a potentially higher purchase price.
Full disclosure, Blue Book is currently piloting a solution designed by the industry, for the industry, to help buyers and suppliers move beyond price wars and into partnerships that drive profit.
By quantifying risk and highlighting historically hidden costs, suppliers can engage on a level playing field, encouraging innovation, new varieties, consumer education, etc.
Beyond this exercise, there are great opportunities for increased education for buyers and consumers to help increase trials across fruits and vegetables.
Take table grapes, once classified only as “red” or “green.” The introduction of specialty grape varieties (like Cotton Candy, Moon Drops, and Gum Drops) has transformed the category from a price-driven commodity to a premium, experience-driven product line.
Many retailers embraced this shift by strengthening partnerships with innovative growers, enhancing sourcing strategies, and educating consumers about the unique benefits of these varieties.
Finally, there’s tremendous opportunity for both growers and retailers to ride the “Make America Healthy Again” wave.
While this effort might take longer to bear fruit, it represents a unique chance to push back against the well-entrenched CPG industry, which has long wielded its influence in Washington, D.C., and with consumers’ wallets.
Conclusion
The road ahead for produce growers presents both challenges and unparalleled opportunities for stronger partnerships with retailers. Yet, this relationship must evolve beyond simple transactional exchanges.
By aligning on shared goals such as offering quality products, optimizing supply chains, and meeting consumer demand for fresh, healthy food — growers and retailers can navigate economic pressures, shifting consumer habits, and industry consolidation.
After all, a rising tide lifts all boats.
