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David Magaña Vice President & Senior Analyst
RaboResearch Food & Agribusiness
Colorado Fruit & Vegetable Growers Association February 2019
Common trends, threats and opportunities in
global (and local) fresh produce markets, not so common anymore?
Food & Agribusiness
Agri Commodity
Markets Animal Protein Beverages
Consumer Foods Dairy
F&A Supply Chains Farm Inputs
Fresh Produce
Grains & Oilseeds Sugar
A global network…
of local experts
One of the largest F&A research hubs in the world and the world’s leading F&A financial services provider
Unique combination of strategic business development and in-depth research
F&A coverage from farm to fork, across rural and wholesale sectors
Broad knowledge of innovation, strategic
development and risk-reward balances along the value chain
Vast global network with access to all
players in the market
Global team of experts
with real-time insights into local markets
RaboResearch
2
US 22
Brazil 4
UK 6
Netherlands 33
India 2
New Zealand 2
Australia 7
Singapore 4
Hong Kong and China 7
Team of 87 professionals in 9 different countries
Rising incomes drive food demand…
Source: OECD, Brookings Institution, Rabobank 2018
New estimate
New estimate
Global middle-class population growing fast
2009
28%
2020 2030
54%
65%
Asia Pacific
Central & South America
Europe
Middle East & North Africa
North America
Sub-Saharan Africa
1,000
2,000
3,000
4,000
5,000
Million people
Food preferences are shifting with income levels
Subsistence Quality Individualised
Health
Enjoyment Convenience Foodservice Snacking
International
Mass-market
Income development
Food perception
Food choices
Diet food, functional food, organic food
Fresh and convenient, segmented meals
Prepared meals, snacks
Eggs, meat, dairy, sugar, processed mass-market
food, soft drinks
Carbohydrate staples (grains, roots, tubers)
India
Sub-Sah. Africa
India SEA
Eastern Europe
Australia
North America
Japan Western Europe
China Urban
China Rural
China 2020
Source: United Nations, Rabobank
A world of seemingly conflicting desires
Be better at feeding the world, but… Deliver perfect quality,
but… Year-round, perfect quality, but…
More convenience, but…
Keep prices reasonable in the face of _______, but…
The definition of “quality” is now more complex
Product & Process Matter, but… left-hand side still rules the day
Affordability Convenience Taste + + = My Values
Health
Environmental Sustainability
Information
Social Good
Consumer Purchasing Decision
Source: Produce Marketing Association (PMA), Rabobank
+ Appearance
+ Food Safety
Fresh fruit & nut consumption – a few are key
Source: USDA/ERS, Rabobank 2019
U.S. fresh fruit & nut “use” – CAGR 2005-07 vs 2015-17 Avg
-7%
-2%
3%
8%
13%
18%CAGR in lb/cap
Give the people what they want
U.S. per capita “use” – 5-year rolling average
Source: USDA, Rabobank 2016
0
20
40
60
80
100
120
0
5
10
15
20
25
30
Pounds/Cap Pounds/Cap
All Fruit (rhs) Bananas Apples Oranges & Temples Strawberries Avocados
Fresh veg consumption – a cannibalization story
Source: USDA/ERS, Rabobank 2019
U.S. fresh vegetable “use” – CAGR 2005-07 vs 2015-17 Avg
-15%
-10%
-5%
0%
5%
10%
15%
CAGR in Pounds/Cap
Some winners in a mature fresh vegetable market
U.S. fresh vegetables annual per capita use (lbs)
Source: USDA, Rabobank 2019
0
20
40
60
80
100
120
140
160
0
5
10
15
20
25
Fresh Vegetables (rhs) Broccoli CucumbersLeaf & Romaine Lettuce Bell Peppers Tomatoes
Value-Added Fruits
Value-Added Vegetables
All Packaged Salads
All F&V
17%
All Fruits
16%
All Vegetables
18% 39%
62% 41%
A SOCIETY OF SNACKERS
Source: United Fresh Produce Association, Nielsen Perishables Group, Rabobank 2018
% Changes F&V Retail Spend, USA 2012-2017
Importance of convenience cannot be overstated
A society of snackers!
Value-Added Fruits
Fresh Cut Fruits
Overwrap Fruit
39% 49%
38%
FRESH TRENDS
Source: United Fresh Produce Association, Nielsen Perishables Group, Rabobank 2018
% Changes F&V Retail Spend, USA 2012-2017
Growth differs across value-added fruit categories
Jars & Cups Fruit
-39%
84%
12%
4%
% Dollar Contribution to Value-Added Fruit, 2017
Fresh Cut Overwrap Jars & Cups
Year-round demand is supporting some prices
Source: USDA/AMS, Rabobank 2019
U.S. Avocado shipping-point data – 2007-09 vs 2015-17 averages*
*Domestic & imported production
Value-Added Fruits
Value-Added
Vegetables
All Packaged
Salads
All F&V
17%
All Fruits
16%
All Vegetables
18% 39%
62% 41%
Organic Fruits
97%
Organic Vegetables
77%
Organic Packaged
Salads
67%
All Organic
F&V
84%
% Changes F&V Retail Spend, USA 2012-2017
THE ORGANIC TRAIN HAS LEFT THE STATION
Growth rate of organics is outpacing everything
Source: United Fresh Produce Association, Nielsen Perishables Group, Rabobank 2018
Changing attitudes – Does it matter whose?
Source: USDA/ERS, Organic Trade Association, Rabobank 2017
U.S. organic food sales 2005 – 2020f
0
10
20
30
40
50
60
70
2005 2008 2011 2014 2017f 2020f
Billion USD
Total US Organic Food Sales
11.2% CAGR
Peaches – Still a summer fruit
Source: USDA, Rabobank 2019
U.S. market weekly peach shipments
-
5
10
15
20
25
30
35
40
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Mill
ion
Lb
Week
2014 2015 2016 2017 2018 2012-16 Avg
Peaches U.S. market weekly shipments
Source: USDA/AMS, Rabobank 2019
2007-09 Avg Share 2016-18 Avg Share
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52California Georgia & SC Appalachia Washington New Yersey Chile All Other
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52California Georgia & SC Appalachia Washington New Yersey Chile All Other
California Georgia & SC Appalachia Washington New Yersey Chile All Other
Peaches – Better prices early in the season
Source: USDA, Rabobank 2019
California Yellow Peach Shipping-Point Prices
10
12
14
16
18
20
22
24
26
28
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42
USD
/Car
ton
Week
2014 2015 2016 2017 2018 2012-16 Avg 2007-2016 Avg
Blueberries continue to gain ground in the berry patch
U.S. berry consumption 2005-2016
Source: USDA/ERS, University of California, Rabobank 2018
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Mill lb
Strawberries Blueberries Raspberries Blackberries
90.2%
6.8%
1.5%
1.5%
66.5%
20.2%
7.6%
5.7%
Blueberries: Shoulders are key…
Source: USDA, Rabobank 2019
U.S. blueberry shipping-point data – 2007-09 vs 2015-17 averages*
*Domestic & imported production
-5%0%5%
10%15%20%25%30%35%40%45%50%
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 520
5
10
15
20
25
30
35
40
CAGR %
Week
USD/Carton
CAGR Q (lhs) CAGR P (lhs) Weekly Avg Price 2007-2017 (rhs)
Blueberry volume shares are shifting
Source: USDA, Rabobank 2019
2007-09 Avg Share 2015-17 Avg Share
0%10%20%30%40%50%60%70%80%90%
100%
1 5 9 13 17 21 25 29 33 37 41 45 49Week
Georgia California FloridaMichigan Other US Peru
0%10%20%30%40%50%60%70%80%90%
100%
1 5 9 13 17 21 25 29 33 37 41 45 49Week
Georgia California FloridaMichigan Other US Peru
Georgia California Florida Michigan Other USPeru Canada Mexico Chile Other countries
Organic blueberry premiums still okay
Source: USDA/AMS, Rabobank 2019
U.S. blueberry shipping-point prices – domestic & imports*
*Prices represent the average weekly shipment-weighted price in each year
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
0%
20%
40%
60%
80%
100%
120%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
USD/lb % Org Premium
Wtd Premium % (lhs) Conv Wtd Price (rhs) Org Wtd Price (rhs)
Windows of opportunity exist
Source: USDA/AMS, Rabobank 2019
U.S. organic blueberry shipping point prices – domestic & imports
0
2
4
6
8
10
12
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2012 2013 2014 2015 2016 2017 2018Week
USD/lb
Most households buy fresh potatoes
Source: The Packer-Fresh Trends, 2018
U.S. Top 10 fresh fruits and vegetables, 2017 Percentage of survey respondents who have bought this item in the last 12 months
The percentage of people who say they bought potatoes in 2017 compared to the previous year’s survey increased by 6 percentage points.
Trends in potato consumption: more than just fresh
Source: USDA, Rabobank 2018
U.S. per capita availability of potatoes (Weight data have been converted to a fresh (farm) equivalent)
5
15
25
35
45
55
65
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
For Chips For Dehy For Fz Fresh
Diversity & versatility: not all potatoes are created equal
Source: The Packer-Fresh Trends, 2018
U.S. consumers have their favorite fresh potato categories
Creativity abounds when it comes to ways to fix fresh
potatoes
New generations do not eat as many potatoes…
Source: The Packer-Fresh Trends, 2018
Opportunities to have a better ‘connection’ with Millennials
The composition of the U.S. population is changing
27% Single person households
70% of households have no
children under 18
Increasingly multicultural
~50%
Share of women in US labor force
25% Millennials have become the largest generation
White 62%
Hispanic
17%
Black 13%
Asian 5%
Native 1%
The growing influence of the millennial mindset
Projected U.S. population by generation
Source: Pew Research Center
0
10
20
30
40
50
60
70
80
90
2015 2028 2036 2050
Millions
Millennial Gen X Boomer Silent>74 years 55 – 73 yrs 40 – 54 yrs 19 – 39 yrs
But millennials…
Technology is transforming our lives
of the U.S. population has internet access
of U.S. adults have a smartphone
(99% of millennials)
77% 89% 1.8 billion active users globally
‘Experts’ are no longer the main source of information
Are granola bars healthy?
Source: Pew Institute, American Association for the Advancement of Science (2016), The New York Times (2016), Food Dive (2016)
Yes No Yes No
U.S. Public Nutritionists
Consumers are moving away from ‘big brands’
Source: Rabobank, Euromonitor 2016. Big Brand >3% market share.
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Big Brand Small Brand Private Label
Gai
n Lo
ss
Smaller brands (more innovative) are gaining market share against big brands
A disruptive, technologically-induced force
Believe us yet?
Convenience, yes, but did he say “relationships?”
Source: Nielsen Perishables: *E-commerce survey conducted by Harris Poll® online between June 17 & June 21, 2016, among 1,995 adults ages 18 and older.
Americans do buy produce sight-unseen
Retail Volume
Up 51% +
31%
Bought Food
Online
52%
of those
Bought Fresh
Produce 16% Bought Fresh
Produce
The food value chain is increasingly data-driven
Source: Rabobank 2018
Blockchain: more than just a chain of blocks
Source: Rabobank 2019 Some images may be subject to copyright. We do not claim ownership.
Block 1
Block 2
Block 3
… Block N
An opportunity to tell your story…
Blockchain: the trigger for disruption in the food value chain
Source: Rabobank 2017
Major trends in the food sector
• Big to small companies – emerging brands are winning
• Convenience – never ending search for conve
• Fresh is #1 – from shelf-stable to fresh
• Health & Wellness – from dieting to ‘better for you’
• Natural/organic – the need for authenticity
Major trends in the food sector
• New routes to consumer – omnichannel
• Personalization - from ‘My Plate’ to my personal d
• Premiumization – ethical & sustainability cl
• Simplicity – cleaner labels, less processed
• Snacking – from meals to multiple eatin
g occasions
• Transparency & Trust – local & transparent supply chains
International trade becoming more relevant
Source: Rabobank 2018
The future of NAFTA/USMCA?
Source: Twitter 2017
High trade concentration in relatively few products
Fruit and tree nut trade in North America
Source: USDA, Rabobank 2018
Taken from Rabobank’s article: “Unintended Consequences of a NAFTA Breakup: Potential Implications for Fruit, Vegetable and Tree Nut Trade in North America.” May 2018.
Edible Vegetables
Source: USDA, Rabobank 2018
High trade concentration in relatively few products
Unintended Consequences of a NAFTA Breakup
Selected U.S. Imports from Mexico and Potential NAFTA Breakup Effects
Source: Rabobank 2018
Taken from Rabobank’s article: “Unintended Consequences of a NAFTA Breakup: Potential Implications for Fruit, Vegetable and Tree Nut Trade in North America.” May 2018.
Unintended Consequences of a NAFTA Breakup
Selected U.S. Exports to Mexico and Potential NAFTA Breakup Effects
Source: Rabobank 2018
Taken from Rabobank’s article: “Unintended Consequences of a NAFTA Breakup: Potential Implications for Fruit, Vegetable and Tree Nut Trade in North America.” May 2018.
Unintended Consequences of a NAFTA Breakup
Potential impact on margin would’ve depended on value chain function
Source: Rabobank 2018
Value-Chain Function Canada U.S. MexicoHigher exports Higher imports Higher exportsHigher domestic price Lower domestic price Higher domestic price
Lower availability Higher imports Lower availabilityUncertain margin impact Lower margins Uncertain margin impact
Lower imports Higher imports Lower importsUncertain margin impact Higher margins Uncertain margin impact
Higher exports Lower exports Higher exportsUncertain margin impact Uncertain margin impact Higher margins
Higher exports Higher imports Higher exportsHigher domestic price Lower domestic price Higher domestic price
Producer Only
Packer/Shipper Domestic Sourcing Only
Packer/Shipper Domestic & NAFTA Partner Sourcing
Packer/Shipper Domestic & NAFTA Partner Sales
Consumer
Taken from Rabobank’s article: “Unintended Consequences of a NAFTA Breakup: Potential Implications for Fruit, Vegetable and Tree Nut Trade in North America.” May 2018.
Labor constraint will continue to tighten
Source: Washington State University, World Bank, Pew Research Center
Change in the 15-35 age cohort in Mexico
-200,000-100,000
0100,000200,000300,000400,000500,000600,000700,000800,000
Annual Change
Net migration from Mexico below zero after the great recession
In thousands
670
1,390
1,000
2,940
1,370
870
1995 to 2000 2005 to 2010 2009 to 2014
U.S. to Mexico
Mexico to U.S.
Rabobank – Growing a Better World Together Complete the diagram
1 3 5 ? 2 4 6
Rabobank – Growing a Better World Together Did you think of this possibility?
This image may be subject to copyright by Pontiac. We don’t claim ownership.
Rabobank – Growing a Better World Together
Mission: Facilitating enough healthy food for the entire world
population
Ambition: 60% more food available with 2x
less in ecological impact before 2050.
Together Earth
Waste
Stability Nutrition
Rabobank – Growing a Better World Together
Contact Details
Rabobank N.A.
David Magaña
Vice President, Senior Analyst
RaboResearch Food & Agribusiness
DISCLAIMER This presentation has been prepared exclusively for the benefit and internal use of RABOBANK (“COMPANY” or the “Company”), and does not carry any right of publication or disclosure other than to COMPANY. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of the Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank” or “Rabobank International”).
The information in this presentation reflects prevailing market conditions and our judgement as of this date, all of which may be subject to change. This presentation is based on public information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information and opinions contained in this document are wholly indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas et cetera contained in this presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be relied upon in connection with any contract or commitment whatsoever.
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