Supermarkets are buying directly from growers, thus eroding wholesalers’ profits
London, United Kingdom (PRWEB) July 03, 2012
The Fruit & Vegetable Wholesaling industry is in trouble. Higher input prices and dwindling profit margins due to poor exchange rates and falls in average fruit prices have caused the industry to struggle over the past five years. According to IBISWorld industry analyst Nick Sallmann, “the increasing incidence of supermarkets bypassing wholesalers to purchase their fresh produce directly from growers has resulted in falling profit and low growth in revenue”. The gross imbalance between the number of buyers and sellers, combined with the clout of supermarkets as a result of being the one-stop-shop for the majority of consumers, has caused wholesalers and farmers to bear the brunt of a recessive climate and higher input prices. Imports and levels of home-grown vegetables have risen over the past decade, muscling out many wholesalers that have not been able to sustain themselves in a difficult marketplace. The organic produce segment is a beacon of hope for the industry despite sales falling during the economic downturn. This segment includes high-margin, niche products that are produced and sold by a few players. In the five years through 2012-13, industry revenue is estimated to fallen by 0.3% per annum. In 2012-13, revenue is expected to decline by a greater 1.0% to £11.1 billion.
Sallmann adds, “the threat from supermarkets is expected to remain as they seek cost efficiencies and establish global supply chains to procure their produce”. Issues to do with climate change and sustainable farming will also affect the industry. Costs could increase for farmers and growers, who will be forced to pass this down the supply chain given their already-eroding profits. In the five years through 2017-18, IBISWorld estimates that industry revenue will increase only marginally. In the coming five years the industry's fortunes will be tied to the economic recovery, input prices and the level to which production can be incentivised. Given the high-cost, low-reward environment in which most fruit and vegetable farmers operate, the future of the industry will be determined by the extent to which domestic production can be revived and rewarded. This will involve support from the government and the private sector to align policies with the industry's needs.
The top four wholesalers in the industry generate less than 10% of total revenue, with the two major players controlling only 5.8% of revenue. This gives the Fruit & Vegetable Wholesaling industry a low level of market share concentration. The industry is highly fragmented and price-competitive, with low profit margins and high costs.
For more information on the Fruit & Vegetable Wholesaling industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
This industry includes wholesalers of fresh and processed fruit and vegetables. Businesses in the industry purchase fruit and vegetables from farmers or growers and sell produce to retailers including grocery stores, supermarkets, food-service industries and farmers' markets. Wholesalers perform no additional processing beyond re-packaging, and instead focus mainly on storage and distribution activities.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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