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Drivers of performance: market analysis of European fruit & vegetable industry
Jeroen Lustig published on September 10, 2021
Fruit & Vegetable (F&V) is a highly competitive, commodity-driven industry in which key players are constantly vying for supremacy. Staying at the forefront of the latest trends and consumer preferences is paramount for survival. The overall F&V market has grown by a compounded annual growth rate (CAGR) of 6.1%, which is relatively high, but the market remains buoyant. How does the F&V industry gear up to meet these challenges? Read more about the latest developments and performance indicators in our trend report.
A-INSIGHTS has developed a unique company classification system, which captures detailed information on the activities of each company in the Agri-Food industry. This allows us to perform multiple cross-section analyses that uncover driving dynamics in the European fruit & vegetable industry.
Key insights into the European Fruit & Vegetable sector
The European Fruit & Vegetable industry is a highly competitive, commodity-driven market in which key players are constantly vying for supremacy. How to add value, while margins are under pressure by increasing complexity and compliance, is one of the challenges of the industry as a whole. Based on our in-depth analysis of publicly available data from 2016-2020, we identified key insights into trends and developments:
Retail margins under pressure
Companies that focus on the wholesale market saw relatively stable profit margins while those that focus on retail are under pressure due to costs of compliance and increasing complexity in general.
Demand for fresh, natural products drives growth
Overall the Fruit & Vegetable market has grown by a CAGR of 6.1%. A rise in consumer demand for fresh, natural products was behind this growth as well as a desire for more exotic fruits.
Suppliers over-estimated growth but still generate high margins
We can see exceptional margins at the start of the value chain due to the long lead time to develop new or improved varieties of seed. However, suppliers recorded the lowest sales growth at 3.8%, largely due to their long investment cycle and lack of flexibility to adapt to changing market conditions. 2020 provided a welcome boost thanks to hoarding, but overall growth is showing a decline.
Traders successful in adding value
As a largely commodity-driven market, companies must strengthen their added value. Traders have been exceptionally successful at achieving this, recording the highest sales growth rates at 7.5%. Successful companies have not only provided exclusive fruits and vegetables but also added smart process steps and catered to convenience solutions.
One of the main challenges for the F&V industry is to become less commoditized to get a better grip on added value and to maintain and restore profit margins. There are prime examples in the industry of how to do this - either with brands or product concepts, superior product quality, and fresh convenience products. As said before, this requires a shift in thinking: from product-centred and volume-driven to a more consumer-focused and value-oriented perspective.
Read all about drivers of performance in our trend report: "Drivers of performance: market analysis of European Fruit & Vegetable Industry". In the series Drivers of Performance, our analysts have also analyzed the following markets: