FRESH PRODUCE SUPPLY CHAIN

• GROWER/FARMER
• Agricultural products are grown by farmers before being sold to handlers or primary processors.
• In 2017, there were 230,755 farms in the United States covering about 9.8 million acres of land. The market value of US fruit & vegetable production was US$57.2 billion.
• Farmers can drastically reduce the miles that their produce travels, as well as increase their share of the food dollar, by opting to process their produce in-house and participating in direct-to-consumer marketing channels such as farmers' markets.


• PROCESSOR
• Handlers or primary processors aggregate the produce that they receive, store and process them before they are shipped to distributors.
• Fresh produce is processed in various ways such as by being peeled, cut, or diced. Processors must then ensure food safety, proper packing and storage of fresh produce that they receive before being brought to the next step of the supply chain.
• Part of food safety is the proper washing, grading, and sorting of fresh produce before they are stored and eventually sold to wholesalers.


• DISTRIBUTOR
• Wholesale produce companies or distributors store fresh produce in a network of warehouses and then sell and distribute these to retail stores and service providers such as supermarkets and restaurants through an extensive transportation infrastructure.
• Fresh produce distributors ensure that they only receive fresh produce from approved suppliers/processors to further ensure food safety. They keep a list of approved suppliers, together with dates of delivery of produce and packaging supplies to maintain traceability of the produce that they store.
• Produce are marked with dates so that a "first in; first-out" (FIFO) stock rotation can be observed. This means that produce received earlier should be the first ones shipped to the next step of the supply chain.
• Produce are repacked into appropriate food containers before being transported to retailers or service providers.
• Fresh produce is ideally transported via trucks with refrigerated storage to maintain their freshness.
• Research has found that over US$7 billion worth of fresh produce in North America spoils in the back of trucks while in transit or warehouses before they are even received by consumers. Temperature control and monitoring is utilized to lessen produce spoilage, however, it has been suggested that an evaluation of actual shelf life with the use of technology will do better to mitigate the risk of spoilage of produce while being transported.


• RETAILER/SERVICE PROVIDER
• This part of the supply chain includes establishments that either sell fresh produce (like supermarkets or grocery stores) or uses fresh produce to provide a service for consumers (like restaurants).
• Overstocking is a problem often encountered by retailers of fresh produce. This leads to eventual food waste, and lower margins and product freshness.
• Ordering too much produce can be prevented by utilizing efficient forecasting techniques. This can be done by rationalizing stock keeping units (SKUs) and integrating customer demand data and supply indicators from their suppliers. This allows retailers to order the right produce at the right quantity to meet customer demands and seasonal spikes.


• CONSUMER
• This refers to consumers who purchase fresh produce from retailers such as grocery stores and consumers of service providers such as restaurants or cafeterias.
• On average, food travels around 1,500 miles from the farm to a consumer in the US.

BREAKDOWN OF FOOD DOLLAR SPEND ON PRODUCE

• According to 2017 data gathered by the USDA Economic Research Service, for every $1 spent on food by US consumers, 7.8 cents goes to farm production. This is the share of the food dollar that goes to farmers. Together with the 2.1 cents that go into the Agribusiness industry group, a total of 9.9 cents goes into the first step of the fresh produce supply chain — the grower.
•  17.3 cents of the food dollar go into the "processor" step of the fresh produce supply chain. This accounts for the food processing (15.0 cents) and packaging (2.3 cents) of the fresh produce.
•  12.6 cents of the food dollar go into the "distributor" step of the fresh produce supply chain. This accounts for the wholesale trade (9.1 cents) and transportation (3.5 cents) of the fresh produce.
• Most of the food dollar goes into the "retailer & service provider" step of the fresh produce supply chain, receiving 49.3 cents of it. This includes the retail trade of fresh produce (12.6 cents) and foodservice (36.7 cents).
•  10.9 cents of the food dollar is likely shared among all parts of the supply chain as it accounts for energy (3.8 cents), finance and insurance (3.2 cents), advertising (2.6 cents), and legal and accounting (1.3 cents) costs which all parts of the chain utilize.

RESEARCH STRATEGY:

SUPPLY CHAIN FOR UGLY PRODUCE: FARM TO CONSUMER

• In the field, ugly fruits and vegetables are often kept unharvested and left to rot.
• Produce that make it past the production stage of the supply chain are either culled by inspectors or refused by retailers.
• Produce that make the cut in the inspection stage and make it into a store is more likely to perish in a bin than be taken home.
• One of the reasons that some produce end up "ugly" is the shipping and handling, which is inevitable in the modern food supply chain.
• At the end of the supply chain, although a lot of the ugly produce goes to waste, there’s also a huge part of it that goes to foodservice. Also, a lot of ugly produce ends as animal feed when there’s no human market for it.
• According to Dr. Oliver Hedgepeth, who is a full-time professor at American Public University (APU), ugly produce and other foods have their place in the supply chain. Farmers sell their ugly produce to manufacturers who store their purchases in huge containers, and then these containers are often transported by trucks, trains, and ships to factories where the produce is made into pies, cakes, cookies, and bags of frozen chopped vegetables.

PERCENTAGE OF UGLY PRODUCE

• An analysis by the Center of Biological Diversity found out that ugly produce alone accounts for 40% of the food produced in the US.
• The National Farmers Union found out that around 20% of Gala apples were being wasted before leaving the farm gate as they weren’t at least 50% red in color.
• According to Wayde Kirschenman, whose family has been growing potatoes and other vegetables near Bakersfield, California, since the 1930s, at times, 25% of the crop is just thrown away or fed to cattle for not meeting the cosmetic standards.
• According to a study published by the American Marketing Association, farmers leave up to 30% of their produce in the field because of being "ugly."
• In the next stage of the supply chain, retailers take one of the two approaches to selling ugly produce: positively marketing the imperfections and/or slashing prices by 30% to 50%.
• When it goes from retailers to store owners, 34% of store owners just throw out substandard fruits and vegetables and another 34% discount it significantly.
• To sell ugly produce, grocers offered a 45% discount on average.

AREAS THAT COULD BE IMPROVED/CHANGED IN THE SUPPLY CHAIN

• Farmers can secure secondary local markets to deliver good but rejected produce, offering lower prices.
• Farmers can also install on-farm refrigeration that can increase the shelf-life of imperfect produce.

• The stakeholders of this stage can make value-added products from discarded produce by converting low-priced produce into high-value products, such as prepackaged chopped vegetables, puree mixes for soups, stews, and baby food.

• The stakeholders in this stage are trying to increase shelf life by investing in better handling, packing, and assuring a constant cold chain from farm to shelf.
• Supermarkets can also educate consumers on what produce looks like at different stages of maturity, which is expected to make buyers more willing to purchase a diverse type of produce.

• As the final point of the supply chain, consumers need to be conscious about the reality of fruit & vegetable production, understanding that is natural for some produce to be misshapen or look imperfect.
• Also, if an investment is made into greenhouse farming, it is expected to reduce the volume unmarketable produce as the plants are not getting exposed to rain and whipped around by the wind.
• Also, several venture capital-backed companies—such as Imperfect Produce, Full Harvest, Hungry Harvest, and Misfits Market—are providing a solution to the problem creating a new channel of distribution for farmers, offering customers ugly produce at a significant discount to what the groceries would cost at retail, and then donating the rest to food banks.

RELEVANT FINDINGS

BREAKDOWN OF HOW THE FOOD DOLLAR IS SPENT

• Farm production: 7.8 cents 
• Food processing: 15 cents 
• Packaging: 2.3 cents 
• Transportation: 3.5 cents
• Wholesale trade: 9.1 cents
• Retail trade: 12.6 cents 
• Food services: 36.7 cents
• Energy: 3.8 cents
• Finance and insurance: 3.2 cents
• Advertising: 2.6 cents
• Other: 3.4 cents

RESEARCH STRATEGY