Fresh Produce Supply Chain

Part
01
of two
Part
01

Fresh Produce Supply Chain

The supply chain for fresh produce starts with the grower/farmer who sells their produce to primary processors that process the products before they are packed and sent to distributors. From the distributors, products are stored in warehouses before they are repacked and sent to retailers and service providers who sell the produce to consumers or utilize the produce to provide a service to consumers. An in-depth overview of the fresh produce supply chain, as well as a breakdown of the food dollar, is available below.

FRESH PRODUCE SUPPLY CHAIN

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:

In order to complete this research, we leveraged on various articles and reports from credible sites such as the USDA for insights into the fresh produce supply chain and food dollar breakdown. We also consulted various materials, both marketing and information documents, for those involved in the fresh produce supply chain such as in processing and distributing to better understand what is expected of companies participating in the supply chain and how the different parts of the chain work together to deliver fresh produce from the farm to the consumer.

We have broken down the food dollar according to where each of the expenditure fits in the supply chain. The source that supplied the breakdown of the food dollar also contained definitions of the industry groups that receive part of the food dollar. We matched these industry groups to where they likely fall in the supply chain according to the previously identified definition of each step in the supply chain.
Part
02
of two
Part
02

Ugly Produce Supply Chain

According to the Center of Biological Diversity, ugly produce accounts for 40% of the food produced in the US. Farmers leave up to 30% of their produce in the field because of being "ugly" while retailers either market the imperfections positively or slash prices by 30 to 50%. Thirty-four percent of store owners, on the other hand, just throw out the substandard fruits and vegetables.

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

According to Inspira Farms—a company that supplies a highly adaptable energy-efficient refrigerated storage and food processing solution for agribusinesses that face problems of loss reduction, energy reliability, and market access—the following improvements can be done at each stage of the supply chain:

FARMERS

AGRI-BUSINESS
  • 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.

DISTRIBUTION & RETAIL
  • 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.

CONSUMERS
  • 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

Although we could not find the exact breakdown of the food dollar regarding ugly produce, the breakdown of the farm share of the food dollar, overall, is as follows:

RESEARCH STRATEGY

To find the supply chain for ugly produce from farm to consumer, areas where it can be improved, and a breakdown of how the food dollar is spent regarding ugly produce, we looked into several academic and scientific journals and articles on fresh produce. While there were articles that have information on ugly produce, the challenges of marketing these produce, and areas for improvement in the ugly produce industry, we could not find anything specific to the breakdown of food dollar for ugly produce.
Next, we expanded our research to include reports and publications by the government and credible third-party media publications to look for the dollar breakdown of ugly produce. However, the closest information we found was the general food dollar breakdown by the United States Department of Agriculture. We presented the general food dollar breakdown under "Relevant Findings" above.
Lastly, we looked into the websites of companies that tackle defective produce, such as Imperfect Produce, Full Harvest, Hungry Harvest, and Misfits Market, to see if they have published any information regarding the food dollar breakdown of ugly produce. However, we also could not find the information we were looking for through this strategy. The lack of information on the dollar breakdown specific to ugly produce could be because this food niche is just emerging, and studies about it may be carried out by interested private parties and reports on those studies may not be publicly available yet.
Sources
Sources

From Part 02
Quotes
  • "“ugly” fruits and vegetables are often unharvested and left to rot in the field. If they make it past the production stage of the supply chain, they’re culled by inspectors or refused by retailers. In the off chance that a wonky watermelon or a curvy carrot makes it into the store, it’s more likely to perish in a bin than be taken home."
  • "There’s a growing number of people, from grassroots activists to national grocery-chain managers, who are working to change that. Using awareness campaigns, creative business sense and donation programs, these food-waste warriors are finding ways to transform ugly but edible food into just food."
Quotes
  • "The USDA estimates that a third of all produce from farmers goes uneaten, amounting to about $161.6 billion in waste. Much of this waste has to do with logistical issues, but some food is also wasted due to cosmetic reasons. “Ugly produce,” the lore goes, is often too unattractive to sell and gets tossed"
  • "In the past few years, several startups have stepped in ostensibly to try to break the cycle of ugly food waste. Venture capital-backed companies like Imperfect Produce, Full Harvest, Hungry Harvest, and Misfits Market say they provide a solution to the problem"
  • "It’s always been a thing! Like all living things, produce does not always come out perfect. Plus, there’s all the shipping and handling that goes into the modern food supply chain, and things get banged up. "
  • "They say that a lot of the ugly produce goes to waste. But there’s a huge part of that produce that goes to food service, where it gets cut up and appearance doesn’t matter."
  • "And a lot of ugly produce ends up being fed to animals when there’s no human market for it. Melons, for example, have no soft market, so they are fed to cattle and pigs, but then you have people going, “Oh, my god, it’s wasted!” But somebody ate it. So is that really waste? No."
  • "Instead of running a rescue operation for farmers to sell their ugly produce, we should invest in switching to greenhouses. With greenhouses, you don’t get as much dinged-up, unmarketable produce because the plants are not getting exposed to rain and whipped around by the wind. "
Quotes
  • "This reverse logistics effort started in 2014 with a European company called Intermarché. The company sold ugly fruit, vegetables and cookies. These products were popular among consumers who were willing to sacrifice appearance for reduced prices."
  • "But statistics cited by NPR indicate that farmers are the ones who really suffer. They have to toss out up to 40% of their crops that are not as perfect as grocery stores and customers demand."
  • "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. These containers are then transported by trucks, trains and ships to factories where the produce is made into pies, cakes, cookies and bags of frozen chopped vegetables."
  • "When you purchase produce – ugly or not – from your local farmer or grocer, you are helping your family lead a healthier life. Buying local also helps the overall food supply chain by reducing potential contamination and decreasing pollution from transportation."
Quotes
  • "WRAP, a charity who have been working with governments on food waste since 2000, have investigated food waste on farms and their initial findings suggest a major cause of fruit waste is due to produce failing aesthetic standards. "
  • "The National Farmers Union also reported in 2014 that around 20% of Gala apples were being wasted prior to leaving the farm gate as they weren’t at least 50% red in colour."
Quotes
  • "Vast quantities of fresh produce grown in the US are left in the field to rot, fed to livestock or hauled directly from the field to landfill, because of unrealistic and unyielding cosmetic standards, according to official data and interviews with dozens of farmers, packers, truckers, researchers, campaigners and government officials."
  • "I would say at times there is 25% of the crop that is just thrown away or fed to cattle,” said Wayde Kirschenman, whose family has been growing potatoes and other vegetables near Bakersfield, California, since the 1930s. “Sometimes it can be worse."
  • "Sunburnt” or darker-hued cauliflower was ploughed over in the field. Table grapes that did not conform to a wedge shape were dumped. Entire crates of pre-cut orange wedges were directed to landfill. In June, Kirschenman wound up feeding a significant share of his watermelon crop to cows."
  • "Imperfect Produce, a subscription delivery service for “ugly” food in the San Francisco Bay area, estimates that about one-fifth of all fruit and vegetables are consigned to the dump because they do not conform to the industry standard of perfection."
Quotes
  • "Farmers leave up to 30% of their produce in the field because it isn’t aesthetically pleasing enough to pick and sell. "
  • "Typically, retailers take one of two approaches to selling ugly produce, positively marketing the imperfections and/or slashing prices by 30% to 50%. "
  • "Some 34% of store owners just throw out substandard fruits and vegetables and another 34% discount it significantly. To sell ugly produce, grocers offer a 45% discount on average. "
  • "Other strategies include blending unattractive produce in with other produce (21%) and repurposing it for other uses in the store so that it is not sold whole (11%)."
  • "None of the store owners surveyed used advertising or digital displays to encourage the purchase of unattractive produce. "
Quotes
  • "For decades, American consumers have been trained to "eat with their eyes," but the trend appears to be shifting. While a recent survey from The Harris Poll showed that 81% of respondents said appearance is at least somewhat important to their produce purchase decisions, 62% of consumers also said they would be at least somewhat comfortable eating "ugly produce."
  • "Ugly produce alone accounts for 40% of the food produced in the U.S., an analysis by the Center of Biological Diversity showed."
  • "Seeing an open consumer mindset and an opportunity for innovation, several startups have jumped in and created a new market for this ugly product. "
  • "In an effort aimed at reducing the more than 6 billion pounds of produce that goes to waste in its stores annually, Kroger announced the launch of an "ugly" produce brand called Peculiar Picks last year. Competitor Hy-Vee added Robinson Fresh’s Misfit produce line to almost all of its 242 stores in 2017. "
Quotes
  • "Sarah Taber, an agricultural scientist, says the movement’s efforts, however well-intentioned, are misguided because farmers aren’t the ones wasting the most food. Consumers, restaurants and grocery stores are the ones responsible for the largest percentage of food waste, but ugly produce companies aren’t touching that waste at all with their business model."
Quotes
  • "Farmers: have several solutions to avoid throwing away produce that doesn’t meet the retailer grade. For instance, they can secure secondary local markets to deliver good but rejected produce, offering lower prices. Installing on-farm refrigeration can increase the shelf-life of imperfect produce"
  • "Agri-businesses: Value-added products coming from discarded produce—such as pre-packaged chopped vegetables, puree mixes for soups, stews, and even baby food—Is becoming a very attractive business because low-priced produce is converted into high-value products."
  • "Distribution & retail: Increasing shelf life of fresh produce by investing in better handling, packing, and assuring a constant cold chain from farm to shelf are some initiatives seen in several supply chains. Supermarkets can also educate consumers on what produce looks like at different stages of maturity "
  • "Consumers: can be more conscious about the reality of fruit & vegetable production, understanding that is natural for some produce to be misshapen or look imperfect. t."
  • "Not-for-profit organizations: food banks, for example, are charitable organizations that distribute discarded food to those who have difficulty purchasing enough food to avoid hunger. Food pick-up of discarded produce can be performed in collaboration with the food banks and produce traders."