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PMA share of wholesale fruit and vegetable market

Commercial and in confidence for Perth Market Authority www. freshlogic.com.au

Perth Market Authority: Assess and

define the Perth Market share of the

wholesale fruit and vegetable market

April 2012 – Final

Prepared by Freshlogic

Martin Kneebone, Director

Phone: +613 9818 1588; Mobile: +61 418 372 988

Email: [email protected]

Level 3, 192B Burwood Road

Hawthorn, VIC - 3122

Melbourne, Australia


Page 1 Commercial and in confidence for Perth Market Authority www.freshlogic.com.au Final

Contents

Executive summary ................................................................................................... 2

Project overview ....................................................................................................... 3

Market model methodology profile ......................................................................... 3

Perth Market Authority - WA wholesale fruit and vegetable market size & share .. 5

Other central markets............................................................................................... 8

Settings ................................................................................................................. 8

Development agenda – key issues across other markets ..................................... 8

Fruit and vegetable supply chain pressure points .................................................. 10

Consumption and shopping trends ........................................................................ 13

Channel share under pressure ............................................................................ 13

Shopping behaviour ............................................................................................ 13

Premiums for convenience ................................................................................. 14

Weekly food spend ............................................................................................. 14

Appendixes ............................................................................................................. 16

PMA market reports on market price and volume ............................................. 16

Methodology to replicate future share calculations .......................................... 17

Supply Profile .................................................................................................. 17

Demand profile ............................................................................................... 18

Modelling design to arrive at PMA Market share ........................................... 18

Process steps to replicate the share calculation ............................................ 19

Key summary outputs ..................................................................................... 20



Executive summary

This project has collated the best available information to map and define the

wholesale market share held by tenants operating on the Market City site

operated by the Perth Market Authority (PMA). The analysis was undertaken for

the year ending 30 June 2011.

The wholesale market was quantified as $908.9m and the PMA share as 49% of

the volume and 66% of the value of externally traded product. This is despite the

two largest supermarket buyers operating from facilities outside the PMA. This

level of share is deemed to leave the PMA able to assert some influence on the

WA fruit and vegetable market.

There are a number of pressures on the local supply chain which reflect long-term

changes in market structure and in some instances, tactical pressure on market

segments that support the PMA. These pressures invite some influences on the

PMA investment agenda.

Below is a summary of key implications for the PMA, resulting from the analysis

outputs outlined in the following pages.

Key Implications Page

→ The retail channel dominates the distribution of fresh fruit and

vegetables.

7

→ There is a substantial level of internal trade between the PMA

tenants.

7

→ There is a substantial level of value added trading in the wholesale

market place that reflects that at times, wholesalers are selling a

bundle of product and services.

7

→ The majority of investments in central market facilities are driven

by tenants’ needs and involve aspects of the handling

infrastructure. It appears that the sum impact of these

developments, on the central markets capacity to compete as a

wholesale option, has not been considered.

8

→ There are a range of pressures on the WA fresh fruit and vegetable

supply chain that span from changing structure to sharp tactical

trading pressure on PMA users. Most pressures have the

momentum to evolve on their own and some combine to put sharp

pressure on some market segments. All indications are that PMA

can take some actions to complement how fruit and vegetable

market stakeholders deal with these pressures and/or exploit the

apparent opportunities.

11

→ Greengrocers and fruiterers remain an important distribution

channel to consumers and are valued by consumers for their

quality, range, location, and pricing benefits. These are a

defendable set of advantages that will be tested by changes in

retail trading hours that will allow competing supermarkets.

14

→ The high frequency of top-up shops and increasing demand for

convenience (including part processed products) represent a market

opportunity for smaller portioned product and high-service levels.

Infrastructure development should ideally incorporate facilities that

would support this growth area.

14

→ Despite the fact that a proportion of total food spend dedicated to

eating out is lower than it was two years ago, the foodservice

sector remains an important channel that has a long-term need for

the core services which fruit and vegetable wholesalers provide.

14



Project overview

The project assesses the share of the wholesale fruit and vegetable market held

by Perth Market Authority, within the state-wide market of Western Australia.

The components of our approach include:

� Quantify the volumes and values of product supplied into the Perth region

and define the volumes consumed by all distribution channels in all forms.

� Confer with the PMA and key stakeholders on the data they have

available that can be used to quantify their product volumes.

� Reconcile total market size with Mealpulse™ household and foodservice

consumption and THRUchain™ market model benchmarks.

� Calculate the PMA wholesale market share with a method that can be

replicated at a later point in time.

� Identify key changes/trends in overall value chain operations.

� Prepare a concise summary report that includes a methodology for a

repeat of this measurement at a later point in time.

Market model methodology profile

Assumptions:

To arrive at market share, there is a need to define the market in which PMA

operates. This is defined below as the products sold and the distribution channels

serviced. The diagram below profiles how the model has collated and reconciled

data from both ends of the supply chain.

Products sold:

• Fresh whole fruit and vegetables in their harvested from.

• Minimally processed fruit and vegetables that maintain a fresh chilled

shelf life.

Distribution channels serviced (F&V products = “product sold” as defined above):

• WA-based retailers of fruit and vegetable products.

• WA-based foodservice buyers of fresh or minimally processed fruit and

vegetables.

• WA-based wholesalers of fruit and vegetable products who operate as

further processors or in a break-to-sell mode, where they buy in large

Total

supply

WA production

Imports International

Imports Interstate

Retail

Food Service

Exports international

Wholesale

demand

Exports interstate

*

*

*

*

PMA

data

PMA

share

Model framework - A reconciliation of supply & demand

* = higher data accuracy



quantities (pallets lots) and sell in smaller quantities (cartons or individual

pieces).

• International or interstate sellers of fruit and vegetable products into the

WA market.

• International or interstate export market buyers of WA-produced fruit and

vegetable products.

Volume supplied and purchased:

• The project has been based on a THRUchain™ analysis of the WA fruit and

vegetable supply chain, identifying the value and volume flows, from

source/production through the wholesale channels to the retail and

foodservice channels to the household.

• WA production volumes were defined using best available data. The

primary sources of data used were Ag Produce Commission, DFAT import

export data, and ABS/ABARE data.

• Wholesale demand was modelled based on market intelligence of retail

outlet sales of supermarkets, specialist greengrocers/markets, and other

retailers. The value of the annual of sales in the retail channel reconciles

with the Mealpulse™ panel data household spend on fruit and vegetables.

Market intelligence was provided from industry sources for foodservice

purchase volumes and values.

• All volumes are reconciled through the WA supply chain from production

through to the distribution channel at a product level. Where the WA

production plus imports was above WA wholesale volumes, it led to

assumptions on interstate exports. Similarly, where WA production less

international exports was lower than WA wholesale volumes, it led to

assumptions on interstate imports. Where these assumptions were

formed, activity in these categories was confirmed through wholesale

market data that revealed product origin.

• All PMA-based tenant sales included PMA share.

Distribution Channel outlet numbers:

• The following table specifies the assumed outlet numbers by sub-channel.

The summary share chart on the following page profiles the outputs from the

analysis and can be summarised as:

• Total supply of 468,416 tonnes.

• Total WA consumption, being retail and foodservice, of 383,268 tonnes.

• Total exports of 85,148 tonnes, of which 75% is international and within

that, 54,179 tonnes are carrots.

• The PMA share of external traded for the wholesale volume is 49% and

wholesale value is 66%. Note that this assumes that PMA is operating as a

wholesale option for all product supplied into and out of the WA market,

including exports.

Source: FOODmap & Freshlogic analysis



Perth Market Authority - WA wholesale fruit and vegetable market size & share

This section defines the supply chain in which the Perth Market Authority (PMA) operates and the distribution channels that acquire fresh fruit and vegetables. It profiles the

volumes that flow from total supply into these distribution channels and the PMA share of the wholesale market interface. The diagram below is based on external trade

volumes and shows the PMA wholesale market share at 49% of volume and 66% of market value.

Foodservice62,041 t 13%

Retail

Distribution Channels

468,416 t

Production

376,025 t

Imports


12,269 t

Imports Interstate

80,122 t

63,741 t

468,416 t

WA Fresh Fruit & Vegetable Supply

$908.9 M

468,416 t229,770 t

$908.9 M $595.5 M

49%

66%

Total

WholesaleTotal PMA

PMA

Share

WA Wholesale Fresh Fruit & Vegetable Market

Central Trading Agent 199,720 t 43%

Secondary Wholesaler

Inside PMA30,050 t 6%


Outside Perth 22,380 t 5%

Other Wholesale

Outside PMA

(Including direct &

export)

216,266 t 46%

21,407 t

Total wholesale

product purchased by

distribution channels

WA Supply

321,227 t 68%

Exports

International

Exports

Interstate

14%

5%

Volume T

Value $

External Trade

Total External Trade 468,416 t

$1.27B

Retail market

value

85%

Carrots

Source: Freshlogic analysis



The diagram below identifies and profiles the volume of value added (internal) trade undertaken by both PMA tenants and other wholesalers. The PMA wholesale market

share is maintained at 49% of volumes and 66% of market value when all the value added trade for the whole market is taken into account. The volumes of this added value

trade is identified in the chart below and explained on the following page.


Foodservice62,041 t 13%

Retail

Distribution Channels

468,416 t

Production

376,025 t

Imports


12,269 t

Imports Interstate

80,122 t

63,741 t

468,416 t

WA Fresh Fruit & Vegetable Supply

$908.9 M

545,916 t267,270 t

$908.9 M $595.5 M

49%

66%

Total

WholesaleTotal PMA

PMA

Share

WA Wholesale Fresh Fruit & Vegetable Market

Central Trading Agent 199,720 t 43%


Inside PMA30,050 t 6%


Outside Perth 22,380 t 5%

Other Wholesale

Outside PMA

(Including direct &

export)

216,266 t 46%

21,407 t

Total wholesale

product purchased by

distribution channels

WA Supply

321,227 t 68%

Exports

International

Exports

Interstate

14%

5%

Volume T

Value $

37,500 t

External TradeValue Added

Trade

Total External Trade 468,416 t

$1.27B

Retail market

value

85%

Carrots

This internal trade is considered valid distribution and

occurs in a number of circumstances explained on the

following page

40,000 t



Adding Value Trading

This value adding occurs in a number of circumstances and is essentially driven by

the efficiency of wholesalers, buyers and sellers specialising in what they do and

employing the services of others to support their needs. These activities are

assessed as market efficiencies, and reflect that PMA tenants and other

wholesalers are selling services as well as products.

In these instances product is traded more than once in the wholesale market

before it is sold to the last distributor.

The situations where this added value trading occurs include;

• A buyer organising for a selected wholesaler to buy, consolidate and deliver all

their requirements. In this instance the wholesaler will need to source product

of other wholesalers.

• A wholesaler importing a large freight efficient semi load quantities and once it

is delivered, selling pallet or carton quantities to other wholesalers.

• A wholesaler specialising in the sourcing and or conditioning/ripening of a

product, which leaves that wholesaler with unique investments and product

expertise. Other wholesalers have not made that investment or hold that level

of expertise, will buy product from the specialist wholesaler to meet their

buyer’s needs.

• A grower appointing a wholesaler to manage the marketing of a complete

crop. This creates situations where some of the crop is sold to other

wholesalers for the likes of prepacking and or sale in broken carton quantities

to smaller buyers.

These types of trades are common and efficient ways of distributing fruit and

vegetable products, as it is not feasible for all wholesalers to be primary sourcing

agents, for all types of fruit & vegetable products. Equally it is not efficient for

every buyer to trade with every wholesaler to buy what they need.

Notes:

1. Sales of non-fruit and vegetables, including eggs and honey etc., are

valued at $12 million, and are excluded from PMA wholesaler sales.

2. Allowances have been made for wholesale sales not captured in available

wholesale trading data.

3. Banana volumes and values have been normalised to remove the price

spike caused by cyclone damage in the March to June 2011, which was in

the year under review.

4. There is a level of “added value trading” where product is sold more than

once before being sold to the final distributor. It is estimated at 87,500 in

volume or 14% of the total wholesale market external sales.

5. Sales to fresh processors (GSF and Harvest Fresh Cuts) are transacted by

all wholesale options.

6. All export sales are included in the definition of the wholesale market and

PMA tenants engage in some export activity. If these sales were excluded

from this assessment it would serve to increase PMA market share by 6.0%

7. This assessment is based on the year ending June 2011.

Key implications for Perth Market Authority

→ The retail channel dominates the distribution of fresh fruit and vegetables.

→ There is a substantial level of value added trading in the wholesale market

place that reflects that at times, wholesalers are selling a bundle of product

and services.

→ The share levels held by the PMA are substantive enough for it to be an

influence on the Perth Fruit and Vegetable market.



Other central markets

This section provides analysis of the trends in the usage of other central markets

within Australia by producers, wholesaler/distributors, and commercial buyers

trading in fruit and vegetables. Some these trends are echoed in the section of this

report that profiles supply chain pressure points.

Settings

Factors that influence the development agenda of central markets:

• Availability and proximity of alternative real estate:

o Can weaken the position of the central market where lower cost options

within close proximity provide a competitive alternative to positions

available within the markets.

o Can also strengthen the role of the market where operators would not

otherwise take a position within the market, but are attracted by the

opportunity to be within close proximity to wholesaler buyers and to

capture logistical efficiencies.

• Location of full-service supermarket distribution centre: That is if a full-

service supermarket or large independent supermarket distribution centre has

established itself within close proximity or within the market. If these buyers

have established elsewhere with new facilities, it is a long-term challenging

task to attract these larger buyers back to facilities in the wholesale market.

The location of these facilities also flows onto to make the buyers for these

operations available. If these buyers are in the market, they will be exposed to

available product and are more likely to buy other product. The volume share

held by the major supermarkets essentially frames their capacity to receive

product and capture logistical efficiencies on their own.

• Transportation and logistics infrastructure: The location, efficiencies, size of

facilities of transportation, and logistics infrastructure. This includes major

transport routes, logistical facilities that go to the core of the market being the

most efficient logistical hub for the market being serviced. If this advantage is

maintained, it provides a platform for other development.

• Trends within the food market including: The share between retail and

foodservice, demand for pre-cut product, and minimal processed product.

• The location of supply sources, as produce that travels longer distance is

more likely to align with central markets to capture logistical efficiencies.

• The proportion of imported product being supplied into a market. This is

relevant as imported product will typically be more consistent graded and

therefore have less quality issues and be likely to use a logistical hub that

makes it possible to travel direct to larger buyers.

• Existence of supporting services: retail markets, technical training facilities,

commercial premises, and other services, which impart attractiveness to both

businesses and their employees.

• Supporting facilities for export and import, particularly regarding biosecurity

requirements.

• Available adjacent and appropriately zoned land, which directly impacts on

competing alternative locations.

• Increasing awareness by producers and wholesalers that some exposure to

the greengrocers and foodservice buyers is needed to diffuse the risk of total

dependence on the supermarkets. This is reflected in decisions by the top-tier

of wholesalers to maintain a presence in the central markets.

• Increasing wholesaler investment in production operations in order to secure

availability of quality product. This is strengthening the role of these

intermediaries who are core tenants for central markets.

Development agenda – key issues across other markets

The common features of the developments in other Australian central markets

include:

• The operation of weekend markets to utilise site facilities, which at times

has led to site-specific enhancements to accommodate this activity.



• Capacity to accommodate foodservice processing and capacity to

accommodate “retail ready” (often prepacked or portioned) processing of

product.

• Warehouse handling facilities where market purchases are consolidated

into retail- or foodservice store-based orders. These operations have

peaks in space requirements, which occur when customer orders are

compiled before they are loaded onto transport.

• The addition of storage facilities that are predominantly catering for

storage windows of 1 -3 days.

• The addition of ripening facilities, which are a higher value-adding service,

that generate a price premium and ideally need to be provided as close to

the buyers as possible to minimise handling damage.

• Investments in road entry and exits to make it easier and more attractive

to carriers. This has included consideration of freeway access that leads

to the market site.

• Covered areas where cover is not already in place to protect product

quality.

• What could be considered normal building replacement due to age and

deterioration, with these rebuilds typically involving improved cover and

cold storage facility.

• Marketing support programs for the greengrocer and/or fruiterers

serviced by central markets as these customer groups are viewed as long-

term supporters of fresh central markets.

• In other develop markets, some central markets facilities have evolved

into specialist suppliers to the foodservice sector. This evolution has seen

product ranges broaden beyond fruit and vegetables to other specialist

foods and the introduction of high levels of service.


→ The majority of investments in central market facilities are driven by tenants’

needs and involve aspects of the handling infrastructure. It appears that the

sum impact of these developments, on the central markets capacity to

compete as a wholesale option, has not been considered.



Fruit and vegetable supply chain pressure points

This section provides an analysis of pressure points, trends, and drivers of wholesale fruit and vegetable market share in the Perth region, including consumer purchasing

preferences. This perspective is used to profile all levels of pressure and in particular, to better understand their potential sum impact if and where they combine. It also

profiles the pressure being felt by stakeholders that are critical to the operation of facilities by the Perth Markets.

The diagram below outlines a series of pressure points applicable to the Western Australia fruit and vegetable supply chain. These issues are discussed further below and are

extended to include implications for PMA.

Production

Fresh Processing

Export

Import

Wholesale

QA and food safety

system requirements

Market dynamics

have changed Intense retail competition

Increasing influence

of production input

providers

Increased supply

volumes

Increased imports from

overseas and interstate

Retail trading

hours deregulationRetail

Foodservice

QSR

National buying

decisions

RPCs are used

Growth in new channels

The dining out foodservice

channels arresting decline

Demand for controlled

portion size

Challenges to

export sales




Pressure points on the wholesale fruit and vegetable market Implications for Perth Market Authority and tenants

Market structures have changed, in particular with respect to the number of growers and the

level of consolidation in the retail channel. These factors have combined to change what many

sellers and buyers now require.

Of significance is the fact that larger buyers can now deal with larger growers, and there is less

need for numerous growers to have a venue to interface with numerous buyers.

• Market structures have evolved to reduce the core needs of the

central market to (a) facilitate the meeting of large numbers sellers

and buyers and (b) provide a logistical hub for product assessment and

the physical transfer of product.

• A reduction in the number of sellers and buyers has reduced the value

that PMA can add to this supply chain.

Increased supply volumes as investments in R&D have flowed on to deliver incremental

growth in production output. In a market that sets prices based on volumes, this has created

increased pressure on prices and returns to all enterprises in the supply chain.

• If production volumes continue to increase, grower returns are likely

to be lower and there will be at least a short-term need for a facility

that can find buyers for that product.

Increased imports from overseas and interstate look set to continue and biosecurity

restrictions are lifted. This will provide quantities of consistent quality product and some

opportunities and threats for wholesalers. These supply lines will be easier for the major

buyers to link in with; conversely these same buyers have shown a tendency to use wholesalers

as brokers, to source these products, and in doing so take responsible for product quality.

• Increases in imported volumes will increase the scope for larger buyers

to deal direct. It will create opportunities for wholesalers to provide

brokerage services.

• This will be disruptive and challenging for local growers production

schedules as some interstate trading is dependent on eastern states

supply availability and prices.

Challenges to export sales, due to the high $AUD, cost factors, and seasonal window

limitations as storage technologies extend seasons.

• Pressure on international export sales could result in more products

flowing into the domestic market.

QA and food safety system requirements from major supermarket buyers have evolved into

standard practice. This has tightened and narrowed product grade standards as supermarkets

screen harder to reduce waste and has increased servicing costs and created barriers for those

without the required accreditation and facilities.

• These practices have locked in the use of wholesalers as intermediaries

in some products, where their screening function is required.

• It has also created a need for ways to sell product that is not up to the

grade the supermarkets specify. The wholesale market venue is the

only viable option for this grade of product.

Increased influence by production input providers such as seed suppliers and other input

providers have set out to support their investments in R&D by becoming increasingly involved

in how their end product is marketed.

• This has led to higher levels of more organised product management,

reflected in planned production volumes and defined distribution

plans.

• Where this influence is applied, it is creating greater alignment in

supply chains and typically, involves engagement with selected

wholesalers and larger buyers.



Pressure points on the wholesale fruit and vegetable market Implications for Perth Market Authority and tenants

National buying decisions, typically executed as part of supermarket national category plans,

are removing the autonomy of some local state buyers.

• This trend can draw volumes away from PMA trading floors and/or

channel through the national wholesaler networks which have market

representation.

• It also leaves the national category managers exposed in that they may

be unable to take advantage of local flushes of the product.

RPCs are used in WA and this locks in the need for a system to manage returns. • The return depot function for the RPCs is a natural central market

function.

Retail trading hours deregulation for specialty retailers who have previously had sole access to

7-day trading hours in some regions.

• The expansion of Sunday trading will see speciality retailers face

increased competition. It will also see major retailers seeking increased

volumes to cover the additional trading hours.

Intense retail competition between the major supermarkets. • The role of greengrocer/fruiterer, who will source 100% of the product

they require, is under pressure as a result of intense “price”

competition between the two supermarkets.

The growth of new channels including home delivery/internet offers, e.g. Aussie Farmers

Direct, Fruit Box, as well as meals offers like Jenny Craig and Lite ‘N Easy, has strengthened,

challenging growth opportunities for existing retailers.

• There are opportunities to improve market share by establishing links

with these evolving alternative channels.

Demand for controlled portion size is a key priority for some consumers who are shopping

more often and less inclined to plan ahead. Fruit and vegetable products need to be in a form

that suits the smaller top-up shops and that same quantity needs to be used before it turns

into home waste.

• There may be opportunities for PMA to enable some minimal

processing on the PMA site to meet the demand for smaller portions.

The dining-out foodservice channels are arresting a declining sales trend after losing market

share as consumers switched to retail food and traded down in the food outlets they

supported when eating out. These buyers, with their typical requirements for high servicing

and “by piece” purchasing, need the flexibility of the market to source their varied stock

requirements.

• Foodservice buyers are core customers as they purchase a wide range

of products in varied quantities that require the coordination of an

intermediary.

� Key Implication: There are a range of pressures on the WA fresh fruit and vegetable supply chain that span from changing structure to sharp tactical trading pressure

on PMA users. Most pressures have the momentum to evolve on their own and some combine to put sharp pressure on some market segments. All indications are

that PMA can take some actions to complement how fruit and vegetable market stakeholders deal with these pressures and/or exploit the apparent opportunities.


Page 13 Commercial and in confidence for Perth Market Authority www.freshlogic.com.au Final – Apr 12

Consumption and shopping trends

This section covers some of the key consumer trends that can impact the food

market and are of higher relevance to the PMA.

Channel share under pressure

Strong retail competition has seen greengrocers/fruiterers lose market share over

the past year. This is true for purchases of fruit and vegetables. While there are

differences between trends occurring nationally and in WA, the key message is

that greengrocers and fruiterers are under increasing pressure as a result of the

price-based competitive intensity driven by the two large supermarkets.

While value remains a key driver of consumer behaviour, shoppers still appreciate

many of the benefits offered by greengrocers and fruiterers. In particular,

specialist retailers remain popular with shoppers who are less sensitive to cost.

The chart below highlights some of the competitive advantages held by specialists,

which include better range and quality, lower regular prices, and handy location.

These are a strong and defendable set of advantages.

Shopping behaviour

Households are shopping an average of 3-4 times a week. Over the last year, there

has been growth in the number of trips made per week – meaning many shoppers

are undertaking smaller, but more frequent shopping trips. This reflects lifestyle

patterns and changes in the way households plan and prepare meals, with fewer

households planning out the week’s meals in advance.

Source: Mealpulse™ Food panel

Source: Mealpulse™ Food panel



At present 65% of all shopping trips are “top-up” shops. These trips typically

involve a basket, which amount to an average of $45 in value and include 9-12

items.

The other 35% of shops are the “main” shop. Here a trolley is used and they

amount typically an average of $175 in value and include 42-50 items.

The simple, yet critical, issue that impacts fruit and vegetables is the suitability of

the product for purchase in a top-up shop. If a product is not suitable, because it is

too large or heavy, then it is restricted to being purchased on the less frequent

main shop. Products that are of a convenient portion size and lend themselves to

easy preparation are more likely to be purchased during a top-up shop.

Premiums for convenience

Freshlogic research indicates that customers are willing to pay a premium for

convenience – this may include products that offer meal-ready attributes, are

part-processed, or packed in a portion size that suite their household.

Further, many foodservice operators are also looking for convenience where it

helps reduce time and costs associated with onsite preparation and enables them

to provide consistent and timely food to the consumer.

The demand for convenience represents an opportunity for growers and

processors to incorporate greater convenience attributes into their products.

Weekly food spend

Over the past 2-3 years, there has been a change in shopper behaviour, which

reflects the difficult economic conditions (GFC) and has led to a desire by many

households to cut back on discretionary spending in favour of increased savings.

As a proportion of total food spending over a week, take home (retail) food

purchases have made up an increasing share as households cut back on eating

out. However, this trend stabilised in mid-2011, possibly a reflection that shoppers

are comfortable with the level of value they are currently receiving and that

eating out from time-to-time is considered an affordable treat for many

Source: Mealpulse™ Food panel Source: Mealpulse™ Food panel



households. The proportion of spend on eating out and take home will also be

influenced by inflation levels across these two areas.

Foodservice buyers understand that it is too difficult for them to combine the

diversity of a fruit and vegetable buying role, with the demand of a foodservice

operation. These functions happen at either end of the day. They also require

frequent servicing with a need to select from a diverse product range.

Over the coming year, it is expected that the proportion of take home food will

settle at around 75%-76% of all food spending. If consumer sentiment improves,

foodservice may start to recover some of the share lost over the previous two

years.


→ Greengrocers and fruiterers remain an important distribution channel to

consumers and are valued by consumers for their quality, range, location, and

pricing benefits. These are a defendable set of advantages that will be tested

by changes in retail trading hours that will allow competing supermarkets.

→ The high frequency of top-up shops and increasing demand for convenience

(including part processed products) represent a market opportunity for smaller

portioned product and high-service levels. Infrastructure development should

ideally incorporate facilities that would support this growth area.

→ Despite the fact that a proportion of the total food spend dedicated to eating

out is lower than it was two years ago, the foodservice sector remains an

important channel that has a long-term need for the core services which fruit

and vegetable wholesalers provide.



Appendixes

PMA market reports on market price and volume

This section is a review and analysis of the PMA-sponsored produce sale price

reports and market produce volume data. This service is currently managed by the

CFVIWA operations and draws on the technology infrastructure that is in place

and the co-operation of participating wholesalers.

The need for price information is stimulated by the variations in wholesale prices,

which are in turn driven by the seasonal influences on supply and demand

combined with the need to clear short-life perishable product. These drivers are

expected to retain their influence on the WA fruit and vegetable market and

therefore, the need for market price information will remain.

The PMA tenants and other market participants can access market prices online

through the online mechanism managed by the CFVIWA. This system collects,

processes, and then publishes price data based on the following method

framework:

• The provision of price data by nominated product by 3-5 wholesalers who are

high volume traders in those products.

• Targeting price data from the start and end of the trading period to better

reflect the range of the day.

• A data capture mechanism via an electronic template to minimise collection

cost and demands on these providing data.

• A validation step that queries and resolves any anomalies in the prices of like

product provided by different wholesalers.

• Collating prices for a representative range that currently includes 48 fruit, 6

herbs, and 94 vegetable products on Monday, Wednesday, and Friday.

• The price data to profile: lowest to highest and a more defined range, within

which, most of the product has been sold.

• Profiling of the following data dimensions profiled include:

• Product name

• Variety

• Container, which reflects carton outer size and or selling multiple (i.e.

bunch or kg)

• Origin: WA, region of WA, Imported or Interstate

• It is also understood that this provides flexibility to capture other

product attributes should they be deemed useful party if the price

information provided to users.

• Data is published online in the following forms:

• Daily, (planned for the day after trading day)

• Monthly with the weekly averages

• Annual with the monthly averages.

• Online access requires a simple registration that captures name and email

address allows the tracking of use.

• Price averages are by sum of data and division by the number of daily, weekly,

or monthly data entries.

Assessment

Provided price data is consistently made available the “day after” the CFVIWA

system efficiently makes the detail of product level prices available to all

interested parties. It harnesses existing infrastructure and has a range of checks

and balances to manage data integrity. This system largely matches the visibility

offered by the system used in other Australian Fruit and Vegetable markets,

operated by Ausmarket services, but does so without the need for outward

communication and subscription costs to the price information users.

There is some scope for improvements in the capture of product level volume

throughput data to enable weighted price to volume analysis. While this would

potentially provide the basis for production planning and forecasting, it is seen as

too sensitive for the traders to share.

They may be a weakness on only having online access only as some users who

only operate with fax communications system.



Methodology to replicate future share calculations

This section details methodology used and the process required to replicate the

market model outputs for future market share calculations.

The process developed and used was based on the principle of reconciling

volumes and values through WA fresh fruit and vegetable supply chain. It was

anchored by collating data that enabled profiling from both demand and supply

ends of the supply chain.

Supply Profile

To build the supply profile, the following data sources were used:

1. WA DPI, Agricultural Produce Commission (APCWA)

2. ABS & ABARE production data

3. DFAT international import and export trade statistics

4. Wholesale market trading data from Ausmarket services

5. Conferring with key industry participants on interstate imported volumes

6. Category profiles prepared by Freshlogic that had quantified state-based

production volumes.

In consolidating the supply data, the following approach was adopted.

• The analysis was undertaken at a product category level in volumes and then

converted to dollar values at the total level. The product categories used are

listed below.

Apple Lemon

Apricot Lettuce

Asian Vegetables Lime

Asparagus Mandarin

Avocado Mango

Banana Melon

Bean Mushrooms

Beetroot Nectarine

Berry Onion

Broccoli Orange

Cabbage Other Fruit

Capsicum Other Veg

Carrot Passionfruit

Cauliflower Peach

Celery Pear

Cherry Peas

Chilli Pineapple

Coconut Plum

Corn Potato

Cucumber Pumpkin

Cumquat Radish

Custard Apple Rhubarb

Eggfruit Salad Mix

Garlic Soup Packs

Ginger Spinach

Grape Sprouts

Grapefruit Squash

Herbs Strawberry

Kiwifruit Tomato

Leek Zucchini

Fuit & Vegetable product category structure

Total

supply

WA production


Imports Interstate

Retail

Food Service

Exports international

Wholesale

demand

Exports interstate

*

*

*

*

PMA

data

PMA

share

Model framework - A reconciliation of supply & demand

* = higher data accuracy



• Preference was given to APC data for fruit, which was available in total tonnes

and viewed as more complete. APC data for vegetables was processed into

tonnes for further analysis by adopting the wholesale market common pack

sizes.

• In the absence of all other data, ABS data was used, but only in a minority of

products.

• Market value was established by a using the CFVIWA total $ per kg, except for

export and import data, where sufficient data was available to calculate these

inputs separately.

Demand profile

To build the demand profile, the following data sources were used:

1. Mealpulse panel household expenditure data for fruit and vegetables.

2. ABS Household expenditure for fruit and vegetables for WA and

proportion of food dollars spend on food eaten away from home.

3. ABS data on number of households in WA.

4. Freshlogic data sources for the retail channels captured detail of:

4.1. The number of outlets by the following types of retail channels

• Corporate Supermarkets

• Independent Supermarkets

• Greengrocer and Markets

• Other retail (IE Direct to home etc.)

4.2. The average fruit and vegetable sales per outlet

4.3. The sales contribution by product category

4.4. Assumed retail margins, waste levels, and cost of distribution were

identified and discounted from retail sales values to arrive at

wholesale purchase values.

5. Freshlogic data sources for the food service channel captured detail of:

5.1. The number of outlets operating in food service distribution

channels. These were collated by type and grouped into:

• Takeaway

• Dining Out

• Event & Leisure

• Institutional.

5.2. Information on the proportion of purchases that fruit and vegetables

represent in food service channels. It is not possible to define the

value of what consumers pay for fruit and vegetables eaten out of

home as these purchases are typically made for meals.

5.3. The total food service wholesale sales were gathered through

discussions with those servicing this sector.

5.4. The sales contribution by product category.

6. Export volumes and value data was drawn from DFAT captured export

sales.

Modelling design to arrive at PMA Market share

A. Wholesale demand volume confirmed based on calculated retail, food

service, and export volumes.

B. Wholesale supply volumes confirmed by calculation of total supply

volumes.

C. Gaps and misalignments identified and reconciled. If required,

adjustments were made to the volumes of interstate imports into WA and

exports out of WA. In instances where there was no evidence to support

import and export volumes, overriding preference was given to demand

volumes and production was adjusted. It is should be noted that all

imports contributed 20% of total supply into the wholesale market and all

exports distributed took 19% of the wholesale volume.

D. Total Wholesale market volumes and values calculated.

E. PMA tenant’s volume and value market calculated based on CFVIWA data.

F. PMA share calculated as an output of E divided by D. The results are on

pages 5 and 6.



Process steps to replicate the share calculation

The market share calculations will be provided in a working spread sheet model.

The key tasks will be to collate and refresh the following fresh fruit and vegetable

data.

1. Production data from APCWA and ABS

2. Import and export data from DFAT

3. Retail sales by retail channel

4. Retail margins, waste levels, and distribution costs.

5. Food service purchases in total value

6. PMA tenant sales from CFVIWA.



Key summary outputs

The two key outputs are the value and volume contribution for the main crops

and they are profiled in the following two tables.

Product category Wholesale $ value Contribution

1 Tomato 62,449,610$ 6.9%

2 Banana 56,649,162$ 6.2%

3 Apple 50,673,333$ 5.6%

4 Potato 44,676,770$ 4.9%

5 Strawberry 44,394,900$ 4.9%

6 Salad Mix 41,991,349$ 4.6%

7 Mushroom 35,637,830$ 3.9%

8 Other Veg 34,302,788$ 3.8%

9 Grape 30,451,124$ 3.4%

10 Melon 30,442,500$ 3.3%

11 Onion 30,169,058$ 3.3%

12 Capsicum 27,113,717$ 3.0%

13 Cucumber 21,632,675$ 2.4%

14 Carrot 21,512,201$ 2.4%

15 Orange 19,889,385$ 2.2%

16 Avocado 18,452,720$ 2.0%

17 Corn 18,100,953$ 2.0%

18 Other Fruit 17,893,917$ 2.0%

19 Broccoli 17,820,244$ 2.0%

20 Pumpkin 17,555,257$ 1.9%

Top 20 Total 641,809,495$ 70.6%

Total value 908,900,000$

Value contribution for the top 20 product categories

Product category Wholesale kg's Contribution

1 Potato 50,786 10.8%

2 Banana 33,520 7.2%

3 Carrot 27,802 5.9%

4 Apple 26,867 5.7%

5 Melon 24,750 5.3%

6 Onion 24,001 5.1%

7 Tomato 22,067 4.7%

8 Pumpkin 18,527 4.0%

9 Other Veg 14,712 3.1%

10 Orange 12,213 2.6%

11 Lettuce 10,983 2.3%

12 Cauliflower 9,468 2.0%

13 Cabbage 8,256 1.8%

14 Capsicum 7,810 1.7%

15 Corn 7,799 1.7%

16 Broccoli 7,391 1.6%

17 Grape 6,648 1.4%

18 Cucumber 6,511 1.4%

19 Celery 6,432 1.4%

20 Mushroom 6,361 1.4%

Top 20 total 332,904 71.1%

Total kg volume 468,416

Volume contribution for the top 20 product categories

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