“The challenges we are facing are common to all irrespective of size”

Fruit Logistica 2018 in Berlin is history, but the global appetite for perishables persists. On the first day of the most important exhibition for the international trade of fresh produce – and at that point in front of a still very fresh audience – Panalpina’s Colin Wells elaborated on the global trends for the supply and demand of fruits and vegetables.

In his presentation, Colin pointed out that the perishables industry is undergoing massive change in terms of trade flows and buying behavior and that producers, buyers and logistics suppliers will have to adapt rather sooner than later to the new reality by working together across the supply chain.

The growing appetite of China and India

“Today, what is grown in the south is typically exported to the north,” said Colin and presented numbers to underline his statement: 80% of worldwide perishables food is imported by developed countries, 34% of South America’s produced meat, flowers and fruits are traded to Europe, and 30% of the Middle East’s and Africa’s produced vegetables, fish and flowers are also traded to Europe. Seabury data from 2016 shows that the USA is currently the world’s biggest exporter (7% market share) and importer (22% market share) of perishables based on air freight volumes. On the import side, China already ranks number two with a market share of 11% (on a par with the Netherlands) and the country’s importance for international perishables trade will only increase.

Asia-Pacific has the greatest development potential for perishables in the coming years, both as a region of production and consumption. China and India are already the world’s largest producers of apples and bananas, respectively. However, most of these fruits are consumed locally and very little is exported. The world’s appetite for fresh products is growing, owing to constantly changing consumer behavior in Western countries and rising incomes and increasing populations, specifically in Asia-Pacific. The OECD estimates that today, China and India account for about 15% of global middle class consumption. By 2050, the organization expects the two countries to account for more than 50%. “To a great extent, Asia Pacific’s growing appetite for fresh products will be fed by Africa as well as South and Central America. Exports from South Africa and Kenya to China in particular are expected to go up,” explained Colin. “In addition, new markets will develop to compensate for the loss of traditional supply into Western markets, for example Uganda.”

However, a shortage of air freight capacity could become a problem for some producers in Africa. “Recent air freight demand growth has outpaced capacity, putting pressure on low-yield cargo such as perishables,” warned Colin. “Airlines are deploying their aircraft on trade lanes where they can expect the highest yields, and typically that is not out of Africa.” One way to address this issue is to shift transport to ocean freight and new solutions like LCL shipments for certain perishables, something Panalpina is working on. The vast majority of perishables, roughly 90 million tons globally, are already traded by ocean freight. “Still, for some perishables such as fresh cut flowers, air freight will remain the only viable transport solution in the near future,” noted Colin.

The higher expectations of digital natives

Another global trend that will shape the perishables industry is the changing demographics of customers. From 2020 onwards, the “digital natives” are going to be the most important consumer group in many countries, for example in the U.K. “They grew up in an app-based environment and have lived their lives ‘online’, most do not even remember the times without the internet,” commented Colin. “A new breed of B2B buyer is emerging and they expect a more consumer-like experience. They will have a major influence on how we purchase things, including perishables.” Panalpina’s experts estimate that by 2020, 20-30% of all B2B purchases including perishables will be made through e-commerce. Tomorrow’s online food shopping will be driven by impulse cravings, and home deliveries expected in a matter of hours, not days. “New models for the final mile will have to be found to meet the expectations of the consumers. I also expect new virtual retailers – companies we have not even heard about yet – to emerge over the next few years,” noted Colin. To illustrate just how demanding digital natives are, Colin played a telling video:

End-to-end solutions become even more important

Beyond the “I-want-it-now-mentality”, consumers will increasingly want to buy perishables directly from the producer and producers will want to sell directly to the country of consumption. Direct marketing and direct shipping between countries will bypass intermediaries, reducing touch points in the supply chain. This development will remove unnecessary costs and potential delays, but at the same time it will make sophisticated end-to-end solutions even more important than today.

In the wrap-up of his presentation, Colin urged all stakeholders in the perishables industry to develop new solutions together. “The challenges we are facing are common to all irrespective of size. We should use the pharma supply chain as a benchmark to set high quality standards and share customer expectations across the complete supply chain. Knowledge sharing is the recipe for success in tomorrow’s perishables industry.”

Fruit Logistica will return to Berlin from February 6 to 8, 2019.