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What is the competition like in the European market for processed fruit and vegetables?

Takes about 16 minutes to read

To be competitive on the European market, a first step would be to implement food safety systems. Investment in new processing technologies, which will render high quality products and preservation of all functional ingredients, can be a next step to success when competing with substitute products.


1 . What are the opportunities and barriers when I try to enter the market?

Food safety certification is an absolute requirement

Due to complex challenges in today’s food supply chain, almost all food retailers request a food safety certification scheme. There are currently more than 200 different certification schemes for the fruit and vegetables sector in the European Union. However, the most preferred and widely recognised certification schemes in the sector of processed fruit and vegetables are BRC, FSSC 22000, IFS and, for the juice industry, SGF .

CSR integration with quality and safety requirements

Suppliers which are already certified for food safety and corporate social responsibility (CSR) are expected to dominate the European market for processed fruit and vegetables, as importers will simply not spend time finding new suppliers nor invest money in their codes of practice.

This means that already certified companies will be more easily selected as suppliers. This could lead to more business with a smaller number of suppliers.

High-quality products and competitive pricing are just the first step for negotiation

Offering high-quality products and fruit and vegetable varieties that are appealing to the taste of European consumers are prerequisites for negotiating with buyers. Even if your prices are competitive, be prepared to wait before being able to make your first shipments. European buyers usually test your products for some time in terms of quality, taste and shelf life before offering them to final buyers.

Innovation and modern technologies drive the market

Fruit and vegetable processors require from their ingredient suppliers the ability to deliver very different specifications of products in a short time. The number and variety of fruit and vegetable products available to the consumer has increased substantially in recent years. New technologies also offer competitive advantages. Examples of such technologies include: ultra-high temperature (UHT) processing, microwave and ohmic heating, high pressure processing (HPP), cryogenic freezing, partial dehydration and freezing such as in Bonduelle’s InFlavor technology, and aseptic packaging.

Tips:

  • Introduce a Hazard Analysis of Critical Control Point (HACCP) system into your daily practice. Even if in your country HACCP is not an obligation, you must comply with European food safety regulations. It is highly recommended to go one step further and certify your production with the latest versions of internationally recognised standards such as FSSC 22000, BRC or IFS. Invest in a certification that is commonly requested by importers in your target market.
  • For more information on legal and buyers’ requirements, read our study on European buyer requirements for processed fruit and vegetables.
  • Do regular laboratory testing of your products for the presence of contaminants before exporting. Carefully check with the European importer that the laboratory which tests your products is accredited and recognised by European authorities and buyers. Being recognised as a contaminant-free company is a great advantage not only for your company but also for your country.
  • Consider investing in ethical and sustainability certification schemes, especially if your product is aimed for re-packing and reaching retail buyers. You can negotiate with your target buyers to mutually finance a certification scheme for long-term cooperation. Some of the most recognised sustainability and CSR certification schemes include Fairtrade, SMETA, BSCI and ISO 26000.
  • For tariff levels that apply to your country and your competitors use ITC’s Market Access Map.

2 . What are substitute products?

Fresh fruit and vegetables are the strongest competitors

Major substitute products for processed fruits and vegetables are fresh fruits and vegetables. Many consumers think that food processing can have an impact on fruit and vegetables nutritional value. They think that it decreases the quantity of some nutrients, such as vitamins or dietary fibre. Consumers also believe that it can increase energy density, for instance in juices or dried fruit. European Union authorities are promoting consumption through different initiatives, such as availability of fresh fruit and vegetables at schools and working places.

Soft drinks and mineral water are beating juices in the European market

Fruit juice consumption has declined in Europe due to the high sugar content in juices. On the other hand, consumption of other soft drinks has grown, such as the case of flavoured waters, energy drinks, coconut water and cider. Beverage producers market soft drinks as low-sugar products, products with functional supplements or products that increase the daily intake of liquid necessary for hydration and maintaining good health.

Chocolate spreads and honey compete with jams and marmalades

Chocolate spreads are increasingly popular in Western Europe with highest projected sales in Belgium, Germany, Italy, Spain and the United Kingdom. Sweet spreads competitors market their products as containing no additives, vegetarian, organic, with low allergen contents, Trans fats free, gluten free and with environmentally friendly packaging.

Final consumers favour locally produced fruit and vegetables

Local produce is on the rise. A threat for developing country suppliers is posed by (processed) fruits and vegetables that can be produced in Europe itself. Processors prefer to buy locally, because of reduced transport costs and reduced carbon footprint. This complies with the growing sustainability market, where value is added to the product. Instead of competition on price, the product is positioned as ‘good for people and planet’.

Cheaper alternatives

There is intense price competition within specific categories of processed fruit and vegetables. Several cheaper products can be used as alternatives to superfruit or exotic fruit products, including nectars instead of 100% fruit juices, homogenous marmalades without visible pieces of fruit, fruit preparations and jams with decreased amounts of fruit and cheaper continental fruit in frozen and canned products.

Chips and baked savoury snacks remain strong competitors to nuts and dried fruit

The snack industry in Europe is dominated by potato chips. The largest market for savoury snacks in Europe is in the United Kingdom, which is estimated to be worth around €4.1 billion. The largest markets for potato chips, crisps, savoury snacks and snack nuts per capita are the United Kingdom, the Netherlands, Norway and Spain. Although it varies from country to country, the average annual consumption of savoury snacks in Europe is 3.6 kg per capita.

Tips:

  • Find unique selling points of your products in comparison to substitute products. For example, quick frozen fruit and vegetables are marketed as having more nutrients than fresh fruit and vegetables sold in stores. Canned tomatoes have higher levels of carotenoids than fresh tomatoes. Juices provide healthier hydration than soft soda drinks. Jams made of 100% fruit are healthier than chocolate spreads. Nuts are healthier alternative to crispy snacks such as potato chips.
  • Actively market from a known origin as a specialty to add value to your product.
  • Advertise your processed fruit and vegetables as natural and, if possible, free from additives.
  • Invest in processing technology that can help your products be perceived as healthier. Try to eliminate by-products of processing, such as acrylamide, and use natural sugars such as fruit juice instead of white sugar.
  • See if you can offer your good quality products at a lower price. Since production costs in Europe are rising, consider using cheaper processing facilities for added value production, such as retail packing in your country.

3 . How much power do I have as a supplier, when negotiating with buyers?

Buyer power

Retail traceability requirements are increasing

Multiple retailers pay attention to traceability and sustainable and responsible sourcing. Exporters from developing countries are being slowly subjected to increasing pressure to disclose where their products come from, up to the farming level. Retail supplying companies, including the European processing industry, must provide detailed information about their sourcing. This means that developing country exporters must more effectively register the origin of their products.

Price competition

Supermarkets will put more pressure on the price you ask through direct or indirect sourcing. This is because retail is characteristically focused on price and volume sales in their own market. In addition, food manufacturers and industrial buyers of processed fruit and vegetables buy mainly in bulk. Therefore, you will be pressured to offer the lowest prices possible.

If you can supply a differentiated product you will have a better negotiating position. Examples of differentiated products include organic, products made from special varieties, products of unique geographic origin or processed in specific ways, such as non-concentrated juice, sun-dried, no sugar added, etc.

Demand is expected to increase for sustainable food ingredients

This implies that items that are produced under good labour conditions or products that are organically produced or have a low CO2 footprint could increase in value. This is in line with the sustainability strategies that are being introduced by (large) companies. Their messages to the outside world inform the consumer and others that they are acting responsibly. This means that they also expect this from their suppliers and even their supplier’s subcontractors.

Vertical integration

Supply chains are shortening. Buyers show increasing interest in contract growing and processing. The volatility of prices and volumes can be extremely high due to scarcity. To eliminate this volatility and to gain more control over traceability, buyers prefer reliable partners or even joint ventures. This is a long-term trend that affects your position. Think about your position and role in the chain and see where you can add value.

Tips:

  • Read more about different types of buyers in our study on European Channels and Segments for Processed Fruit and Vegetables.
  • Try to partner with importers to have the right equipment for processing and to meet the different requirements of European buyers.
  • Find ways to demonstrate transparency in the supply chain, for example, by building long-term relationships with European buyers, by having an ‘authentic’, well-grounded story behind your product, and by ensuring that you have an information infrastructure within your company that can be easily shared upon request.
  • Try to find a sustainability initiative or a certification scheme that supports you in entering the European market. This initiative can help you optimise your business for the European market. Find more information about sustainability initiatives development on the website of IDH.
  • Contract growing is a ‘common’ contract, in which farmers need to deliver a certain quantity of harvest at a certain time of year. This can be an opportunity to consider, since you can supply at fixed times in the year.
  • Cooperate with other exporters in your country; combine forces to export to European markets.
  • Investigate who the major buyers are and try to arrange long-term contracts with them for a constant supply of processed fruit and vegetables. Use trading agents if your company is new in the European market and if your country is not well recognised as a supplier of a certain product.
  • Invest in packaging equipment if you aim to supply to retail chains. Being able to offer different packaging formats and recyclable packaging increases your chances of becoming a supplier of private label brands to European retail chains.

Supplier power

Increasing bargaining power of suppliers for specific products

The bargaining power of suppliers, i.e. farmers, over developing country exporters is slowly increasing. Information is becoming more easily accessible to farmers thanks to modern communication tools, such as cell phones and computers.

In general, the cyclical nature of raw material markets will continue, and markets will change from being dominated by buyers to being dominated by sellers. In the long term, it is expected that some products will not be sufficiently available. New land for production is sought-after and the farmers gain power.

The concentration of specific products in a small number of countries gives them strong negotiation power. Examples of these kinds of concentration include hazelnuts and dried grapes from Turkey, almonds from the USA and orange juice from Brazil. High-quality products sourced from new origins are in good competitive positions as welcome alternatives to dominant players.

European eating patterns

European eating patterns may change, increasing the bargaining power of suppliers. The influence of different cultures opening more ethnic restaurants translates into the introduction of new dishes often containing exotic processed fruit and vegetables. This trend leads to increased consumption of tropical and exotic fruit and vegetables, as consumers try the dishes at home too. This will result in higher demand and an improved position for developing country exporters.

Europe not always the most attractive market

Demand from emerging economies puts Europe under pressure. People are becoming richer (like the development of a middle class in the BRIC and Next Eleven countries), leading to more demand for imports from developing countries. Higher global demand results in price increases in all markets.

Tips:

  • Consider bundling supply with other suppliers in your country, as European processors want to ensure continuity of supply. Note that the European processing industry has some strong players.
  • Eating patterns and dishes differ across Europe. Try to find out what kind of nuts are eaten where and how. This will determine your position in that specific market. To be learn more about which edible nuts are eaten in the EU, read our studies on cashew nuts, desiccated coconuts, groundnuts, macadamia nuts, walnuts and the general study about edible nuts and dried fruit.
  • Look at worldwide demand to strengthen your position within the chain. Demand from emerging economies is putting pressure on the availability of ingredients in Europe for food manufacturers. This could strengthen your position.

4 . Who are my rivals?

Developing Countries are gaining market share in Europe

Total European imports of processed fruit and vegetables have been increasing over the last several years. This growth was especially high last year for the edible nuts sector, where the highest growth came from cashew nuts. Over the last five years, imports from developing countries grew at an average annual rate of 6%, while intra-European imports grew at an average annual rate of 4% in the same period.

Figure 1: European imports of processed fruit and vegetables, by origin, € thousands

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Source: ITC Trademap

The European market for processed fruit and vegetables is concentrated

Four countries account for 60% of all European imports of processed fruit and vegetables: Germany, France, the Netherlands and the United Kingdom. There are a number of well-established importers, agents and food manufacturers in those countries. Dutch companies form the main European import hub for American and Asian countries.

All leading European importers of processed fruit and vegetables have increased their imports and consumption. Among the largest importers, the Netherlands and Spain noted the highest annual growth rate of imports at 7%.

Figure 2: Main European importers of processed fruit and vegetables, 2017, € thousands
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Source: ITC Trademap

Processed fruit and vegetables from new origins coming on the European market

Due to the large variety of products, there is no single country of origin that dominates the supply of processed fruit and vegetables to European markets. For the majority of single product groups, several countries are leading suppliers. However, a current strong trend is to reduce imports from leading supplying countries and increase sourcing from new countries (Figure 3).

For frozen fruit and vegetables, Serbia (berries), China (various) and Morocco (strawberries) have a strong position. For canned fruit and vegetables, your main non-European competitors are China (various), Turkey (peppers and olives) and Thailand (pineapples). For juices: Brazil (orange), USA (cranberry), Turkey (apple) and Thailand (pineapple). For jams, purees and fruit preparations: Turkey (nut purees), Mexico (homogenous preparations), Serbia (plum jams and purees) and South Africa (peach purees).

Several new supplying countries in the processed fruit and vegetables sector are strengthening their positions in the European market. Such countries include Benin and Vietnam as suppliers of pineapple juice, as well as Sierra Leone and Guatemala as suppliers of mango puree. Mango products are also increasingly sourced from African countries instead of traditional suppliers such as India.

For edible nuts, your main competitors are the USA (almonds and, to a lower extent, walnuts), Turkey (hazelnuts) and Spain (almonds). For dried fruit, Turkey (dried grapes and dried apricots), China (dried vegetables and mushrooms) and the USA (dried grapes, prunes and cranberries). Strong competition for other products includes China (walnuts and pine nuts), Vietnam (Brazil nuts), Argentina (prunes), Chile (prunes and dried grapes), and Philippines (desiccated coconuts).

Among the leading suppliers, Vietnam (mainly cashew nuts), Australia (almonds and walnuts) and USA (almonds) have recorded the highest annual growth. Several new supplying countries in the dried fruit and edible nuts sector are also strengthening their position in the European market. For example, cashew nuts from West African countries, Pakistan and Indonesia, groundnuts from Nicaragua, walnuts from Eastern Europe and dried grapes from Iran and Uzbekistan.

Traditional internal European Competition

Within Europe, the biggest supply in the vegetables segment comes from Belgium and in the frozen fruit segment from Poland, but mainly frozen berries. In the canned fruit and vegetables segment the biggest competitors are Italy with preserved tomatoes and Spain with vegetable mixtures, artichokes and olives. In the fruit juices segment, the biggest European competitors are the Netherlands and Germany, but partly re-exports for the latter. For jams, purees and fruit preparations the strongest competition comes from Germany and France.

In the segment of edible nuts and dried fruit, the strongest competitors are Spain (almonds), Italy (hazelnuts) and France (prunes and walnuts). However, internal European production is not self-sufficient so demand must be complemented by additional imports. There is increased production and sourcing of walnuts from Eastern Europe, such as from Bulgaria, Moldova and Ukraine.

Figure 3: Leading external suppliers of processed fruit and vegetables to Europe, € thousands
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Source: ITC Trademap

Applied tariff rates vary and some countries benefit from preferential agreements

Depending on your exporting country and the existing trade agreements with the European Union applied tariff rates may differ when exporting to Europe.

Examples are: walnuts where the applied tariff is 4% for China and 0% for the other main suppliers, hazelnuts (3.2% for the USA, 3% for Turkey and 0% for Chile and the other main suppliers), dried grapes (0% for Turkey and Chile, and 2.4% for the USA and Iran), dried apricots (0% for Turkey and Afghanistan but 2.10% for Tajikistan and other GSP countries). In other cases such as desiccated coconuts there is no difference between applied tariffs per country.

Tips:

  • Continuously monitor trade between Europe and competing countries. In the years with low harvest in leading producing countries, European buyers looked for new alternatives. Some European importers even invest in new producing countries to secure a stable supply. In the long term, production of processed fruit and vegetables may become less concentrated.
  • Add value with substantiated health claims. The superfruit category is a new category where competition is not so fierce compared to mainstream products. You can use this opportunity and offer quality superfruits even if you are new to the market.
  • Compare your offer to that of the largest European suppliers for specific products. Find out why certain products are imported from specific countries.
  • A great deal of efficiency can be gained in transportation and distribution in developing countries. You can realise efficiency savings by achieving control over their distribution channels. This will give you a competitive advantage in your country and make you more competitive on price.
  • Check the current import tariffs on the EU Trade Helpdesk site.

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