Healthy growth

IBISWorld estimates revenue for the fruit and vegetable retailing industry will grow at an average annual rate of 2.7% per annum over the five years to 2009-10. Seasonal weather patterns, organic produce and continued competition from supermarkets have created volatile trading conditions for fruit and vegetable retailers over the past five years. The marginal growth in revenue has been underpinned by rising disposable income levels and increasing consumer awareness about the importance of fresh fruit and vegetables as part of a healthy diet.

Over the period, competition from supermarkets and other grocery stores has started to impinge on the market share taken by this industry. As such, retailers have had to increase hours worked and specialise services offered to compete.

In the period, establishment numbers have increased due to growth in employing operators through an anticipated rise in store numbers. Employment numbers have also increased; this has been due not only to the rise in establishment numbers, but also because of the longer trading hours.

IBISWorld forecasts Australia’s fruit and vegetable industry’s revenue will rise by 1.5% per annum over the five years to 2014-15. Demand will be affected by continued changes in fruit and vegetable consumption, competition from supermarkets and other grocery stores, and by variations in disposable income levels.

It is expected that as supermarkets and other grocery stores increasingly encroach on the profit margins on retailers, operators will expand their business to include a broader range of organic goods along with gourmet items such as olive oils, fresh pasta and sauces, cheese, deli items (salami, sun dried tomatoes), along with specialty breads (sour dough) as another avenue for differentiation from supermarkets.
It is expected that over the outlook period, this industry will continue to experience weak growth in enterprise and employment numbers. Increased competition from other retailers who also sell fruit and vegetable product will limit the successful entry of new players. The better located fruit and vegetable shops and those more attuned to changing consumers tastes and needs, particularly of their local clientele, will continue to trade well. Other key factors include the available range and quality of fruit and vegetables as well as quality service and advice for which people will pay a premium price.

Key success factors for operators in the industry:

• Proximity to key markets. Are in a good location (eg. strip shopping centre, market or large shopping centre location).
• Experienced work force. Have high quality staff to ensure quality customer service.
• Attractive product presentation. Organise the store layout and display of produce to encourage customers to purchase.
• Production of premium goods/services. Provide a larger range, maintain a high quality of fruit and vegetables and present it attractively.
• Provision of superior after sales service. Provide quality advice and service to customers.
• Ability to alter goods and services produced in favour of market conditions. Take account of changing consumer tastes and needs in fruit in vegetable consumption.

Robert Bryant is the general manager of business information firm IBISWorld.