Is sub-quality produce your best profit opportunity?
Arguably, it has never paid less to work in farming. With fresh produce businesses feeling the squeeze from all sides, profit margins for many are paper-thin.
The balance of power in the food industry has long been with retailers; as food has become cheaper and cheaper for consumers, suppliers have shouldered the burden. Meanwhile, climate change is increasingly wreaking havoc for agriculture in many regions of the world. A study found that it has reduced the annual profitability of Australian farms by 22% over the past two decades.
In light of these challenges, fresh produce businesses need to be open to exploring potential new revenue streams; some of the most exciting and quickly achievable options involve maximising the value of products which usually go to waste. Sub-quality produce - which is produce too small, blemished, bruised or deficient in some other way to sell at full price - could provide the answer.
How can sub-quality produce improve profitability?
Whether it’s painstakingly identified manually to be ploughed back into the field or discarded by retailers to the cost of the supplier, sub-standard produce represents a profit loss and a drain on resources for many businesses.
3.6 million tonnes of food, worth around £1.2billion, is wasted by UK farms each year. Quite apart from the financial implications for suppliers, the food poverty prevalent in the UK and the fact that the vast majority of cosmetically undesirable produce is perfectly nutritional means this is simply wrong.
So what can be done?
Food suppliers can tap into a whole new opportunity for profit by selling their aesthetically displeasing produce to different markets and for different purposes. Some excellent uses for sub-quality food include:
- Selling it to retailers discounted as an added extra
- Converting it for use in products such as soup
- Processing into pre-prepared packaged product
- Selling it direct-to-consumer (D2C). There is now a niche market for “ugly fruit and veg” as more people are becoming aware of the huge levels of food wastage.
Different options will work better for different businesses, but the reason lower-quality food can potentially prove so profitable is because of the simplicity of repurposing excess produce. The new product (the sub-standard produce) already exists. Production of the raw product is effectively free, so it just needs to be effectively converted, delivered, packaged and sold. Less wastage may also eventually lead to an increase in potential capacity for the business overall.
How can technology help?
There is, however, a major stumbling block - locating the sub-quality produce. To do it by hand is costly and time-consuming, at best denting profitability and at worst negating the benefit of the exercise altogether. As is often the case in agriculture, technology has the solution.
Food grading is a major part of the quality control process, and is even more important for businesses wanting to filter out sub-quality produce straight after picking. To be able to do this efficiently, automated grading is by far the best option.
Technology is now sufficiently advanced to accurately identify produce that doesn’t meet retail standards. There are systems that differentiate produce by weight - useful for removing products which aren’t plentiful enough.
At the more advanced end of the spectrum, high-definition cameras and imaging software can be used to inspect produce. As it passes through a conveyor belt, items that don’t meet the quality benchmark can be identified and separated. Inspection can cover the shape, colour, dimensions, external quality and internal integrity of produce.
The software can also dictate the sorting and packaging processes, automatically separating produce based on its characteristics. This kind of technology allows for a quicker grading process, a more effective allocation of resources and a lower risk of damaging produce through manual handling.
How can this be integrated into a fresh produce business?
While repurposing sub-quality produce can be considered a simple way to increase profit margins, it can only have a positive impact on the business if it works in harmony with the existing processes. In particular, new automated grading technology must be able to communicate in real time with the other systems, and must be easily monitorable by everyone in the business.
Enterprise Resource Planning (ERP) software is the simplest and most comprehensive way to achieve this. ERP is essentially a set of integrated technologies designed to act as the single point of truth in an organisation. For fresh produce businesses of a certain size, ERP is integral to maintaining synergy between all its disparate components.
Beginning a new product line using sub-quality produce is undeniably a significant undertaking. In addition to requiring real-time consistently across all operations, it also challenges businesses to:
- Take on more end-to-end tracing responsibilities
- Comply with a new set of regulations
- Alter their management of resources
- Measure the relative success of the new product in improving profit margin
ERP can manage all of these challenges, facilitating seamless integration for any new operation and allowing businesses to focus on reaping the rewards of repurposing sub-quality produce.