Survey reveals the path to profit for fresh produce businesses
Growing the bottom line of a fresh produce business is notoriously difficult. UK market analyst, Plimsoll, shows that many fresh produce companies are not profitable and are serial loss makers. On average, fresh produce businesses record just above a 1% profit margin.
In these turbulent times, not helped by labour uncertainties and spiralling costs, the outlook of the industry may seem challenging. But not everyone feels the same way. Many, actually, are looking ahead to the future and picturing a more efficient, more profitable marketplace.
A survey by The Packer on what this industry needs now, revealed why leading figures are anticipating a surge in bottom-line growth across the industry. In this article, we examine a few of these hoped-for changes and explain how businesses can start to introduce these changes today.
Organics: making a key growth market more profitable
Organics are in hot demand; the market is worth more than £2.5 billion in the UK alone. It’s not a flash in the pan trend, either. Growth in the UK has remained steady for the last 7 years. This sentiment is being echoed internationally, too.
With consumers willing to spend more on organics, agile businesses have sought to exploit this opportunity. With the right business model and technology in place, they could be on course to receive a substantial windfall of profit. The key is in carefully managing the costs:
- Chemical-free farming makes production labour-intensive.
- Input costs are higher.
- Organic production requires more land.
- Certification takes time and can be costly.
- Organic produce takes longer to grow.
The survey revealed a desire from the sector to find solutions to manage these costs effectively. By introducing technology that allows leaders to effectively manage resources, businesses in the organics sector are starting to enjoy the fruits of their investment, such as Wholesum Harvests in North America.
Accelerating the supply chain and enabling collaboration
Supply chain inefficiencies can cause costs to spiral, especially when these inefficiencies produce delays and food wastage. Wastage represents lost revenue and puts a further dent into profit margins.
Businesses in the fresh produce sector want to see supply chains that are more nimble, responsive and lean. At the moment, a third of globally produced fresh produce goes to waste.
Technology that makes supply chain management and produce traceability easier is key. With information to hand, fresh produce businesses can forecast and plan accurately as well as identify vulnerabilities before they cause disruptions. This is precisely why LINKFRESH created an ERP solution that makes the movement of produce through the supply chain more visible.
Swift, accurate traceability
Foodborne disease outbreaks have devastating consequences. Last year, the E. Coli outbreak in romaine lettuce halted leafy green sales for three entire months. It took weeks to locate the source of the outbreak, all the while official advice told consumers and supermarkets to steer clear of the product.
Blockchain technologies have been repeatedly highlighted as a solution. Each member of the supply chain would be responsible for adding a ‘block’ into the many chains of consignments when they received and transported goods. This would allow complete, end-to-end traceability within seconds, rather than weeks.
Of course, for this to truly take off, the industry needs to get behind an open, fair-for-all system that everyone contributes to. LINKFRESH are listening to industry feedback and our customers requirements on Blockchain to enable such a solution.
Boosting profit margins for all
The salient conclusion to be drawn from the survey is that profit margins are minuscule, and every change that can help businesses reduce their costs and improve their operating efficiency would be welcomed.
However, one of the major challenges for businesses is uncovering exactly how those costs are spiralling. Only from there can a fresh produce business seek to rectify the challenges that are halting growth on the bottom line.
Enterprise Resource Planning (ERP) systems are built to use organisational data to enable better strategic and operational decision making. However, the unique nature of the fresh produce industry means that standard traditional ERP systems cannot support this industry. Fresh Produce business need solutions that are designed specifically for their industry, designed, deployed and supported by industry experts with knowledge of how a fresh produce operates.
To find out more about how LINKFRESH speaks the language of fresh produce download our What is Fresh ERP Whitepaper.