Rising prices, supply shortages – apart from the coronavirus, the headlines are dominated by gloomy news about the world markets. In an interview, Eugenio Guidoccio and Markus Bobenhausen from the REWE Group’s Ultra-Fresh Products 1 division report on the situation in the fruit and vegetable sector.
Mr Guidoccio, Mr Bobenhausen, in many industries, there is talk of supply shortages and rising prices. What is the current situation in the fruit and vegetable sector?
Markus Bobenhausen: General supply is secure and product availability is normal. However, in terms of pricing, the situation is fairly tight. Rising oil prices are having an impact on freight charges for shipping and hauliers.
is Division Head for Ultra-Fresh Products 1 fruit and vegetables at the REWE Group.
In your opinion, which factors have the most significant impact when it comes to the price and availability of fruit and vegetables?
Eugenio Guidoccio: Beyond the current challenges, the main areas are of course climate change and political issues such as CO2 emissions. Added to this are the increasing regulatory requirements in respect of supply chains and supply-chain transparency. These are long-term requirements that we need to meet.
How does this manifest itself in practice?
Eugenio Guidoccio: Extreme weather events are no longer solely a phenomenon that occurs somewhere else; they are becoming increasingly frequent across the globe, in Europe, even on our own doorsteps. One example is the unprecedented winter weather seen in the Mediterranean last year. This led to shortages of vulnerable crops such as berries and fruiting vegetables. The consequences of heavy rainfall on the growth phase of potatoes is a further example from this year. Heavy rainfall has an impact on the quality and shelf life of tubers. This year, they are less likely than usual to keep well. In addition, we are expecting the season to end early in Germany.
is General Manager for Ultra-Fresh Products 1 – fruit and vegetables at the REWE Group.
How do you manage this in purchasing?
How good the availability of fruit and vegetables is depends, among other things, on how long the growing cycle is, says Markus Bobenhausen.In terms of potatoes, we had the advantage of being able to prepare in good time and secure crops from other countries, or influence local production, such as in Spain, in order to meet our needs.
However, climate change also has a direct impact when we select our countries of origin. We are seeing a shift in climatic conditions. While Spain used to have relatively stable temperatures during the winter season for growing berries, we are now seeing these shift further south, including to Morocco. In order to ensure the availability of products, we have to expand our supply regions accordingly.
How good the availability of fruit and vegetables is depends, among other things, on how long the growing cycle is, says Markus Bobenhausen.
Which brings us back to the issue of supply chains and product availability. What are the precise measures being taken by the REWE Group to safeguard its supplies?
Markus Bobenhausen: This depends on a number of factors. When it comes to fruit or vegetables that can be stored, such as apples or potatoes, we can take different measured compared to a sensitive product, such as raspberries. It also depends on whether the produce has a short growing cycle which we can still influence, depending on the country, such as the potato example above. If we are talking about stone fruits, where you can’t just plant a tree and then harvest it soon after, then we need to be able to quickly turn to other producers. The product itself determines our response.
Eugenio Guidoccio: Our fundamental position is always to establish sustainable supply chains with suppliers and to develop partnerships which create loyalty to us. Unlike procurement, we are not pursuing a verticalisation strategy with our growers. And we benefit from the expertise of the Eurogroup and at Campiña Verde. Moreover, the REWE Group’s Fruit Logistics hub gives us powerful platforms that allow us to manage the goods flow efficiently.
Markus Bobenhausen: As briefly outlined above, it is important to have a diversification strategy across the main growing regions. For instance, this spring, stone fruits suffered crop failures in France owing to frosts during the flowering period. Due to our flexible procurement structures, we were able to offset this by buying from Greece, Spain, and Italy.
Would it be possible to grow alternatives locally or regionally for some types of fruit and vegetables?
Eugenio Guidoccio: From the customer perspective, local growers and regionality are bang on trend. In this respect, this is an issue for us because we also strive to maintain short supply chains, which allow us to reduce CO2 and transport costs.
Markus Bobenhausen: There are certainly some exciting approaches here in respect of product availability. The technology is developing and the REWE Group is already involved in several fairly large-scale projects with our partners. These include greenhouses growing peppers or tomatoes locally and sustainably with the use of geothermal energy, bio-gas facilities and other alternative energy sources. The latter is also important because we are again feeling the impact of rising energy prices here.
This brings us back to the start and the factors influencing the fruit and vegetable sector. The complexity of the global markets sometimes yields unexpected results, if you consider that fruit and vegetable prices are now impacted by the higher price of gas, because natural gas is needed for greenhouses but also for the production of fertiliser. How much more difficult is it to keep track of things these days?
Markus Bobenhausen: It’s actually easier now because our planning processes are more intensive. Having direct contact with producers means we have a higher level of commitment from them and better opportunities to safeguard availability. Overall, we now have a more professional set-up and a wider selection of producers. In addition to Eurogroup and Campiña Verde’s procurement expertise, we have also strengthened our logistics capabilities through the REWE Group Fruit Logistics hub, among other things.
