A shift to biofuels combined with a growing population will likely tighten produce availability in the future, reinforcing the need for good relationships between retail buyers and growers. This is the view of Ahold's European sourcing manager Ge Happe, which he presented at the Produce Marketing Association's (PMA) Fresh Connections China conference in Shanghai last week. As the final speaker, Happe gave his long term view for retail and his company while also drawing on changes in the Netherlands as a sign of what could be in store for China.

Happe has seen a great deal of chain with Ahold since he began working with its supermarket chain Albert Heijn 31 years ago. In the early days, the idea of supermarkets sourcing directly from growers was not so common.

Ge Happe

"We said to the suppliers please give us fruit, and then the supplier said "who are you Albert Heijn? We would like to sell to the wholesalers, to the wet markets." 80% of all the fruit and vegetable sales were through wholesalers," Happe said.

"Then we said we want to establish a relationship, now and for the next three, five, 10 years time because we want to dominate the market of fruit and vegetables, so give us the availability.

"That was in the 70s, and then it was created the first supply base, and most of the suppliers who started to supply us then are still supplying us."

The 80s then became about improving taste, and around the same time, as well as in the 90s, there were a series of food safety scares in the Netherlands.

"With our supply base we created a way of working where we reduced the pesticides to 50%, so it was easy to cope with the maximum residue levels."

The 2000s brought another change for Ahold - responsibly sourced products.

"Our own brand, our private labels, are produced with respect for people, for animals and for the environment, and we reduce the impact of our logistics and packaging; our own brands are produced with GlobalG.A.P. and that comes very close to food safety."

For what he calls "high risk" countries in Africa and Latin America, he said Ahold representatives spoke with suppliers to arrange social programs, including the Ethical Trading Initiative (ETI), the Rainforest Alliance and others.

"And we care for the environment – we reduce the environmental impact of our activities and we manage our waste that we use," he said.

"Now in the coming years we have a lot of new things to do. It is about the sustainability, and the sustainability is taken care of in a couple of steps; the first step, we took care of it, was the sensitive ingredients in our program like soy, palm and fish.

"For fruit and vegetables the biggest issues for the coming years will be water, land and air. Then again, we [will] speak with our supply base."

He says there will be pressures on food growth in the future, "because the agricultural areas are going to grow biofuels, and climate change and the impact of the weather will be more important - El Niño and La Niña".

"The availability of fresh and clean water will be in competition with the growing population."

Reshaping retail

Happe said the Ahold team was convinced that the world it operated in was changing rapidly, from the way people were living, interacting and shopping, to the economic environment and competitive landscape.

"The things that make us successful today will not guarantee us success tomorrow or in the future. We have to be extremely sharp, because the consumer behavior is changing at a dramatic pace," he said.

"Reshaping retail - because the consumer is changing so rapidly, we have to adapt to the new situation. The model is as follows – we have to lower our integral cost base, we have always looked for efficiencies, and when the prices go down it doesn’t mean that we pay the growers less.

"Basically we say we want to pay the grower more, but pay in the end less to the end consumer to take out all the costs that do not add any value."

He said the produce industry would be split into two worlds in the future - the programmed world and the non-programmed world.

"It will be the programmed world where the best breed of retailers and the best breed of suppliers will meet in strategic programs; today, tomorrow, in five years time.

"They will meet and we will have to commit, and that will give us all the good benefits of the strategic partnership.

"The second world is the non-programmed world, which is more related to the small growers, to the wholesale markets, to the anonymous market where you do not know what the tracking and tracing of the products is."

View for China

While wet markets may be the dominant produce sales format in China, Happe said the situation was familiar to him and the industry could follow the same path it did in the Netherlands over the last decades.

"That reminds me of when I was a kid, when I was 7 or 8 years old when went with my father to the wholesale market, because in those days in Holland, fruit and vegetables were sold in wholesale market," he said.

"I feel familiar. You are there where Holland was 35-40 years ago. Now, after those great changes supermarkets hold 85% of the sales in fruit and vegetables, but it took many years.

"China is developing. In fruit and vegetables you will be booming, you will sell twice as much as you are doing now in three to five years time."

Related stories: Costco Wholesale Canada: from convenience to cocktail cucumbers

Spinneys Dubai: moving produce like clockwork

www.freshfruitportal.com