"There are three ways to grow a category: you add shoppers, you get them to buy more often, or you premiumise," Kantar Worldpanel consumer insight director Emma Fencott told the conference. "Tomatoes already have a market penetration of 93% so there is little scope for attracting new shoppers, and they already buy them every two weeks. But two-thirds of all year-on-year growth has come from premium — it’s seeing double-digit growth in volume and value."
While traditional round loose tomatoes are still responsible for the highest volume of sales, they are no longer the most valuable format, she added. "Piccolo tomatoes are the best performing line in Tesco’s Finest range. It’s a trend we see in grocery more generally, especially in own-label. Just 36% of shoppers are currently buying premium tomatoes, so there’s massive headroom — you can expect at least £11m growth here, that’s a fairly easy target." Opportunities here are greatest with discount retailers "as they underperform in premium", she pointed out.
Overall, spending on fresh produce has risen from £11.3bn in 2013 to a projected £12.1bn this year, even as shoppers’ spend per trip has dipped, said Fencott. Meanwhile "the landscape in promotions has changed", with the share of groceries bought on promotion dropping below 20% earlier this year.
"Price growth in produce is creeping back into the market, and is now 5% up on this time last year, so outpacing general grocery inflation of 3%," she said. "Discounters are still in double-digit growth, and Aldi and Lidl have seen growth of 15.9% in produce, compared with 12.2% overall."
Tomatoes "are driving growth in the salad category" and, after two years of declining value in the sector, tomato sales rose by 2.4% to £716m last year. "There has been growth in both value and volume of tomato sales since last year and we project growth of a further 6% to £759m this year," with volumes are also projected to rise 7% to 279,000 tonnes, she added.
Uncertainty over the outcome of Brexit negotiations should not preclude action now, AHDB research and industry team leader David Swales warned growers at the conference. "When I speak to growers, there is a ‘wait and see’ approach, but my view is that’s high-risk," he said.
"It’s 18 months before it’s clear but we know the issues and can look at scenarios and think things through. We can ask: ‘if this were to happen, what would we do?’ That way, you will be better prepared when it does."
He added: "Already the UK has set out a position of withdrawal from the single market coupled with a comprehensive free-trade agreement with the EU. But the EU sees the four freedoms as indivisible so there is a conflict there." In light of this, likely future arrangements "will add costs and complexity to the trading environment, which could be an opportunity for you guys".
Some in farming, including the NFU, see market access as a key issue because two-thirds of the UK’s food exports currently go to the EU. "But exports aren’t important for UK tomato growers so you aren’t exposed to any risk," said Swales. Meanwhile, the EU’s external tariffs "vary across products and sectors, but for food are incredibly high at 40-50%where there are no preferential deals".
For tomatoes, "tariffs are complex, but are around 14%", he said. "The EU will apply those to our exports, and we will in kind. Currently, nearly 400,000 tonnes of fresh tomatoes come into the UK, mostly from the EU, as well as 500,000 tonnes of prepared and preserved products. In pretty much all scenarios, this will raise wholesale tomato prices. This could be an opportunity for domestic producers."
Government support for agriculture is likely to reduce, but horticulture is much less exposed to this, Swales explained. "The Government is looking for inspiration from elsewhere, particularly from the US, Canada, Australia and New Zealand, where support is lower overall and is based on managing risk." With less money likely to be around, "the Government will be thinking ‘who should we not annoy?’ so will rather keep food prices down than farmers’ incomes up", he added.
Swales also sought to dampen hopes in the industry that a post-Brexit Government will relax restrictions on crop-protection products. "Change is unlikely in the short term, since as we go out into the rest of the world the Government will want to retain an image of Britain as a high-quality, high-standard food producer," he said. But the Government "may pursue a more risk-based approach in the longer term".
On labour, if a points-based migration system is pursued: "it’s very unlikely that horticultural workers will be deemed as having skills in order to be included. We are much more exposed to this than other parts of agriculture as it’s much more challenging to replace workers with technology."
Forthcoming AHDB work modelling different Brexit scenarios will show the likely cost of labour rising by up to 50% "due to the cost of attracting workers from other industries", he warned. "We need to make sure we still have an industry in 10 years to take advantage of the opportunities."
Case for automation
Session chair Phil Pearson, chair of the TGA technical committee, said: "I see labour as the biggest challenge for our industry, which adds to the case for automation." University of Cambridge engineering lecturer Dr Fumiya Iida told the conference: "The robotic revolution is already happening. Robots are getting cheaper and more available commercially, and they are interconnected. But not everything is solvable."
While their use in tasks such as car assembly is long-established, and modern warehouses use them to manage stock, "agriculture is more difficult, though not the most difficult sector", he said. Tasks that are simple for humans, such as vision and grasping, are hard to automate. "You also need to be able to recover when something goes wrong," he explained.
In looking for "lower-hanging fruits" of manageable, economically viable tasks for which technology already exists, Iida has worked with G’s Growers on field harvesting of lettuces, a task that has so far eluded automation. He said: "Combining this with automated quality control will come in the near future."