With the health trend still rising, demand for fresh fruit and vegetables is constantly on the rise; according to leading grocery retailers, fresh produce consumption has leaped by over 20% in just three years. Companies are responding to this trend by launching various products, such as new varieties of vegetables and fruit or products packaged conveniently, ready-cut or in small packages. However, contrary to expectation, prices are also on the rise, with several factors pushing them up throughout the supply chain.
It starts with the farmers, who have been struggling with climbing costs in the past few years. After several years of poor rainfall, during which water costs rose gradually, in 2017 the local Water Authority decided to cut subsidized water allocations by over 50%, with a dramatic impact on farmers. Costs have in fact risen so high that some farmers choose to abandon their fields, which in turn decreases local supply. Farmers in southern Israel have even had to face the threat of burning fields, set afire by neighboring Gaza citizens, with disastrous effect on their ability to continue cultivating them as well as major losses.
Further down the supply chain, distributors have also had a significant impact on prices. This market is very concentrated, with only few players offering distribution services, which thus allows them to charge high prices. Retailers, too, realizing the high demand for fresh produce, do not hesitate to raise prices even further, and this often results in price gaps of over 100% between the final price for consumers and that of the farmers.
Unfortunately, despite farmer's ongoing protest, no steps are being taken to cut the high margins that distributors and retailers are making, and government efforts to lower the prices of fresh produce focus on import; this of course further damages local farmers, who now face the additional threat of competition from import.
With the current situation, it seems that prices will not decline any time soon unless dramatic measures are taken by the government. However, prices may also rise due to an additional factor: companies' investment in new products. As in many other food categories, premiumization is likely to happen in fresh produce too, with companies introducing interesting new strains of fruit and vegetables suitable for varying purposes, and we expect great development in this aspect.