Mario Flores, Director of Product Management, Naturipe Farms (EE.UU)

U.S. Fresh Fruit and Vegetable* Value Chain, Estimated Dollar Sales,

Billions, 2010 Preliminary

institutional wholesalers food service

establishments

supermarkets and other

retail outlets

consumers

exports

farm

s

shippers

integrated

wholesale-

retailers

produce and general-line wholesalers

farm & public

markets

imports

$6.1$26.8

$12.3

$51.157

$122.711$69.175

$2.380Source: Cornell and UC Davis compilations based on US Census, ERS/USDA, NASS/USDA and other data. Preliminary estimate.

*Excludes nuts and pulses

Market Shares of Top 4, 8 and 20 U.S. Grocery Chains, Share of U.S. Grocery Sales Excluding Club Stores, 1992–2009

Source: Phil Kaufman, USDA/ERS, 2010.

percent

64%

50%

37%

Consolidation of the Fresh Produce Value Chain• Higher retail concentration levels have led to shipper

consolidation so today shippers are larger and better equipped to offer services (incl. food safety, traceability, data-based sales and marketing support, consumer insights).

• Fewer, larger buyers have enabled shippers to reduce their customer lists and to focus more on understanding the needs of key accounts – becoming account-driven.

• Scale is increasingly important – investment capabilities and competitive wherewithal.

• Scale can help achieve buying and selling advantages but can only be managed successfully with focused management, real-time data management systems and operational excellence.

Top Factors in U.S. Consumer Selection of Primary Supermarkets2011

Source: FMI Grocery Shopper Trends 2011

*Was 64% in 2007**Was 55% in 2007

Information Technology• Information technology, business intelligence will

play a vital role at all levels of the value chain going forward.

• Firms embracing this may gain competitive advantages.

• This includes a better understanding of consumers and the tactics that increase consumption without sacrificing return for the commercial buyer or seller, e.g., promotional efficiency.

• SKU rationalization and store clustering are keys to better coordination of supply and demand, lower shrink and greater value chain efficiency – opportunities to achieve via retailer-vendor partnerships – but must be done leveraging best shopper data.

• Lower retail profits are an obstacle to greater investments in technology.

Through 2010

8

North American Market (US & CAN)

Total Retail Sales grew $981 Billion in 2010 (7.7% inc)

Top 10 Retailers Account for 69% of SalesTop 20 Retailers Account for 82% of SalesMarket Has Been ConsolidatedFresh Produce Represents 12.5% of Total SalesBerries Represent 10% of Fresh Produce Sales

Berry Sales Increased 5.8% Straws 55%; Blues 26%; Rasp 11%; Blacks 7%

9

Who Are Top 26 Retailers

10

Rank Retailer Rank Retailer

1 Walmart 14 Meijer

2 Kroger 15 Dollar General

3 Costco 16 Wakefern

4 Safeway 17 Metro

5 SuperValu 18 B.J.’s Wholesale

6 Loblaws 19 Whole Foods

7 Publix 20 Giant Eagle

8 Ahold 21 Trader Joe’s

9 C&S Wholesale Grocers 22 A & P

10 Delhaize 23 Family Dollar Stores

11 H.E. Butt 24 AWG

12 Sobey’s 25 Hy-Vee

13 7- Eleven 26 Aldi’s

Source: Supermarket News

11

Retailer

Comparable Sales

Growth, 2010

Comparable Store Sales

Growth, 2009

Costco 7.0% +3.0%

Kroger 2.8% +2.1%

Publix 2.3% -4.7%

Safeway -1.8% -2.5%

Supervalu -5.1% -6.5%

Target 2.1% -1.6%

Walmart US -0.8% -0.5%

Whole Foods Market

7.1% -0.9%

Sources: company annual reports and investor relations announcements compiled by R. Cook.

Top Food Industry Trends• Shoppers have migrated towards retailers with strong value

for money credentials; on-going channel-blurring trend

• Many retailers have lowered prices to close the gap with

discount competitors

• Retail strategies include new pricing initiatives, format

development, e.g., smaller, price impact, and fresh food

formats by non-traditional grocery retailers (Walgreen’s,

Target P-Fresh)

• Cost-cutting to maintain margins, seeking efficiency gains

• Lowering inventory levels, SKU RAT, painful lessons already

• Retail corporate restructuring to eliminate duplication and

generate cost savings

• Store brand/private label growth

Supply Chain Imperatives• Streamlining the supply chain, improving vertical

coordination, involves identifying mutually beneficial strategies and tactics, e.g., promotions, packaging, logistics

• Identifying which activities add more value than cost• Eliminating non-value-adding activities • Decreasing internal operational inefficiencies – due to

lack of ERP’s and underutilization of BI they are often hidden or not considered important enough to attract attention in more favorable markets – but with margin squeeze they count

• Sustainability/social responsibility goals, metrics and verification will become more important and firms will seek competitive advantages

• The same goes for traceability and food safety expectations and requirements; foodservice has led in food safety; and there is a growing and more active government role

Berry Market Trends at RetailValue is Key

Pack Size and Quality are the key componentsRetailers are Up Sizing Packs

Small Packs are a luxury purchaseMargins have been reduced

Pressure to provide value to consumers (Price Wars)

Available Ads Space reduced 25%Health Message Major Driving Force ConvenienceOrganic Sales ReboundingPrivate Label is increasing

14

Why Retailers Love Berry Consumers? They Spend Money

Most Berry Consumers are categorized as:Lifestyle

CosmopolitanAffluent SuburbanComfortable Country (Rural)

Behavior/Stage Older Bustling Families Empty Nest Couples Start-up Families

Primary reasons consumers buy berries are:Great Taste Health Benefits

Make me feel good & good for my family

Other attributes to be stressedConvenienceVersatilityAvailable year round

U.S. Consumers Rank Key Factors Affecting Their Produce Purchase Decisions, Fall 2009 v. Fall 2008

Source: Lutz, Brand Performance and Produce, Produce Business, Jan. 2010.

On a scale of 1-5 with 5 being most important.

Source: The Hartman Group and PMA, Identifying Consumer Trends in the Produce Category, 2010.

Policies that US shoppers say they want from their produce providers, 2010

2010: How comfortable are you that food grown/produced outside the U.S. is safe?

Source: U.S. Grocery Shopper Trends 2010, FMI.

• How to use Blueberries• Why this is good for you• Not a special occasion – Good for Every Day• As production matures (Globally)

o We have to convince consumers that they need to eat blueberries as much as – strawberries, apples, grapes

o Not specialty itemo Packaging implications – encourage larger quantitieso Create retail and foodservice programs to sell more

Last 52 Weeks

Berries18.2%

Apples14.0%

Bananas13.1%

Grapes11.9%

Melons9.1%

Avocados4.9%

Oranges4.6%

Cherries3.7%

Tangerines3.2%

Peaches2.4%

All Other14.8%

Ber

ries

App

les

Ban

anas

Gra

pes

Me

lons

Avo

cado

s

Ora

nge

s

Che

rrie

s

Ta

nge

rines

Pea

ches

Total US - FRUIT

Top 10 Fruit Categories - Dollars

Fruit – % of Dollar Sales

52 Weeks ending 9/11/2011 – FreshLook Marketing (FLM)

Dollars Current 52wks%

ChangeBerries $3,453,250,172 5.3%Apples $2,656,307,526 1.4%Bananas $2,487,698,169 2.7%Grapes $2,263,136,616 -2.0%Melons $1,730,581,922 0.6%Avocados $926,766,705 6.3%Oranges $862,944,407 -5.1%Cherries $709,871,754 7.0%Tangerines $602,663,218 7.2%Peaches $450,435,940 3.8%Total Fruit $18,955,072,842 2.3%

5.3% 1.4% 2.7% -2.0% 0.6% 6.3% -5.1% 7.0% 7.2% 3.8%

The Berries category accounts for 18.2% of Total Fruit dollar sales:

And Berries saw a +5.3% increase in dollars vs. the previous year:

Total US - FRUIT

Top 10 Fruit Categories - Pounds

Fruit – % of Pound Sales

52 Weeks ending 9/11/2011 – FreshLook Marketing (FLM)

Ban

anas

Me

lons

App

les

Gra

pes

Ber

ries

Ora

nge

s

Ta

nge

rines

Pin

eap

ple

Avo

cado

s

Pea

ches

-0.4% -4.0% -2.6% -4.2% 1.3% -6.4% 7.7% 1.5% -16.6% 0.0%

Bananas27.0%

Melons20.3%

Apples11.8%

Grapes7.6%

Berries6.9%

Oranges5.8%

Tangerines3.0%

Pineapple2.2%

Avocados2.1%

Peaches1.9%

All Other11.3%

Pounds Current 52wks%

Change

Bananas 4,146,060,521 -0.4%Melons 3,110,189,455 -4.0%Apples 1,802,232,728 -2.6%Grapes 1,172,748,613 -4.2%Berries 1,064,224,038 1.3%Oranges 885,866,031 -6.4%Tangerines 467,189,287 7.7%Pineapple 337,388,203 1.5%Avocados 321,124,308 -16.6%Peaches 297,290,967 0.0%Total Fruit 15,332,986,296 -2.0%

Bananas account for 27% of Total Fruit pound sales:

And Bananas saw a -0.4% decrease in pound sales vs. YAGO:

Berries Sales Breakdown by Variety

18.2% of total fruit

$1,834M

$244M

$422M

$867M

Total U.S. Retail Volume and Dollar Contribution by Variety

4-wks and 52-wks ending 8/14/2011

Data Source: SymphonyIRI Group / FreshLook Marketing 27

Total U.S.: Regular/ConventionalRetail Volume and Dollar Sales4-wks, 13-wks and 52-wks ending 8/14/2011

Data Source: SymphonyIRI Group / FreshLook Marketing 28

Actual vs PY Actual vs PY Actual vs PY

Straw 62,229,305 +4% 261,478,992 +3% 712,432,375 -1%

Blue 24,253,202 -21% 94,183,166 -5% 175,563,932 +8%

Black 1,937,888 -9% 12,099,970 -21% 39,133,209 -6%

Rasp 3,797,929 -4% 21,892,497 +26% 53,447,870 +16%

REGULAR BERRIES 92,218,324 -5% 389,654,625 +1% 980,577,386 +1%

Straw $140,105,626 +6% $555,606,840 +5% $1,687,603,258 +1%

Blue $83,420,781 -7% $308,777,744 +2% $786,347,260 +10%

Black $13,973,683 +7% $62,719,698 -6% $224,777,868 +4%

Rasp $27,671,315 +4% $126,646,190 +21% $369,679,818 +12%

REGULAR BERRIES $265,171,405 +1% $1,053,750,472 +5% $3,068,408,203 +5%

Straw $2.25 +2% $2.12 +1% $2.37 +2%

Blue $3.44 +17% $3.28 +8% $4.48 +1%

Black $7.21 +17% $5.18 +19% $5.74 +11%

Rasp $7.29 +9% $5.78 -4% $6.92 -3%

REGULAR BERRIES $2.88 +6% $2.70 +4% $3.13 +4%

NOTE: For very large variances, the figure is set to "+1000%" to maintain integrity of table format.

Re

tail

Do

lla

rsR

eta

il V

olu

me

Re

tail

AS

P

4-wks 13-wks 52-wksTOTAL U.S.

Total U.S.: Regular/Conventional Per Store, Per Year Averages by Segment

52-wks ending 9/14/2011

Data Source: SymphonyIRI Group / FreshLook Marketing 29

30,4

91

Total U.S.

Regular Berries52-weeks CY

22,0

20

Total U.S.

Strawberries52-weeks CY

5,52

1

Total U.S.

Blueberries52-weeks CY

1,27

2

Total U.S.

Blackberries52-weeks CY

1,67

7

Total U.S.

Raspberries52-weeks CY

$95,

797

Total U.S.

Regular Berries52-weeks CY

$52,

161

Total U.S.

Strawberries52-weeks CY

$24,

730

Total U.S.

Blueberries52-weeks CY

$7,3

07

Total U.S.

Blackberries52-weeks CY

$11,

599

Total U.S.

Raspberries52-weeks CY

Per

Sto

re D

oll

ar

Ave

rag

es

+3% vs. PY

-1% vs. PY

+8% vs. PY

+3% vs. PY

+9% vs. PY

-7% vs. PY

-1% vs. PY

-3% vs. PY

+7% vs. PY

+12% vs. PY

North America Retail Blueberry SalesChile vs. Total $ and Lbs

Last 52 weeks ended 9/14/2011

Mil

lio

ns

30.2%

38.3%

Supermarket Channel only

Chilean Blueberries vs. Total U.S. Ave. Retail price/lbLast 52 weeks ended 9/14/2011

Supermarket Channel only

Source: Perishables Group FreshFacts® Powered by Nielsen.

Berries – Strong Positive Growth for All VarietiesTrend Comparison, U.S. Supermarkets, 52 Weeks

Ending 02.26.11Percent Change vs. Year Ago in

DollarShare of cat. 54.4% 25.2% 11.8% 7.3% 1.3%

US & Canada per Capita Blueberry Consumption

34

U.S. Fresh Blueberries (High-Bush): Production, Imports & Exports, 1,000 Pounds, Selected Years

1985

2000 2004

1998 2010

Th

ou

san

d P

ou

nd

s

Sources: USDA/ERS, October Fruit Yearbooks thru 2004; GATS/FAS/USDA online queries for 2010 trade and NASS for 2010 production, July 2011.

Metric Tons

Source: GATS/FAS/USDA online data queries.

US Fresh Blueberry Imports by Key Country of Origin,1990-2010

US Supermarket* Fresh Blackberry Sales: Quantity, Dollars and Average Retail Price, %

Change 2010 vs 2009

*Excludes club stores and supercentersSource: IRI

1,000 lbs

Production

Imports

U.S. Fresh Blackberry Production and Imports, 1990-2010P (but USDA/NASS tracks

only Oregon where most production is processed)

Sources: ERS/USDA Fruit and Tree Nut Situation and Outlook Yearbook, Oct. 2010 for production through 2007; NASS/USDA Noncitrus Fruits and Nuts 2010 Summary, Julu 2011 for production 2008-2010; GATS/FAS online queries for trade data.

This grossly underestimates actual USA production.

North American Blackberries

North American Blackberries

Source: IRI

US Supermarket* Fresh Raspberry Sales: Quantity, Dollars and Average Retail Price, %

Change 2010 vs 2009

*Excludes club stores and supercenters

Mt tons

Mexico

Chile

Canada

Guatemala

US Fresh Raspberry Imports by Key Country of Origin,1990-2010Mt tons

Source: GATS/FAS/USDA online data

queries.

Positioning for Success

44

Supplier OrganizationSupplier Organization

Customer Organization

Customer Organization

Buyer

Salesperson

Source: The Hale Group, Ltd.

Traditionally, the main, and sometimes the only, contact between a supplier and an retailer was the

sales organization

45

Producer

Organization

Producer

Organization

Customer OrganizationCustomer Organization

Sr. Mgmt.InnovationFinance

Food SafetyLogisticsMarketing

SalesSeller & Buyer

Transparency

Source: The Hale Group, Ltd.

Broadening the communication increases the effectiveness and efficiencies – and creates deeper,

stronger and lasting corporate relationships

Becoming Marketing-Driven• Becoming customer-centric.• Understanding that you will get there faster if you work

together.• Next level is to become consumer-centric.• Consumer-centrism will increasingly be achieved via

supplier-customer partnerships.• Suppliers and customers must choose strategic partners

– align with those who will succeed in the marketplace.• Growers should receive higher returns over time if they

market through the wide-line berry shippers that have the key accounts and are leaders in the marketplace.

• Selling through brokers and wholesalers contributes to market fragmentation, disorderly markets and downward pressure on prices.

Conclusions• Suppliers and buyers who partner together to

identify mutually beneficial actions may gain a competitive advantage in their respective markets

• Successful partnerships are likely to be based on achieving logistical or operational efficiencies and/or consumer insights that get THE RIGHT PRODUCT TO THE RIGHT CONSUMER AT THE RIGHT TIME

• Getting a handle on “meaningful” consumer segments that can be effectively targeted is challenging but today smaller segments may be reached more cost-effectively with “new media” – how to achieve this is a challenge

Conclusions• Investments in information technology are critical

to both streamlining the supply chain and firm level efficiency

• Costs of meeting certification requirements of various types will grow along with public expectations about ways of doing business

• Vertical coordination can better match supply and demand (meaning a profitable market-clearing price for efficient growers)

• Effective positioning requires understanding the fundamentals of the rapidly evolving food and fresh produce distribution system!