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Producer Organisations

after BrexitJuly 2017

2 | BRITISH GROWERS | Producer Organisations after Brexit

Executive summaryAs we move towards a post-Brexit world there is significant potential for UK growers to increase their share of the UK fresh produce market. The UK grower share of the UK market in fresh produce is circa 50%. The UK relies heavily on imports from the EU and UK growers are keen to see their market share increase in the years ahead.

The support provided to the UK fresh produce industry from the EU Fresh Fruit and Vegetables Aid Scheme and managed by the 33 UK based Producer Organisations (POs) has played an important role in maintaining a UK fresh produce supply base. In an industry where margins are typically low and operating at scale is a necessity, the encouragement to collaborate and create POs has helped sustain large sections of UK horticulture.

UK growers operate in arguably the toughest food retailing environment in the world. Success is dependent on delivering produce to exacting standards at competitive prices. The match-funded grant aid provided through the network of POs plays a vital role in supporting the UK’s innovative growers to plan and continually develop their activities. It helps to maintain investment whilst reducing the risk of that investment. This in turn generates improved productivity and efficiency, higher rates of return, great customer value and maintains grower confidence – factors which are all integral to the success of the sector.

The UK berry industry (where most UK production is through Producer Organisations) provides an outstanding example of how match-funded grant aid has delivered great value for consumers and taxpayers and created a world-beating industry based here in the UK. Since the inception of the EU Fruit and Veg Aid Scheme, production of strawberries has increased from 40,000 tonnes to 115,000 tonnes. This has been achieved through carefully targeted investment, new varieties and the introduction of highly productive, capital intensive, growing techniques. The match-funded grant aid provided through the POs has been critical to this success.

Producer Organisations have played a key role in:

• Improving routes to market for growers

• Encouraging collaboration

• Maintaining grower confidence

• Reducing risk for growers

• Supporting vital investment

• Delivering productivity gains

• Maintaining a UK supply base in fresh produce

• Improving grower returns

• Better bargaining power

• Creating supply chain efficiencies

• Delivering environmental enhancements

• Providing great customer value.

• Increasing the amount of fruit and vegetables consumed in the UK.

As the UK prepares to withdraw from the EU and the EU Fruit and Veg Aid Scheme, the UK’s POs are keen to carry forward the principles of the EU scheme into a new UK-based and UK-focused scheme. The POs are keen to build on the successes achieved since the introduction of the scheme in 1997. We recognise that there are areas where the scheme could be amended with advantages to both POs and Government, and we would be keen to explore these with the Government in the months ahead.

We believe that there are significant opportunities for the UK fresh produce industry in a post-Brexit environment and that the Producer Organisation concept should be a key element of any future domestic agricultural policy.

BRITISH GROWERS | Producer Organisations after Brexit | 3

Seasonal labour – high on the agenda

Executive summary

About the UK fresh produce industry

UK market share

What is a Producer Organisation?

How have POs benefited UK horticulture?

How POs have benefited the economy

Retaining the principles of the Fresh Fruit and Vegetables Aid Scheme

Consequences of not having a parallel Fruit and Vegetable Aid Scheme

Serving the UK consumer with high quality, high value fruit and vegetables

Global Demand, Productive and Competitive, Sustainable, Trusted, Resilient

Case studies

Supplementary notes 1: Nutrition targets and health benefits

Supplementary notes 2: Self-sufficiency

Supplementary notes 3: Growth of UK strawberry production

The UK POs

References

Contents

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About the UK fresh produce industry

Horticulture occupies less than four per cent of British arable land, produces a vast diversity of fruit, vegetable, salad and ornamental crops, and employs the full-time equivalent of 50,000 people. The sector has an estimated farm-gate value of over £3.1 billion, of which 60% is derived from edible crops and 40% from ornamentals, and an estimated gross value of £9 billion according to official statistics.

85% of produce grown in Britain is sold to the multiple retailers and the rest to the wholesale sector, food manufacturers or direct to consumers through local or online outlets. Fierce competition in the grocery market is driving down margins and forcing supply chain consolidation. British growers receive relatively little in the way of Government support, but a significant part of that support is

provided by the Fresh Fruit and Vegetables Aid Scheme through a network of 33 UK-based Producer Organisations.

There are compelling economic and public health reasons for supporting the growth of the UK horticulture industry. The UK imports circa 50% of its fruit and vegetable requirements, and a proportion of this deficit could be taken up by UK production. If the UK is to meet its 5-A-Day consumption goal, production would need to increase by a further million tonnes. (See Supplementary notes 1: for further details on nutrition targets and health benefits).

This would also deliver knock-on benefits in terms of employment and investment at the farm level in addition to downstream and upstream investment.

There is significant potential for UK growers to increase their share of the UK market. Figure 1, based on British Growers Association market research, shows the proportion of demand currently met with UK supplies for a range of crops.

Since 1997 UK market share has increased for strawberries and apples, and we are producing more raspberries and carrots than we were in 1997 (Defra, 2016c). (See Supplementary notes 2: for further details on self-sufficiency).

UK market share

Figure 1 Opportunities to increase the UK market share

Opportunities to increase UK market shareSource: British Growers Association

UK

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0%Carrots Peas Brassicas Onions Soft fruit Mushrooms Top fruit Tomatoes Cut flowers


What is a Producer Organisation?

A Producer Organisation (PO) operates under the Fresh Fruit and Vegetables Aid Scheme. The aim of the Scheme is to improve the grower’s position in the market place, which it achieves by encouraging the formation of Producer Organisations. A PO is described in the official guidance as an organisation formed on the initiative of farmers who are growers of one or more approved products. It encourages the use of environmentally sound cultivation practices, production techniques and waste management practices. In particular to protect the quality of water, soil and landscape, and preserve or encourage biodiversity.

POs develop three to five year Operating Plans, which must have a balance of a proportion or all of the following objectives:

• Planning of production

• Improvement of product quality

• Boosting the commercial value of products

• Promotion of the products, whether in a fresh or processed form

• Environmental measures and methods of production respecting the environment, including organic farming

• Crisis prevention and management.

A PO operates as a single enterprise, and is run democratically by its grower members. A Producer Organisation allows growers to benefit from special legal protection. By grouping together, producers can improve their negotiating power and protect themselves to a large extent against complaints under competition law. This enables them to negotiate more effectively with the multiples which control 85% of the entire market.

Under the current Scheme, match-funding enables POs to invest in collaborative facilities; employ specialist staff; and professionalise production planning, growing and marketing operations. These play an important part in achieving productivity and product quality improvements.

With margins in the fresh produce industry typically between 1% and 3%, managing risk is a key issue. The principle of match-funding allows POs to reduce the risk associated with investment and increase the rate of payback. This investment is vital in helping to maintain a globally competitive fresh produce supply base in the UK.


Match-funding enables POs to invest in collaborative facilities; employ specialist staff; and professionalise production planning, growing and marketing operations.‘ ‘

How have POs benefited UK horticulture?

• Through the provision of match-funding for innovative investment

• POs have encouraged collaboration and instilled confidence, enabling growers to invest

• PO investment has had a significant impact on productivity through careful investment in production, quality and the environment

• POs have facilitated investment in the latest varieties, technology to enhance crop yields, quality and extended the supply season and replaced imports

• POs have enabled sharing of assets across several producers, for example pea viners. This raises utilisation and efficiency, and avoids multiple investments in underutilised assets

• POs create opportunities for smaller growers to work with larger customers and help the competitiveness of smaller growers

• POs deliver supply chain efficiency which benefits the consumer through continuity of supply

• POs provide an effective forum for sharing knowledge and best practice

• The corporate structure required of a PO, ensures that growers are at the centre of the strategy and governance process

• The financial structure of a PO is such that the sole beneficiaries are the member growers themselves

• UK strawberry production illustrates the benefits: production has increased by 250% since the introduction of the scheme. (See Supplementary notes 3: for further information about the sectors impressive growth).


How POs have benefited the economy

Productivity improvements match-funded by the Scheme have reduced the inflationary effect of fruit and vegetables. Fruit and vegetables prices have not risen as fast as other items in consumers shopping baskets (Figure 2).

• POs have delivered large amounts of innovation

• High employment levels and high investment associated with intensive horticultural production make a significant contribution to sustaining the rural economy

• The existence of a thriving UK production base provides spin-off opportunities for a world-beating research and education industry

• Match-funded investment in UK horticulture through the scheme has helped maintain a UK production base and limit our dependence on imported product

• Securing a well-invested competitive and sustainable fresh produce production base ensures greater food security, food safety and value for money for UK consumers.

Figure 2 Consumer price inflation: Food

Prices for domestically produced fruit have not increased as much as the RPI data suggests, exotic fruit prices have increased more markedly contributing to the overall inflation.

Consumer price inflation: FoodSource: ONS RPI: Food

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801997 1999 2001 2003 2005 2007 2009 2011

Fruit Vegetables Sweets & chocolates

2013 2015


Retaining the principles of the Fresh Fruit and Vegetables Aid Scheme


The POs believe that the original purpose of the Scheme is as valid in a post-Brexit environment as it was when the scheme was first introduced in 1997, and should therefore be continued. Maintaining the scheme will help to safeguard key elements of the UK fresh produce market at a time of significant change. Furthermore retailers are looking to source increased volumes of UK fruit and vegetables. Major changes in the existing supply chain arrangements represent a major risk for UK growers, the retail industry and UK consumers.

Retaining the principles of the Fresh Fruit and Vegetables Aid Scheme will:

• Help deliver the UK Government’s productivity ambitions for UK agriculture

• Continue to provide UK consumers with fruit and vegetables of a known provenance and outstanding value

• Provide the volumes of fresh fruit and vegetables necessary to support healthy diets

• Embed grower collaboration as a fundamental and essential part of the fresh produce supply chain.

Going forwards a future scheme should incorporate the following principles:

• A single scheme with common operating rules should apply across all devolved governments in the UK. Operating different rules for growers in different parts of the UK would add significantly to the administrative complexity

• Match-funding should remain a key element of the scheme. The operating and evidence gathering requirements of the scheme make sure that the use of these funds is done in a way which is transparent, auditable and capable of delivering a tangible return on investment

• A joint industry and Government review of the operating rules to improve clarity, simplicity of operation and a reduction in the administrative burden and associated costs. A key aim should be to make PO membership more attractive to a larger and wider cross-section of growers

• The National Strategy should be replaced with a set of guiding principles consistent with the Government’s overarching principles covering global demand, productivity, competitiveness, sustainability, trust and resilience

• Allow more flexibility around investment options. Current restrictions on expenditure can limit the benefits for growers and funders

• The scheme should more accurately reflect the supply chain and retailing environment which currently operates in the UK.

Maintaining the scheme will help to safeguard key elements of the UK fresh produce market at a time of significant change.‘ ‘

Consequences of not having a parallel Fruit and Vegetable Aid Scheme

• UK growers would be at a competitive disadvantage with EU growers, who will continue to receive circa €800m of support through their PO scheme

• Currently the UK supply chain only meets around 50% of its fresh produce requirements from UK growers. Anything which affects the ability to invest, reduce risk and increase productivity will open the door to increased imports

• The loss of the Fresh Fruit and Vegetables Aid Scheme in the UK will result in the relocation of significant volumes of UK production to other EU countries

• The loss of match-funding would reduce investment by the UK industry, resulting in reduced competitiveness and higher volumes of imported fruit and vegetables

• Reduced collaboration among growers

• Diminished contribution by UK horticulture to the local economy, with knock-on effects for upstream and downstream industrial and professional services activity

• Reduced opportunities for smaller growers. The loss of POs would result in further consolidation of the industry leading to larger businesses and fewer opportunities for new entrants.


Serving the UK consumer with high quality, high value fruit and vegetables

Consumers are increasingly demanding British fruit and vegetables, this has been shown in independent, industry and retailer-led surveys. In 2016 a Mintel survey found 56% of shoppers said they try to buy British food whenever they can (Defra, 2016a), whilst a 2014 YouGov survey found 79% of British people think British supermarkets should sell more food produced on British farms (NFU, 2014).

Morrisons recent YouGov survey found 67% of consumers prefer to buy British food and support local economies and domestic production (Benton et al., 2017).

Aldi, Lidl and The Co-operative have all signed the NFU Fruit and Veg Pledge which includes a commitment to increase the proportion of British fruit and vegetables that are available for consumers to buy.

Waitrose, Marks & Spencer and Morrisons have signed the NFU’s Back British Farming Charter, committing to “stocking more British food and to work in partnership with British farmers to develop committed, fair and beneficial relationships”.

The retailers are also keen to see innovation in British horticulture. When signing the Charter, Marks & Spencer said:

It is also worth noting that in early 2017, Morrisons commissioned a team of leading experts on global food issues, to consider what role UK producers should have in feeding the UK. They concluded that our reliance on imports, particularly for fruit and vegetables, means we are often exporting the environmental cost of production, and are exposed to climate change and global trade risks. This led to a recommendation that the UK should become more self-sufficient in food production (Benton et al., 2017).

We are committed to sourcing as much of our food as possible from the UK. We continue to explore ways to grow new crops in the UK, and to extend the UK growing seasons for fruit and vegetables (NFU, 2015).

‘ ‘


67% of consumers prefer to buy British food and support local economies and domestic production.‘

‘

Global Demand, Productive and Competitive, Sustainable, Trusted, Resilient

The Government has outlined its vision for the UK to become a world-leading AgriFood nation, whilst also leaving the environment in a better place than we found it. This vision will be delivered with the following principles in mind:

There many examples among Producer Organisations, supported by the Fresh Fruit and Vegetables Aid Scheme, of achievements which help the horticulture sector to improve its delivery against these principles. With the correct support, much more can be achieved as the following examples demonstrate.

Global Demand – take full advantage of trading opportunities to make UK food and drink the brand of choice both at home and abroad

1.Productive and Competitive – be at the forefront of innovation and skills to deliver a world leading AgriFood sector

2.

Sustainable – a food supply chain that improves the environment we live in

3.

Trusted – deliver on standards including, animal welfare, food safety and traceability

4.

Resilient – ensure that the AgriFood sector can take full advantage of opportunities available; and are resilient to external shocks and longer term pressures

5.


Principle 1: Global Demand

The Producer Organisation scheme has acted as a catalyst helping producers build capacity and productivity. Retailers and consumers are keen to source and consume more British produce. The collaboration inspired by the PO Scheme has encouraged growers to react to these opportunities.

For horticulture there are significant opportuni-ties to do more business in the UK market place. The Greenshoots PO invested in a collaborative onion store which allowed it to increase production, improve marketable yield and extend its marketing season, replacing imported onions.

By collaborating and aggregating supply within Producer Organisations, growers are able to access markets, expertise and technology which is more difficult when acting in an individual capacity.

This is likely to become even more important with supermarkets seeking to form direct relationships with growers, to shorten the supply chain. By collaborating with other growers via a PO, producers (large and small) can collectively justify and access negotiating skills to increase their marketing power, counteracting the imbalance. There is a significant opportunity for UK horticulture to increase its output and take a larger share of the UK market. The PO principle provides the chance for UK growers to capture these opportunities.

Addressing global demand

Increased investments through POs to

boost Productivity

Increased share of the UK market

for UK growers

Reduced reliance on

imports

Open up further export

opportunities

of fruit and veg imports into the UK

£5bnof fruit and veg exports from the UK

£200mn


So how, in the future, can we help farmers secure the capital they need to enhance innovation, and how can we help them combine together to improve their power and influence in the supply chain?‘

‘Principle 2: Productive, competitive and innovative

At the NFU Conference 2017 the former Secretary of State Andrea Leadsom asked:

This is the very essence of the Producer Organisation concept. The provision of collaborative match-funding has enabled producers to drive productivity. The scheme incentivises producers to invest their own capital together with the match-funding. The combination of match-funding and collaboration reduces risk, while the PO operating programme application process encourages greater discipline and scrutiny. The Scheme effectively halves the payback period, making it easier for growers to justify continuing investment in an operating environment where margins are notoriously tight.

The ability to access match-funding has had a proven effect in driving innovation within POs, with knock-on benefits to the wider horticulture industry. For example, packing of lettuce crops has developed from manual use of bags and cellophane to automated wrapping and sealing, reducing labour requirements and unit costs. This technology, originally developed with the match-funding from the Fruit and Vegetables Aid Scheme, has become standard practice across the salad sector. With rising labour cost and uncertainty over future labour supplies, innovation to reduce labour use is an investment priority for many POs.

StrawberriesThe strawberry crop is a good example of PO supported innovation increasing productivity. There was little improvement in average yields between 1970 and 1995, but, following the

introduction of Producer Organisations in 1997, yields began increasing rapidly (Figure 4). This led to a significant increase in total output, more than double historic levels.

Match-funding through the Fruit and Veg Aid Scheme has

resulted in new varieties, Spanish tunnels and table top production. This has had a transformational

effect on the UK soft fruit industry


Average yields have increased from 10 to 22t/ha. This was achieved through research and development; and investing in varieties, husbandry skills and technology to improve the crops productivity. This has included:

• New varieties

• Growing systems – extending season and increase efficiency e.g. Spanish polytunnels, table top production

• Reductions in crop lifespan – quicker to fruit

• Artificial growing media – lowers disease pressure

• Irrigation and hydroponics – optimise water supply and nutrition

• Crop coverings – encourage earlier crops

• Mechanisation

• Storage

• Grading and packing

• IT for efficient orders and dispatch.

This type of innovation has allowed growers to extend the cropping season for UK strawberries and improve quality. The benefit of this innovation and investment has enabled growers to respond to the 180% increase in demand between 1997 and 2015. Despite this impressive productivity gain there is still potential to increase production and improve on the UK’s 69% self-sufficiency.

Figure 3 UK strawberry productivity

UK Strawberry production – 3 year rolling averageSource: Defra Horticulture Statistics 2015, Savills

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Strawberries (continued)


Apples

Match-funded investment by POs has resulted in significant yield increases over the last 15 years, with five-year average yields currently around 26t/ha (Figure 4). New intensive orchard planting systems supported by match-funded investment are now achieving 55t/ha by planting twin-stemmed trees and fruit wall systems with new varieties and clones. These new systems make fruit easier to harvest and trees easier to plant and prune, thus improving labour efficiency. Collaborative investment in storage has delivered better product quality across the marketing season and allowed growers to better meet the retailer standards.

Together the improved yields and labour efficiency reduce the cost of production. POs have also invested in hail insurance and hail netting which helps stabilise returns and thus improves resilience. Investment in 52-week storage is a clear objective of the industry to increase self-sufficiency levels.


resulted in new varieties, new growing systems, increased efficiencies and increased outputs. This has resulted in a doubling of apple yields and the

opportunity to compete with overseas production

Figure 4 UK apple productivity


UK Apple production – 3 year rolling averageSource: Defra Horticulture Statistics 2015, Savills

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Around 50% of dry onions consumed in the UK are domestically produced with the balance supplied by imported product. Match-funded investment by Greenshoots PO in state of the art box storage technology has extended their marketing period to 49 weeks reducing the UK reliance on imported onions. The investment in a

higher quality storage method and modern environmental control enabled storage periods to be extended and grade-outs to be reduced, leading to a 7.5% increase in marketable yield. Support for investment in this type of technology has resulted in a 31% increase in the five year average onion yield since 1990 (Figure 5).

Figure 5 UK onion productivity

Onions


supported major development in onion storage systems. The use of

cutting edge technology has reduced wastage, increased marketed volumes and extended the UK

onion supply season


UK Onions (dry) production – 3 year rolling averageSource: Defra Horticulture Statistics 2015, Savills

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It is essential that we continually strive to improve the sustainability of our food supply. The UK is one of only nine countries in the world with a sustainable supply of rainwater and has a moral imperative to produce food. The UK food policy has global implications. Many countries from which we import fresh produce are already water stressed and pressure on their resources is likely to increase (Benton et al., 2017).

Match-funding through the Fruit and Vegetables Aid Scheme has supported the introduction of a range of technologies designed to make UK production more sustainable.

POs in the salad and soft fruit sector have invested in hydroponic growing systems which are often water positive. The closed growing system avoids nutrients leaching into the environment. Pesticide use can be reduced, and the use of water as the growing medium eliminates the risks associated with soil-borne bacteria and pests.

Top fruit POs have invested in innovative irrigation systems such as AutoAgronom. This system analyses plants needs and automatically provides accurate amounts of water and feed in response to the demand. This cuts fertiliser and water use, reduces the risk of nutrient leaching, and improves water use efficiency.

PO investment in hail netting has reduced pesticide use on top fruit, as well as maintaining crop quantity and quality. By enclosing orchards, trials have shown codling moth catches and fruit damage are significantly lower.

Greenshoots PO invested in onion storage which uses a computer-controlled air suction system for drying and refrigeration, this provided a more energy efficient solution than traditional blown air systems. A further example of how match-funding has been applied to deliver more sustainable production systems.

Packaging is another area where gains have been made in sustainability through the application of latest technology. Wye Fruit PO was the first to trial heat-seal film lids on soft fruit punnets, a technology which has since become standard. Sainsbury’s calculated that replacing plastic clip-on lids with heat-seal film lids on its soft fruit lines cut plastic use by 440 tonnes a year (Sainsbury’s, 2011).

Waste is a big issue throughout the food chain from field to fork and impacts on sustainability. Producers have developed a variety of processes and technology to cut waste. Research by Greenshoots PO pioneered a technique allowing leeks to be stored for up to 6 weeks. This enables production to be stored to smooth supply and prevent surplus crop going to waste. Crops can be harvested in advance of adverse weather conditions, stored and then supplied to the market avoiding disruption in the supply chain and crop waste in field.

Principle 3: Sustainable

Sustainability


supported an introduction of a range of technologies designed to reduce

inputs notably, water, energy, and plant protection

products


The quality control element of a PO’s activity plays an important role in food safety and traceability. The complexity of the requirements, coupled with the needs for specialist skills would be a barrier for many smaller producers. Waveney Mushrooms PO provides these services to its five grower members, who would not be able to justify the necessary equipment. The match-funding enables the PO to invest in equipment such as an x-ray machine, which helps growers to meet the food safety requirements of their customers.

Collaborating within a Producer Organisation allows smaller growers to employ dedicated specialist staff to monitor food safety standards. By pooling resource, and through the provision of match- funding, POs’ funding can professionalise this aspect of their business and meet the exacting standards set by retailers. This has a positive effect on contract retention and bids for new contracts.

Support services provided by POs are vital in meeting the exacting standards of retailers and providing a safe and secure food supply for consumers. Certification under the Red Tractor Assurance Fresh Produce Scheme, and a range of other schemes, is a fundamental requirement of most leading retailers. In some cases a PO will be supplying a number of multiple retailers operating their own quality assurance schemes. Access to professional support from the POs helps growers to meet these standards and share costs.

A further benefit of the Fruit and Vegetables Aid Scheme is a legal principle underlying the scheme which allows Producer Organisations, irrespective of size, to bargain on a fair basis with the purchasers, notably the multiples which control 85% of the UK fresh produce market. This is best illustrated by Recital 7 to Council Regulation 2200/96:

The effect of this regulation is to encourage the grouping together of producers into a Producer Organisation, and by so doing protect them [to a large extent] against complaints under competition law.

Match-funding through the Fruit and Veg Aid Scheme

has funded a wide range of quality assurance activities making UK produce safer and more trusted

by the UK consumer

Increasing trust

Principle 4: Trusted

Whereas Producer Organisations are the basic elements in the common market organisation, the decentralised operation of which they ensure at their level; whereas, in the face of ever greater concen-tration of demand, the grouping of supply through these organisations is more than ever an economic necessity in order to strengthen the position of producers in the market;

‘ ‘


Principle 5: Resilient


allowed growers to take measures to safeguard their businesses against

an increasingly volatile climate

Increasingly producers need to be resilient against threats from weather, disease, labour availability and contract loss. Retailers are looking for consistency and reliability of supply to meet consumers demand 365 24/7. The PO model helps growers by providing a mechanism to develop a stronger supply relationship, by increased scale and greater concentration of supply.

With 85% of UK demand for fresh produce met by ten main retailers, the options in terms of volume customers is limited. Collaborating through membership of a PO can provide protection against income shocks caused by a contract loss. The additional scale created through collaborating as a PO opens up opportunities for growers to access a more diverse range of retailers and other customers, thereby spreading risk and making growers more resilient.

A major issue facing UK producers is price pressure and maintaining margins with static or declining

output prices and increasing costs, notably labour costs. This situation was described by John Pelham (Horticultural Business Specialist, Andersons Midlands) at the Worshipful Company of Fruiterers conference as the cost-price ‘pincer’.

Innovation supported and encouraged by POs has enabled producers to boost productivity, mitigate cost increases and reduce labour costs. This is an important factor in maintaining competitiveness and remaining in business.

For example, Figure 8 shows that the strawberry price has remained constant between 1999 and 2015, although labour costs increased by 222%. PO funded investment in the development and rollout of table top production allowed growers to cut labour requirements and contain costs at 32% of crop value. Without this innovation labour cost as a proportion of price would be closer to 48% at current values.

Year Strawberry £/Tonne

Labour Hours/Tonne

Labour £/Hour

Labour £/Tonne

Labour % Price

Soil grown

1999 3,000 180 3.60 648 22

2015 3,000 180 8.00 1,440 48

Table top, substrate grown

2015 3,000 120 8.00 960 32

(Pelham, 2017)

Increasing resilience

Figure 6 Strawberries: illustration of the cost-price pincer


Greenshoots is a PO which produces onions, carrots, parsnips and leeks. It formed in 2003 and currently has seven members.

They operate one of the UK’s largest onion supply chains, supplying J Sainsbury’s via Produce World. The group identified that onion storage had become a constraint on expansion. Half of their crop was being stored in rented third party storage which was not necessarily in the optimum locations and varied in terms of age, technology, performance availability, and cost. Because the storage was not the highest quality they could not store onions beyond March, so could not benefit from higher late season prices in April to June. On average the rented storage was costing member’s £40-45 per tonne.

The members developed a business case for constructing a dedicated modern onion store and identified a site next to their main customer, Produce World, which would allow efficient logistics. Produce World grades and packs the onions and then supplies them to J Sainsbury’s.

To add value to their produce the group planned a box store rather than bulk store. Box stores protect the crops quality better, cutting grade-outs. Greenshoots calculated that their marketable yield would be 7.5% higher as a result. Combined the higher quality storage method and modern environmental control would allow the storage period to be extended so that members can benefit from late season premium prices.

Building a 6,720 box store would cost the group £3.9 million and attract £1.9 million of support from the Fruit and Vegetables Aid Scheme. This support was essential to the viability of the project as even after grant aid the modern store would cost the group £74 per tonne for ten years. The higher marketable yield and late season premium prices help to offset the higher storage cost. The Fruit and Vegetables Aid Scheme funding unlocked this project and allowed the members to expand production by over 5,000t within two years, and substitute imported onions with domestic production.

Storage

Case studies

Name Greenshoots Limited

Type Horticultural PO

Formation Cooperative formed in 2003, PO since 2003

Size Seven members, £32 million turnover

Greenshoots objective is to help our members to collaborate in producing and marketing vegetables in an environmentally sustainable way, whilst exceeding our customers’ expectations

‘ ‘


Wye Fruit was formed by a group of growers who saw that cooperation was necessary in order to achieve economies of scale and keep competitive in the food chain. A rationale that is as relevant today as it was in 1963. The cooperative operates a centralised site where both soft and top fruit are stored, graded, packed and then distributed to supermarkets. Supported by the Fresh Fruit and Vegetables Aid Scheme, the cooperative became a PO which allows the growers to access markets, expertise and technology that they would not be able to access as individuals.

The group was the first in the UK to trial heat-sealed film tops on soft fruit punnets. This technique is now widely adopted in the industry and has improved sustainability by cutting plastic use. They were also the first growers to adopt flow wrap technology.

By collaborating the group is able to invest in the most efficient technology to maintain margin and justify a dedicated professional management team. The group’s average cost of storage is 20% below external contract rates. Its charge for processing

is also lower, members pay 10p/Kg for grading, bin hire, packing and transport; elsewhere 13-14p/Kg is charged for grading plus additional transport and bin hire charges. Labour is the group’s biggest cost; it employs 100 skilled full time staff and an additional 70 at peak season. Reducing labour requirements is a target for future PO investment.

The support and access to markets provided by the scheme has allowed the members to expand production. In the past five years top fruit production has increased by 60%, whilst soft fruit has increased 75%. The members attribute a substantial proportion of this growth to the support of the Fresh Fruit and Vegetables Aid Scheme.

Grading and packing

Name Wye Fruit Limited

Type Top and soft fruit PO

Formation Cooperative formed in 1963, PO since 1998

Size 14 members, £25 million turnover


By collaborating the group is able to invest in the most efficient technology to maintain margin and justify a dedicated professional management team.‘ ‘

The members of Asplins PO are geographically dispersed from Aberdeenshire in the north, to the New Forest in the south. Membership of the PO has allowed the members to invest in production methods which have increased their yields and crucially their consistency and predictability of supply. For soft fruit, research and development work has led to better varieties and husbandry skills, whilst capital investment in Spanish polytunnels and latterly table top production has improved control of the growing environment.

The PO was formed by a group of growers supplying the marketing desk Berryworld; since then the group has actively diversified its customer base to reduce risk. Asplins are at the forefront of the recent supply chain trend for supermarkets to seek to form direct relationships with growers. This allows the margin formerly made by marketing desks to remain in the value chain and increases transparency. A current

example is Sainsbury’s which has conducted a Value Chain Analysis process, and aims to transition its soft fruit procurement to 30% direct supply in 2017, 50% in 2018 and 70% in 2018.

Some individual growers however are nervous about dealing directly with supermarkets, and it is here that POs such as Asplins provide an advantage, especially for smaller growers. By collaborating with other growers via a PO, producers can collectively justify and access negotiating skills and increase their marketing power, counteracting the imbalance. The PO provides the experts required to bridge the gap between supplier and customer and allows the supplier to meet the retailer’s expectations for direct supply. Asplins now supplies Morrisons, Sainsbury’s, Lidl, Aldi, IPL/Asda and Iceland directly.

Marketing

Name The Asplins Producer Organisation Limited

Type Top and soft fruit PO

Formation PO since 1998

Size 12 members, £65 million turnover


The PO provides the experts required to bridge the gap between supplier and customer and allows the supplier to meet the retailer’s expectations for direct supply.‘ ‘

UK vegetable production and requirements (based on 2014 data)Source: Food Foundation, 2016

Mill

ion

Tonn

es/y

ear

8

6

4

2

0UK veg

production Veg available

(home production and imports)

Current consumption,

NDNS

Veg required for population to meet

5 A Day target*

Veg required for population to meet Eatwell Guidance*

*Assuming 50% reduction in current levels of household waste (29%) and supply chain waste (12%)

Figure 7 Average portions of fruit and vegetables per day

To meet nutrition requirements and unlock proven health benefits, fruit and vegetable consumption per capita should be increased. Both these factors provide compelling reasons to encourage an increase in UK fruit and vegetable production.

The current total supply (production and imports) of vegetables in the UK is similar to that needed for the population to meet the 5-A-Day target (Figure 8). However, household and food chain wastage

means not all of the supply is eaten, so consump-tion is below the target. The latest National Diet and Nutrition Survey data shows that only 8% of children and 25-28% of adults (aged 19-64) are meeting the 5-A-Day Target. Children average 2.8 portions per day, whilst adults average 3.9 for 19-64 year old men and 4.1 for 19-64 year old women (Public Health England, 2016) (Figure 7).

.

The importance of fruit and vegetables as part of a healthy diet is well established. Studies have shown that fruit and vegetable consumption significantly reduces all-cause mortality, premature deaths, and mortality from both cancer and cardiovascular disease. Fruit and vegetable consumption also reduces the incidence of heart disease, cardiovascular disease, cancer and risk of stroke (Oyebode et al., 2014; Institute for Health Metrics and Evaluation, 2017; Aune et al., 2017). Oyebode et al., (2014) and Aune et al., (2017) both found that the benefits of fruit and vegetable consumption are enhanced as consumption increases up to and beyond seven portions a day.

Increased vegetable consumption may also protect against type 2 diabetes (Cooper et al., 2012), a disease which accounts for 9% of the NHS budget (House of Commons Health Committee evidence session 21 January 2016).

Major retailers are keen to encourage domestic production and support increased fruit and vegetable consumption as part of healthier diets. Nearly 50 organisations, including the major retailers Aldi, Co-op, Lidl, Marks & Spencer, Morrisons, Sainsbury’s and Tesco have pledged under the Government’s Public Health Responsibility Deal to “do more to create a positive environment that supports and enables people to increase their consumption of fruit and vegetables” (Department of Health, 2017).

Nutrition targets and health benefits

Supplementary notes 1:

Figure 8 UK vegetable production and requirements

Importance of fresh fruit and vegetable consumption


2.8

3.9

4.1

Our £8 billion trade deficit in fruit and vegetables (Defra, 2016b) is partly due to changing consumer tastes - demand has increased for fruit and vegetables such as pineapples and avocados, which are not grown in the UK. Secondly, seasonality has been all but eradicated from the market, so imports are required to satisfy consumer demand when the crop cannot be produced in the UK (Lang and Schoen, 2016). Innovation has, however, substantially extended the economic season for many British crops, for instance UK strawberry harvesting can now start in early March and run through to December.

As a consequence of these trends the UK grower’s share of total UK fruit and vegetable supply has fallen over the last 20 years. However, for fruit types which we can produce in the UK, self-sufficiency has improved. Between 1997 and 2015 the tonnage of apples, pears, plums and strawberries produced increased by 53%, consumption increased by 24% meaning that self-sufficiency for these fruits increased from 32% to 39%, a 24% improvement (Defra, 2016b). Looking at total UK fruit production, 18% of fruit consumption is now domestically produced, compared to 11% in 1997.

The positive impact of POs can be seen in the growth of the UK strawberry industry. Since the introduction of POs UK strawberry production has increased over 250%. In 1997 33,000 tonnes were produced, by 2015 this had risen to 115,000 tonnes (Defra, 2016c). Over this period demand for strawberries has increased by 153%, so with the support of the Scheme, the industry has been able to increase self-sufficiency from 49% to 69%. During May to September, UK producers meet almost 100% of UK consumers demand (British Summer Fruits, 2017).

Grant aid has been used to support variety and technological improvements which have boosted productivity. In 1997 the three year average yield was 8.6t/ha, it is now 23.0t/ha. The impact of the grant aid has been significant, but the sums involved are relatively modest, Figure 9 shows the rapid growth in strawberry turnover at the major POs, against the grant aid they received for their soft fruit businesses.

Self-sufficiency


Figure 9 Strawberry turnover and soft fruit grant aid

Strawberry turnover and soft fruit grant aidSource: Aggregated data for major soft fruit POs

£ m

illio

ns

140

120

100

80

60

40

20

02002 2004 2006 2008 2010 2012

Strawberry turnover Total grant aid relating to soft fruit

2014 2016

Growth of UK strawberry production



Aune, D., Giovannucci, E., Boffetta, P., Fadnes, L.T., Keum, N., Norat, T., Greenwodd, D.C., Riboli, E., Vatten, L.J. and Tonstad, S. 2017. Fruit and vegetable intake and the risk of cardiovascular disease, total cancer and all-cause mortality–a systematic review and dose-response meta-analysis of prospective studies. International Journal of Epidemiology. [Online]. Oxford University Press. Available from: https://doi.org/10.1093/ije/dyw319

Benton, T., Crawford, J., Doherty, B., Fastoso, F., Gonzalez-Jimenez, H., Ingram, J., Lang, L., Smith, P and Tiffin, R. 2017. British Food: What role should UK producers have in feeding the UK? [Online]. WM Morrison plc. Available from: https://www. morrisons-corporate.com/Global/local-foodmakers/ BritishFoodReportFeb2017.pdf

British Summer Fruits. 2017. The Impact of Brexit on the UK Soft Fruit Industry – Seasonal labour report. British Summer Fruits.

Cooper, A.J., Sharp, S.J., Lentjes, M.A.H., Luben, R.N., Kahw, K., Wareham, N.J. and Forouhi, N.G. 2012. A prospective study of the association between quantity and variety of fruit and vegetable intake and incident type 2 diabetes. Diabetes Care, 35(6), pp.1293–1300. Available from: http://care.diabetes-journals.org/content/35/6/1293.long

Defra. 2016a. British food and farming at a glance. [Online]. Defra. Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/515048/food-farmingstats-release-07apr16.pdf

Defra. 2016b. Food Statistics Pocket Book 2016. [Online]. Defra. Available from: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/553390/foodpocket-book-2016report-rev-15sep16.pdf

Defra. 2016c. Horticulture Statistics – Dataset 2015. [Online]. Defra. Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/539797/hort-dataset-22jul16.ods

Department of Health. 2017. Public Health Responsibility Deal – F6. Fruit and vegetables. [Online]. Department of Health. Available from: https://responsibilitydeal.dh.gov.uk/pledges/pledge/?pl=34

Food Foundation. 2016. Veg Facts – A briefing by the Food Foundation. [Online]. Food Foundation Available from: http://foodfoundation.org.uk/wp-content/ uploads/2016/11/FF-Veg-Doc-V5.pdf

House of Commons Health Committee evidence session 21 January 2016. Childhood obesity—brave and bold action. 604 c1596. [Online]. UK Parliament. Available from: https://www.publications. parliament.uk/pa/cm201516/cmhansrd/cm160121/ debtext/160121-0002.htm#16012124000001

Institute for Health Metrics and Evaluation. 2017. GBD Compare | Viz Hub. [Online]. IHME. Available from: https://vizhub.healthdata.org/gbd-compare/

Lang, T. and Schoen, V. (2016). Horticulture in the UK: potential for meeting dietary guideline demands. UK: Food Research Collaboration.

NFU. 2014. Consumers want retailers to back British farming. [Online]. NFU. Available from: http://www.nfuonline.com/misc/press-centre/press-releases/ consumers-want-retailers-to-back-british-farming/

NFU. 2015. Who’s backing British farming?. [Online]. NFU. Available from: http://www.nfuonline.com/back-british-farming/campaign-supporters-hub/whos-backing-british-farming/

Office for National Statistics. 2017. Consumer Price Inflation time series dataset. [Online]. Office for National Statistics. Available from: https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceindices

Oyebode, O., Gordon-Dseagu, V., Walker, A. and Mindell J.S. 2014 Fruit and vegetable consumption and all-cause, cancer and CVD mortality: analysis of Health Survey for England data. Journal of Epidemiol Community Health, 2014 Sep;68(9) pp.856-862.

Pelham. J. 2017. Technical and business developments to counter the cost / price pincer. Presented at the Worshipful Company of Fruiterers conference, London, 16 March 2017. Hereford: Andersons Midlands.

Public Health England. 2016. National Diet and Nutrition Survey Results from Years 5 and 6 (combined) of the Rolling Programme (2012/2013 – 2013/2014). [Online]. Public Health England. Available from: https://www.gov.uk/government/uploads/sys-tem/uploads/attachment_data/file/551352/NDNS_Y5_6_UK_Main_Text.pdf

Sainsbury’s. 2011. Reducing packaging to a minimum. [Online]. J Sainsbury plc. Available from: http:// www.j-sainsbury.co.uk/blog/2011/09/reducing- packaging-to-a-minumum/

ABB Marketing

Anglian Pea Growers

Angus Growers

Asplins, The

Aylsham Growers

Berry Garden Growers

East of Scotland Growers

FarmFresh PO

Fen Peas

Fresh Growers

Fruit Growers Alliance

Fruition PO

G’s Growers

Green Pea Company, The

Greenshoots

Growco

Holbeach Marsh

Mid Kent Growers

Mockbeggar

Northway Mushrooms

Plantsman PO

Scottish Borders Produce

SGT (Society of Growers of Topfruit)

Snaith Salads

South Devon Organic Producers

South Eastern Produce

Speciality Produce

Stemgold Peas

Suffolk Produce

Swaythorpe Growers

Waveney Mushrooms

Westgrowers

Wye Fruit

.

The UK POs.

References


The initiative for this report started at a meeting of leading figures from the fresh produce industry in July 2016. The meeting identified key issues for the sector resulting from the decision to exit the EU. Among these was the future for the UK’s 33 Producer Organisations (POs).

In October 2016, a meeting was convened for the UK POs, and a decision was taken to prepare a report highlighting the achievements of the PO system and setting out the case for the continuation of the scheme post 2019.

The structure and content of the report has been guided by a steering group comprising Nick Allen, Berry Gardens PO; Fay Coulson, G’s PO; Martin Evans, FreshgrowPO; Chris Highwood, FarmFresh PO; Carmella Meyer, Plantsman PO; Chris Rose, Asplins PO; Keith Leddington Hill Laurence Gould; Hayley Campbell Gibbons, NFU.

Andrew Teanby of Savills was seconded by Savills to draft the report and the overall co-ordination was undertaken by Jack Ward of British Growers.

The report



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