Between the Field and the Plate: Distribution

A bunch of carrots, a pint of strawberries and a few potatoes? Sure, but from the small local producer or from the tried-and- true supermarket? Today, when we want to get our fruits and vegetables, there are tons of choices. It’s time to take a closer look and see how they get to us.

Distribution: The Intermediary Between Producers and Consumers

Food rarely falls from the sky, arranging itself into a beautiful fruit salad on our waiting plates. We have to work to produce it or we have to move around to find it. And while it’s true that we’re far removed from having to go hunting in order to eat, there’s a real jungle of food choices out there. Food is available virtually all the time. Without even talking about where fruits and vegetables are grown, we want to take a look at how we get to them. So what are the hunting grounds of our modern times?

The oldest form of distribution is a face-to- face supply chain. There’s no intermediary, no detours, just someone purchasing directly from the producer. This was the most common distribution circuit up until World War II. But just as the war was left behind, so there have been numerous evolutions in our society.

And our perception of how we access food has evolved. In 1950 in France, at the dawn of the consumer revolution, the distribution circuits generally involved accessing traditional structures. At the time in France there were 795,827 shops, of which 375,850 were focused on food. Sales techniques were traditional. Stores were typically associated with that old image of a shopkeeper in a rumpled shirt, pencil tucked behind the ear, offering a relatively small variety of goods at a relatively high price.

That model, which worked for decades, began to show its limits during the 1950s, and new models began to appear. Society’s evolutions began to impose new norms: producing more, with lower prices and a larger variety of products. It was in response to these norms that the supermarket arrived in France in 1957 and the superstore in 1963. Thus began the era of mass distribution. This evolution also called for separating the players involved in production, processing and sales. In other words, it contributed to putting more and more space between the producer and the consumer.

The impact of these new networks was so great that between 1965 and 1968 the average surface area of supermarkets increased by 14%. In 1968 they had absorbed more than 40% of the sales increase in food products, competing against virtually every other form of distribution. In 1969, 25% of production was handled by large distributors. Large-scale distribution thus imposed itself as an unavoidable way to fill up our shopping baskets.

By the 1980s, the cycle shifted back a bit, and there were new developments in short circuits that were alternatives to large-scale distribution. These fell back out of favor in the 1990s before beginning to grow again post-2000. It is a phenomenon that exists at the margins of large distribution networks and processing plants, and that is seeing mounting competition across Europe. So today, what networks should we turn to? Where do we buy fruits and vegetables?

Consumption Trends

Where do we buy our fruits and vegetables? Why do we choose to do so? Because it’s on our way? Because it’s the only one that reflects our values? Because it’s the one where things are cheapest?

All of these factors have an impact. But nonetheless, it seems that consumers are most attentive to one thing: cost. It is the most important criteria in our shopping decisions. Nonetheless, according to Kantar Worldpanel, three other aspects are also essential:

  • Saving time
  • Product quality
  • Client proximity

The quest to save time is notably seen in the progress of Drive (increasing 0.5% to have 4% of the market) and in the purchasing of “ready-to- eat” products. The quest for proximity is seen in the new rise of short circuits and proximate circuits.

In addition, food is still heavily attached to the idea of pleasure for French households. And a certain lack of confidence in the quality of available food can perhaps explain the surge in “homemade” products. These may be raw materials that we cook at home, or products that were made by an individual and that we buy for ourselves. These are products that give us a sense of control in terms of the quality that they’re providing.

The amount spent per household on fresh fruits and vegetables has increased by 5% since 2014. This increase is in large part due to rising prices (5.5%). Volume has stayed relatively stable (-0.5%) in the past 5 years. Purchases of fresh fruits and vegetables amount purchased total cost average price.

Purchases of fresh fruits and vegetables by French households.

Different distribution circuits

It appears that for about 80% of respondents, the distribution circuit isn’t in and of itself a real criteria. And practically, fruits and vegetables belong to one of three circuits: the hypermarket, the supermarket, and smaller markets. A relatively small number of consumers frequent specialty shops or short supply chains such as those selling directly from producer to consumer. Lets take a closer look at the different circuits.

Different markets and average prices by distribution circuit (total fresh fruits and vegetables)

Hypermarkets and supermarkets

In France, notwithstanding a slight decline in 2015, hypermarkets control over 33% of the market. The decline in purchases for this sector was balanced by a rise in online purchases (from 0.3% of the market to 1.7%). Supermarkets represent an additional 18.3% of the market. In other words, these two circuits by themselves represented more than half of the fruit and vegetable distribution in France in 2015.

We should point out that supermarkets and hypermarkets have begun investing more and more in organic markets. E. Leclerc has a special organic price comparer (lebiomoinscher.com), Carrefour recently bought Greenweez (the organic leader of the internet in France) and Auchan opened its first organic market in Paris (Coeur de nature).

The hard-discount stores

Hard-discount stores are brands such as Aldi, Lidl and Leader Price. These are traditionally known for selling fewer items but at very competitive prices. This type of distribution was declining in 2013, representing 10.7% of the market. This was in large part due to a reduction in the number of retail stores, an overall price increase and a reduction in the number of items purchased during the average shopping trip.

This sector is also starting to become involved in the organic market. For example, Lidl has begun offering an organic line called “Si bon, si bio”, including roughly 40 products. The other brands are similarly starting to include a number of organic offers on their shelves.

Markets

In 2013, markets also saw their market share diminishing, representing only 12.5% of the total. This was the fourth consecutive year of decline.

Specialty shops

Finally, a sector that isn’t seeing their market share decrease: specialty shops. These are retail locations that only distribute a single product category. They’re oftentimes found in cities and are of relatively small size. For greengrocers, for example, there has been an increase of 0.1%, giving them 7.7% of the market. Fresh retailers (GSF) have similarly seen an increase of 0.4%, raising the total to 3.5%.

Proximity shops

This category includes brands with a relatively small retail area, situated close to people’s homes or work. Examples would be the small Monoprix or Carrefour Market located just down the street. This market segment has also increased by 0.1%, arriving at a total of 6.4%.

Bonus

There’s one category that wasn’t examined in the study, and it deserves a bit of our attention: short supply chains and proximate circuits. If the numbers don’t show massive growth in this sector, it is in part because they can be difficult to quantify, and they nonetheless are much beloved by the press and consumers alike. They allow us to adapt to a serious evolution in our society: cities are eating up 26 m2 of countryside every second. That means that the producer is moving ever further from the heart of our cities, and logistics are becoming more and more complex. Short circuits bring a fresh breath of air, and have an intuitive logic to them. Today in France, 1 farmer out of 5 participates in these short circuits. To better understand the idea, here’s a definition:

👉 Short supply chains include either direct sales from the producer to the consumer (farm sales, farmers’ markets…) or indirect sales that include only one intermediary between the producer and the consumer (specialty retailers such as butchers or a restaurant).

All sectors are touched by short circuits, from honey and vegetables (50% of operations are involved), to fruits and wine (25% of operations), and animal products (10%). Short circuit sales represent roughly 1.5% of household food consumption in France, which translates into total revenues of about €2.5B in 2010. What’s more, numerous studies show that for roughly 50% of consumers a direct sale is a way to ensure product quality and origin.

The future of distribution is being constructed

Distribution is a problem of scale that is undergoing a real revolution. The impact is such that we should be asking ourselves if the models that we know today aren’t already obsolete.

We’ve seen for some time a vast increase in the number of shops in high-traffic areas (train stations, airports, subways). The idea is to save as much time as possible and shop by taking a quick moment during one’s commute. The transformation of airports is developing in this sense. The newest ones are transforming themselves into little cities, termed by some as the “aerotropolis”. Some believe that these evolutions will radically change the landscape of our cities and our ways of consumption. Wait and see…

But the revolution in food distribution is only at its very beginning. How do we know? The giants of the digital age are more and more interested in this sector. Amazon recently launched its Amazon Prime Now service, letting people order almost 30 varieties of fresh fruits and vegetables through its app, with a minimum order of just 19 euros and delivered within 2 hours. And for just 6.90 euros more, you can receive the order within the hour. There is also Amazon Fresh, an at-home delivery service that acts as an online market. Clients have access to traditional food offers (fresh and dry goods), and they can also order with shops and restaurants nearby, using the site as a platform. Google is working on a similar offer, having launched Google Express for testing in San Francisco and Los Angeles. It offers clients the possibility of having fruits, vegetables, eggs, meat and dairy products delivered directly to their home that same day.

Finally, over the past few years Instacart has been pushing the American market forward, as the startup has raised over 44 million euros to accelerate their growth. The concept is to put a client in touch with their neighbor, who is certified as a “personal shopper,” with the neighbor doing the shopping for them. This service isn’t yet available in France, but it is likely only a question of time.

So, where to go to fill up your cart?

If there are multiple options available, there is one trend that is starting to become clear: spend as little time as possible and have access to quality products. Certain brands are making their mark in short circuits, proximate stores or specialty shops. There are thus options that match all kinds of needs, and many types of consumer wishes. So, where do you buy your fruits and vegetables? Tell us, and we’ll tell us who you are (or at least, part of who you are ;)


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