Fruit & Vegetable Processing

Companies in this industry use freezing, canning, dehydrating, and pickling processes to preserve fruits and vegetables. Major companies include Dole, Kraft Heinz, Seneca Foods, Simplot, and The JM Smucker Co, and divisions of large food companies such as Conagra Brands and General Mills (all based in the US); as well as AGRANA (Austria), Bonduelle (France), Del Monte Pacific (Singapore), Greenyard (Belgium), La Doria (Italy), and McCain Foods (Canada).

The worldwide fruit and vegetable processing market is expected to grow about $18 billion by 2034, with a compound annual growth rate (CAGR) of about 6%, according to Precedence Research. Major exporters include Canada, Mexico, and Japan. China and India are high-growth markets for processed fruit and vegetables due to rising disposable income and large agricultural production.

The US fruit and vegetable processing industry includes about 1,900 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $72 billion.

COMPETITIVE LANDSCAPE

Demand is driven by food consumption, which depends on population growth. The profitability of individual companies depends on efficient operations, because products are commodities subject to intense price competition. Companies compete largely based on cost and their ability to distribute the finished product. Large companies have advantages in purchasing and distribution. Small companies can compete effectively in local or regional markets. The US industry is concentrated: the 50 largest companies generate about 60% of revenue.

Imports of fruit and vegetable preserves and specialty foods account for about 15% of the US market. Major sources of imports include Mexico, Canada, and China. Exports, mainly to Canada, Japan, and Mexico, account for less than 10% of US production.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major revenue sources by fruit and vegetable processing includes frozen dinners, which accounts for about 25% of the industry revenue. Other products include canned and fresh fruit juices (about 10%), canned soups and stews (about 5%), and dried and dehydrated fruits and vegetables (about 5%).

Raw materials are usually acquired from contract growers, who grow specific varieties of plants according to processor requirements. In Maine, for example, farmers grow Russet Burbank and Shepody potatoes for French fry processors, and various specialty varieties for potato chip processors. Grower contracts are usually for one year and typically specify product quality, a base price, and various price adjustments. While growers contract for a certain acreage, quantities of product can't be specified because crop yields can be sharply affected by weather and other factors. Almost all tomatoes are grown under contract because they are highly perishable, whereas a large open market exists for oranges and potatoes. Supply contracts for some fruits can extend up to ten years. Because fruit trees may not produce for several years, growers need long commitments. In long-term supply contracts, prices are negotiated annually.

Some canning operators produce their own cans, but most buy them from outside suppliers. Plant operations are usually highly seasonal, coinciding with the growth cycle of the crop; for many fruits and vegetables, this means harvesting and processing ("packing") from June to October. Temporary workers are hired and inventories grow substantially during the "pack" season. Some crops, such as potatoes, can have several harvests per year (although fall potatoes are by far the largest crop). To use plants most efficiently, many companies handle more than one crop, contracting for crops with differing harvest seasons.

While French fry, potato chip, and fruit processing plants produce a finished product, orange juice processors may produce bulk frozen concentrated orange juice (FCOJ) sold to remanufacturers that either package it as frozen orange juice or mix it with water and flavorings and package it as reconstituted, ready-to-serve (recon RTS) orange juice. Concentrated tomato paste shipped to remanufacturers accounts for a significant share of processed tomato products. Economies in transportation generally favor the location of fruit and vegetable processing plants near production fields, but FCOJ is more cheaply shipped to processors near customer markets, and potato chip processors are usually located near customer markets because their finished product is fragile. Show more