Creating A Food Service Market For Local Produce

The Government has made the agriculture sector a prime target for growth, and the tourism food service industry an important sector for  increased sales. Government has commissioned several studies and
18 Oct 2014 07:55
Creating A Food Service Market For Local Produce
Most farmers in Fiji are small operators and need to work with other farmers to develop planting programmes to ensure supply over the long-term.

The Government has made the agriculture sector a prime target for growth, and the tourism food service industry an important sector for  increased sales. Government has commissioned several studies and a number of experts have looked into the issue. Government’s policy is that local producers be supported, because increasing market share will reduce the foreign exchange outflow and create positive growth in the economy. Other things involved in the shift of market share need to be considered,

Fiji tourist market has exceeded 600,000 visitors since 2010 and it is growing. The average tourist stay is around 9.4 days, representing in excess of 17 million meals consumed annually. Denarau also caters to significant numbers of local diners, so that will be around 20 million meals in total

How big is the tourism produce market?

Reliable data in 2007 showed imported produce met 80 per cent of demand. The tourism market was over $42 million, local consumption $35m. Tourism purchased over 660 tonnes of tomatoes annually. Local production of tomatoes is estimated at 150 tons, so current production would not meet  demand.

What sort of produce do the tourists want?

Tourists are on vacation but they want to eat basically what they eat at home. They will try a Fijian meal for an experience, not out of a desire to change their basic diet. The tourists are particular about produce quality and react badly to anything they deem to be sub-standard

What does the tourism industry want?

Research conducted by a leading food service company showed the top requirements for produce supply.

Quality and service are far more important than price. Half the managers said service was most important, the other half said quality  price was a consideration after suppliers had satisfied the first two points. Reliability was very important, followed by flexible purchase contract. They prefer a limited number of suppliers and to receive one monthly invoice and one monthly payment.

Managers need to be assured of consistency of supply. They go to great trouble and expense to set up their menus and any disruption of supply causes issues with guests. Kitchen protocols are also set up for the menus and a deletion of one dish causes considerable rearrangement in the process.

Managers are required to meet stringent food safety and handling requirements. One of the main drivers for this is insurance. Insurance companies will not honour claims that they deem to be caused by a failure to follow set standards.  They generally insist on dealing with suppliers who have food handling certification such as HACCP or ISO.

What are the barriers to improved market share?

It is a given that there is demand for local produce, but for farmers who have the desire to benefit from it, but not the resources, capacity or finances this is an impossible dream. Government uses high duties to deter locals from buying imports, but this does nothing to improve quality of local product. Farmers need help with funding and expertise. There are just a few types of produce that the local farmers need to concentrate on that make up the bulk of imported produce, including iceberg lettuce, tomatoes, capsicums, carrots, potatoes, onions and mushrooms. Some local produce is already up to international standard, including cucumber, cabbage and fresh herbs and these are strong in the tourism markets.

What does the food service supplier need to do?

First, be able to provide a wide range of products with assured availability and those products need to be to international standard. A credit facility needs to be available with all invoicing consolidated to one invoice.

They need a fleet of delivery vehicles designed for the product transportation, such as freezer units, cool units and dry goods units.

In the case of fruit and vegetables they will need to have access to a range of different suppliers in different parts of the world so that they can guarantee consistency of supply for seasonal items. And they will need a high level of working capital to support the credit they need to provide.

The issues with converting imported produce to local.

Primary among the issues is that farmers need to produce what the tourism segment wants. There is little demand for cassava or dalo and very specific standards for tomatoes. The F&B managers will not buy outside their standards. Consistency of supply is difficult when the items are seasonal in nature. Most farmers in Fiji are small operators, and need to work with other farmers to develop planting programmes to ensure supply over the long-term. The volume of supply required for the tourism and supermarket industries is huge and the farm pool also needs to be huge.

The tourism industry requires credit services so a very large amount of working capital is required to enter the market. If enough people get together and pool their finances then it is possible, but management will need to be tight. There are also middle-men that need to be paid so demand on operating capital is high.

Delivery also involves considerable capital. Vehicles acceptable to the buyers are expensive and need be relatively new. They need to be big, as the customer wants a single delivery, generally at a specified time each day. They want produce delivered in bulk so that they can take it fresh, straight to the kitchen. Most resorts want their delivery at the same time, so a fleet big enough to serve multiple customers has to be available.

All the warehouse, handling equipment and handling protocols have to be to the standard required by the customer. The only way to achieve this is to have a scale of operations big enough to warrant the capital expenditure. Small farmers will never achieve this operating alone. Getting the necessary certifications is also an expensive exercise, but needed to deal with the top level of hotels and resorts.

Can import substitution be achieved?

Yes, but slowly, with lots of work being put into developing the industry and changing its structure and focus. Government needs to take the lead in this as there is no immediate commercial return for a company to take on the task.

Supermarkets realise the benefits of buying local and they do not face as many obstacles as the tourism sector. They are starting to take the first tentative steps.

NewWorld, the second biggest supermarket brand in Fiji, is in the process of building a cold store in Nadarivatu. It will take commitment by the farmers, a number of acts of faith and a significant shift in attitude,  it will eventually happen because the rewards for the farmers and for the country are so great that self interest will eventually prevail.

What can the farmers do to grow their business

There are a number of things that need to be done to move the local industry forward.

The supply chain needs to be rationalised and upgraded as the quality controls are currently haphazard or non-existent and not consistent.

Delivery standards need to be lifted. Farmers could work through existing farmer’s associations or one of the government bodies charged with assisting farmers, but it will be difficult to find one that has the expertise, structure and finances to bring the farmers to the same level of service the importers are now providing. The existing food service operators should be considered as partners as they are already equipped and know the business.

The cost of bringing the farmers up to the standards and certifications tourist operators require will be both time consuming and expensive. Extensive pre-harvest control and planning is needed to ensure consistency of supply. For farmers to grow market share they need to develop import quality standards.

The issues that stand in the way of growth are understood, all that is required is a lot of hard work in areas where the local farming and marketing is falling down.

Feedback:  newsroom@fijisun.com.fj


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