Produce fuels growth at C.H. Robinson

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: July 14, 2012 - 9:52 PM

The international logistics company has delved deep into brand-name fruits and vegetables as it broadens its business.

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Drew Schwartzhoff, Director of Marketing at C.H. Robinson in the Eden Prairie Cub foods at 8015 Den Road on June 26, 2012.

Photo: Joel Koyama, Star Tribune

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C.H. Robinson Worldwide, which handles $10 billion in global cargo deliveries a year, is searching for growth in unusual places -- apple orchards and orange groves.

Robinson, an Eden Prairie logistics company that matches shippers with transportation companies, is these days deeply involved in growing, inspecting, marketing and shipping fruits and vegetables that arrive in the store under popular brand names such as Mott's apples, Tropicana oranges and Welch's grapes.

The company got its start in 1905 delivering generic produce to grocery stores, but in the late 1990s began to ride the popularity of national brand-name produce that analysts say typically carries a 30 percent higher price than generic produce.

It's one example of Robinson's attempts to broaden its base so it can hit the 15 percent average annual revenue growth it has promised Wall Street. Last year, the company achieved 11.5 percent growth, creating uneasiness among analysts about its prospects.

Are fruit and vegetables the answer? Not by themselves. Robinson won't say how big its brand-name produce initiative is, but says it represents only a portion Robinson's total produce business, which is only 8 percent of total company revenue.

But fruit and vegetables can help, because Robinson said there's a big market for branded produce that helps grocery stores differentiate themselves from competitors.

"Produce is one of the biggest reasons, besides location, that people pick a food store," said Drew Schwartzhoff, director of sourcing marketing at C.H. Robinson. "Our independent research shows that half of consumers find branding of produce pretty important."

Among Robinson's customers in the Twin Cities is Supervalu, which markets Robinson-delivered produce brands through its Cub Foods stores.

Robinson's produce strategy is three-pronged: It will sell grocers national name-brand produce, provide private-label produce with the grocer's name on it or just sell generic produce. Robinson says grocery retailers opt for different approaches: traditional grocers may see national name brands as a way to draw customers, while discount stores may opt for the bargain-priced generic produce.

Robinson won't disclose the way it charges for different types of produce, saying it varies by customer and by the source of the produce. But Illinois-based market researcher Nielsen Perishables Group says the produce industry has distinct pricing tiers.

"On average across produce, branded produce has a 30 percent price premium over unbranded produce, and an 11 percent price premium over private-label produce," said Jen Campuzano, senior account manager of Nielsen Perishables.

Pricing and promotion

Schwartzhoff says pricing isn't that simple.

"Can retailers charge more for branded products if they want to? In certain categories and in certain situations they can. Or they may use branded produce to differentiate themselves from competitors," Schwartzhoff said. "But branding is more about driving year-round promotional programs that have value."

Robinson's foray into branded produce began in 1998 with an exclusive license to sell apples to food retailers under the Mott's brand name, and has accelerated since then as the company signed similar licenses with Welch's and Tropicana and bought three companies that either had lesser-known brands or expertise in produce marketing.

The effort paralleled a major shift in the grocery industry in the 1990s, when it switched from wholesale produce sourcing to brand-name marketing, Schwartzhoff said.

Since then, Robinson's brand-name marketing has been expanded to cover more kinds of produce. Today, the company's brands include sweet corn (Sweet Elite), personal watermelons (Melon Up) and Southern vegetables (Glory Collard Greens.)

Robinson is far more involved with its branded fruit than one would guess from its obvious role as the company that delivers apples and oranges to stores.

"We start back in the early side of the supply chain, working with growers to determine what is needed and how to maximize the opportunity," Schwartzhoff said. "We're looking for new varieties at the seed end, working on specific sizing or color characteristics and making sure the produce is packed to order and has the shortest supply chain to reach our customers and consumers."

Robinson is also in charge of quality control.

"All of our branded produce meets strict quality specifications set up between us and the brand owners," Schwartzhoff said. "There are electronic and manual sorting to remove product that doesn't meet specifications, and we have food safety and control teams that visit our growers to make sure they're following the specifications for the produce and the packaging. We also hire a third-party service to inspect the products for individual customers."

All this effort is worth it because industry sales of branded produce are increasing. While branded produce sales dropped 2 percent in 2009, the early part of the recession, they have grown since, Campuzano said. Private labels, typically with a store's own brand name, have grown steadily since 2007. Meanwhile unbranded produce sales have continued to drop since 2009.

Is there a difference?

But is there really a difference between branded oranges and unbranded ones? It doesn't matter, says John Dean, a Minneapolis retail consultant who specializes in supermarkets. What matters is what consumers believe.

"Brand names and brand loyalty came into play at a point where products didn't have the quality they do today," Dean said. "Brand names are now largely a marketing ploy."

If it's a ploy, it's one that doesn't always work. During the recession, some people opted for less-expensive generic produce, or chose store brand names over national ones.

The Packer, a trade publication for the fresh produce industry, said in its 2012 Fresh Trends report that 47 percent of shoppers say they bought generic brands because they were on sale often. It also reported that 76 percent of shoppers say the quality of store-brand produce is just as good as the national name brands.

But Fred Wilkinson, managing editor of the Packer, said brand-name produce sometimes gives products a psychological edge.

"Some brands have a certain equity to them," Wilkinson said. "A Green Giant label might stand out in a crowded produce aisle more than a bulk product would."

Schwartzhoff said brands only help sell produce if the product quality is there.

"If the product isn't good, it doesn't matter what brand is on it," Schwartzhoff said. "We can't sell rotten fruit or vegetables. Our marketing isn't that good."

Steve Alexander • 612-673-4553

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