Trends in the leafy greens: sustainability, health, and investors

What impact will technology have on our business? How did the COVID-pandemic influence consumer behaviour? And how are the dynamics between lettuce growers and venture capital investors evolving? During our celebratory year of 20 Years Multileaf®, industry analyst Cindy van Rijswick from Rabobank Research Food & Agribusiness talks about the trends in leafy greens.

As industry expert in fruits and vegetables, Cindy foresees market developments and assesses the competitiveness of businesses. She has noted some trends in the lettuce industry: some that have been on the rise for years and years, some boosted by the COVID pandemic.

Sustainability and sourcing locally

An important trend that has been growing steadily and will impact the entire value chain of leafy greens is sustainability, notes Cindy. “Governments, supermarkets, and consumers alike stress the importance of sustainably grown greens, so it is up to the entire value chain to meet their demands.” Sustainability might be an added value for now, but it won’t be long before it is a mere license to operate. For growers, that has big consequences; they need to adapt their operating processes to these changing needs.

Cindy: “And of course, it is up to breeders to offer plants that are even more resilient to the ever more unpredictable climate. That being said, we believe precision farming will take a flight as regulations concerning sustainable farming will continue to pile up. It is an important step towards dealing with risks and restrictions in the field of lettuce.”

Playing into the sustainability trend, is the growing emphasis on locally grown produce. “Although many countries still import lettuce during winter, we see a growing share coming from local greenhouses. Icebergs that are intended for consumption in north-western Europe, will probably still be grown in Spain for the near future, but other types are more often grown indoors.” This is partially accelerated by incidents with quality and supply over the last few years. “Supermarkets have seen instances of drops in quality and supply, due to heavy rainfall or harsh winters. So, they are willing to pay for a more steady and planned supply from greenhouses. Especially when there is an added product chain awaiting crops to be processed and packaged.”

And there are its own advantages to growing lettuce in greenhouses, Cindy adds. “Like less need for pesticides, less water usage, a stable quality and longer shelf life. And with innovations like led lighting to kill viruses and develop flavour or colour in vegetables, predictability of quality and supply goes up. But we also see that growers are hesitant and are awaiting results of others, thinking the ROI will be too long for now.”

Ecommerce and consumer behaviour

The steady growth in e-commerce and digitalization with consumers over the last decade, applies to lettuce too: it has experienced roughly the same growth in online demand as other groceries. “It might have taken consumers a while to get used to ordering produce online, but the COVID pandemic seems to have given them the final push. And although online groceries only account for 6% of all groceries bought in the Netherlands, that number has doubled over the last year. We believe that trend is here to stay. Which means that growers and producers have to keep other types of packaging into account”, says Cindy.

The growing emphasis on health and healthy foods has only been accelerated by Corona, too. “Although we might expect people to behave healthier, it is actually institutions like the government, insurance companies and retailers who have fuelled this movement. Some European countries have introduced nutri-scores on packaged foods (and the Netherlands is debating the introduction as well). All this might have a positive impact on the sales of leafy veggies, but it will be a slow process over the years to come.”

The lingering effects of COVID on consumer behaviour

In general, the rise of prepped and packaged lettuce and salads has paused during the pandemic. “Over the last year, people have been cooking at home more, and thus have been buying whole heads and basic mixed bags. We have seen an abrupt decline in ready-to-eat and on-the-go meals during the pandemic. That is a clear break from the pattern of previous years.”

How temporary the COVID effects are, is hard to determine. “Most likely, convenience products will make a quick comeback. We already see signs of this in some markets like the UK. But there are also some structural changes. Because a large group of office workers will continue to work from home more often, even after the pandemic, we expect roughly 1 billion lunches in the EU to change from ‘in the office’ or ‘on the go’ to ‘at home’. This can impact certain players in the foodservice business, such as caterers and canteens. We do believe the market for pre-packaged lettuce and salads will recover, but the effects of the pandemic will linger.”

Cindy explains how the pandemic has put the brakes on innovation. “With retailers and restaurants less likely to experiment, we predict a reduced assortment of varieties. And although people might be willing to try new things while cooking at home, it remains a question to which extend this will compensate for the loss that growers of the more exceptional varieties of lettuce have experienced due to the closing of restaurants.”

Growers will probably be happy to stick to their known varieties, Cindy explains, not needing the added risks and insecurities of trying new things. “With so much focus on different varieties to entice consumers over the last few years, breeders should now put their innovate power to use creating varieties that make growers’ lives easier.” Like the Teen Leaf-varieties, that are so much more resilient and uniform, making it easier to harvest mechanically and reducing labour costs.

The influence of venture capital in the leafy business

A final trend, that we have seen all over the world, is the growing interest of venture capitalist in the production chain of lettuce. In America, the typically larger lettuce growing businesses have been on the radar of investors for a while. And we now see an emerging interest in the European family businesses and coops too.

“We see a shift in the way businesses are run. In the old days, we saw that the grower was typically also the owner, the entrepreneur and the salesperson in their business. Nowadays, we see a trend in offering stock options and reorganizing the business. Families keep an interest in their corporation but are not necessarily the sole owners anymore.”

The interest of venture capital on European businesses is rather new, making it hard to pinpoint the actual influence or trends. “We can predict, as we have seen in the United States, that with investors, new management arrives. They will want to scale up business and will invest in technology and risk assessment to gain more control and have a steady stream of income. But the industry does not fit the idea of making a quick profit and increasingly, investors are aware. Only investors with affinity for the product will commit themselves long-term.”

Vegetables People Love

BASF vegetable seeds ambition is to make healthy eating enjoyable and sustainable by offering vegetable solutions that meet and raise the consumer’s demands and expectations. We achieve this not only by creating improved varieties using state-of-the-art breeding practices but above all by working closely with partners throughout the vegetable value chain. Pro-actively contributing to increasing and enriching vegetable consumption through innovations that are healthy, enjoyable and sustainable.

Looking at all developments mentioned before, all stakeholders within our vegetable seeds value chain have to contribute to these changing circumstances, allowing all of us to meet consumers’ needs. Investing and adapting will entail different challenges to each of us. Together, we should focus on the long-term results and make sure that in the end, we’ll keep our promise to deliver Vegetables People Love.