With life so hectic, how can Americans fulfill their desire to eat healthy without dropping their fast-food habit?
Local companies like Ready Pac Produce Inc. and Dole Foods Inc. think they have the answer: packaging.
Packaged baby carrots have already freshened up kids’ lunchboxes, and packaged greens make it possible for two-earner families to put salad back on the dinner table.
Now fruits and vegetables neatly wrapped in plastic are showing up at fast-food chains.
When McDonald’s Corp. began selling a bag of sliced apples as an alternative to French fries, it chose a unit of Irwindale-based Ready Pac to supply a quarter of its 13,700 U.S. restaurants.
Such deals signal a new round of growth for packaged fruit and vegetables, building on their adoption by the nation’s supermarkets. This has led to heated competition and consolidation.
Ready Pac cemented its position as the No. 3 player in the industry when it purchased No. 4 Salad Time from Salinas-based grower Tanimura & Antle Co. last year. Still, it’s an underdog to the much-larger Dole, based in Westlake Village, and Fresh Express, a subsidiary of Chiquita Brands International Inc., based in Cincinnati.
“The smaller players do need to join forces to compete with the big guys,” said Bob Nielsen, senior vice president and chief administrative officer of Tanimura, which became a 25 percent shareholder in Ready Pac.
The intensity of competition is reflected in a lawsuit filed by Dole, accusing Ready Pac of poaching several executives.
After a Dole executive jumped ship last year to become Ready Pac’s chief executive, three sales executives followed this spring despite signing non-competition agreements, Dole alleged in the lawsuit, filed in Monterey County Superior Court.
Eric Schwartz, president of Dole’s fresh vegetables division, wouldn’t comment on the suit other than to say it was dropped last week. Officials at Ready Pac declined comment.
Diet debate
Overall, U.S. sales of fresh-cut produce rose to an estimated $15 billion in 2004 from just $3 billion a decade earlier, according to the International Fresh-Cut Produce Association.
Sales of salad bags in supermarkets are growing much faster than produce as a whole; they reached 7 percent of U.S. produce sales a year ago, surpassing bananas as the top-selling produce item at 6.8 percent, according to a Food Institute report.
Volume helps operators like Dole and Ready Pac keep prices for the salad bags lower than shoppers would pay buying the ingredients separately. And it’s also a more profitable segment than commodity produce. In its 2004 annual report, Dole said it was shifting its product mix toward value-added foods, such as ready-to-eat salads, because they were growing faster and had higher margins.
But growth in bagged salads has slowed to 4 percent last year from 10 percent a year four years ago, said Dole’s Schwartz. Now, pre-mixed salads and cut fruit are the areas Ready Pac and Dole are targeting for growth.
Demand for fresher foods is being spurred by criticism of processed foods in the U.S. diet. The fast-food industry has been singled out as a cause for the alarming rise in obesity, diabetes and heart disease. Still, the marriage between convenience and healthy eating is still shaky. McDonald’s sells the apple slices with a caramel dip, for example.
“It’s a way to blunt that negative publicity. It’s somewhat of a PR move,” said Bob Sandelman, chief executive of restaurant industry market research firm Sandelman & Associates in San Clemente.
The irony is that packaging helped fast foods and processed foods become a staple of American life in the first place. Everything from pre-cut French fries to sliced tomatoes to bags of chopped lettuce helped fast food restaurants cut labor costs and standardize their menus.
Though the underdog, Ready Pac is considered the innovator in the field and has been moving rapidly.
In 2000, it acquired Missa Bay in Swedesboro, N.J., which recently opened a new plant just to slice apples for McDonald’s. That year it also established partnerships with OBIM Fresh-cut Fruit Co. of Ft. Worth, Texas, and Canadian grower Veg Pro International Inc., and it dedicated a plant in Irwindale to fruit processing. This month, it secured $25 million of private equity financing to upgrade and expand its four plants in New Jersey, Indiana, Georgia and Irwindale.
This summer, Ready Pac introduced 8-ounce Grab-and-Go cups of water-packed carrots and celery. Its other products include varieties of Complete Salads, which have lettuce, croutons and a pouch of dressing, and various kinds of pre-cut, pre-washed vegetables such as carrots, cabbage, spinach in bags and tubs that can also be put directly into a microwave.
“They’re all rolling out new things, but Ready Pac has been ahead of the curve,” said Justin Marsling, managing editor of the Food Institute Report in Elmwood Park, N.J. “They’re more on the ball about getting new variations of things out there, like smaller packages for people to eat on the go.”
