Analysis
increase of roughly 20% since 2020 for employers with 26 or more employees. But, from years of personal experi- ence within the fresh produce industry, it’s rare to pay only a minimum wage even for harvest crews or packers, given the skill set needed for the job and the challenges in labor availability. So, it’s safe to assume the average wage paid for labor throughout the fresh produce industry in California will be much higher than $15.50/hour starting in January 2023. Without transferring these costs onto the individual consumer, one can only assume that the combination of increased fuel surcharges, increased pricing of the under- lying packaging ingredients, and rising labor costs will eat through the margins of several parties within the fresh produce industry supply chain. These cost increases are only sustainable with the ability to pass the cost along to the consumers. Unless these costs can be transferred onto consum- ers, which could be difficult given the looming news of recession all around us, there will likely be radical shifts that will occur in the fresh produce industry. There will be more pressure for harvest automation, which is incredibly difficult given the variability in harvesting complexity per commodity. Producers will need government support to continue to fund expensive automation initiatives. Expect to see significant consolidation among producers and shippers to enable economies of scale in the production, packing and shipping of fresh produce goods. The news of a looming recession may prohibit the abil- ity to pass these costs along to consumers, but supermar- ket executives should take this information into account when making merchandising and procurement decisions. While the Consumer Price Index (CPI) hovered at 8.2% for September, there is a much harsher reality within the fresh produce segment. Increased fuel prices are one of the most difficult cost challenges facing the industry.
need for additional plastic products to safely ship products directly to customers. Finally, while this is an outline of the underlying cost dynamics of the ingredients that make up packaging, of course none of these include the increased cost of freight and transportation to haul the packaging from the manu- facturer/suppliers to the shippers. Increased fuel prices are one of the most difficult cost challenges facing the industry. The average retail price of all grades of U.S. gasoline in 2020 was $2.258/gallon, according to the U.S. Energy Information Administration. The price increased to $3.935/gallon in October 2022. This represents a 74% increase in fuel prices since 2020. These sustained high prices are usually passed on as freight sur- charges from the logistics/transportation companies to whoever contracts the freight to haul the packaging from the supplier to the shipper. Finally, the increasing cost of labor to harvest and pack fresh produce goods is not slowing down. Many fresh produce goods are produced and shipped from California. California will have a state-wide minimum wage of $15.50/ hour for all employer sizes on January 1, 2023. This is an
Vision Magazine 47
December 2022
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