France
April 2011

Innovation generally exerts a positive impact on growth: an improving quality and broadening a product range do indeed contribute to stimulating demand. But does this well known and verified effect also operate in the fresh fruits and vegetables sector? A research team at the INRA-Toulouse School of Economics Joint Research Unit in Mathematics and Quantitative Economics has sought to answer this question in the case of fresh tomatoes (the most widely consumed vegetable in France). The study concerned the period 1990-2007 and measured the impact on total demand of the market introduction of vine and cherry tomatoes.

In the fresh fruits and vegetables sector, products are differentiated upstream of distribution by the breeding of varieties or modes of production (organic/standard). In the tomato market, the segmentation of supply may, for example, be based on the rehabilitation of old-fashioned varieties or the presentation of fruits with different calibres or colours. Thus, in the mid-1990s, two new products were introduced into a market dominated by traditional round tomatoes (95% of market share): vine tomatoes and cherry tomatoes.

Because of their stems and the odour they emit, vine tomatoes are associated with an image of a natural product, although their uses are similar to those of round tomatoes. Cherry tomatoes are more expensive and are positioned in a slightly differently targeted sector (snacking and appetisers) although a stronger trend towards culinary preparation has emerged in recent years. Until 1996, when these new products started to appear, the demand for fresh tomatoes had remained stable in France (at around 350,000 tonnes/year for home consumption). So was consumption stimulated by these innovative products? The authors of this paper say no. In fact, consumption has fallen in volume terms since 1996 (fewer than 320,000 tonnes in 2007), mainly in reaction to price increases, and the new products did not entail any taste modifications that favoured tomatoes. If the market share of vine tomatoes has risen sharply, this has been to the detriment of round tomatoes. But unlike vine tomatoes, the consumption of cherry tomatoes has seen an "independent" rise in demand compared with other products, but this remains a marginal niche market because the high prices demanded.

These evolutions are a good example of the product "cannibalisation" that occurs when a newly-introduced product is too little differentiated from those already present in the same range. Indeed, this substitution has exerted a negative effect on demand because of the higher prices demanded for these new products. However, this price effect has allowed producers to restore their profit margins. The authors conclude that the increase in the consumption of fresh vegetables (e.g. for health reasons) would result less from segmentation accompanied by a rise in prices than from efforts in numerous directions (transport, storage, harvesting at ripeness, etc.) that are designed to enable a uniform increase in the quality of all products.
 

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Published: April 14, 2011