(Jan. 30, 2:54 p.m.) Fresh produce suppliers and retailers are adjusting to the economic realities of 2009, and one produce consultant says those realities may be so grim that 2008 might seem like party time.

“We may look back and say 7% unemployment was the good old days,” said Dick Spezzano, president of Spezzano Consulting Services, Monrovia, Calif. “At the end of this year we are going to look back at 2008 and say, ‘What a great year that was.’”

Spezzano speculated the nation’s unemployment rate could top 10% in 2009, straining family budgets and purchasing power.

A common belief in the industry is that the economic slump would cause an erosion of foodservice sales and a bump up in retail sales, Spezzano said. While the restaurant industry is down about 4% to 5%, Spezzano said many supermarkets don’t seem to be reaping big dividends from more consumers eating at home.

“When you read the quarterly (reports), the last quarter of the year has been flat in the supermarkets,” he said. “You say, gee, people have got to eat,” he said. “That’s true, but I think what you have seen is tremendous trading down and trading off.”

He said some consumers appear to be cutting back on driving, entertainment, eating out, vacations and food as their jobs have been lost and personal credit has tightened.

Spezzano said some supermarket departments are getting hurt worse than others. He said some floral industry leaders tell him the category is off 4% to 6%. Likewise, he said sales of alcohol reflect that consumers trading down from a $20 bottle of wine to a $10 bottle.

Some chains are closing stores or delaying expansion. Capital expenditures may be reduced 20% to 50% this year compared with last year, he said. He noted that Eden Prairie, Minn.-based Supervalu Inc. plans to close about 50 stores this year, and projections of store growth by Austin, Texas-based Whole Foods have been pared.

Produce retail sales numbers from the Perishables Group, West Dundee, Ill., show that total fresh produce dollar sales per store were up 3.8% in November, while volume per store was off 1.8% compared with last year. Average retail produce prices were up 5.7% compared with year ago levels.

“These numbers look an awful lot like October,” said Steve Lutz, executive vice president of the Perishables Group.

He said October and November reflected higher dollars and higher prices compared to year-ago levels. However, increasing numbers of produce categories have showed declining volumes. Exceptions to the volume trend include berries, grapes and avocados, which all showed double-digit volume growth in November.

Banana volume for November was off less than 1% despite a 20% increase in average prices. Most other commodities have languished.

“From a volume standpoint, it’s pretty negative across the board,” Lutz concluded.

“The dollars were up and the units were down,” Spezzano said. “What does that tell you? That tells you that the retailers are trying to get more margin.”

For example, while value-added produce marketers have not raised prices in the last couple of months, Spezzano said the Perishables Group figures show average retail prices for packaged salad still rose. For November, the Perishables Group reported that packaged salad sales were even with last year, with volume down 7% but prices 8% higher than a year ago.

For some items, Spezzano said retailers are willing to raise prices, sacrificing unit sales for an increase in category dollars.

“If they are getting less units and more dollars, they are getting more gross dollars, too,” he said.

Part of the reason retailers selectively raise prices, Spezzano said, is that the percentage of fresh produce sold on promotion appears to increasing.

For example, Spezzano said he recently visited a retailer who was running a promotion on grapes for 10 pounds for $10. The retailer said he sold about 20% more this year than a similar ad a year ago.

Normally 20% to 30% of total produce department sales are linked to promotions or ads, Spezzano said. With more fruits and vegetables sold on ad, retailers’ margins are lower.

If more produce is sold at promotion prices than typical, the gross margin may suffer a little. Retailers can recover their gross margin through price concessions from suppliers, operating more efficiently or raising prices, Spezzano said.

At the same time, chains are trying to create value, Spezzano said.

“You see more ads on more staples than we used to see,” he said.

For example, he said chains may promote iceberg lettuce instead of 1-pound salad mixes, promote bananas in place of grapes, or advertise navel oranges and apples in place of strawberries.

“There are more potato and onion ads — kind of the belly fillers of the produce department,” he said. “The produce department and the entire store are trying to create more value for the consumer.”

Lutz predicts the marketplace may see more deflationary pressure in the coming months.

For suppliers, Spezzano predicted some companies will refrain from new hires and not replace employees when they leave. Capital expenditures for grower-shippers may also be put off. Growers will resist adding acreage if their competitors go out of business.

“Their go-to-market plan is to stay as solid as possible and have a strong balance sheet,” he said. Suppliers say their buyers are already “beating them up” for better pricing and longer payment terms, he said.

Retailers may also try to extend payment terms, Spezzano said.

“If it is 22 days, it going to 24, if it is 30 days it is going to 34,” he said.