Senior analyst David Pattison at Plimsoll said the industry had a stark choice: change or risk failure. Of the 1,500 businesses surveyed, 272 were found to be in danger because of declining margins and rising debt.
Pattison said: "At these high risk companies, the managers need to act quickly to get their firms back on a decent financial footing. It seems inevitable that we will see a period of consolidation. Job losses and certainly cost-cutting are essential if these companies are to survive."
A further 326 companies, or 22% of those surveyed were having problems, but were not on the critical list, he said. At the other end of the scale, a healthy 456 firms were described as strong and 166 as good.
The survey also found that sales were dropping steadily at the average small fresh produce business - notably those turning over less than £250,000 a year. Wilting revenue left them open to collapse or takeover, Pattison added.
The average company in the sector sells £4.6m a year and has grown at 2.6% a year for the past ten years, the survey found.
Retail sales of produce are buoyant, though, and Nigel Jenney, chief executive of the FPC, rejected the pessimistic analysis. There were plenty of examples of small, positive companies in the sector, he said.
"Like many other industries, fresh produce is highly competitive and companies must respond to the needs of customers and consumers while ensuring their manufacturing processes become more efficient."
Increasing consumer interest in a healthy diet and Government backing for schemes such as 5-a-day and school fruit presented opportunities.