May 3, 2007
GHQ: The Category That Keeps on Growing
Written and Developed by the Grocery Headquarters Staff
Through a special arrangement, what follows is an excerpt of a recent article from Grocery Headquarters magazine, presented here for discussion.
The fresh produce category just keeps getting bigger, and more retailers are expanding their sections to take advantage of that growth and of consumer demand for new varieties of fruits and vegetables.
According to Nielsen’s Strategic Planner, dollar sales of prepackaged UPC-coded fresh produce items rose by an impressive 6.4 percent to $12.35 billion in the 52 weeks ended Jan. 27, while unit sales rose by 1.3 percent. The increase in dollar sales came on the heels of a slightly larger 7.6 percent gain during the 52-week period a year earlier.
Leading the charge were such products as garlic, herbs, potatoes, lettuce and kiwi, each of which posted double-digit dollar sales gains during the year. Industry observers say a growing desire for different types of fruits and vegetables has caused many consumers to search for new types of produce for their meals. Also, many say that the aging Baby Boomer generation is extremely interested in eating produce as part of a healthy diet.
With the produce category performing so well, retailers are battling among themselves for consumer dollars. Many realize that freshness is the most important factor in persuading shoppers to visit their stores for produce, but they also understand that developing the right image though the use of signage, displays and lighting can draw shoppers into the section, as well.
Interestingly, many industry observers say that price is not as much an issue with produce as with many other supermarket categories. Consumers, it seems, remain relatively unconcerned with the cost of an item as long as their other key expectations are satisfied.
There were some changes in sales growth from one year to another. In the latest 52-week period, sales of spinach fell by 13 percent after a 15.6 percent gain the previous year. Many observers say concern over E. coli after an outbreak during the summer hurt spinach volume. Sales of precut salad mix also fell during the tracked period.
Observers predict that sales of fresh produce will continue to increase at a good pace over the next few years.
Discussion
Questions: Do you see any signs of the growth in fresh produce slowing down?
How can food retailers further capitalize on the apparently strong underlying
produce trend?
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Shoppers want convenience and they’re sometimes willing to pay extra for it. Retailers have to be wary of more E. Coli outbreaks, since they’re certain to come, and the publicity is very damaging. Many people still avoid fresh spinach.
Buying local or at least “more local” produce is also popping up on the radar screens of affluent shoppers. Down the road a piece, I also look for a backlash against excessive packaging in the produce department, as there has been in other categories. And, with the continuing focus on obesity, positioning produce as a tool to help with weight loss can’t be a bad idea.
I think there are a couple of consumer trends at play that retailers could take advantage of for produce departments. One is menu-driven shopping lists – creating shopping lists for say 5 nights of dinners, featuring some seasonal produce items, like asparagus in the spring, or tomatoes in the summer.
The other thing retailers can do in this category is take that whole “prepackaged” thing in a different direction: by pre-assembling measured amounts of ingredients to match up to featured recipes. You want the perfect broiled vegetable medley for 4? Here it is already sliced and diced, with the dash of chopped fresh basil too. And the recipe card taped to the package for when you make it at home.
Being late to the discussion since I’m on the West Coast, I can say I concur with many of the observations expressed by others so far regarding factors impacting the growth of fresh produce i.e. baby boomers, healthier lifestyles, innovation, section merchandising etc. Another element that I believe is a factor is multi-cultural: Asians and Latinos specifically bring to the U.S. a shopping and consumption tradition where “fresh” everything is an important part of their culture and shopping behavior. Its why they shop (more often) than the general public and a key influencer on which retailers to patronize. For example during the Lent period, almost every independent Hispanic grocery store has a pallet or two of “nopal” (cactus) sitting in the produce section.
Great comments all–and certainly fresh produce is “on trend” in many ways. One question that comes to mind in looking at these numbers, however, is substitution. That is, these numbers report the tremendous growth in prepackaged produce–but has there been a corresponding drop in bulk produce sales? What happens to bulk lettuce when prepackaged salads hit the shelf?
Are dollar sales driven by trade-up to things like pre-packaged? Organic? Moving from basics to basil? Don’t know the answers–and if these trends are driving margin into the produce department, flat or even declining tonnage isn’t such an issue.
The growth of fresh produce reflects both the health emphasis and the affluence of our society. Expect it to continue as long as these drivers remain in place. There are two opportunities, however, to drive even further produce growth that, in my opinion, haven’t been fully exploited and need to be brought into the mix.
>Product innovation and differentiation that expand the eating occasions for fresh produce.
>Truly differentiated produce departments. There’s no question that consumers can differentiate among stores on the basis of produce, but among the top-performers, are there examples–with the possible exception of Whole Foods and HEB Central Market–of truly differentiated produce departments?
There will probably be many who disagree, but I don’t think we have begun to scratch the surface in either of these areas, and as we do, it will lead to even further growth in produce.
The real trend here is that society, as a whole, is eating healthier. Us baby boomers are trying to stay alive longer, so we’re eating more fruits and veggies and want more variety. The younger set has been better trained in their eating habits, but don’t want to get bored.
A few years back when I asked my 10 year old niece if she wanted a snack, she said carrots or cauliflower. What kind of snack is that? Where’s the chips or candy? Ah, youth.
Growers are getting better at growing it and society is getting better at eating it so the retailers must keep up. There’s also this new fascination with the European style open-air market, but I’m not sure if that’s not just a fad.
We recently finished a large R&D study that had category specific findings. There were some interesting findings about fresh produce. Of the categories we studied, it was by far, the most likely to impact the shopper’s image of the store overall. Basically, fresh produce has a strong advertising and signage effect. On the other hand, some other product categories were more fun to shop for. While retailers are trying to capitalize on health and wellness, they should not forget shoppers’ interest in indulgence and giving themselves a treat. My suspicion is that retailers will do a little re-balancing of priorities at some point.
The growth in produce reflects a number of fundamental trends and issues for retailers.
Most evidently, it shows the desire of consumers for fresh foods. But even more importantly, it reflects an increased level of food sophistication and a growing rejection of convenient, processed foods as the primary solution at mealtime. This has significant implications for both manufacturers and retailers.
The retail battle over produce is critical to the store’s image. It is often the first department shopped and forms the impression of the shopping experience.
In our research, we find that the produce department is the area consumers love to shop. It appeals to the senses; it is colorful, tactile, and has pleasant aromas.
Perhaps there are lessons to be learned here for merchandising the whole store. It’s about the experience as well as the products.
Consumers will continue to look for fresh produce and will be attracted to grocers that take precautions with the suppliers they work with to achieve “safe produce.” As consumers get more health conscious, they will look for more varieties and the fresher the better.
There are a few ideas grocers can do to attract these consumers: 1) Expand the natural herb section; 2) Have a nutritionist on site several times a month to discuss benefits, recipes and tips; 3) Buy items from local farmers; 4)Keep clean and maintained, mark items down before they’re rotten and continually rotate fresh items.
The “fresh revolution” continues. With the A&P Fresh formats as well as Bloom and Tesco’s Fresh and Easy entry, the marketplace has voted and “fresh” is the word.
I feel that this revolution has long legs. The produce section of today’s fresh format stores is chock full of exotic and fresh varieties of fruits and veggies, colorfully displayed.
It’s fun to eat healthy. And the availability of all kinds of produce all year round only benefits the consumer. Bambino watermelons are my favorite.
Availability and price are the key elements to the long haul of this phenomenon.
The comments above are all instructive. Perhaps one additional contributor to the higher $ sales is the dramatic rise in food price inflation over the same time period. If for no other reason, I think this factor will contribute to similar (with upside risk) gains moving forward.
Well, are these UPC prepackaged produce products included in the “home delivery” program? Secondly, there has been a normalcy of good weather in all world regions for produce growing. And if not, one geographic location usually compensates for the “hit” produce area.
One would wonder, besides lettuce–whole or shredded, easy UPC produce to mark and bag, like apples, potatoes, bananas,etc.; and/or peppers, etc.; captures the major selling produce products in today’s marketplace, with demanding shoppers and needed, segmented categories?
OBVIOUSLY, SOMETHING IS WORKING IN THE SUPERMARKETS. BUT, ARE THESE PRODUCE ITEMS THE HIGH MARGIN, OR LOWER MARGIN ONES?
Who wins, the very popular and service driven, privatly owned produce chain, or the supermarkets?
Hmmmmmmmmmmmmmmmm
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Shoppers want convenience and they’re sometimes willing to pay extra for it. Retailers have to be wary of more E. Coli outbreaks, since they’re certain to come, and the publicity is very damaging. Many people still avoid fresh spinach.
Buying local or at least “more local” produce is also popping up on the radar screens of affluent shoppers. Down the road a piece, I also look for a backlash against excessive packaging in the produce department, as there has been in other categories. And, with the continuing focus on obesity, positioning produce as a tool to help with weight loss can’t be a bad idea.
I think there are a couple of consumer trends at play that retailers could take advantage of for produce departments. One is menu-driven shopping lists – creating shopping lists for say 5 nights of dinners, featuring some seasonal produce items, like asparagus in the spring, or tomatoes in the summer.
The other thing retailers can do in this category is take that whole “prepackaged” thing in a different direction: by pre-assembling measured amounts of ingredients to match up to featured recipes. You want the perfect broiled vegetable medley for 4? Here it is already sliced and diced, with the dash of chopped fresh basil too. And the recipe card taped to the package for when you make it at home.
Being late to the discussion since I’m on the West Coast, I can say I concur with many of the observations expressed by others so far regarding factors impacting the growth of fresh produce i.e. baby boomers, healthier lifestyles, innovation, section merchandising etc. Another element that I believe is a factor is multi-cultural: Asians and Latinos specifically bring to the U.S. a shopping and consumption tradition where “fresh” everything is an important part of their culture and shopping behavior. Its why they shop (more often) than the general public and a key influencer on which retailers to patronize. For example during the Lent period, almost every independent Hispanic grocery store has a pallet or two of “nopal” (cactus) sitting in the produce section.
Great comments all–and certainly fresh produce is “on trend” in many ways. One question that comes to mind in looking at these numbers, however, is substitution. That is, these numbers report the tremendous growth in prepackaged produce–but has there been a corresponding drop in bulk produce sales? What happens to bulk lettuce when prepackaged salads hit the shelf?
Are dollar sales driven by trade-up to things like pre-packaged? Organic? Moving from basics to basil? Don’t know the answers–and if these trends are driving margin into the produce department, flat or even declining tonnage isn’t such an issue.
The growth of fresh produce reflects both the health emphasis and the affluence of our society. Expect it to continue as long as these drivers remain in place. There are two opportunities, however, to drive even further produce growth that, in my opinion, haven’t been fully exploited and need to be brought into the mix.
>Product innovation and differentiation that expand the eating occasions for fresh produce.
>Truly differentiated produce departments. There’s no question that consumers can differentiate among stores on the basis of produce, but among the top-performers, are there examples–with the possible exception of Whole Foods and HEB Central Market–of truly differentiated produce departments?
There will probably be many who disagree, but I don’t think we have begun to scratch the surface in either of these areas, and as we do, it will lead to even further growth in produce.
The real trend here is that society, as a whole, is eating healthier. Us baby boomers are trying to stay alive longer, so we’re eating more fruits and veggies and want more variety. The younger set has been better trained in their eating habits, but don’t want to get bored.
A few years back when I asked my 10 year old niece if she wanted a snack, she said carrots or cauliflower. What kind of snack is that? Where’s the chips or candy? Ah, youth.
Growers are getting better at growing it and society is getting better at eating it so the retailers must keep up. There’s also this new fascination with the European style open-air market, but I’m not sure if that’s not just a fad.
We recently finished a large R&D study that had category specific findings. There were some interesting findings about fresh produce. Of the categories we studied, it was by far, the most likely to impact the shopper’s image of the store overall. Basically, fresh produce has a strong advertising and signage effect. On the other hand, some other product categories were more fun to shop for. While retailers are trying to capitalize on health and wellness, they should not forget shoppers’ interest in indulgence and giving themselves a treat. My suspicion is that retailers will do a little re-balancing of priorities at some point.
The growth in produce reflects a number of fundamental trends and issues for retailers.
Most evidently, it shows the desire of consumers for fresh foods. But even more importantly, it reflects an increased level of food sophistication and a growing rejection of convenient, processed foods as the primary solution at mealtime. This has significant implications for both manufacturers and retailers.
The retail battle over produce is critical to the store’s image. It is often the first department shopped and forms the impression of the shopping experience.
In our research, we find that the produce department is the area consumers love to shop. It appeals to the senses; it is colorful, tactile, and has pleasant aromas.
Perhaps there are lessons to be learned here for merchandising the whole store. It’s about the experience as well as the products.
Consumers will continue to look for fresh produce and will be attracted to grocers that take precautions with the suppliers they work with to achieve “safe produce.” As consumers get more health conscious, they will look for more varieties and the fresher the better.
There are a few ideas grocers can do to attract these consumers: 1) Expand the natural herb section; 2) Have a nutritionist on site several times a month to discuss benefits, recipes and tips; 3) Buy items from local farmers; 4)Keep clean and maintained, mark items down before they’re rotten and continually rotate fresh items.
The “fresh revolution” continues. With the A&P Fresh formats as well as Bloom and Tesco’s Fresh and Easy entry, the marketplace has voted and “fresh” is the word.
I feel that this revolution has long legs. The produce section of today’s fresh format stores is chock full of exotic and fresh varieties of fruits and veggies, colorfully displayed.
It’s fun to eat healthy. And the availability of all kinds of produce all year round only benefits the consumer. Bambino watermelons are my favorite.
Availability and price are the key elements to the long haul of this phenomenon.
The comments above are all instructive. Perhaps one additional contributor to the higher $ sales is the dramatic rise in food price inflation over the same time period. If for no other reason, I think this factor will contribute to similar (with upside risk) gains moving forward.
Well, are these UPC prepackaged produce products included in the “home delivery” program? Secondly, there has been a normalcy of good weather in all world regions for produce growing. And if not, one geographic location usually compensates for the “hit” produce area.
One would wonder, besides lettuce–whole or shredded, easy UPC produce to mark and bag, like apples, potatoes, bananas,etc.; and/or peppers, etc.; captures the major selling produce products in today’s marketplace, with demanding shoppers and needed, segmented categories?
OBVIOUSLY, SOMETHING IS WORKING IN THE SUPERMARKETS. BUT, ARE THESE PRODUCE ITEMS THE HIGH MARGIN, OR LOWER MARGIN ONES?
Who wins, the very popular and service driven, privatly owned produce chain, or the supermarkets?
Hmmmmmmmmmmmmmmmm