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New markets and media mean expanding opportunities for growers and retailers

by Chip Carter | March 09, 2010
TAMPA, FL - Grower-shippers and retailers alike are missing out on opportunities for business from new markets and media, as a series of workshops at the Southeast Produce Council's 2010 Southern Exposure expo, held here March 4-6, revealed.

New opportunities representing hundreds of millions of dollars in new revenues exist from expanding WIC produce voucher programs, trending consumer interests, and industry utilization of social media like Facebook and Twitter.

Lorelei Disogra, vice president of nutrition and health for the United Fresh Produce Association and one of the pioneers of the 5 A Day Program, told workshop attendees about new opportunities in the WIC program, which provides federal assistance to needy mothers. WIC packages now include vouchers redeemable for produce, with adults receiving a $10 monthly allotment and children receiving $6 (soon to be $8).

Retailers participating in the program stand to gain a piece of a growing $750 million market.

"For years WIC had no fruit and vegetable component, but we worked 10 years to change that," Ms. Disogra said. "We wonder how to drive produce consumption -- here's a huge opportunity for all of us in the industry. It can help make up for some of the shrink due to the recession."

Anthony Barbieri of Acme Markets said of the program, "It's incremental business. This demographic never really bought produce [because] it was out of their realm. Our stores got a half-million dollar windfall. We have an opportunity to get produce in people's baskets who couldn't buy it before."

Ms. Disogra also updated growers on the federal fresh fruit and vegetable school snack program, which was funded in the 2008 budget. Schools with more than 50 percent lower-income population are eligible for funds to provide every student a daily fresh fruit or vegetable snack at no cost. The program was initially funded at $50 million per annum; this year's budget is $110 million, rising to $150 million next year through 2018.

"It really is a life-changing thing," Ms. Disogra said. "This program really gets kids hooked on fresh fruits and vegetables. When you think about who your future customers will be, this is one of the ways to promote that."

Meanwhile, consumer trends are proving to be a moving target as the U.S. struggles to recover from turbulent economic times, said Dick McKellogg, director of produce and floral merchandising for Lowes Food Stores Inc. in Winston-Salem, NC.

"I'm just a retailer trying to figure it out," Mr. McKellogg said. "I thought I had it figured out, but the last two years have been a challenge. What is the new normal? We don't know. It's not business as usual, as we've known it for the last few years."

Mr. McKellogg said that the economy represents a challenge to the produce department similar to what the bakery department faced during the low-carb diet craze. "That's now reversed," he said, noting that produce sales slipped by 2 percent last year after rising 2.3 percent in 2007-08.

According to Mr. McKellogg, the reasons included economic uncertainty, high unemployment and a lack of customer loyalty as shoppers hop from store to store looking for values. "There is no customer loyalty as families are trying to stretch their dollars," he said.

The good news is that consumers are eating more meals at home, and are willing to pay for quality as taste and flavor continue to be more important than price.

The bad news is that bargain-seeking customers are sticking to lists and less likely to try new items. They also are opting more often for frozen or canned fruit and vegetables, which have experienced a double-digit increase in sales during the recession, Mr. McKellogg said.

Mr. McKellogg conducted a small survey of retailers and found that 78 percent reported sluggish produce sales, 67 percent had felt the impact of deflation, and 100 percent agreed that consumers now focus on value over impulse. Of those surveyed, 78 percent said those numbers hold true for organic produce as well; the same percentage said customers are skipping value-added products.

Mr. McKellogg said that even his wife recently bought bagged carrots instead of value-added baby carrots. "When I asked where my baby carrots were, she told me, 'It won't take you long to peel those.' And she was right."

Mr. McKellogg said that there is a silver lining to the industry's current woes. Focus on locally grown products "feels good"; unable to control the economy, consumers are zeroing in on areas they can impact, like social responsibility and health and wellness.

He added that produce sales at Walmart were up 2 percent in the 13 weeks before Jan. 10, and more surprising, produce sales at Whole Foods rose 2.2 percent during the same time frame after four down quarters.

Still, said Tony DiMare, vice president of the DiMare Co. in Homestead, FL, retailers need to prudently apply the locally grown label.

"Should 'locally grown' be defined to a certain region, if that is the only region in production of a certain commodity or commodities during that period of time?" Mr. DiMare asked. "Without a clear definition of local, it will be impossible to verify that a product is local. The greater the potential for deception in 'local' claims, the more rapidly the term will become debased."

With consumers seeking ever-more information about the food they are buying, social media like Facebook and Twitter offer growers and retailers new opportunities to connect with an audience, said John Avola, market and Internet development manager of the Produce For Kids program.

Mr. Avola said that new data contradict current wisdom that such outlets are primarily for kids. In 2005, adults spent an average of 5.6 hours daily engaged with some form of media, while children spent 7.5 hours. Last year, those numbers had flipped, with adults averaging 8.9 hours daily versus 6.2 for kids.

Mr. Avola told growers and retailers that despite skepticism, "You already have a network in place you can tap into for social media. Your target audience is already online looking for you in their browsers."

Social media has potential for a "huge return on investment," Mr. Avola said, with opportunities for lead generation, networking and "focus groups on steroids" at no cost.

It takes patience to establish a social media presence, Mr. Avola cautioned, and consumers are not looking for advertising. Whole Foods has 1.75 million followers on Twitter and millions more on Facebook, but "90 percent of the information they offer there does not sell product. Consumers are looking for information - that's the main point."

While some growers and retailers worry that social media can be a distraction or, given rogue individuals or dissatisfied customers, even a hindrance or harm to business, Mr. Avola said those fears are unfounded.

"Don't panic," he said. "I hate to tell you this, but people are already talking about your company. Social media give you a chance to correct misperceptions, improve customer relations and directly engage dissatisfied customers."