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IGSA convention: Understanding consumer is key to increasing sales

by John Groh | September 12, 2010
SUN VALLEY, ID — While the Idaho potato industry is coming off a difficult year plagued by high volume and suppressed prices, there is optimism that a shorter crop will lead to better returns for growers. But a veteran retailer warned the industry that it must be proactive in maintaining and improving its standing among consumers.

At a luncheon session Sept. 1 during the 82nd annual Idaho Grower Shipper Association convention, here, Bruce Peterson, president of Peterson Insights, who is best known for having led the perishables division at Walmart Stores Inc. during that retailer's unprecedented growth, affirmed that it has been a difficult year for the produce industry.

"Consumption has been pretty flat," he said. “We can hope that consumption increases. We can hope that retailers pay more. We can hope that expenses go down. We can hope that transportation costs go down. Or we can hope to win the lottery. But hope is not a strategy.”

Stating that produce marketing has changed drastically, Mr. Peterson said that a “one-size-fits-all approach to retailers does not maximize returns. Retailers are responding to consumers’ needs with more specialized formats, and grower-shippers need to give more thought to that.”

The concept of mass-marketing has become antiquated, said Mr. Peterson. “It doesn’t matter how many SKUs a store carries. What matters is that they carry the right SKUs and have a relevant assortment.”

To achieve that relevant assortment, it is critical for a retailer to understand the profile of its consumers in order to maximize inventory turns. Among the key points to understand:

* Gender — 85 percent of decisions made in a supermarket are made by women, which is a challenge for the traditionally male-dominated produce industry.

* Age — The age of the target market must be taken into consideration, and the industry should pay special attention to the 18-to-35-year-olds, who are driving produce purchases.

* Household income — Retailers cannot have the same assortment in all their stores, and so they must determine the economic status of their customers and carry items that fit that status.

* Ethnic background — By 2050, the United States will be the largest Spanish- speaking nation in the world, which bodes well for the produce industry, as Hispanic consumers are heavy consumers of produce. Still, establishing its customer profile is key in carrying the correct items.

* Education — The level of education plays a role in purchasing habits, and determining that level of education is key for a retailer to meet its consumers’ needs.

“Various consumer demographics play into who buys what and why,” said Mr. Peterson. “Retailers develop these profiles because mass-marketing is dead in the water. If this is done right, they will maximize their inventory turns.”

Developing new products is also a way for grower-shippers to make inroads with consumers, said Mr. Peterson. But four factors must be taken into consideration: the value proposition, the convenience proposition, the health and wellness proposition, and the indulgence proposition.

“If you hit on one of those, it could have an impact,” he said. “If you hit on two or more, [a product] could be big.”

For product innovations, he suggested taking common products and using them in an uncommon way. “Spend time with chefs, and find out what people are eating, when and why,” Mr. Peterson said. “And tailor innovations to a specific demographic.”

Finally, Mr. Peterson addressed food safety in the produce industry, calling it a “sleeping giant that can wake up at any time.” He said that compared to other commodities, potatoes are lower-risk items because they are cooked. Still, “the best time to fix the roof is when it is not raining,” he said, urging the industry to take a proactive approach toward food safety and traceability.

“You can have 99 percent of the industry focused on food safety, but that 1 percent can sink it with an outbreak,” he said. “It doesn’t even have to be in your geographic area.”