RETAIL VIEW: Fresh-cut products continue growth pattern
- November 05, 2007
HOUSTON -- Consumer research and analysis of scan data reveal that the fresh-cut category continues to be in a very strong growth mode, and produce suppliers should continue to look for new opportunities in this arena.
At least that was the major take-home point during a workshop at the recent Produce Marketing Association Fresh Summit, here, that covered the shopping and buying habits of American consumers.
Steve Lutz and Jonna Parker of the Perishables Group presented the results of their research, which polled 3,000 consumers and analyzed scan data from 13,000 retail operations.
Mr. Lutz said that all the research shows that consumers are taking fewer stock-up trips to the supermarket, spending less time in the market and in the kitchen, and thus are open to any product that reduces both their shopping and cooking times.
"Fresh-cut is still one of the fastest-growing sectors," he said.
Ms. Parker said that fresh-cut produce is a $3 billion industry.
For the purposes of the survey, the Perishables Group team categorized basically all cut produce as fresh-cut except items that would fit in the packaged salad category. Items such as sliced mushrooms and baby carrots were included as well.
Mr. Lutz said that fresh-cut items are soaring in popularity as consumers are buying more items and suppliers are gaining distribution across the United States. The top fresh-cut items, such as mixed vegetables, have close to 100 percent distribution, but there are many items in fresh-cut fruit that do not have great penetration, so there is great opportunity for growth.
Ms. Parker said the scan data show that the fresh-cut segment is currently growing at the rate of 5-6 percent compared to 4 percent for the entire produce department. Sales gains of this magnitude on an annual basis are generally considered to be phenomenal. While the fresh-cut vegetable sector is fairly mature, there continues to be growth with new items, such as fresh- cut beans. That category had a 155 percent sales gain last year, although it only has 14 percent market penetration.
Obviously the growth potential is huge.
The two researchers showed data that revealed that there are more than a handful of individual fresh-cut vegetable and fresh-cut fruit SKUs that experienced double-digit growth over the past year. To put that in perspective, Mr. Lutz said that there are probably only three or four items in the rest of the department with double-digit growth on an annual basis.
The research looked at regional rates of growth, and while there were differences, Ms. Parker said that the success of the category seems to depend more on the efforts of the retailer than the chain's geographic location. Not surprisingly, retailers that carry the most fresh-cut SKUs tend to experience the fastest growth.
"Variety and assortment are the keys to more sales," said Mr. Lutz.
As a general rule of thumb, retailers on the East Coast, where the category is more mature, have experienced less annual growth than their counterparts in the South and West.
Ms. Parker said that the research also confirmed the general industry belief that the fresh-cut consumer tends to be "affluent, suburban and Caucasian. African-Americans and people with low-income levels tend to index much lower in buying fresh-cut products. Interestingly, families with older kids also index low. Parents with young children tend to buy more fresh-cut products than those with teenage children. Fresh-cut shoppers also tend to be younger, indexing highest when in their mid-20s to mid-30s."
The research also showed that supermarkets are the leading venue where consumers purchase fresh-cut items. Mr. Lutz said that the data show that the fresh-cut department is an excellent category that supermarkets can exploit as a point of differentiation from their growing list of competitors that sell food.
It has been well chronicled in recent years that consumers have found many different outlets for grocery purchases, including clubstores, general merchandise stores, dollar stores and convenience stores. But for the most part, shoppers are not buying their fresh-cut items at these locations. Only 6 percent of people said they had not purchased fresh-cut items at the supermarket, while 40-50 percent made that same claim for these other store categories.
Mr. Lutz said that this represents a "huge opportunity" that many chains have not pursued. If this information is accurate, a supermarket might be well served to greatly increase its fresh-cut offerings.
The research also asked consumers what they want these fresh-cut packages to look like. Almost 80 percent want "sell by" or "use by" dates, and nearly the same amount asked for increased product visibility. More than 50 percent said they would like to see more resealable packaging.
Consumers also want both packaged fresh-cut products and those produced in the backroom, such as sliced and overwrapped melons.
One very interesting fact garnered from the research is that the vast majority of those polled are not loyal to a national brand with regard to fresh-cut product. They like their store brands, but heavy users were not brand loyal. However, light users did have a higher degree of brand loyalty when trying new products. So branding may be an important factor when introducing new items, said Mr. Lutz.
He also said that a strong 25 percent of consumers did show an affinity to brands, so retailers might be better served to offer both national and store brand items.