On an assignment years ago, our marketing director and I drove the division president to the airport for a business trip. Prior to departing, he turned back and said, “While I’m gone, don’t give the house away.” He was referring to our merchandising and pricing strategy.
The retail supermarket world is reshaping itself. As operating expenses rapidly climb, there is no room for doing business as usual, especially when grocery stores are under so much pressure to achieve profit results.
The fresh departments are attracting a greater number of shoppers than ever before and produce is leading the pack. With the budgeted bottom line as the paramount goal of any supermarket retailer today, produce executives and produce managers need to be looking at every possible way to increase their gross profit. Unfortunately, this task is not getting any easier.
Every item in the produce department must increase its growth to keep pace with the constant change of consumer shopping habits. In order to stay on the same page with consumers, merchandising practices must also adapt to those changes.
It is very difficult for me to understand why some retailers today feel the need to advertise 10-pound bags of potatoes at $1.29, or even lower. Those retails date back over 40 years. Such intense discounting can also depreciate the image of the product.
Why feature potatoes at such incredibly low prices? Undoubtedly it’s because that’s the way it has always been done in the past. Well, times have changed and the pressure on produce gross profit has become more demanding.
Potatoes are a consistent meal ingredient that are purchased by every customer. Since the demand is so great, why give them away? Why not take advantage and capture more of the profit they can generate?
This is especially the case for potatoes from Idaho, which I personally feel are truly a brand themselves. They are of superior quality and so well known that shoppers request them by name.
Many retailers sell a lot of featured produce items at rock-bottom prices yet never make any profit on them. This is a good way to move additional amounts of produce, but those items don’t have a positive effect on the bottom line.
Consumers do not react to retails the same way, with some looking for low prices without considering the quality, size or condition. Deep discounts may move some volume, but we’re not only in the volume business, we’re in the profit business.
On the other hand, there are shoppers who are willing to pay a premium price for a superior product associated with equity and value, such as Idaho potatoes. It’s a better practice to get a premium price on a premium item like Idaho potatoes and still move larger quantities by applying better selling strategies.
Merchandising is an art and a science. It’s also about experimenting. I often tested retail psychology by experimenting and trying something different with selected produce items, including Idaho potatoes.
During one test, we relocated bags of Idaho potatoes from the normal section in the produce department to a massive end display priced at the regular retail, and the results were amazing. We sold three times the volume and tripled gross profit, compared to when they were displayed in the normal potato section. Simply giving them spotlight exposure and using point-of-sale material from the Idaho Potato Commission proved that branding and quality will sell at a premium price. The demand was motivated by the expansion and exposure of the display, not lowering the retail.
We also tested 80-count Idaho potatoes as an advertised sub feature — again in the regular potato section and on an off-shelf display. Surprisingly, we sold almost four times the amount over a normal week. We used descriptive words such as “premium Idaho potatoes” and “genuine Idaho potatoes” to affirm the high-quality standards.
Many consumers recognize Idaho potatoes as being a brand since they are marketed so well. The current TV commercial featuring the Idaho potato truck and humorous farmer has become quite popular with consumers, giving Idaho potatoes key exposure similar to our massive table end display test.
Try some creative experimentation when merchandising Idaho potatoes. The manner and strategy in the way you display them will make a big difference in generating incremental profit. Our testing proved that point.
Idaho potatoes already have brand awareness. The best-quality produce will make you the most profit. Idaho potato quality raises its value and lessens consumer sensitivity to price.
Attaining a profit in 2017 will be crucial to reaching budget goals. Stand firm on your pricing and focus on the versatility Idaho potatoes can generate in gross profit for your company. Simply apply a better merchandising strategy.
Ever since some Mexican avocado growers disrupted the flow of fruit in early October, the supply-demand situation in the United States has had some difficulty getting in balance. The result has been somewhat of an unsettled market and probably fewer retail promotions than might be expected.
Rob Wedin, vice president of fresh sales and marketing at Calavo Growers Inc. in Santa Paula, CA, has told The Produce News repeatedly over the past several months that uncertainty in the marketplace typically results in a reluctance to promote. Retailers just don’t want to be putting any product on ad when they are not sure whether price and supplies are going to move up or down.
On Monday, Dec. 5, Wedin said demand has been improving steadily, but growers in Mexico, where the vast majority of U.S. avocado supplies currently originate, have been cautious in ramping up production. Those growers, who witnessed several large swings in the market earlier in the year, are guarding against an oversupply situation. At the same time, he said U.S. retailers have been a little slow in promoting the crop because of the recent experiences with lack of supply.
Josh Underseth, a salesman with Del Rey Avocado Co. in Fallbrook, CA, noted Dec. 6 that the market had been settling down before some rain hit this week, disrupting supplies for at least a couple of days.
“Just as it appeared we were getting back to normal, we missed a couple of days of picking and the market strengthened again,” he said. “Right now, supplies are short.”
Underseth added that anytime supplies get short, rumors (in this case unfounded ones) circulate that the shortage is due to manmade efforts rather than Mother Nature. That perception also leads to an unsettled situation.
However, both Underseth and Wedin expressed optimism that the volume would pick up and there should be promotable volume for the Christmas holiday pull as well as for January, leading up to the Super Bowl. Super Bowl weekend is always one of the top three avocado-consumption weekends of the year, along with Cinco de Mayo and Fourth of July.
Wedin said Mexico has been sending around 30 million pounds of avocados to the market each week for the past three weeks. He noted that is below forecast, and below shipments of a year ago, but is still a sizable volume. Over the next few weeks, he expects volume and promotions to increase, with shipments reaching the 35 million-pound weekly level fairly quickly.
Looking at past records, he said in late November-early December 2015, Mexico’s shipments were in the neighborhood of 38 million pounds per week.
Besides a general caution limiting volume, he said many groves are into their second pick, which also can reduce the volume. In January of 2016, Mexico had one week in which it sent close to 60 million pounds to the United States, according to the Calavo executive. That volume led to a significant drop in the f.o.b. prices shortly after the Super Bowl. That is a situation Mexican producers are hoping to avoid this year.
Wedin expects volume throughout most of December and January to match up better with demand than it did in October and November. He said size distribution is much better this year than a year ago, and more normal with the smaller sizes in greater supply and the price curve reflecting that.
Last year, the reverse was true as there was a dearth of small fruit. In the first week of January, the larger sizes had an f.o.b. at the Texas border of around $35, while the smaller fruit was commanding numbers in the mid- to high $20s. It is this smaller fruit, which can be promoted quite heavily at favorable price points, that can ramp up demand and push volumes to a higher level.
Hollandia Produce LP, a leading grower of hydroponically greenhouse grown lettuce and leafy greens, based in Carpenteria, CA, has named John Cochran as chief executive officer. The appointment was effective Nov. 14.
Cochran, who brings a wealth of experience taking companies through high-growth periods, will build on the successes of long-time CEO Pete Overgaag, who will stay on as executive vice president of innovation and corporate strategy.
"We are in a prime position to accelerate our growth plans," Overgaag said in a press release. "One of the major opportunities surrounds innovation. John's appointment will allow me to focus on those important facets of the business. I am confident he will successfully lead us through our next phase of growth."
"I am very excited for the opportunity to work with the Hollandia Produce family," Cochran said in the press release. "They have done an amazing job growing the hydroponic lettuce market to what it is today. Our plans for the future are very exciting and we look forward to partnering with our customers as the category captain for living greens."
In January, Hollandia Produce became employee-owned by implementing an Employee Stock Ownership Program. The company's values and commitment to customers, employee-owners, and the community run deep and there is a lot of excitement around the future of Hollandia Produce.
Prior to joining Hollandia, Cochran served for three years as CEO of Ole Smoky Distillery introducing new products to the market and significantly increasing revenues. Prior to Ole Smoky, he led the turnaround of Pabst Brewing Co. and spent six years with Fiji Water as it became a top premium bottled water brand in the North America.
Cochran is married and has three children. He will split his time between Hollandia's facilities in Carpinteria and Oxnard, CA.
As a result of its one-day Honoring our Heroes hiring event in November, the Kroger Co. hired more than 4,000 military veterans and their family members.
"I'm so proud of our store teams for their outstanding efforts during our national hiring event in November," Tim Massa, Kroger's group vice president of human resources and labor relations, said in a press release. "We can all be proud of hiring 4,000 veterans and family members in one day. We are delighted to welcome them to our Kroger family."
Last month's veteran-focused hiring event performed better than Kroger's first one-day Honoring our Heroes hiring event, which was held on Sept. 15, 2015 and resulted in the company hiring 2,000 military veterans and their family members.
Kroger has hired more than 35,000 veterans since 2009 as part of its commitment to active duty troops and the nation's 23 million veterans.
Through the Honoring Our Heroes program, Kroger's family of stores have donated more than $18 million since 2010 to help support USO programs, which represents the largest cumulative gift to the USO in its nearly 75-year history.
Opal apples are currently at retailers nationwide. Available in both conventional and organic varieties, Opals are known for their distinctive crunch, sweet yet tangy flavor and natural resistance to oxidation — making them the perfect apple for snacking and including in holiday entertaining and recipes.
“Fans continued to ask for Opals after the season had ended and counted down the days until they arrived in stores this Fall,” Chuck Zeutenhorst, general manager of FirstFruits Marketing of Washington, said in a press release. “We’re very excited to give Opal fans new and old the chance to enjoy this uniquely delicious apple throughout the holiday season and well into the new year.”
The Opal program is fully supported at retail with high-graphic packaging, point-of-sale materials, merchandisers and plenty of opportunity for in-store support. Opal apples are also supported through a comprehensive digital consumer marketing campaign, including coupons, geo-targeted advertising, engaging social media content and a family-focused public relations campaign.
Utilizing data, including purchasing behaviors obtained through Nielsen, Opal consumer marketing targets consumers based on demographics and location to deliver advertising through multiple mediums, including internet searches, webpage content, social media and internet radio.
“The Opal apple has a reputation among consumers of being one of the best they’ve ever tasted,” Zeutenhorst said in the release. “We’re tapping into that reputation and reaching consumers directly where they search for recipes, talk with friends and family about food and prepare their grocery lists.”
Additionally, Opal will again fund youth-based initiatives through the Youth Make a Difference Initiative. Fourteen initiatives were supported in 2015, with each dedicated to serving their communities across the country in which youth ages 6-25 take leadership roles in the project. Each initiative addresses food security and politics, nutrition, agriculture or education.