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Retail View: Produce sales are on the rise

ORLANDO, FL — Produce sales at retail are on the rise, which has led to better placement and additional sales avenues within the store.

That was one of the takeaways from an analysis of the Food Marketing Institute’s Power of Produce 2016 report, which was the subject of a seminar session at the Produce Marketing Association’s Fresh Summit in Orlando, FL, in mid-October.

Anne-Marie Roerink, principal of 210 Analytics, said the path to produce within the traditional supermarket is changing as fresh produce claims its spot as the top driver of store sales. She said IRi scan data show that fresh produce is a $61 billion business at traditional retailers. Adding farmers’ market, independents and the other retail categories not covered by the scan data, Roerink said total sales are probably in the vicinity of $90 billion. She added that those sales numbers represent a 5-6 percent annual growth in fresh produce.  

What makes that growth figure even more impressive is that the number of store trips for the average grocery shopper is down 7 percent. For sales to increase with fewer trips means the basket volume has to increase substantially.  

The format of the session had Roerink going through the Power of Produce report followed by a panel of experts commenting on various topics within the report. The panel consisted of Rick Stein, FMI vice president of fresh foods; Sally Lyons Wyatt, executive vice president of IRi; and Kristin Yerecic, marketing manager of Yerecic Label.

For the most part, Wyatt took a researcher’s perspective while former retailer Stein gave the retail perspective, and Yerecic, who is a millennial, explained how that demographic views the particular topic at issue.

The first subject involved the popularity — or lack thereof — of organics and GMO food. Wyatt said the jury is still out on whether the American populace will accept GMO foods. In fact, there are many GMO foods that are being purchased. She opined that what people really want is transparency. Given that, maybe they will purchase those products.

Yerecic agreed, stating that millennials are driven in many different aspects of their life by the right to know. It is the digital generation that has lots of information at its fingertips. They want to know if the food has been created via GMO, but simply stating what an item is “free from” is not enough. Millennials want to know what is in the product, as well.

Speaking about organics, Stein said the category has moved completely mainstream. Every supermarket has to carry organic items.  Interestingly, he said it has progressed to the point where supermarkets can actually drop the conventional choice and just offer an organic choice for many items, even staple items such as baby carrots.

Roerink discussed the digital revolution and how it is affecting the marketing efforts of retailers. She noted that even millennials still read the weekly circulars that have long been a staple of supermarket advertising. She noted that there is still a lot of produce purchased as an impulse buy, which retailers can influence through promotions both the old-fashioned way and through digital marketing.  

Both Wyatt and Yerecic agreed that millennials are spending an inordinate amount of time online, especially through their mobile devices. Wyatt said they learn about many products through online promotions or through their online communities. She indicated that it is very important for retailers to promote within this space.  

While which venue a shopper frequents is determined by many different factors, Stein noted that many specific produce-buying decisions are not made until the eyeballs see the product. He reasoned that this still gives retailers ample opportunities to sell that product in-store.

Stein noted that many retailers are taking advantage of this opportunity with many more creative displays than one might have seen a generation ago. He said Super Bowl promotions are a prime example.  The display used to be limited to chips and beer, but now a whole host of items — including avocados — can get top billing in that display.

One very interesting discussion during the session revolved around the many choices consumers now have in which to emerge with food. Venues that carry food are omnipresent, from convenience stores to a general merchandise discounters — and everything in between.  Supermarkets are still the top choice but more than one-third of consumers also shop elsewhere for food items, though Roerink noted that produce skews much higher as a “supermarket-only” item.

In fact, only 15 percent of shoppers claim to buy produce anywhere other than a supermarket. Farmers markets are the top secondary supplier followed by specialty stores. Only 3 percent actually buy meal kits online, Roerink said.

While the supermarket still captures the vast majority of produce sales, Stein urged retailers to add a digital platform to make sure they don’t lose sales. He noted that quite a few supermarkets have adopted a click-and-collect program to stem the erosion of sales.

While meal kit sales (such as Blue Apron or Munchery) still comprise only a small percentage, Wyatt said growth has been steady and called them “a life saver” for working moms, who still want to prepare a meal for their family but want convenience.

She agreed that online food shopping still represents only a sliver of traffic, but she said it is experiencing significant growth and getting close to the tipping point. She said it takes a trend a while to go from 1 percent to 5 percent, but then it typically doubles in very short order.  She predicted online sales of food will be around the 10 percent level in two to three years.

Specifically talking about consumer perception of produce sales, Roerink said the category is different than most. Most food product sales are determined by price, but produce is different with quality, condition and other factors playing an important role.

“Execution is crucially important to drive impulse sales,” she said.

She said retailers need to adopt strategies to keep the customer in the department. She called that “dwelling and selling,” meaning the longer the customer stays in the produce department, the more they buy.

Again noting that millennials want information, Yerecic advocated using more point-of-purchase material to satisfy that need. Wyatt said personal customer engagement is always a great way to increase in-store sales.

Roerink said one challenge for the produce industry is the perception by consumers that produce is more expensive than other food categories. She urged produce marketers to engage consumers and tell them how to use fresh produce to solve their own challenges, such as to satisfy additional eating occasions such as snacking.

Speaking of solutions, she called value-added produce products a “definite winner” when it comes to solving the consumers’ need for convenience. There is still the perception that value-added items are expensive, but she suggested that sampling is a great way to increase sales of these items.

Wyatt said retailers should capitalize on what she calls “demand moments.” Consumers come to the store looking to fill a specific need, such as what to eat for dinner that night. The IRi executive advised retailers to adopt that mindset and the ideas will flow as to how to address that need.

With regard to improving produce departments, Roerink said variety is the spice of life.  When asked that question, 62 percent of consumer want more choices in their produce department. That compared to only 41 percent who asked for better pricing.

“Variety sticks way, way out there,” Roerink said, adding that doesn’t just mean different produce varieties but more organic, ethnic and local options.