Fresh Produce’s Potential as High as an Elephant’s Eye

As the fresh produce industry gathers this weekend for the Produce Marketing Association’s annual Fresh Summit, our Retail Produce Review is packed with juicy insights that underscore the dynamic influence of the multibillion-dollar industry.

A key driver of why consumers shop a particular supermarket, the produce department is a crucial part of the decision-making process for grocery shoppers.

“Right now in grocery, produce, meat, deli and bakery are carrying the industry,” asserts Keith Turner, store manager for C&R Supermarkets, a Macon, Mo.-based chain of 12 supermarkets, and a participant in Progressive Grocer’s 2016 Retail Produce & Floral Review, which surveyed 100 grocers nationally.

When executed successfully, the produce department exudes quality, freshness, convenience and a healthy lifestyle, and it’s where shoppers want to be. To that end, retail produce decision-makers are focusing more on what they can do to appeal to today’s increasingly health-conscious, convenience-seeking, variety-hungry shopper, and less on what the folks up the street are doing.

Crazy About Convenience

Whether it’s packaged and ready to go, fresh-cut or value-added, flavorful fresh produce that’s also convenient is winning over consumers across the nation.

“People are looking for quick and convenient. They want to open a bag, throw the contents in a bowl, and it’s ready to go,” says Turner. At C&R, packaged salads are a top seller in produce, a fact that Turner believes correlates to frequent promotion.

While survey respondents report that sales of packaged/value-added/fresh-cut vegetables are relatively flat this year versus last, fruit is a different story.

Sales of packaged/value-added/fresh-cut fruit are up nearly 3 percentage points, representing 37.8 percent of total fruit sales versus 34.9 percent last year, according to PG research.

“Fresh-cut is flying off the shelves,” enthuses Alex Scott, store manager for Shaw’s Supermarkets, a 154-store chain (including the Star Market banner) based in West Bridgewater, Mass. Parent company Albertsons Cos., which launched the Signature family of store brands earlier this year, recently added cut fruit and pre-cut vegetables to the line’s offerings.

At Shaw’s, Signature family trays and 2- and 4-packs of washed, cut and ready-to-eat fruit are resonating with customers. Scott points to such popular items as 2-packs of grapes and strawberries, and trays of cheese, crackers and hummus with a fruit or vegetable.

Hannaford Supermarkets, a grocer with more than 180 locations, has also witnessed a boost in fresh-cut, fueled in part by an upgraded program, says Manager Chris Hadie.

“We expanded our offerings in the cut-fruit section about nine months ago,” he notes. “Sales jumped significantly when we added fresh-cut watermelon and other items that are easier for people to eat than the whole fruit or vegetable.”

Part of Ahold Delhaize, Scarborough, Maine-based Hannaford has also expanded its cross-promotional efforts with value-added produce in the meat department, which Hadie believes is contributing to the sales lift.

The Boost in Store Brands

Increasingly, grocers are expanding store brands throughout the supermarket, including the produce department.

While sales of store-branded fruit remain flat, PG’s survey found that sales of store-branded vegetables increased 3.4 percent to 18.5 percent, up from 15.1 percent of sales last year.

C&R, Shaw’s and Hannaford all report that sales of store-branded produce are up, and all three say potatoes are a particularly popular store-branded item. Store-brand lemons, bagged apples and celery were also mentioned as strong sellers.

Grocers indicated that while price is often driving sales of store brands, quality remains critical to ensure repeat purchases.

Despite the rise in store brands, national brands still comprise 50 percent of fruit sales and 46.6 percent of vegetable sales.

Organic Expansion

According to the Organic Trade Association’s (OTA) 2015 Organic Industry Survey, organic fruits and vegetables are the No. 1 category in organic food, with just more than $13 billion in sales.

Organics represent 12 percent of the fruits and vegetables sold in the U.S., notes Washington, D.C.-based OTA, and organic produce now accounts for nearly 40 percent of the entire organic sector.

PG’s survey finds that 32.6 percent of supermarkets surveyed increased organic fruit and vegetable sales this year, while 67.5 percent said their sales in this sector remained the same. No respondents reported a decrease.

As with nonorganic categories, variety is the order of the day with consumers who continue to crave exciting new flavors and eating experiences.

“Our sales of organic produce have been on the rise since we’ve added more variety in organics,” observes Scott, of Shaw’s. As one example, the grocer began packaging store-brand organic grapes in bowls six months ago — a program that has met with particular success, he says.

Focus on Floral and Seasonal

Seasonal items and floral could be under-tapped categories for some grocers. Among the 58 percent of survey respondents who sell floral, 34.2 percent report a sales increase over the previous year. Overall floral sales increased 3.5 percent.

“Floral is one of the best-growing categories in the company,” says Scott. “There was a company-wide initiative from Shaw’s, and we brought in hibiscus earlier this year, and pre-decorated pumpkins and mums for fall — new items and seasonal items that people really like. As a result, floral is now driving sales growth.”

At C&R, customers perceive a return on investment when they purchase a floral or seasonal pick-me-up. “Our sales of seasonal and floral are up,” notes Turner. “When times are hard, it’s an added value that people can enjoy for longer than something like going out to eat.”

Communicative Culture

Grocers are promoting fresh produce like never before. PG’s survey finds that nearly 98 percent of supermarkets use signage for weekly specials, 47 percent cross-promote produce elsewhere in the store, and nearly 30 percent use social and digital media to tout fresh produce offerings.

Avocados and guacamole are among the items frequently promoted through signage at Shaw’s, and the results are phenomenal. Scott’s store uses colorful signs that hang from the ceiling to spotlight its wildly popular house-made guacamole. Whole avocados are also actively featured.

The creamy green fruit is an excellent example of the power of promotion. Supermarkets report that volume is up for avocados more than for any other category in produce — by a mile. Avocado volume is up 12.4 percent weekly/per store. That number surges to 28.2 percent when avocados are on promotion.

“Avocado sales are definitely up,” confirms Turner. “Part of it is the national advertising — every TV show, every magazine that you grab, you see something with an avocado in it. We also hand out free magazines at our store each month with recipes. I have found that whatever recipes we run in the free catalog, including those featuring a nice avocado dish, sales of those items go up.”

The complete 2016 Retail Produce Review can be found here.