Produce departments have been hit with volume declines, but several strategies are still working to boost sales
With so many shoppers looking to save money wherever they can, produce departments are stepping up their efforts to emphasize fresh fruits and vegetables as a good value. Unfortunately, many consumers still view the category as pricey, a view that produce department managers are going to have to fight in order to increase sales while the recession drags on.
“Consumers have a misconception that produce is expensive,” noted Julia Stewart, spokeswoman for the Produce Marketing Association, Newark, Del. “In fact, when you look at it from a per-servings cost, we are quite a good bargain. So we think that's certainly messaging that retailers could be enforcing.”
Highlighting produce-based meal solutions is one way to emphasize the cost-per-serving value of produce, and it's a strategy that some retailers are already enjoying success with.
“We believe produce-based meals are on the rise as customers become more health-conscious,” said John Baty, produce merchandiser, Associated Food Stores, Salt Lake City.
“To take advantage of this trend, AFS is working to improve its cross-merchandising efforts and the fresh image of its stores. AFS is also implementing an ‘Ask the Expert’ program to position its store team as a valuable resource to customers.”
Ron Williams, produce manager for Dorothy Lane Market's Washington Square, Ohio, location, agreed that healthy eating has remained in the spotlight during the economic downturn. His team merchandises produce and recipe cards all over the store and hosts manned demos on Fridays and Saturdays.
“We'll have the traditional bananas next to the cereal and we make our own salsa here in produce and we'll have that down in the dairy or deli departments,” Williams said.
Recently, PMA teamed up with the Hartman Group, Bellevue, Wash., to conduct a survey on consumer attitudes and purchasing behavior in produce departments, and 61% of respondents said they buy produce to eat healthier, while 43% said they buy produce because fruits and vegetables are a good source of vitamins and minerals.
The survey also found that point-of-sale messaging remains critically important to spur impulse purchases, but advertising has a big impact on shopper habits as well. Forty-eight percent of consumers said coupons entice them to purchase produce, 41% said in-store displays drive their purchases, 36% said circulars, and 34% said that freestanding inserts or ads influence their decisions, according to Stewart.
PMA's research also indicated that consumers are trading down, but most of those trading down are staying within the fresh produce category, rather than switching to canned or frozen alternatives. Twenty-three percent of respondents said they are buying less expensive fruits and vegetables, while only 12% said they are now buying frozen. Also, 85% of respondents said they were still purchasing the same amount of produce that they have in the past, if not more.
“So, we seem to be avoiding the economic-related downturn that's impacting a lot of purchases,” Stewart said.
Rather than striking fresh produce off of their shopping lists, shoppers are purchasing fruits and vegetables that they are well-acquainted with, and buying products that are in abundant supply and, therefore, are available at a lower cost, Stewart said.
“We call it a back-to-basics movement.”
Respondents also said that they are buying seasonal produce because they know it's cheaper, she added.
The total produce category experienced a 1.2% increase in dollar sales during the 52 weeks ending May 30, 2009, despite a volume sales decline of 3.8%. The average retail price increased 5.1% during the same period.
“As we've moved into the economic crisis, retailers were increasing their prices in order to keep their dollars up,” said Steve Lutz, executive vice president of the Perishables Group.
This year, during the first quarter and part of the spring, volume losses continued in the category, but retailers started losing the flexibility to raise prices, Lutz added.
“That's a little unique to produce because if we look at meat during the same time, there was a lot of switching going on, but meat sales were actually gaining dollars and gaining volume.”
Grapes, berries and avocados experienced volume gains, however, which Lutz attributed to crop increases.
Berries experienced a 9.1% dollar increase, a 10.1% volume increase and a 1% average retail price decrease. Grapes saw a 1.3 decrease in dollar sales, a 5.1% increase in volume and a 6.1% drop in average retail price. Avocados experienced increases across the board with dollar sales up 7.3%, volume up 6.6% and average retail price up 0.6%.
Some consumers may be making substitutions by switching from fresh produce to canned or frozen items, and others who are financially squeezed may be viewing produce items as discretionary purchases, Lutz said. This could hurt produce more than some of the other departments during the recession, which makes it even more important for retailers to focus on merchandising the category effectively.
“It's really critical, because we're in a time period where it's sort of back to basics. And, if consumers are stressed and retailers have a tendency to lose volume, they're not going to be able to make up those dollars through price increases,” Lutz said.
“They're going to have to come up with strategies and ways to go back to Retailing 101, which is building your sales by building your volume. Over the last year, what we saw was retailers building their sales by increasing their prices while volume declined, and you just can't sustain that approach long term.”
While price is important to shoppers in this economic climate, Stewart cautioned against produce departments forgoing quality in an effort to cut prices. Instead, she said that PMA “would certainly recommend that in this economy, they highlight the great all-around value that produce offers, both from a per-serving cost as well as the nutritional benefits,” Stewart said.
“Moving produce to the center of the plate is one of the easiest ways to reduce your meal cost and that's a trend that's here to stay,” said Stewart. “We've been talking about that for at least 10 years now, so the entree salad now has a regular place at the dinner table.”
One strategy that has proven remarkably effective at generating traffic and excitement while getting the word out about the value and health benefits of fresh produce has been outdoor farmers' markets hosted by a growing number of retailers.
“Outdoor farmers' markets have been very successful for Associated Food Stores' members,” said Baty.
“Currently, the company offers its stores a ‘Fruit Stand Fresh’ package that includes an 8-by-8-foot easy-up canopy, a ‘Fruit Stand Fresh’ banner and custom-wrapped produce bins and tops. More than 60 stores are using these packages with solid results.”
DLM also hosts outdoor markets three times per summer, once at each of its three stores. This is the retailer's second summer offering the farmers' markets.
“We actually didn't know what would happen the first time we did it. We didn't know if it'd hurt sales or help sales, but it helped sales, actually,” Williams said.
“All of the local producers that we buy from, we invite them to set up a booth in our parking lot and we publicize it as a farmers' market. Our customers can come in and meet the actual farmers.”
DLM also recently partnered with a new Community Supported Agriculture initiative, Farm 2 Fork Fresh, to give its customers easy access to the group's freshly picked, local produce.
While CSA members are buying directly from the farmers through this program, DLM benefits from the additional traffic, when Farm 2 Fork Fresh members stop by a DLM produce department every Thursday to pick up their shares.
“I usually ask customers when they pick up if they're going to do any more shopping, and probably about 75% of them say yes,” Williams told SN, adding that he may be thinking about implementing special promotions on Thursdays because of the increased traffic.