After two very difficult economic years, fresh food departments may want to place some bets on a modest recovery in 2010
It has not been an easy year. The United States endured its worst recession in decades, national unemployment topped 10% and businesses throughout the country went bankrupt as consumers slashed spending to cope with the downturn.
Supermarkets were spared the worst of it. People have to eat, and in difficult times, many shoppers opted to dine out less and eat at home more to save money.
Looking forward to 2010, there are many hopeful signs that the economy has stabilized and will begin growing again sometime next year. November's new claims for unemployment were the lowest since 2007. And, the nation's gross domestic product grew 2.8% in the third quarter of 2009.
Many of the initiatives suggested by Fresh Market in this year's strategic planner presuppose that employment will remain stable, and that the economy will post modest growth by the end of 2010.
Of course, retailers can't take anything for granted in this highly competitive market, but it's a safe bet that the popularity of local foods will continue to grow. Retailers who wish to stay on top of this trend will need to begin differentiating themselves from competitors.
Also, shoppers will still be shopping with an eye toward value, but there's a good chance their definition of “value” has evolved somewhat during this recession. Price is still a big part of the equation, but bundled deals, helpful service and other factors also come into play when bargain hunters decide where to shop.
By the same token, fresh food managers should ensure that their departments don't overcorrect and focus exclusively on price-sensitive shoppers. Customers still have special occasions to celebrate, and there are still premium shoppers out there looking for premium items.
Focus on Value
TODAY'S SUPERMARKET customer is looking for value like never before, and that will continue to be true next year, industry sources told SN.
With that in mind, retailers can benefit by thinking “value-added,” which doesn't always mean lowered prices.
Indeed, “value” to the customer can be something as simple as recipe cards or cooking advice in the meat department, or the convenience of secondary displays for easy access of selected, seasonal items.
“We let customers know our prepared foods are made right here in each store's kitchen, but also our associates are food professionals who can advise customers on serving, storing, anything to do with the food,” said Chef James Conroy, prepared-food director at Middletown, N.J.-based Food Circus' nine Super Food Town stores. “We know they consider that a value.”
But Conroy doesn't hesitate to lower the retail on some items even as he underscores quality and ramps up service.
“With the economy like this, we've begun highlighting customer favorites like chicken parm and beef stew in plain, unadorned aluminum pans, at a lowered price, and our kitchens are told they must have at least five of those choices available, fresh every day of the week, in addition to our other menu items.”
Continuing with a full schedule of demos, too, Conroy sometimes lowers an item's price quite significantly for a limited time to get people to try it.
Meanwhile, in Texas, United Supermarkets has come up with innovative ideas that fit well into its recently revved up strategy to give customers more product for the money they spend.
For example, a current promotion is based around a 10-inch frying pan for $9.99. With the purchase of it, the customer gets free items from various departments, including dairy.
“The one right now is an example of our ongoing bi-weekly ‘Meal Deal,’ offering one product at regular price, with the rest of the meal items free,” said Eddie Owens, director of corporate communications for United Supermarkets, Lubbock.
“This time it's a 10-inch frying pan for $9.99, with all the breakfast food items free. They include 12-count Red River Farm large eggs, Food Club 16-ounce jumbo biscuits, Pioneer Gravy Mix and a 12-ounce package of Smokehouse Ranch Bacon, giving the customer a total savings of $6.54.”
Sometimes quality trumps everything else when it comes to value. It depends on the retailer and the customer base. Value can simply mean making a standout product available that can't be had anywhere else in the marketplace. Or it can be represented by a simple twist that makes an everyday product sparkle.
For example, in an earlier interview on merchandising, Carol Christison, International Dairy-Deli-Bakery Association executive director, suggested stacking small wedges of various cheeses, wrapping them in colored cellophane, and topping them with a bow. That's value in a package.
— Roseanne Harper
Become a Local Foods Standout
THE LOCAL FOOD trend continued to enjoy healthy growth in 2009, and retailers can expect shoppers' enthusiasm with local foods to continue growing next year. But, as “locally grown” signs become regular fixtures in produce departments, and locally raised meats and other locally produced foods start becoming more commonplace, supermarkets should be looking for ways to build their relationships with local growers and set their local food programs apart from competitors.
The best local programs highlight partnerships between specific growers and/or specific varieties of fruits, vegetables or other items, and store-level merchandising and execution emphasize that partnership, noted Steve Lutz, executive vice president of the Perishables Group, West Dundee, Ill.
“You can see it at a Kroger store, where they'll tie in with a local sweet corn producer and really merchandise the fact that they're working with this grower — he works exclusively with them, here's the background on the grower, it's available only for a short amount of time, just in our stores,” Lutz said.
“You see a number of those going on that are very seasonal and [locally] focused. The concept of local in many ways is similar to the concept that you might see with fine wine; it's available for a limited amount of time and handcrafted. You see those same kinds of characteristics played out in local.”
Exclusivity and specialization provide differentiation, Lutz said, adding that varietal marketing can work very well with local foods.
“You continue to see retailers really looking to work specifically with growers to get specific varieties — probably more with apples than with other categories — where retailers are aligned with specific growers who hold the rights to a single variety, and so it really creates many of the elements of a locally grown product,” Lutz told SN. “It has exclusivity, it's unique, high flavor, short-lived and it establishes a connection to the land that's very unique and definable.”
Demand for local foods has continued to grow despite the economy, as evidenced by various studies from Bellevue, Wash.-based The Hartman Group. A majority of consumers surveyed in the consulting group's “New Value Paradigm 2009” study said they were purchasing about the same or more local products compared with a year ago. Specifically, 60.3% said they were buying about the same amount of local products and 35.2% said they were buying more. The market research firm Packaged Facts also projects sales growth in local food to rise from $4 billion in 2002 to $7 billion in 2011.
— Amy Sung
Don't Neglect Premium Shoppers
AFTER A YEAR in which much of the economic news focused on how shoppers were trimming household budgets, clipping coupons and focusing on necessities, it might seem unusual to suggest that retailers may want to take stock of their premium perishables next year.
Of course, premium steaks, imported cheeses, specialty desserts, top-notch floral bouquets and other high-end items aren't a fit for every market. But, throughout the year, retailers and other experts regularly noted that many pricier categories held up unexpectedly well during 2009. Keep in mind that customers still have special occasions to celebrate, and any stability or growth in pricier items could be a sign that they are still willing to splurge a little, especially when they celebrate those occasions at home.
At Schnuck Markets in St. Louis, sales of $6.99 bouquets have increased as shoppers trade down when making impulse buys. But, sales of one of the company's most expensive bouquets, priced at $22.99, have held steady.
“We didn't see that much of a decline in the sales of the more expensive bouquets,” floral director Michael Schrader told SN in an interview this fall. “It just seemed like the middle of the road sales; it just became a little more polarized.”
Similarly, several retailers pointed to an uptick in meat and seafood sales during interviews with SN in June.
“Our stores are located in affluent areas, where people are used to eating out several times a week,” Mark Eckhouse, vice president of three-unit McCaffrey's Markets in Langhorne, Pa., said this summer. “The theory is they're eating out less frequently now, but don't want to give up the high-end meals they're accustomed to.”
Another good example is Kroger's recent expansion of its partnership with New York-based importer and retailer Murray's Cheese. Last month, Robert Kaufelt, president of Murray's Cheese, said specialty cheese sales had risen 50% to 100% in Kroger's three Murray's store-within-a-store test locations. The Cincinnati-based chain now plans to open 50 new Murray's locations during the next three years, indicating that it believes premium categories can thrive in the right markets, when supported with good merchandising and knowledgeable service.
— Matthew Enis
Renew Focus on Health & Wellness
CONSUMERS ARE hungry for information, especially for nutrition information, and supermarkets are still in an excellent position to provide that information.
Supermarkets are using signage, hand-outs, labeling, demos, classes, community events, radio segments, even YouTube and Facebook to educate customers.
Over the past year, a number of chains have adopted the NuVal nutrition labeling system, developed by an independent panel of experts. It assigns numerals from 1 to 100 to products — including dairy, some produce items and meats — based on their nutritional profile.
“We've received very positive feedback about NuVal,” said Ruth Mitchell Comer, communication director for Hy-Vee. “Customers like it because it's easy to make comparisons within a category.”
United Supermarkets will be the first supermarket in Texas to have NuVal when it rolls out the system early next year. The Lubbock-based chain already offered a nutrition-labeling system of its own, but the chain's officials are excited about starting NuVal in selected stores, they said.
Supermarket dietitians all over the country are educating customers about healthy eating. At a Hy-Vee unit in Omaha, Neb., registered dietitian Carrie Nielsen told SN she's currently planning demos in the perishables departments for 2010.
“I'll be concentrating on seafood and citrus in January and February,” she said.
“Last month, during a super sale [in seafood], I made one of my favorite salmon recipes and demoed it myself, talking about its health benefits.”
Nielsen also goes farther afield to educate shoppers, with a regular segment on local radio.
United reaches out, too, with its programs. For example, one involves some units helping Girl Scouts earn nutrition badges, according to Alicia Brown, United's health/wellness marketing manager. The chain also gets involved in weight management programs.
“We'll continue to focus on offering more nutritious alternatives in our prepared-foods areas, maximize our relationships with community groups, and continue to pursue new promotional avenues,” Brown said.
Back in Pennsylvania, Giant of Carlisle is continuing its micro-nutrient-labeling program, which it adopted a little over a year ago in conjunction with the National Cattlemen's Beef Association.
“Giant has received positive feedback about the on-pack nutrition labeling program, as customers have reported they like having nutritional information on beef packages,” said Shelley Bradway, NCBA marketing manager.
— Roseanne Harper
Prepare for Enhanced Traceability
PRODUCE BRAND owners passed a key deadline of the Produce Traceability Initiative in the third quarter of 2009, and began providing Global Trade Item Numbers (GTIN) and corresponding data to their buyers.
PTI is still a voluntary industry initiative, led by the Produce Marketing Association, the United Fresh Produce Association and the Canadian Produce Marketing Association. And, much of the burden for compliance has been on the supplier side of the produce industry. But, to realize PTI's vision of focused, quickly executed product traceback and recalls, retailers must be prepared to process and store this information as well.
Several leading retailers have already endorsed the project, including Wale-Mart, Kroger, Supervalu and Safeway. But, as participants noted during a panel discussion at PMA's Fresh Summit conference in October, there's still a lot of foot-dragging throughout the supply chain.
All parties involved should note that the U.S. Food and Drug Administration has been taking steps to reform the nation's food safety system, and many retailers regard enhanced traceability systems as a key to restoring consumer confidence in the food supply.
“I've had to sell this to our ownership, and they're very supportive, because this is not just a produce project — it's a perishables project,” Mike O'Brien, vice president of produce and floral for Schnuck Markets, said during the PMA panel. “For us retailers, this isn't going to end with produce, this will also be moving into our deli, seafood and meat operations. We're building a template that will be used in all of these different areas.”
The FDA is still seeking input on the issue, but it appears very likely that new regulations, requiring electronic traceability for produce and other perishables, will be enacted in the near term. Attending last week's meeting of FDA and U.S. Department of Agriculture food safety officials in Washington, Kathy Means, PMA's vice president of government relations and public affairs said that “when we look at the questions [federal officials] are asking we can see what they're looking toward. They're looking for unique identifiers, they're looking for programs that include all the links in the supply chain.”
— Matthew Enis