Many tropical and specialty produce items faced a difficult year in 2009, but retailers should not cut back too heavily on the category
It's been a meat and potatoes kind of year for many shoppers. As consumers spent the year trimming household budgets in the wake of the recession, many have opted to dine out less and prepare more meals at home. And for produce departments, this trend translated into a sizeable bump in sales of familiar staples such as potatoes, lettuce, onions, cooking vegetables and mushrooms, and fruits where great deals were available due to bumper crops, such as berries, cherries and grapes. Avocados were one anomaly, enjoying very good volume and dollar sales growth off of relatively stable pricing compared with last year, according to recent data from the Perishables Group, Chicago.
In the face of this year's economic challenges, consumers are “walking the economic tightrope, cooking at home more, buying basic items, spending less on vacations,” Bryan Silbermann, president of the Produce Marketing Association, noted during his annual State of the Industry address at PMA's Fresh Summit this October.
“PMA's Hartman Group research also tells us consumers are buying more produce staples that are easily integrated into a variety of home-cooked meals, while still experimenting with new varieties of mushrooms and tomatoes that fit this pattern. More exotic items have not fared as well.”
This would seem to be bad news for tropical fruits and specialty produce. And, in fact, during the latest 52 weeks ending Sept. 26, the specialty produce category has declined 5.9% in dollar sales and 4.3% in volume sales, despite a 1.6% decline in average retail price, according to the Perishables Group.
Mangoes — the largest subcategory in specialty fruits, accounting for about 34% of its sales — took one of the hardest hits, losing 13.5% in dollar sales and 14.2% in volume. Kiwis and papayas fared a bit better, partly due to price declines. As the average retail price of kiwis fell
5.3%, volume sales rose 6.7%, and as the average price of papayas fell 11%, volumes increased 8.3%. Pomegranates were an exception, with sales rising 5.5% in dollars and 2.4% in volume, despite a 3% average price hike. On the opposite end of the spectrum, dollar sales of tomatillos fell 13.2%, and volume fell 8.4%, despite a 5.2% decrease in average prices.
“When we look at mangoes specifically over the last year, the total dollars and volume and velocity per store is down vs. a year ago,” explained Sherry Frey, vice president of account services for the Perishables Group. “The average retail price stayed about the same but there was a slight loss in distribution points when looking at total U.S., meaning [mangoes were] carried in slightly fewer stores.”
Frey added that the Perishables Group did a study on produce purchasing habits over the past year and found that shoppers were switching between categories.
“Specialty fruit was a category that consumers appeared to trade out of during the recession. Some retailers tried to counteract this trading by promotional activity, as we did see an increase in the percent of mango volume sold on promotion and a lower promotional retail price this year vs. last.”
Consumer price sensitivity manifested itself in several produce department trends this year, Frey added. These included: trading down to less expensive items within a category; trading out of categories or out of the fresh produce department entirely; buying less per trip and shifting across the value spectrum to less expensive items; buying select items in larger quantities to stock up on specials; and changing retail formats to find better deals.
Karen Caplan, president and chief executive officer of specialty fruit importer Frieda's, Los Alamitos, Calif., agreed that sales of specialty fruits have been “off a little bit compared with last year,” but said that any sales declines in the category could be due to retailers preemptively cutting back their assortments.
“It's a bit of a ‘chicken and the egg’ situation,” she said. “It's really hard to interpret whether consumers are buying less variety and more of the mainstream items because retailers have been cutting back on variety and offering more mainstream items. What I see going on at retail is that retailers have big displays of items focused on price.”
Of course, many retailers would argue that they have had little choice. During one panel session at this year's PMA Fresh Summit, in which similar Perishables Group data was discussed, participants noted that prices on many items have declined off of highs from last year, and that in this economic environment, it has been crucial to keep pace with competitors' pricing. When prices are lowered, the best way to make up the difference is to try to move more volume, so top sellers and items where special deals have been available have been getting the most attention.
Greg Calistro, director of produce for Modesto, Calif.-based Save Mart Supermarkets, noted during the discussion that many of the shifts in produce purchasing habits appear to be driven by demographics and income. For example, some shoppers appear to be selecting bulk carrots rather than packaged varieties, even when they aren't advertised.
“In affluent areas, our value-added items are flat or up, in low- to mid-level income areas, they're down,” he said, noting that Save Mart serves a diverse set of demographics in the California market under four different banners.
These trends will probably continue until the economic downturn is in the rearview mirror. But, in the meantime, when working on their merchandising and assortment plans, produce departments should be careful not to read too much into national sales figures, and careful not to neglect their Latino and Asian customers.
“In terms of the Hispanic market, you'll find you need more varieties of mango and papaya, and when it comes to the banana category, you would see a lot more plantains and red bananas than your Cavendish bananas,” noted Robert Schueller, director of public relations for Los Angeles-based Melissa's World Variety Produce. Schueller added that there are several new mango and papaya varietals available in the U.S. market, which could help drive category sales during different times of the year in supermarkets that serve different ethnic demographics.
“With any retailer, they really need to know their shopper,” said Caplan. “So if their shopper is someone who really likes to experiment and try new things, no matter what's going on with the economy, they need to make sure they have enough variety.” Or, if a high percentage of their shoppers are from an ethnic demographic, retailers should be sure to focus on key drivers during different times of the year, such as holidays and festivals.
The popularity of the Food Network and other television cooking shows has also boosted demand for many of these items among non-Asian and non-Hispanic shoppers. And, to make those “foodie” shoppers aware of their availability and seasonality within a conventional supermarket, both Schueller and Caplan suggested that retailers focus sampling and demo events around holidays. Chinese New Year is coming up on Feb. 14 in 2010, Schueller noted, offering a good opportunity to promote items such as star fruit, lychees, kumquats, star fruit and pomegranates. Similarly, Cinco de Mayo is a great time to highlight Hispanic foods and cuisine in the produce department.
Caplan also noted that produce department staff must be familiar with specialty produce items if retailers hope to sell them to crossover shoppers. Her company has offered its “Produce University” training courses to top retail partners for 20 years in an effort to boost consumption of specialty items.
“The easiest way to get a customer to buy something is to get them to try it,” she said. “But, we also know that the easiest way to sell something is to get the produce manager to know something about the product. Sampling is certainly part of it, but it's not the only part.”
Good labeling is also crucial. Even if a shopper has seen a dish prepared on television, they may have trouble distinguishing between a Klamath pearl potato and a fingerling potato when they get to the store, Caplan noted. For specialty produce, signage should contain a photo if possible, but also have a couple of lines describing a product's attributes and how to use it, along with the price.
If a grower or supplier's website contains additional information, such as recipes, the website address can be included as well.
Regardless, even as the economy begins to turn a corner, shoppers may not be so quick to abandon their newfound cooking habits, and may be eager to try some new, exciting flavors in the coming year.
“Consumers still, whether it's Thanksgiving or Christmas, they're still willing to splurge,” Caplan said. “They may not go out to eat, they may not be going to fancy restaurants, but they do want to duplicate those wonderful-tasting menu items at home. And a retailer can really set themselves apart by making sure they have the most appropriate specialty ingredients. They're really leaving money on the table if they're just offering the basics.”