RETAILER PREDICTS GROWTH SPURT FOR PRODUCE DEPARTMENT

RALPH RAIOLA

ATLANTA -- Total store sales may be headed for a flat future, but produce sales will enjoy lively growth as consumers focus on healthier food.

At least that's the way Jim Richter, director of produce merchandising for Marsh Supermarkets, Indianapolis, sees it.

Richter offered this and other predictions for the fresh produce department to a packed house during a seminar dubbed "Produce 2000," at the Newark, Del.-based Produce Marketing Association's convention here.

"This is like everything you always wanted to know about the future of produce, but were a little afraid to ask," said Richter, who served as moderator for the seminar. "The trend is toward healthier eating. I myself have cut down the red meat [intake]."

That will mean increased produce sales in the years to come, Richter said. But he did not share that optimism for sales performance in the rest of the store. Richter said sales trends storewide will flatten out, because more consumers will be getting their meals on the run.

"Food consumed away from home will grow faster," he said. Because people are continually on the move, Richter said, there will be less and less time for them to enjoy home-cooked meals. Weekends, he said, will offer the opportunity to take more time to cook at home, but that won't carry sales growth throughout the grocery store.

"If you look at the restaurants people are going to -- Rock 'n' Roll Cafe, Planet Hollywood -- people are becoming more adventuresome," he said. "But people [still] want to eat at home, especially on the weekends."

Another prediction he made is that consumers' preferences will dictate the direction of the department more than now. Again, health is a key; shoppers have become more versed in understanding nutrition labels, they are reading packaging and are genuinely interested in eating better.

Richter noted that several years ago, doctors told consumers that cholesterol was bad for them, but now the emphasis is on low-fat, which he said is a natural advertisement for produce.

He called on the industry to raise the stakes on its Produce For Better Health campaign "from 5 a Day to 10 a Day" to take advantage of the ascension of healthy eating as a prime concern.

Richter said he developed his predictions for the department's future using a "conglomeration of things" such as industry reports he has read, his efforts at keeping abreast of trends in the industry and his accumulated years of experience in the business.

He named a number of other issues as likely to affect the produce business well into the future. These included an increase in what he considered user-friendly store formats, a diminishing of supercenters as a competitive threat to supermarket chains, consolidation in the industry, and the value-added market.

With regard to value-added's centerpiece, the packaged salad category, Richter said he believes two national companies are stepping out as the category leaders. "Dole and Fresh Express will dominate the [fresh-cut] market," he said.

Extensive consolidation will affect both the retail and the grower-shipper communities. Richter attributed that likelihood to an influx of European companies in these businesses.

Touching on PMA's interactive CD-ROM training program, Richter said he believes the use of computer-based training for produce department employees will see a dramatic increase at the retail level.

"It's critical to developing our work force," he said. The widespread use of such training aids will reduce turnover, and instill and maintain loyalty in employees, he predicted.

Richter also foresees that organic produce will become more important as a chunk of the business in departments nationwide. That prediction was disputed by several members of the audience, however, who said consumers are not willing to pay the higher prices now and won't be later, either.

Produce 2000 panelist John Roberts, vice president of fruit acquisition and sales at Bear Creek Operations, Medford, Ore., a distributor, said he experienced the consumers' lack of interest in organic produce firsthand when his company attempted unsuccessfully to market organics in its home delivery catalog.

"We tried to offer organic fruit," he said. "The customer would not pay a premium."

Bear Creek has since dropped the program, but Roberts hopes to revisit an organics program.

The Marsh produce executive, however, remained steadfast in his vision of organics growth, although he conceded that, "certainly, it's never going to replace conventionally grown."

In answer to the claim of a pricing barrier, he said, "We have seen prices [of organics] come down, while the quality has improved. We believe a lot of the major grower-shippers are offering organics."

The pricing gap will rectify itself, Richter believes, once organic products become more accepted, and the prices of conventional and organic produce will drift toward a greater parity.

Richter also suggested to attendees that the "department of the future is going to be centered on meal solutions," but he cautioned that the home meal replacement phenomenon will also become oversaturated by companies getting a late start in the game.

Category management, on the other hand, will "become the cornerstone of buying and selling decisions," Richter said.

Another retailer on the Produce 2000 panel, Rick Noeth, vice president of produce and floral operations at Gerland's Food Fair, Houston, said his company is against letting category management rule the department, preferring to let the customer instead decide what items will be stocked.

"We are not into category management, we are into customer management," Noeth said. "Our best customers will dictate what's sold in our stores."

At Gerland's, about 70% of its business comes from 30% of its customers, so the company has made a decision to market to and satisfy those shoppers.

Recently, Gerland's revamped its mailing policy to single out its most devoted shoppers for marketing.

"We changed to only mailing our circular to our best customers," said Noeth. Database marketing, he added, is a trend that supermarkets are, or at least should be, moving toward.

"We didn't care if we lost [customers] in the lower deciles. The company's philosophy is to treat all customers the same, but to reward them differently," Noeth said.

He also theorized that targeting the best customers will lead to attracting more shoppers overall, because prospective customers are more likely to listen to what their friends suggest than what a newspaper ad is telling them.

Richter closed his presentation by suggesting to retailers that they must "identify these trends and develop strategies" to best accommodate them, if they expect to benefit from the industry's prosperity in the future.