Making the Cut 2008

AMY SUNG

The economy may be in recession, but consumers are still willing to spend on convenient, healthy foods — a trend that has made value-added produce a resilient, growing category.

“We're continuing to see double-digit growth year over year,” said Darvel Kirby, business director of produce for United Supermarkets, Lubbock, Texas, who added that based on volume, bagged salads are the most popular fresh-cut products for United's customers, followed by fruit and vegetable trays.

“Clearly, ready-to-eat is the driving ticket with today's busy consumer,” Kirby reasoned.

This appears to be the case for many retailers across the country, according to United Fresh Produce Association's “Fresh Facts on Retail” report for the second quarter of 2008, sponsored by Del Monte and the Perishables Group.

Weekly dollar sales per store averaged $1,686 for the value-added fruits category, reflecting dollar sales growth of 1.4% since the second quarter of 2007. Weekly volume fell 0.1%, but average retail prices were up 1.6% compared with the same time period one year ago.

Fresh-cut fruit is the top seller in the value-added fruits category, with $1,181 in weekly dollar sales per store. Overwrapped fruits are second with $334 in sales, while jars and cups net third place with $171 in sales, according to the report. The jars and cups subcategory led sales growth, posting a whopping 12.5% increase vs. sales in the second quarter of 2007. Weekly volume per store grew 26.3%. The average retail price could be a contributing factor for the boost in sales, since it decreased 10.9% vs. the same time period.

“For me, one of the surprising things was that although value-added and fresh-cut fruits in jars and cups are still small volume, they actually saw a pretty good growth rate over the past quarter or so. According to the research, this is a growth area, an area that is becoming more popular,” said Amy Philpott, vice president of communications for Washington-based United Fresh.

“I think some of it is that it's new and different, at least the packaging, but also because it traditionally lasts longer, the shelf life is a little bit longer,” she added. “We'll see if that growth continues; I'm not sure if it will, but it will be interesting to see if it does.”

Overwrapped fruits decreased both in weekly dollar sales and weekly volume, falling 1.4% and 5.7%, respectively.

By contrast, value-added vegetables experienced slight decreases in both dollar sales and volume. The total category's weekly dollar sales per store declined 1.7% in the second quarter of this year vs. the same period in 2007. Weekly volume decreased 2.1%.

Side-dish value-added vegetables, which include fresh vegetables that are typically served as side dishes and can often be cooked in the microwave directly in the bag, account for almost 50% of the value-added vegetables category, with $366 in weekly dollar sales per store, a 1.3% increase over the second quarter of 2007.

Nationally, the vegetable tray subcategory experienced sharp declines in dollars and volume, with 13.3% and 15.5% drops, respectively, according to the report.

FRESH IDEAS

However, many retailers, such as Associated Food Stores, Salt Lake City, say they continue to do well with vegetable trays, thanks in part to recent innovations, such as trays that combine meats and cheeses with produce like celery and carrots.

“It's kind of a crossover item, and those have done really well. We've sold a few hundred of each of those in the past week,” said Leigh Vaughn, director of produce at AFS. “We're probably pushing 1,000 cases between the two meat-and-vegetable SKUs that we carry.”

Philpott noted that many of the newer products she is seeing are focused on meal solutions or almost ready-to-eat, and typically include a protein component.

“It's more like produce being used more as an ingredient,” she explained. “We've seen that, where fresh produce is being coupled with proteins to make a dish vs. using frozen or canned produce. That's probably where we're seeing some of the newer products. Many times they'll be packaged together, so if you have chicken kabobs, rather than having them skewered already or premade, you'll have a package that has a package of chicken and a package of produce and maybe a package of fresh spices as well.”

Value-added vegetables geared toward meal prep and snacking also demonstrated gains in both weekly dollar sales and weekly volume.

“On the vegetable side, we've seen growth — not so surprisingly — in a lot of the side dishes,” Philpott said. “[In] prepared meals — especially in the deli, where they have prepared side dishes or prepared vegetables — there's been quite a bit of growth in that,” Philpott said.

Philpott also suggested that retailers might benefit from cross-merchandising fresh-cut produce in other departments to make meal preparation more convenient for shoppers.

“These fresh-cut items really lend themselves well to other aspects of the supermarket,” she said.

“We've always had whole produce like fresh lemons over by the fish counter, but these fresh-cut items are now actually being coupled with fish or chicken or dairy products or those types of things in other departments, especially perishable departments.”

Vaughn agreed, noting that fresh-cut produce suppliers seem to be undergoing a significant period of innovation.

“The biggest trends I see are that the companies that supply us with [value-added produce] are trying to be more innovative and trying to expand into different areas of the same lines they've carried for a while. Whether it's Del Monte, Dole or Fresh Express, they all seem to have showed up in my office lately and have a whole new line of something, whether it's cut fruit or mixed salads,” Vaughn told SN.

“Of course, some of the trends that I've seen in salads of late is the ever-popular clamshell. I was approached [recently] to bring in a new line of clamshell items. I had an organic company come in and speak to me about some organic items and some conventional spinach. All of those have been shown to me in the new clamshell format, which I find is a value to the consumer, mostly because its reclosable and stackable aspects make it much easier to use at home.”

Vaughn also noted that retailers are continuing to innovate on their own.

“We have a great chain that we supply called Harmons, and they've really grabbed hold of it and actually have a fresh-cut — for lack of a better term — ‘bar’ where you can shop and get just about anything in the produce department in some stage of preparation,” Vaughn said.

“That's in their produce departments. It almost looks like a butcher shop, and they're doing really well.”

Kirby of United Supermarkets said cut fruit has been steadily growing at his stores, with mango mixes showing particular promise lately.

“All fruit medleys continue to grow, and there may be room for innovation in this category with more varieties of fruit,” Kirby said.

In order to boost sales and maintain consumer interest, retailers can be marketing fresh-cut produce in a way that emphasizes the category's inherent strengths, such as health and convenience, Philpott suggested.

“I certainly think hitting home that these items are convenient, especially around the holiday season, [is an effective message]. This probably isn't a new message for retailers, but it is clearly the message that hits home with consumers, that these items are more convenient and that it's worth it,” she explained. “You spend more time with your family when you can use these items.”

Philpott also said that by emphasizing health and convenience, retailers could also help dispel any misconceptions consumers might have about fresh-cut being less nutritious, less fresh or less environmentally friendly.

“I think that as retailers are advertising these products, one of the things they can do is to reinforce some of these positive messages,” Philpott said. “If you're advertising fresh-cut produce and you have ‘convenience’ as one of the tag lines or one of the reasons to buy, why not add ‘healthy fresh produce,’ or ‘healthy and convenient’?”

ON THE SHELF

Yet while the “Fresh Facts on Retail” report indicates that value-added fruits and vegetables continue to command more shelf space in produce departments, finding sufficient space for the category remains a key challenge.

“I think when we started this whole value-added movement, nobody understood where it was going to go; we all kind of rode the train for what it was worth. And now that the mind-set is changing — where stores are bringing in larger value-added sections and racking, display areas — the problem is that now we're getting to the point where we need to do that again,” Vaughn said. “We need to revisit it and expand, and really, I can see a typical produce department having half of their refrigerated section as some type of value-added in the future, whereas now it's probably a fifth, a quarter maybe, at best.”

Although fresh-cut produce tends to be slightly more expensive than whole produce, consumers have become so acclimated to time-saving options that the category has become more mainstream than ever, industry experts agreed.

“We are hearing more that people are shopping more at the supermarkets rather than going out to eat, and when they get to the supermarket, once they get into the produce department, I think they will continue to purchase fresh-cut, even though it might be more expensive than your traditional whole produce,” said Philpott. “I think in times of economic downturn like this, if someone is going to sacrifice going out to eat, they're going to spend an extra penny in the produce market. It's kind of a compromise, I think.”

Vaughn agreed.

“I think, generally, it's become less of a luxury item and more mainstream, almost a destination-stop item over the last 20 years,” he said.

“I really think [the value-added and fresh-cut category] is going to continue to expand. It's funny, because it's been relatively insulated from this difficult economy, because people are bent on convenience. They're still going to buy a fresh-cut salad.”