PRE-CUT, MIX GROWTH SEEN TOPPING FOR '96 PRODUCE

MINA WILLIAMS

Value-added items, including precut salad mixes, top the list of categories likely to help produce departments in 1996 to improve on 1995's strong sales, said retail executives.

"We have come off a year with the greatest increase of produce sales. The challenge will be to beat it," said Dennis Andreessen, assistant director of produce purchasing at Hy-Vee Food Stores, Chariton, Iowa.

"Last year was a very good year," agreed Bob McPhearson, director of produce at Minyard Food Stores, Coppell, Texas. "The big winner overall was, and will continue to be, salads. Value-added produce items are hot as a pistol."

Supermarket operators are apparently not the only ones with big expectations for produce this year. "Wholesalers, brokers, growers all have big numbers in the budget for next year," said Norm Carpenter, produce buyer for Rosauers Supermarkets, Spokane, Wash.

Retailers polled by SN agreed that trends in consumer demand will continue to drive produce sales in the direction of precut, helped by a broader recognition of the role fresh produce can play in a healthy diet.

"We anticipate produce sales to continue to be strong on a nationwide basis," said Ruth Kinsey, corporate communications manager at Harris Teeter, Charlotte, N.C. "This is primarily because people are eating healthier. The specific categories we believe will be hot in 1996 are ready-to-eat, prepackaged salads, mushrooms and table grapes."

McPhearson predicted steady sales growth at Minyard. "I have

no reason to think it would do otherwise. There is a trend toward the purchase of more fresh produce; and there is a trend in our company to offer fresh produce and other fresh foods that our customers are looking for."

It's a trend that other retailers said they plan to stay on top of as well.

"Customers are demanding more fresh foods," said Andreessen of Hy-Vee. "Our challenge is in the procurement of the right produce at the right time.

"With the precuts we are in the middle of growing pains. There is a value-added explosion," he continued. "There is more and more to it, more and more is being offered, and the vegetable lines continue to grow as this big item comes to the forefront. Value-added is expanding more and the end isn't in sight."

Indeed, the consensus on value-added seems to be for virtually unlimited category growth. "The packaging category has not begun to top out," said Carpenter of Rosauers. "It has a huge potential for whole new product lines. We are continuing to see huge growth in packaged salads. Now fruits, apples, are being experimented with."

Retailers also agreed that while the bulk of future produce sales growth for 1996 will be rooted in precut, emerging new products will continue to create procurement issues, to pose handling questions and challenge the cold chain.

"In 1996 produce variety will continue to expand in precuts," according to Brian Gannon, director of produce and floral at Big Y Foods, Springfield, Mass. "The amount of products will outpace space available, and force retailers into using category management processes in order to determine the right product mix within the category."

As the trend of proliferation in product assortments continues, buyers will become more diligent in making decisions and analyzing decisions within category management formats using pricing, demographics and margins, said Gannon. "I expect to see more companies expand into private-label produce lines," he added.

Retailers agreed that, for the upcoming year, they expect to see processed fruits driving overall fruit sales more than ever. Specifically, they named peeled and sliced apples, soft fruits, cherries and grapes as the value-added fruit items to watch.

But even as this expansion into fruit becomes possible, not all retailers said they are fully convinced that precut fruit is the goose that laid the golden egg. For one thing, it calls into question the advisability of using outside suppliers vs. in-store preparation.

"The major question is, how can we do it outside the department?" said McPhearson. "I may be a little old-fashioned but I feel it can only be done in the department. Fruit can represent excellent growth if the product is put in stores so customers can buy it, take it home to eat it and it will taste delicious. I am dubious about the use of additives to make products hold up better. That's why I hesitate to take cutting fruit out from the department, even though it is labor intensive and costly."

The general air of optimism expressed by produce executives for 1996 is being carried over from the retail produce industry's demonstrated ability to turn 1995, a potential lemon of a year, into lemonade.

"Overall, 1995 was certainly a good year, despite the floods in California and hurricanes in Florida," said Jim Richter, director of product merchandising at Marsh Supermarkets, Indianapolis. "The big challenge was managing those events."

Produce availability was the foremost concern in the wake of the year's natural disasters, said Gannon of Big Y. "This problem made it difficult to plan advertisements, especially for lettuce, stone fruit and cherries," he recounted. "The lettuce shortages, however, directed more people to precut salads."