PRODUCE'S ADDED CACHET

AMY I. STICKEL

The debate continues among retailers about whether the branding of bulk produce will catch on -- but brand names already are clearly more valuable in the value-added section.

What's more, many of them said the brands will become even more important as the value-added category -- which includes items such as prepackaged salads, produce-based meals, baby whole-peeled carrots and precut pineapples -- expands and new players fight for limited shelf space and for the attentions of consumers looking for precut they can trust.

The category currently accounts for about 6% of produce department sales, according to industry estimates. But that figure is expected to reach 25% by the year 2000.

Scanning data analysis from Nielsen North America, Schaumburg, Ill., shows dollar volume for prepackaged salads alone jumped 78.4% from 1993 to 1994, to $447.1 million.

With performance that impressive, retailers predict a fight is brewing between brand-name suppliers in the value-added category. While that could help the category grow, many merchandisers still have mixed feelings about what the impact from branding in value-added produce could bring to their departments.

So what's in a name? From the manufacturers' perspective, the package provides a ready tableau for a brand-bearing label. But retailers said the link between value-added and branding means something else to consumers.

Precut produce items are still largely unknown quantities to their shoppers. They can't judge the quality of a value-added product very well by sight, touch or smell. In that situation, a brand name can offer some assurance of quality that is acceptable or better.

"There is not a consumer in the world who is going to care if their [raw] produce is branded. With value-added, it's a different story," said Clark Wood, corporate produce specialist for the Salt Lake City division of grocery wholesaler Associated Food Stores.

"With value-added, it's very important, because the quality question is there. People relate to a label."

At the same time, however, some produce executives told SN that, as far as they can tell, shoppers don't much care whose name is on the package, as long as the name is there and the product quality promised by that name is delivered consistently.

Wood said if a consumer has a bad experience with one branded product, that consumer will likely switch to another, rather than abandon the value-added section altogether. That's why most stores need to carry at least two major brands to provide shoppers with options, he explained.

Brookshire Grocery Co., Tyler, Texas, does indeed carry two different brands of value-added produce, said David Dupree, vice president of produce operations at the 105-unit chain.

"Those two companies are working very well with us," he added.

Shari Steinbach, consumer and public affairs supervisor at wholesaler Spartan Stores, Grand Rapids, Mich., agreed that brand names reassure shoppers about the quality of value-added products.

For example, she said, if a consumer tries one brand of baby whole peeled carrots for the first time and likes them, that person may not be so nervous about trying something else by the same supplier.

However, Spartan is not promoting one particular branded variety over another, she said. Instead, the wholesaler is leveraging a number of brands to help expand its overall value-added business with retailers.

"Our strategy is to grow the entire category, not just brand names," she said. "Image and quality is key for the whole category." Steinbach added that Spartan provides incentives to retailers who run in-store promotions that feature different types and brands in the value-added segment.

It's not a fully egalitarian market, however, said some retailers.

Newcomers to value-added branding, as well as those who specialize in value-added products only, may be at a disadvantage running against the one or two suppliers who have already gained broad name recognition with commodity produce.

At Brodbeck Enterprises, an upscale eight-unit independent based in Platteville, Wis., as much as 80% of the value-added produce products are supplied by one very well-known company, said Jim Boudreau, senior vice president of merchandising.

"It makes a big difference," said Boudreau. Shoppers "know there is real quality there."

Other retailers were less convinced that consumers who buy value-added products necessarily relate to any one particular name brand more than any other.

Produce consumers shopping the precut section at Rosauers Supermarkets, a 16-unit operator based in Spokane, Wash., are not looking for one particular

brand yet, said Norman Carpenter, produce buyer. However, he added that he sees benefits as a merchandiser to sticking with only one or two brand names in the category.

Carpenter said his chain has handled one brand of packaged salads exclusively for about three years.

"We really hammered on that brand a lot the first year, to the point of having it in our ads nearly every week," he said. Even with all that support, he conceded, consumers still may not recognize that particular brand name, but he is convinced they know the products.

"I don't think it matters what brand you have," he said. "But I think you need to stay loyal to one brand, to help build the category."

Wood of Associated Food Stores was even more skeptical about name recognition. "I bet if you polled one hundred consumers, not one could name a packaged salad brand," he said. Steinbach of Spartan disagreed. She said Spartan was one of the first in its market to introduce value-added produce, and consumers definitely recognize brands.

"We've made a big push for the category," she said, adding the the wholesaler has been steadily promoting its value-added category using only a limited number of brand names. Now that's changing; Spartan is branching out into new products and new names, she said.

In fact, the business at large is changing, and suppliers will have to change with it, the merchandisers said.

One produce executive at a medium-sized Southern chain said processors will need to reach out to consumers directly with their brand names if the companies expect to survive the next several years.

Ken Lanhardt, director of produce and floral operations for the 13-unit Georgia division of Cub Foods, based in Lithia Springs, Ga., said it is a smart move for suppliers to push their brand names directly to shoppers through advertisements in consumer media. "Value-added brands will develop their own following as times goes by," he said.

"I think there's a pretty good battle going on," he said, noting that every company's working on getting its brand noticed. "That's not all bad, and it's not all good," Lanhardt said. "The more competition you've got, the better everyone gets."

Carpenter of Rosauers said, however, that even with such support, brand names would probably be less important than price in the value-added category.

He pointed to the status of branding in commodities. "Look at all the money some suppliers have put into brand-name recognition [for commodities]," he said. "For a dime, people will leave them."

Other merchandisers see it

differently. Mark Luchak, director of produce and floral at 30-unit Rice Food Markets, Houston, said quality is the key, rather than price, for value-added. "In most stores, consumers will pick a brand name. A brand name of any type is a signal for quality."

Fred Mooney, director of produce operations at five-unit Andronico's Markets, Albany, Calif., said it is ultimately up to the retailer, not the brander, to assure product quality.

"The customer has to believe everything you say as a retailer," he said. Mooney added that he is looking to build his value-added produce using regional processors, rather than national operators. He said the reason for that is he has concerns about the quality and consistency of the product from some major operators.

Mooney said regional processors have a greater stake in providing quality. In general, he likes to outsource to family-oriented operators, instead of large, faceless companies.

The deepening connection between value-added and branding raises the specter of slotting fees invading the produce department, Mooney added.

When produce executives begin to bank on slotting allowances from manufacturers, long-term commitments to quality and customer satisfaction will suffer, he said.