THE PRECUT CONSENSUS 1996-02-26

STEPHEN DOWDELL

Retailers are eager to applaud the ascendancy of precut fruit as The Next Big Thing.

But first, they'll have to put down their knives -- and for that, they're not quite so ready.

In a roundtable discussion of the future of precut fruits and vegetables in the produce department, six retail produce executives made it clear that processors don't yet have prepackaged cut fruit in the bag. The retailers on SN's precut roundtable concluded that cut fruit as a concept has plenty going for it, but at present there are so many "ifs" attached that they'd rather do it themselves, and they are. For one thing, they are reluctant to let go of the profit building potential in, say, turning tired whole melons at the store into high-margin convenience items. What's more, they said, they've seen little evidence that processors are able to deliver high-quality, tasty cut fruit economically.

Still, the roundtable participants concluded that an industry built around providing them with cut fruit was virtually inevitable, and would be welcome, if the quality and price were right. (This is the third and final part in a series based on the wide-ranging retail roundtable.)

SN: What are you doing with cut fruit now? Will 1996 be the breakthrough year?

SCHROEDER: We think that cut fruit will be the next big explosion and, depending on how it's handled at source level, there could be a big future in it for us. Right now, we either do it in the store or, in some cases, have it done outside and delivered directly to stores.

CHANCE: We do it all in-store. There are companies out there that process fruit trays for institutional uses, but I have reservations. You get into that type of deal, and the product is always green and the taste isn't there.

I don't know if the processing technology will ever allow you to prepack it and get the quality and ripeness you want compared to doing it in-store if you've got a good program. And we do a major job in cut fruit.

JOLLEY: Tests we've done show you can get seven days' shelf life if everything is done flawlessly. It can be done, but the question is, is everybody ready to do what is required?

BERGAN: I've tried those apple bags and those peaches last year, and I'll tell you, we have a long way to go on this. Even with the sugar brick alone. It looked like they took the fruit, cut it and chose what would last the longest, rather than what would be edible.

ALSTON: Let's really cut down to it here, guys. We are cutting up melons in the store that don't look right on the counter, that are at their ripest point. We are reducing our shrink by selling them at twice the price; we probably don't want to take that out of the store, when it's all said and done. At store level right now, we are doing a better job than anybody else.

JOLLEY: You are packaging ripe product for an eight-hour shelf life?

ALSTON: That's exactly right. One day. We are taking cantaloupe that has a sunken area on it out of the display, cutting that in half, coring it out and making chunks out of it. It is perfectly acceptable to the customer, and is selling at twice to three times the price.

TERRY: The whole point is that it is impossible to get any packer that delivers product that eats, and I mean any type of precut fruit. Everybody wants to play first on the block, but there will be blood on the streets after consumers take it home and find out it tastes like the bag it came in.

SCHROEDER: If they can contract for the fruit to be grown just to be cut -- not for shipping, not for cosmetics, but for flavor -- and deliver it so that there is good flavor, then you'll have something. But I don't know where that is.

SN: Is there enough demand on the value-added fruit side of the business as there is for salads?

TERRY: With fruit, much of it is already just about ready to eat. Even if we have technology do it for us, aren't we just reinventing the wheel that's already in grocery? If in the end it is like having it in a can you can see through, what is the difference?

ALSTON: I think there is an advantage to being able to do an apple for a customer, so that she does not have to peel and core it at home or slice it -- if it can be done economically so you don't have to sell it at exorbitant prices. But with many items, what is the demand, really?

BERGAN: But look at strawberries. A few years ago, nobody wanted to handle that 1-pounder, but now everybody does, and they had to come up with good technology for that.

TERRY: But the reason for that is convenience for the store. The retailer was driving that because it helps him achieve his own goals.

BERGAN: Well, that's why we want cut-up fruit, because if you do it right it would be a labor saver and a dollar builder.

ALSTON: But what would you do with your old melons, just mark them down and take the loss on gross?

BERGAN: No, I think we'd still cut them up.

CHANCE: In our company there's been some controversy with salad bars, about where they are going, to deli or produce. And my argument is

always going to come back to how many extra dollars we are able to make ourselves by being able to use that fruit at the peak of taste. And you are not going to sell that product to any deli that's doing the salad bar.

SN: Where will the precut trend be five years from now, whether it's fruit or vegetables?

ALSTON: I think you are going to see more prepared foods. Maybe it will take longer than five years. We are fooling around right now with fresh sliced and chopped onions, taking the work out of the customer's hands, making it convenient to buy just what she needs tonight rather than a full bag of onions. We are going to have to trend toward that.

SCHROEDER: I think that fruit has one great possibility -- if it can be very consistent -- to compete with candy bars and chips as a snack.

ALSTON: And what about mixed fruits, the fruit cocktail, if you will? You know, the No. 1 tonnage item we have in our salad bars is the cut fruit. They'll do four or five huge bowls of that a day, vs. the lettuce; so we know the demand is there. We also package it and sell it on ice tables.

TERRY: But Harold, have you established a consistency as far as the flavor goes?

ALSTON: That is what I am saying. Somebody will find a way to do it. We cannot make it fast enough, and we are not even consistent with what is in it.

LANNERS: There are going to be challenges with packaging technology. How are they going to create the right vehicle to put products like this on the shelf? Will it be similar to what we are using now, basically a deli cup to protect that fruit?

BERGAN: Look at the frozen food aisle -- that might be a fresh aisle five years out.

CHANCE: Maybe. In our company, frozen food is overseen with produce, and we used to never do very much in frozen fruit. Then we went into the 5-pound value pack of mixed fruit, and big sales and displays and it has really picked up.

ALSTON: That's an indication of the potential for fresh, right there.

SN: Are precut's portion of space and sales in the department as big as they are likely to get?

CHANCE: No, I think you are going to see a lot more growth in it. Space will be the biggest factor, but sales too. People are going to keep buying more prepared ready-to-go items in the future.

BERGAN: Three consumer trends will be consistent: health, time and age. How we match those needs will guide how big the value-added business gets.

SCHROEDER: I think the category will continue to grow. But I am coming to the point where 20 to 24 feet is going to be the maximum for our size stores.

ALSTON: I don't think you'll need a lot more space, to be honest. You'll see cannibalism within segments and you'll start using that space in a different way. Also, as more people want prepared, less people will want unprepared and you can watch for chances to swap space.

It will be a profit-driven issue, I'm sure; if the bottom line says you're not getting a certain amount out of your space, upper management will cut you right back, too. It's a simple measurement.

Joining in the Discussion

SN's roundtable discussion on the future of precut produce included six retailers and a packaging supplier representative.

Harold Alston Jr.

VP, perishables sales and procurement Stop & Shop Cos. Quincy, Mass.

Don Bergan

produce supervisor Tidyman's Inc. Greenacres, Wash.

Larry Chance

director of produce, frozen food operations Hy-Vee Food Stores West Des Moines, Iowa

Jack Lanners

director of fresh fruits and vegetables Glen's Markets Gaylord, Mich.

Roger Schroeder

VP, produce Hughes Family Markets Irwindale, Calif.

Vince Terry

director of produce Harp's Food Stores Springdale, Ark.

Chuck Jolley

press relations specialist Cryovac Packaging/Marketing Systems Duncan, S.C.