Value-added items brighten companies' bottom lines - The Packer

Value-added items brighten companies' bottom lines

03/15/2013 02:11:00 PM
Mike Hornick

Fresh-cut and value-added fruits and vegetables get much of the credit for the modest sales growth produce departments enjoyed in the past year. As consumers vote for convenience with their dollars, it’s a trend that’s likely to continue.

For fruit, fresh-cut rose almost 17% in dollars in 2012 over the previous year while value-added was up 12%, said Steve Lutz, executive vice president of Nielsen Perishables Group, West Dundee, Ill. Value-added vegetables rose 12%. Department-wide, produce grew just over 4%.

By volume, value-added vegetables were up 15% at retail in 2012 after gaining 10% the year before, according to Nielsen Perishables Group. Side dishes spurred that with a 16% volume gain. New products lifted the overall category as unique item count rose 11%.

“People are still time-starved and I think they’re getting more time-starved,” said Noel Brigido, vice president of operations for Canadian processor Freshline Foods, Mississauga, Ontario.

“There have been a lot of single-serve applications this year for the snack or filler market, for shoppers to grab something quick. It’s up dramatically.”

“What we continue to see across all fresh foods is consumers seeking out items that deliver convenience,” Lutz said.

“There are more items coming into the store.”

“If you end up with more items on the shelf, you’re either decreasing shelf space for existing items to allow more in, or you’re expanding the space,” Lutz said.

“I can’t prove it, but my guess is that fresh-cut items are continuing to pick up display space. With the growth rates we’re seeing I’d really doubt it’s otherwise.”

Some of the space gains for fresh-cut are coming from the deli department and beyond.

“We continue to get a lot of competition from deli,” said Ed Odron, owner of Stockton, Calif.-based Ed Odron Produce Marketing Consulting.

“Look at a Safeway deli — Taylor Farms is supplying a lot of those. Alongside the fried chicken and pizza, the salad section is getting substantial. We all thought it would hurt produce sales, but it hasn’t and might have even enhanced it with complementary items. Value-added is profitable in both.”

Fresh-cut and snacks

Produce Marketing Association research shows two-thirds of consumers buy non-salad fresh-cut items, said Kathy Means, vice president of government relations and public affairs.

That broad reach seems borne out by results like those of Fresh Del Monte Produce Inc., which reported net sales up 11% in 2012 in fresh-cut. Chairman and chief executive officer Mohammad Abu-Ghazaleh said his company is the biggest branded fresh-cut food supplier in the U.S.

For sliced-apple specialist Crunch Pak, Cashmere, Wash., past is prologue. Its future lies in snack and breakfast items, said Tony Freytag, marketing director. Sales of Crunch Pak tray snacks — such as Apple Snackers, Dipperz and Disney Foodles — are up about 250% over a year ago.

“We’ll be introducing new products at United Fresh,” Freytag said, referring to the May 14-16 trade show in San Diego.

Lately Crunch Pak research has focused on breakfast-themed snacks, he said.

“Clearly, innovation is more snack-driven in fruit,” said Steve Kenfield, vice president of sales and marketing for Kingsburg, Calif.-based HMC Group Marketing Inc.

“Snacks are the strongest area we’ve got.”

HMC Farms offers snacks under the Grape Escape label. It’s also added a 1-pound tray to its line of ONEders destemmed grapes.

Pouch parade

In packaging, stand-up pouches are spreading. Freshline Foods, now in its second year with pouches, added nine stock-keeping units in 12 months.

“We’re promoting those like crazy,” Brigido said.

The Canadian processor’s line includes sliced apples, peeled parisienne potatoes, cubes of turnip or butternut squash, and others.

Sales of value-added potatoes in microwaveable bags are up over last year but some retailers still aren’t carrying them, Kevin Stanger, senior vice president of sales and marketing for Wada Farms, Idaho Falls, Idaho, said in March.

Getting trials in prominent display spaces has been a challenge, but so has a rise in products from competitors.

Kale, carrots, celery

In the salad mix category, demand for kale blends shows no sign of slowing. Salinas, Calif.-based Church Bros. LLC is the latest in a long line of product introductions with its Italian Greens for foodservice.

“Kale is the darling of everybody these days,” Means said.

Oxnard, Calif.-based San Miguel Produce reports its value-added kale sales more than doubled in 2012. The company’s products include four SuperKale Salad Slaws launched then under its Cut ‘n Clean Greens label.

Carrots are also going along for the ride.

“The solid growth is coming from the value-added sector of our business, (which is up) 12.8%,” said Bob Borda, vice president of marketing for Bakersfield, Calif.-based Grimmway Farms. He was comparing the four weeks ending Jan. 27 to a year ago.

“What’s driving the business is the value-added along with the organic carrots,” he said.

Organic baby and cello carrots are up 19%.

Grimmway is focusing its efforts on the snack category and marketing its Carrot Dippers, Borda said.

In celery, demand for fresh-cut remains strong, said Nichole Towell, director of marketing for Duda Farm Fresh Foods. The grower-shipper pegs annual processing at 134 million pounds, mostly off the West Coast.

Duda grows sweeter, proprietary celery varieties for such items as its 1.25-pound ready-to-eat pack, labeled as the equivalent of two stalks. A larger pack is sold in club stores.

“The snacking vegetable category is still growing,” Towell said.

Salads

Salads are about 60% of the combined fresh-cut and value-added market, Means said. Excluding salads, carrots equal nearly half of the remaining vegetable segment.

For Ready Pac Foods, Irwindale, Calif., sales of its expanded Bistro salad line contributed to overall growth of nearly 22% in the single-serve salad category in 2012, said Tristan Simpson, director of marketing and corporate communications.

Data indicating 47% of meals are eaten alone suggests further increases are likely, she said.

“We’re starting to get a variety of usage occasions in the salad set, which is going to increase overall consumption,” said Samantha Cabaluna, vice president of communications and marketing for San Juan Bautista, Calif.-based organic grower-shipper Earthbound Farm.



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