(Web Editor’s note: This article is an expanded, updated version of a story we posted the morning of Aug. 28).
(Aug. 28, UPDATED 5:10 p.m.) Making produce more convenient for consumers is one key market opportunity highlighted in a just-released study of produce department performance and opportunities.
The study, released by West Dundee, Ill.-based Perishables Group, measures sales growth in 2007 compared with 2006 and suggests opportunities for retailers and produce marketers to boost sales in the coming year.
In looking at profit opportunities, the study also points to greater sales potential in marketing to children and providing consumers more options to buy locally grown and organic produce.
The Perishables Group released its annual State of the Department reports in late August for produce, meat, seafood, deli and bakery. Those five segments are considered the five core perishable departments. Inquiries about the report can be directed to info@ perishablesgroup.com.
In a presentation to the U.S. Apple Association on Aug. 21, Steve Lutz, executive vice president of the Perishables Group, said consumers are responding to convenience needs by buying variety packs and packaged produce items.
He noted that household budgets are under pressure in the U.S., with many shoppers looking to cut costs. For one thing, they are making three or four trips to retailers rather than big stock-up trips. Lutz said nearly 70% of consumer trips to all retail outlets are considered small trips, with less than $30 spent.
Retail category growth is coming from price increases rather than volume increases, he noted. Lutz said retail shelf space is at a premium, with fruit subject to substitution by higher-earning varieties. Lutz noted cherries generate the top sales per square foot among fresh produce items at retail, followed by grapes berries and avocados.
Retailers need new products to create sales and differentiate their departments, Lutz said. In particular, marketing help is needed for high-impulse and high-value items, which tend to include the fruit category and fresh-cut produce.
Traditional supermarkets also face more competition from alternative channels, Lutz noted.
Retail expansion of stores since 1996 has largely come from outside traditional food, drug and mass merchandisers, he noted. Particularly, Lutz said warehouse clubs, supercenters, dollar stores, and convenience store have expanded rapidly.
For example, Lutz said the number of dollar stores have grown by 13,900 stores since 1996. He also said mass merchandisers like Wal-Mart have converted many of their stores to supercenters, and hard discounters like Aldi and new formats such as Fresh & Easy have also grown.
Lutz predicted Tesco’s Fresh & Easy into the U.S. could lead to a shakeup in the formats offered in the convenience/gas channel.
Key findings offered in the produce department report by The Perishables Group:
- 2007 produce department sales were up 3.7%;
- In 2007, the produce department contributed 33.2 % to total perishable sales. That is a 0.1% increase in share compared with last year;
- Vegetables accounted for 48% of produce department sales and fruits accounted for 44%, the study found. However, fruit sales grew at a faster rate those vegetables;
- Led by berries and apples, organic fruit sales grew at more than double the pace of organic vegetable sales;
- Fresh-cut produce sales have fallen off double digit growth rates, but still experienced moderately stronger overall growth than whole produce;
- Empty nest and senior couples buy the most produce, followed by families with older kids; and
- Interest in exotic fruits is spilling over to the fresh-cut sector, with fresh cut mango and papaya sales up sharply in 2007.