First quarter shows hint of retail challenges ahead - The Packer

First quarter shows hint of retail challenges ahead

06/26/2009 02:27:44 PM
Tom Karst

Value-added produce
Value added fruit

Dollar sales per store: -9.4%
Volume per store:-8%
Average retail price: -1.5%

Value-added vegetables
Dollar sales per store: -5.8%
Volume per store: -9.5%
Average retail price: 4.1%

Source: The Perishables Group and United Fresh Facts on Retail 

In the first quarter for 2009, Lutz said that approach proved to be unsustainable.

“Over the long haul, you can’t continue to raise prices as a way to offset volume losses — it’s not going to pencil out,” he said.

At some point, consumers will shift their preferences and priorities, he said.

The report said consumers appear to be trading down from packaged salad to head lettuce. In the first quarter, head lettuce dollar growth was 6.9% and volume growth was 2.2%. head lettuce sales growth was 6.9% and growth in volume sold was 2.2%.In contrast, packaged salad sales at retail during the first quarter were off 4.7% and volume suffered a 7.5% decline.

In fact, Lutz said the Fresh Facts report indicates that nine of the top 10 vegetables were down in volume the first quarter.

“Bulk lettuce was the only category with increased volume in the first quarter,” he said.

“You pay a sizeable premium to have the salad already prepared,” said Dick Spezzano, president of Spezzano Consulting Services, Monrovia, Calif. “You buy a head of lettuce for 99 cents or $1.49 and get enough from that one head for six or eight people,” he said. “You do that in value-added, and it takes you a couple bags at $3 to $4 a piece to get that same volume,” he said.

Likewise, the Fresh Facts report said canned tomatoes sales were up 11.8% in the first quarter, with volume was up 2.2%.  In contrast, fresh tomato sales in the first quarter were off 14% in dollars and 3.1% in volume.

Lutz said a Perishable Group survey of 1,600 consumers in March indicated that significant numbers of consumers haven’t changed their behavior at all, while about 30% of consumers — mostly lower-income — are stressed by the economy and have made substantial changes in their purchase behavior.

“The message is that you have to know your consumers better than ever,” Lutz said.

Lower transportation costs are also contributing to the deflationary price trend.

For example, the U.S. Department of Agriculture reported the average truckloads cost for transportation for California strawberries New York in mid-June was $6,600, down from $8,300 at the same time a year ago. The average cost of a truck for Florida melons to New York City was rated at $2,400 this in mid-June, off from $3,350 at the same time a year ago.



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