Southwest region invites retailers’ experiments in drawing consumers

01/04/2011 01:54:33 PM
Susie Cable

Geography, ethnicity, income and other factors influence retail produce trends across the Southwestern U.S., just as they do throughout the rest of the country.

Phoenix, however, is different from some other Southwestern cities because it often serves as a test market for retail trade and other industries.

“There’s just about every (retail) concept you can imagine here (in Phoenix),” said Greg Reinauer, senior vice president of Amerifresh Inc., Scottsdale, Ariz.

Reinauer said Phoenix has an array of retailers that focus on diverse concepts, including the Hispanic or Latino market (Bashas’ Food City; Pro’s Ranch Markets), the smaller bulk food store (Sprouts Farmers Market), the fresh and natural market (Whole Foods Market), and the neighborhood store (Fresh & Easy Neighborhood Market). There are several Wal-Mart Stores concepts — Sam’s Club, Neighborhood Market and Supermercado de Walmart — in the area, as well as gourmet markets, such as Bashas’ A.J.’s Fine Foods.

Any of those retailers might choose to feature local produce in their stores.

“Wanting local produce is very, very big,” said Barry Zwillinger, partner in Legend Distributing LLC, Glendale, Ariz.

“We’re aggressively working to lead that … in some of the items that we’re looking to get into growing on our local farms.”

Some retailers are aggressively looking for locally grown produce, and Legend is working with its retailer customers to feature more local items.

“I expect in two years it will be a big part of our business and the fresh produce business in Arizona,” Zwillinger said.

He said he knew of a couple of retailers who have space dedicated to local products. He declined to name the retailers, but said one has about 15% of the space throughout its store committed to local products, including produce. Consumers in Arizona can find local vegetables during the winter, but that’s not the case in El Paso, Texas.

El Paso consumers don’t have much interest in locally grown produce because it isn’t a crop-producing area.

“It’s basically desert,” said Nick Delgado, owner of Quality Fruit & Vegetable Co. in El Paso.

New Mexico, however, grows lettuce, chilies and onions, and consumers there do support local growers, Delgado said.

“Especially the way the economy is today,” he said.

Marketing local produce is a newer strategy in the Southwest, said Willie Itule, owner of Willie Itule Produce Inc., Phoenix.

Itule said he thinks locally grown produce is more popular now because it can be more affordable and because retailers are using local as part of their marketing strategy.

“When the economy turned down, retailers backed off organics and went to local,” Itule said.

New Mexico has a good market for organic produce, but El Paso has only a small organic presence, Delgado said.

“A couple of stores do well with it, but in small amounts in comparison to what I’ve seen in Albuquerque,” he said. “They’re probably more price-conscious in El Paso.”

Organic produce is important for some retailers in the Southwest, but Legend doesn’t feature organic items, Zwillinger said. It occasionally handles some organic produce, but it doesn’t fit the company’s current strategy.

Reinauer said organic produce seems to be a steady segment in the Southwest, but it is not a growth category for Amerifresh. It represents only a small part of its sales.

In Arizona, retailers use specialty produce to stand out from the competition, Itule said. The trend is most visible in high-end supermarkets, but midlevel supermarkets also are beginning to handle small quantities of specialties as a way to hang on to customers, he said.

“Every retail produce department is out there looking for the specialty product that is going to make them stand out from the other stores,” Itule said. “The more unique the item, the more desirable it is for them.”

Although most of Itule Produce’s business is with foodservice and restaurant buyers, its strong point with retailer buyers is in specialties, Itule said. Itule Produce can typically source specialty produce within 24 hours. In December, for example, Itule could source a variety of specialty radishes, baby carrots, baby kohlrabi and all colors of baby beets within a day.

The growth in specialty produce has been occurring for the past two to three years in Arizona, Itule said. He said he thinks consumers have been cooking more often instead of going out, and they look for specialty produce to make meals at home more special.

El Paso is not a strong market for specialties, Delgado said. Instead, produce that appeals to the Hispanic market is very popular.

The Hispanic market is important in the Phoenix metropolitan area, too. Supermarkets designed to appeal to Hispanics are a growth segment, Zwillinger said. The potential for this market has grown considerably during the past three to four years, and Legend’s sales to mercados are a growing part of its business.

Historically, ethnic-driven markets have been important in the Southwest, Reinauer said. As the Hispanic population grows, more retailers are responding to demand and entering the market.

“That Hispanic demographic has a tendency to have a higher produce consumption rate than Caucasian consumers,” Reinauer said. “I think some smaller retail markets have always realized that, but now we’re seeing larger players starting to understand that.”

In June 2009, Wal-Mart Stores Inc. remodeled a Neighborhood Market in Phoenix and opened it as the chain’s second Supermercado de Walmart. The first Supermarcado opened in Houston earlier that year.

Bashas’ Food City Supermarkets is an Arizona chain that targets the same market. It features on its website the prickly pear cactus as a popular vegetable. The Phoenix Food City’s Dec. 15 weekly ad circular featured cilantro bunches priced at six for 96 cents, 3 pounds of limes for 99 cents, banana leaves for 99 cents a pound, green chilies at 3 pounds for 99 cents, and jicama priced at 4 pounds for $1.

The Kroger Co. opened its first Fry’s Mercado in 2006 in the Phoenix area, according to The Arizona Republic. Pro’s Ranch Markets, a California-based supermarket with what it calls a “Hispanic store concept,” opened in Phoenix in 2002, and has added stores to the area in six of the last eight years, according to its website.

As in many other North American markets, produce suppliers in the Southwest are now targeting marketing directly at consumers, said Jose Felix, partner in Delightful Quality Produce Co., Mesa, Ariz. Felix said his company uses several techniques to draw consumers’ interest and to familiarize them with Delightful’s products and labels.

Its main strategy is working with Beau MacMillan, chef at Elements restaurant at Sanctuary on Camelback Mountain resort and spa, Paradise Valley, Ariz., to provide exclusive recipes to consumers through “Beau Mac’s Delightful Secrets” program. Delightful’s labels for its tomatoes are double sided, with a MacMillan-created recipe on the back of each. The recipe is created specifically for the type of tomato that the label is on.

“We’re trying to differentiate ourselves and the types of tomatoes that we’re selling,” Felix said.

Recipes are changed to reflect seasons or holidays, Felix said. He said he expects recipes to be available in the next few months on Delightful’s website, http://delightfulquality.com.

Delightful has a one-year contract with MacMillan to provide recipes. The contract started in about August, Felix said. The contract doesn’t specify the number of recipes to be provided.

Another direct-to-consumer strategy Delightful uses is an appeal to safety concerns. Each package has a traceability number on it, which can be entered on the company’s website to discover when and where the tomatoes were harvested. Felix said the company’s traceback program is another point of differentiation.

“Very few (companies) are tracing on a clamshell or mesh pack level,” he said.

“Some are tracing on a case basis, but that information is only available to the retailer buyer. We are going to the consumer.”



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