CHICAGO — Lending insights on consumer apple demand from a retail perspective, Randy Riley outlined the challenges and opportunities he sees for the apple category.
Riley, director of produce merchandising for Cincinnati-based Kroger Co., outlined the challenges the apple industry faces at retail and outlined recommendations to address them, at the U.S. Apple Association’s annual Crop Outlook & Marketing Conference.
Riley said 11 million consumers walk into Kroger stores across the U.S. every day, and the chain gathers loyalty card data on more than 90% of shoppers.
The data allows Kroger to develop strategies to better serve customers, based on shopping patterns. Pulling data from a multitude of store formats, from discount to upscale, gives the chain complete coverage of the market.
Kroger is the largest organic fresh produce retailer in the nation, he said, with sales of more than $1 billion annually for the past three years.
Riley estimates Kroger stores account of 20% of U.S. retail organic produce sales. In the markets they operate — 35 out of the 50 states — Riley said Kroger’s share of the organic market is 40%.
Altogether, 27 million household are buying organic in Kroger stores. Riley said the Simple Truth private label organic brand in all departments has annual sales of $3 billion per year.
As consumers migrate from conventional to organics, the trend has been a driver for Kroger’s business, Riley said, including fresh apples
For the entire apple category, Riley said Kroger stores account for about 38% of U.S. apple retail sales. With about 200 stock-keeping units, he said Kroger moved about 9,000 truckloads of apples — about 350 million pounds — to stores in the past year.
Engagement and response
Riley said consumer engagement and consumption of apples has dipped in the past five years, with Kroger’s shopper card data show a 4% reduction annually.
Riley said he thinks there may be several reasons related to the decline.
Internal competition from the multitude of apple varieties may be one reason for the lack of consumer engagement, he said.
“What this translates to the retailer is that there’s too many options for the retailer, and there’s too many options for us to match the varieties with the customer,” he said.
Multiple varieties with similar flavor profiles may be confusing the consumers, he said. Most importantly, there is too much supply of less-than-optimal eating apples, Riley said.
“The problem here is that these declining varieties (including red and golden delicious) still represent 9% of the total category,” he said. “And the new varieties that are replacing them represent less than 1% of the total category.”
The increased variety tactic is clearly not lifting the category and it’s not translating to the consumer, he said. As they add newer varieties, growers and marketers need to more aggressively remove declining varieties from the mix.
The mainline varieties of granny smith, gala and fuji represent almost half of the entire category sales, leaving only half of the category to account for dozens and dozens of other varieties.
Soon expanding Cosmic Crisp production may present another challenge to the industry in years to come, Riley said.
“This thing can be good or it can be bad,” he said, noting that the industry is putting “a ton of eggs in this basket.”
Riley said Kroger will be an ambassador for the Cosmic Crisp, but it will be consumers who will decide its fate.
External competition from other fresh produce options may be another reason consumer apple engagement has dipped. Improved availability, strong branding and better varieties have helped the growth of citrus, berries and grapes, he said.
A third reason that Kroger believes apple engagement has slipped is related to emerging trends, such as diets that limit consumption of sugar in fruits. He encouraged the industry to support diets that promote apple consumption. Apple consumers also tend to skew older, he said.
A fourth reason that apple demand may have slipped is related to political tension, particularly related to tariffs in China, that have limited export sales.
Answer the call
The industry’s response to the challenges, Riley said, should include a focus on the customer.
“The customer is not the retailer, the customer is the one who’s purchasing the piece of fruit and taking it home,” he said. “Make investments that are customer driven.
Riley said also recommended the industry look to innovation beyond variety and operational efficiencies. Cut out the deadwood of nonperforming varieties, Riley advised.
Building marketing investments and partnerships also is an important response, he said.
Riley suggested the industry needs to do a better job employing marketing tactics that both target users and non-users to engage them and bring them back to the apple category. Tell the story of apples and their value to consumers, he said.
“What is your strategy as an industry to acquire new households and retain them?,” he asked.
Finally, Riley said the industry should focus on the sensory experience that apples offer consumers.
“My point of view on all of this is that there’s no one person big enough to solve declining consumption,” he said. “There’s too much that’s causing cannibalization, proliferation of varieties, over planting, lack of understanding of the customer, labor costs — all these problems are bigger than any one person or any one company,” he said.
“Our challenge to you, as a call of action, is to find a way to work together for one common goal to get (increased) customer engagement.”