BOSTON — The foundations of commodity business are crumbling, Steve Lutz told a packed room at the New England Produce Council’s Produce, Floral and Foodservice Expo in Boston.
“Those foundations that built stores, built commodities, over many, many years are under attack from new product introductions,” said Lutz, vice president of insights and innovation at Category Partners, Idaho Falls, Idaho.
Until early August, Lutz was the vice president of member engagement at the Produce Marketing Association. Before that, he was chief strategist and vice president of marketing for CMI Orchards and held leadership roles at Washington Apple Commission and Perishables Group, which later became Nielsen Perishables Group.
The NEPC event was Sept. 18-19.
The educational session Lutz led at the 20th anniversary expo focused on how product innovations are disrupting the dominance of the produce industry’s long-held commodity framework.
Much of his information came from a Category Partners Analysis with data from Nielsen, Total U.S. Grocery Scan, and the U.S. Department of Agriculture’s Economic Research Service.
“At every level, we’re competing with new products and new formats. It’s crazy,” he said. Most notably, Honeycrisp and other branded apples are changing the category. The same goes for Cotton Candy grapes and the rise of mandarins/clementines in the citrus world.
Whether the retailer is focused on discount or high-end shoppers, there’s a dilemma with new items, Lutz said.
Driving the most volume, the commodity produces the vast majority of volume dollars for these categories, he said.
“But it’s ultimately the niches and segments that are driving consumer loyalty,” he said. “They’re driving incremental transactions — people to buy more — and in many cases, they’re getting the disproportionate share of the actual growth for the retailer and the producer in the segments where they’re competing.”
Volume sales may not rise with product innovations, but incremental dollars do rise, he said.
Lutz related this dilemma to what he called the Starbucks Effect: Once a consumer makes a new purchase decision and is happy with it, there’s no going back. It becomes almost permanent, like the decision to buy premium coffee.
There’s also the Amazon Effect, which has taught consumers they can, and should, be able to get anything they want at any time.
“We know that consumers are absolutely shopping differently. It doesn’t matter if it’s the category,” Lutz said. “It might be the store. It might be online.
“Product introductions are here to stay, and that will make our life challenging, and really the opportunity to grow the dollars is doing a better job for all of us,” he said. “How do we manage that mix of products and optimize it in a way that drives the most dollars?”