Over 25 years the produce industry has changed dramatically. While some dominant names are the same, many large companies, products, packages that were prominent when I started in the industry are gone, replaced by upstart organizations, completely new products and unimaginable technological innovation.
From a sales and marketing focus I think three big trends have been particularly significant over the last 25 years. So, let’s talk about the trajectory of these trends and make a few predictions about what might happen next.
- Generic commodities were replaced by new varieties, but proprietary brands will control the future. Twenty-five years ago, nearly all consumer directed produce marketing spending was for broad commodities like apples, oranges, green/red grapes, etc. To the extent consumer differentiation was attempted, the vast majority was done by state-based commissions or product specific associations. These commissions and marketing orders worked to establish trade preference and price advantages based on the superiority of their growing regions. Groups like California Strawberries, Washington apples, Idaho potatoes, Florida Citrus and many more in virtually every major growing region ably touted the generic virtues of their regional growers and products.
But the reality is generic promotion programs were never expected to highlight differentiating qualities among individual growers and their products. Setting aside the econometric evidence that these industry programs successfully boost demand, most in the produce industry acknowledge that “industry” promotion activities are not a substitute for individual, company/product specific marketing. The new investments being made now are by individual grower-shipper companies that are highly motivated to differentiate their organizations through packaging, branding, product innovation and proprietary products. For example, generic apple promotions transitioned to highlighting specific varieties like Honeycrisp, Jazz and Envy, etc. Citrus sales were reinvigorated by Clementines. The tomato industry was completely change by leading hot house producers.
What happens next? While many marketing order associations still have an important role, I expect to see broad adoption and utilization of marketing tools completely focused on driving proprietary branded produce products. These products usually make up a small portion of their respective categories but are driving a significant percentage of overall growth. In addition, the digital transformation and the emerge of social media marketing tools will be a game-changer for the industry. Marketing tools which were previously cost prohibitive and inefficient are suddenly viable options. I expect to see growers aggressively engage the trade and, more importantly, target individual shoppers with product/brand messages via new media channels. The inefficiencies of mass media historically rendered traditional advertising far too expensive for individual growers. But the internet and social media have shifted the marketing paradigm, opening efficient direct-to-consumer communication tools to the industry. To date, marketing efforts among many growers remain one-dimensional, limited to using the internet like an electronic version of a company brochure or magazine ad when a target chooses to click on their webpage. This completely misses the power of web to be proactive vs. reactive. Never have so many produce organizations had the option to reach into consumers’ homes with emotional video, rich storytelling, compelling detail on growing practices and, most importantly, targeted, high-frequency reach. With the emergence of proprietary branded produce items, it is inevitable that we will see increased marketing investments (both people and budgets) with much of the activity centered around web-based, consumer-directed communications.
- Growers have gone from being data blind to become full category partners with complete access to a suite of supermarket sales metrics. Predictive analytics will rule the future. It hasn’t been that long-ago growers had no access to retail data documenting how their products performed in supermarkets. Worse, many growers didn’t want to know, optimistically believing “retailers will get it right”. Other growers indicated that assessing retail performance pushed them into areas beyond their expertise, essentially saying “My job is to grow it, their job is to sell it.” High data costs and accuracy questions further slowed adoption. The challenge was that as major fruit and vegetable categories fragmented due to product proliferation, a data blind approach among producers of “hoping” the retail customer gets it right became an untenable strategy of leaving dollars on the table solely due to sub-par store execution.
The reality is supermarket produce executives trying to make buying and merchandising decisions across 650+ items per store need all the help they get. There is simply no incentive for the retailer to bring the same level of expertise to the product category as the grower. As we’ve seen, it’s the growers (and their sales team) who have a vested interest in documenting the nuances of category/item dynamics. It’s the grower who understands changing consumer purchase preferences and substation patterns because they see it across a broad customer base in what is selling at retail and what sits unclaimed at the warehouse. And it’s the grower who is in position to reap the benefits of using a fact-based approach to documenting the retail practices proven to drive optimal sales performance for the category.
Over the last decade, data costs have declined while data accuracy and transparency have improved. At the same time, powerful predictive software tools have emerged. Going forward, greater analytical power combined with more expansive data sets—wielded by skilled category analysts within grower organizations--will create a new pivot point. The emphasis for growers is going to quickly shift from score-carding past performance (traditional category reviews) to accurately projecting future sales goals and performance targets. This will be based on data-driven analysis of how shifts in product assortment, pricing, merchandising and promotion will optimize category performance.
- Bulk item replaced by packaged products. Traditional packages will be rendered obsolete by packaging innovation. It hasn’t been that long ago that bulk produce drove over 70% of all retail produce dollars. For many categories, packaged items were discount products where growers sold their lower grade/off size products. Even packaged salads were originally nothing more than the pre-cut versions of bulk head lettuce or bulk romaine. Not surprisingly, research at the time showed that many consumers believed “packaged” or “bagged” meant a lower quality.
Over the past 10+ years that story has been completely reversed. Packaged items have emerged to become some of the highest revenue generating products in the produce department. Packaged salad blends and kits led the way, but even commodity products like berries generate among the highest dollars per square foot of display space in the produce department. Not far behind are packaged products like Clementines, tomatoes, other specialty citrus and proprietary grape and apple varieties. The reality is, today many of the best high flavor, proprietary produce items are dominated by package sales.
I expect to see next packaging innovation and branding of proprietary items fully emerge as a differentiating marketing tool. Look no further than the success of the grape/cherry tomato producers. Innovative growers using the combination of unique package design, proprietary varieties and spectacular branding have re-created the tomato category. Look at the package innovation in small, creamer potatoes. At the store level consumers are demonstrating a willingness to buy innovative, packaged products at substantial price premiums. The result is these unique products generate a meaningful transaction size advantage over the comparable bulk items. It seems obvious that growers and retailers will increasingly seek out packaging innovation as a competitive advantage and to increase value for retailers.
The beauty of the produce industry is innovation is as inevitable as the seasons. What is completely predictable is the landscape within our industry will continue to shift, revealing unexpected opportunities for those willing to look. It will also bring unexpected, painful challenges for those unwilling to change.
Growth of fresh produce and The Packer