How is fresh produce faring amid inflation?

TAMPA, Fla. — “Stupid expensive” is how 3 out of 10 consumers in a recent survey describe food prices today, said 210 Analytics’ Anne-Marie Roerink, addressing the audience gathered for “The Power of Produce 2024” session at the Southeast Produce Council’s Southern Exposure conference on March 8.

But while rising food inflation is impacting every department across the store, the good news, says Roerink, is that price increases have moderated throughout the store, and the even better news is that fresh produce pricing is far below average price increases in other areas of the store.

If you compare fresh produce to frozen and canned fruit, for example, you see that people are paying 30% to 35% more in center store than they are in the perimeter, she said. And if you translate that inflationary pressure into performance, “you see that the fresh produce department has actually done a tremendous job compared to a lot of other departments around the store.”

Fresh produce had one of the strongest performances in 2023, continued Roerink, pointing to the department’s $77 billion in sales for the 52 weeks ended Dec. 31, 2023, up 1.5% from the year prior. But it’s in units that produce really shone in 2023, as every other category from dry grocery to dairy to meat and seafood was down in units save produce, which was static.

"The Power of Produce 2024," co-moderated by Roerink and Rick Stein of FMI, featured John Clear, senior director, A&M Consumer and Retail Group and interim chief merchandising officer for 99 Cents Only Stores; Melissa Thrasher, procurement team leader, Whole Foods Market; and Jon Greco, senior director of produce sourcing, Sysco Corp.

Panelists explored challenges, opportunities and, ultimately, how to increase produce spend and consumption.

What’s driving produce sales now

The majority, or 83%, of consumers are making changes to their fresh produce purchases, said Roerink, citing recent consumer survey results. When it comes to top money-saving measures, 35% buy more produce on sale/promotion, 25% buy produce that lasts longer for less waste and 24% are simply buying less produce.

Grocers can drive sales in three different ways: get more people buying, have products sold more often or incentivize people to spend more, Roerink said. To ensure growth, “let's continue to impress [the consumer].”

With the majority of sales happening in-store, “wowing in produce is crucial,” said Roerink, pointing to survey results indicating the top 11 traits of a great produce department:

1. Freshness/quality.

2. Good prices.

3. Well stocked.

4. Clearly marked prices.

5. Extensive variety.

6. Locally grown.

7. Good promotions.

8. Seasonal items.

9. Bulk displays.

10. Hand-stacked, eye-catching displays.

11. Knowledgeable produce associates.

And as freshness is top of mind for consumers, retailers would do well to talk about and quantify the freshness of their produce — how soon after harvest and how often do they receive produce deliveries to ensure customers have the best tasting experience?

While the need to impress on these 11 traits may be present in all economic climates —  now more than ever — an additional focus on pricing, value and merchandising are critical to driving sales.

Pricing and value

“Pricing is extremely important,” Clear said. “What we’ve found in the value chain is that people are willing to spend money on produce, but they're more discerning about what they're getting for that product … which means they need to get value for everything.”

On the other end of the spectrum from today’s value shopper, Whole Foods Market shoppers are also looking for deals. Its customers seek out the “yellow signs” the color the Austin-based grocer uses to indicate a sale, Thrasher said.

Value dominates the purchase and price goes hand in hand with appearance and ripeness, said Roerink, showing survey results that revealed the majority of shoppers rank price as No. 1 in their purchase decision factor. Ripeness and appearance were ranked second and third in importance.

Consumers are buying less and stretching their produce dollar, Roerink said. They’re looking for cheaper prices, and they’re shopping different stores to find them. There’s a “massive focus on everyday sale,” she said.

Powerful promotions

Retailers are responding by bringing back promotions. While “we’re not back to 2019 levels,” promotions are making a comeback, Roerink said. Retailers are also getting more creative with both in-store and digital campaigns, she added.

What's being seen are a lot more happy hour promotions, cross-merchandising, one-day sales and bundling of deals, where shoppers can pick how many items for a set price they want, which is also a great solution to unit pressure, Roerink said.

As the cadence of life after the COVID-19 pandemic has returned to a fast pace, consumers are craving convenience in the form of value-added items. And in certain cases, like holidays and seasonal items, they are willing to pay more for them in spite of inflation.

Digital engagement is an “incredibly important” piece of the promotions puzzle as well, Roerink said.

However, out-of-stocks are one of the surest ways to sabotage a promotion or ruin a shopping experience, warned the panelists. And as indicated by the survey results favoring “appearance,” the produce has to look good or shoppers won’t buy.

Local, organic, sustainably grown

Today’s consumers, particularly younger consumers, want to know where their food comes from, how it was grown and by whom.

99 Cents Only Stores has launched a new “Fresh Picks” marketing campaign that Clear said has had a “strong halo effect,” particularly in produce. The campaign highlights good quality and product origin.

While yellow sale signs at Whole Foods Market may be shoppers’ first stop in-store, “red signs” that signify local are the second-most visited, Thrasher said.

At the moment, organic may be feeling the effects of inflation more than local. “We see less engagement with organic,” said Roerink, pointing to survey data that found 76% of consumers say organic is “too expensive.”

She sees this lack of engagement as temporary. More than likely, shoppers will move back to the organic category once the wage gap picks up against inflationary pressure, she said.  

Local is also stealing the show in foodservice.

We direct our team to buy local, Greco said. “It's not just to support local [because it will] sell better on the menu; it's because it's the right thing to do. Supporting local shouldn't be [about] a sales advantage. It should be [about] thriving farmers.

“Farmers are heroes,” continued Greco, underscoring the theme of this year’s Southern Exposure, “Produce: The Unseen Heroes.”