Circana's Jonna Parker: What grocery transformation means for produce

Jonna Parker of market research firm Circana explains how produce fits into all the transformation happening at grocery retail at the IFPA Retail Conference June 6-8 in Oak Brook, Ill.
Jonna Parker of market research firm Circana explains how produce fits into all the transformation happening at grocery retail at the IFPA Retail Conference June 6-8 in Oak Brook, Ill.
(Photo: Amy Sowder)

OAK BROOK, Ill. — Grocery retail is transforming to meet the changing ways consumers shop and the technology created to meet these demands. But how does this affect fresh produce at retail?

Jonna Parker, principal of Circana, shared her analysis June 8 with the crowd at The Retail Conference, hosted by the International Fresh Produce Association.

“The reality is, we can’t expect to do what we’ve always done and get what we’ve always gotten,” Parker said. “Today it’s about experience, variety, surprise and delight as much as it means just good ol’ price value.”

Market research and analytics firms Information Resources Inc., or IRI, and The NPD Group merged in 2022 and rebranded as Circana in March.

Retail's gain from foodservice

Retail and at-home food sales grew 10.1% in 2022, comprising a 62.5% share of total food and beverage sales — still ahead of 2019’s share of 57.9% of total food sales.

That means grocery retail hasn’t lost the edge it gained during the pandemic when foodservice suffered. The 2021 restaurant boom has settled.

Related: IFPA Retail Conference strengthens bonds, yet gives edge

As grocery retail food inflation continues to concern shoppers, they’re hyper-aware of how much they buy and how it will be used.

Ninety-five percent of shoppers are concerned about food-cost inflation, which is 2% higher than it was in February and 1% higher than in March, according to a Circana Shopper Survey for four weeks in April. The study also noted that:

  • 40% of shoppers are more conscious of using up fresh foods before they go bad.
  • 76% of shoppers noticed “shrinkflation” — they’re getting less in the box or package for the same price, and it’s affected their behavior.
  • 25% of shoppers decided not to buy a product due to the size/price value equation.
  • 46% of shoppers reported focusing on specific preplanned items when grocery shopping. Stock-up-sized trips were down across departments, but produce and deli saw a 2-point share increase from quick trips.

While produce has the challenge of extreme perishability compared to center-store products, it does have an advantage when it comes to “shrinkflation.”

“We, in produce, have the blessing of size variety,” Parker said.

crowd at conference session
(Photo: Amy Sowder)

Traditional grocer challenges

Shoppers continue to split their fresh food spending across multiple retail channels with mass/supercenter and specialty shops (independent and focused-food outlets), taking the biggest bite from traditional grocers.

Traditional grocery’s share among other outlets has steadily declined since 2020, dropping to 39% so far in 2023, she said, while mass/supercenter retailers gained a 2.2% share. Fresh represents 45% of retail food and beverage sales, down by almost 1 share point from last year, driven by grocery departments having a higher price change.

Prices are up 11.3% across all food at retail, including fresh, according to year-to-date 2023 Circana data. Convenience and quality are still driving sales, as the deli and bakery are driving growth.

Produce's share with other store departments

Produce’s share of perishables has dropped 1.5 points from 2020, the data shows.

“Produce is not seeing the same inflation impact as other departments,” Parker said. “We’re actually eating less veggies than we were pre-pandemic.”

Across all of fresh, the only produce items experiencing growth are potatoes — “talk about stretching your dollar,” she said — and lettuce. Paradoxically, convenient, indulgent produce items are experiencing growth too.

What's growing, slowing within produce

According to Circana data ending May 21, this is what’s seeing growth in produce, using the dollar sales percent change over volume percent change, in order of most to least:

  • Pomegranates
  • Plums
  • Specialty fruit
  • Papaya
  • Side dish kits
  • Fruit-vegetable party trays

This is what’s slowing its growth in produce, in order of most slowing to least slowing:

  • Cherries
  • Peaches
  • Jarred fruit
  • Artichokes
  • Broccoli-Cauliflower
  • Oranges

Fresh and produce trends, sales myths

Parker noted these top trends in fresh for 2023:

  • Table stakes: Holistic health; sustainability and transparency; connected consumer.
  • Mindsets: Affordable essentials, everyday escapes, convenience continuum.
  • Difference makers: Solving the meal; cohort mosaics; fresh channel shifting.

There are four myths in the challenge of helping produce rise to the opportunity, she said.

  1. Myth of fact-based selling: Produce is a commodity and sold by PLUs and random weight; we don’t have the data and insights to be as strategic as other consumer goods.
  2. Myth of price and promotion: Price is the barrier to produce; if we want growth, we put things on promotion.
  3. Myth of differentiation: My store’s produce is the best quality. Why would anyone want to buy produce elsewhere?
  4. Myth of digital: People don’t buy produce online. I shouldn’t worry about digital.

The under 40 consumer crowd

Produce sales are driven by more than price. It has to be convenient, indulgent and interesting. Look at Trader Joe’s, Parker said, which has branded food in fun, unique packaging and has a cult following.

“There are whole Instagram accounts on what is on sale at Trader Joe’s this week. The reality is, this is having an impact on the market share,” Parker said.

Nontraditional stores are gaining momentum for all these reasons.

With channel shifting on the rise overall, nearly half of shoppers choose retailers outside of traditional grocery as their primary source for produce, Circana data showed.

Becoming the go-to retailer for produce is less about price and more about efficient shopping, location, freshness and selection, data showed. Only 40% of shoppers said consistently low everyday prices on produce was why they chose a particular retailer for their produce purchases.

“The reality is, if you’re under 40 today, Walmart has always had produce,” Parker said.

crowd at conference session
(Photo: Amy Sowder)

Millennials and Generation Z have very different consumer behavior than older generations.

“Younger consumers are more concerned than their parents about their health and longevity, which should be a boon for produce,” she said.

Data showed 51% of people younger than 40 love trying a lot of different approaches to health and wellness. And these digital natives are fluid in their behavior.

“It’s not about online or in-store. It’s both. It’s seamless,” Parker said. “That’s why Trader Joe’s wins so much with this generation. It’s the hunt, the experience, the discovery and the brag of what they found.”

Create a fluid omnichannel experience for younger consumers. Aspirational browsing creates a framework for desire. In-store, it's all about the experience and instant gratification. Online supports "the hunt" and sharing.

Shoppers younger than 40 buy 22% more produce online than older shoppers do, Circana data shows. And 41% of U.S. households with children mix in-store and online grocery shopping, compared with 25% of households without children.

Viral TikTok and Instagram food posts and reels are affecting produce sales, such as tomatoes from the viral tomato and feta pasta trend, still nabbing millions of views more than a year later.

“Viral is not hard, but what are you going to do about it when it happens? As a retailer, what are you doing?” Parker asked. “If you’re not seeing it on social and then tying it back to sales, what are you doing? You can literally buy a purchase-based audience for pennies on the dollar.”

When smaller, or simply traditional, supermarkets can spend that dollar more judiciously, that closes the gap between them and the big guys,” she said.

Takeaways for action

So, what are some truths to help produce rise to the challenge?

  • Truth 1: Arm with facts. Analyze who, how, where and why shoppers buy your product; focus on strategic selling, identifying opportunities and maximizing category partnerships.
  • Truth 2: Price smartly. Use both retail sales and commodity condition data in forecasting pricing, as price sensitivity and volume impact change; differentiate with multiple volume-driving ideas, not just price discount.
  • Truth 3: Know “why” they buy. What sets your brand, product or store apart from others? Consider the consumer in all decisions and partner where, when and how it matters to them.
  • Truth 4: Digital. Spend wisely and smartly, using purchase-based targeting for social and digital media; partner to ensure produce demand is met with choice and suggestion.

 

 

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