2019 Retail Produce & Floral Review: The Primacy of Produce
“While the amount of different produce commodities themselves may not be growing that fast, the actual different ways they are offered is growing more each day,” says Tops’ Cady. He notes that trying to work these new items into his produce sets is difficult. “We only have so much space to put items, but consumers demand it, so it is forcing us to find ways to increase space,” he explains. “One might think, just cut back on the main item and make room for its offspring. The problem is, there are still plenty of people who want the main item. Trying to take care of every customer has always been a challenge, but one that must be met.”
The average gross margin percent reported in the 2019 PG survey was 33%, roughly the same as last year. Average net profit percent reported by respondents this year was 21%, the same as in 2018. Produce department average percent of total store sales was 17%, a very slight increase from last year.
Vegetables are the primary produce purchase for respondents, at 41.8%, a slight uptick from 41% in the 2018 survey. Fruits were up a bit in second place, at 36.1% versus 33% last year. Sales of nuts were slightly lower, according to respondents, at 4% in 2019, versus 6% in 2018. Premium juices, and refrigerated dressings and dips were mentioned by 4.5% and 6.4%, respectively, with little change since last year. The “all other” category, which includes exotics and mixes, also showed little change, coming in at 7.3% in 2019.
Sales of organic produce have increased, according to respondents in the 2019 survey, with 56.8% citing a larger percent of produce sold being organic, up from 46% in 2018. At the same time, 37.9% of respondents said there had been no change in organics sold, a large drop from 46% in 2019.
Some produce managers are concerned about “changing over to organic,” while others worry about “continued availability of high-quality organic local produce.”
In the most recent “Fresh Facts on Retail” quarterly report from the Washington, D.C.-based United Fresh Produce Association, organic produce dollar sales reached nearly $1.5 billion, which is 3.9% higher than the amount logged the same time last year. This represents 9.1% of all produce dollars in Q2 2019. Organic vegetables sold the most, but organic fruit also gained in sales.
Signage for weekly specials within the produce department remained the most popular form of promotion, the current survey showed. According to respondents, 81.1% place signage within the department and 44.2% use it elsewhere in the store. Signage promoting meal and eating suggestions is used elsewhere in the store by 39% of those surveyed, and in the department by 41.1%. Signage denoting the local origin of produce is used within the department by 80% of those surveyed, and elsewhere in the store by 34.7%, while signage identifying the country of origin is used in the department by 79% and elsewhere in the store by 21.1%.
Sampling items is also strong in the produce department, according to 60% of respondents, and elsewhere in the store, cited by 34.7%.
According to 32.6% of 2019 survey respondents, in the past year, floral sales have increased (roughly the same as last year, at 35%) while 31.6% said that sales stayed the same, up slightly from last year’s 28%. An additional 26.3% said that they didn’t sell floral in their produce departments.
And the Future . . .
Looking to the future, there are many opportunities and challenges for the produce department. “One thing we are facing … is sustainability in packaging, for stores and for the industry,” says Savidan. Southern California is beginning the move toward bans on plastic containers. “We will be using 100% compostable containers eventually,” he notes. “This will be huge for the industry. It’s like going back to where we started, with [pre-plastic] containers.
“I believe that the biggest challenge for produce departments today is the drastic weather/climate changes, which can be favorable to crops one week, driving costs down, and the next week, the opposite, creating product shortages driving cost and pricing up,” says Juan Estrella, produce specialist at Garland, Texas-based El Rancho Inc. Supermarket/Supermercado, which operates more than 20 stores.
Another area that produce departments are dealing with, which is still fairly new, is product recalls. According to FMI’s 2019 “Power of Produce” report, among the 97% of shoppers who would appreciate updates on major product recalls, email and in-store signage are the preferred contact. Twice as many shoppers simply want in-store signage to inform them of recalls, rather than having the store suggest alternatives. Many shoppers, in particular Millennials, are also interested in learning more about how to safely handle produce at home, especially in regard to safe storage and preparation.
On the same subject, in responses to PG, one survey respondent notes the challenge of “contamination scares of fresh leafy vegetables.” Given this need for greater knowledge and transparency, educating customers can create a bond and build trust.
In August 2019, Progressive Grocer fielded a study to grocery retailers involved in produce operations. A total of 95 retailers responded to the survey.
Of these retailers, 52 percent represent chains with 11 or more stores, while 48 percent operate one to 10 stores. A total of 31 percent are store managers; 27 percent are produce executives; 21 percent of respondents are produce category managers, merchandisers or buyers; and 21 percent are owners, CEOs or presidents.