FRESH FOOD: Perimeter: Charting new territory

With nearly every grocer in the nation now relying heavily on perimeter departments to court and keep customers, most operators have made at least some degree of significant investment in their fresh category management platforms.

This frontier for category intelligence gathering and analysis, however, still presents acres of hazardous, unknown territory when it comes to understanding shopper motivations and behavior, as well as the impact of shrink.

Fresh departments are clawing their way out of the information Stone Age. The emergence and evolution of fresh food data and tools are creating new and promising opportunities for retailers and suppliers alike. Still, it's not too soon to bring consumers to the forefront of the process.

Produce historically has been in the best position among perimeter departments to adopt category management practices, because of the industry's relatively pervasive use of standardized PLU codes. Now the progress is moving into the realm of subcategories, including specialty produce, as operators continue to search for ways to improve the department's overall performance.

"Category management has most definitely evolved, across the board," says Tristan Millar, v.p. of sales and marketing for Los Alamitos, Calif.-based Frieda's, Inc., a leading marketer and distributor of specialty produce. "Years ago, when we first started out, category management was rather an ominous subject. But we've now seen it become much more pervasive, effective, and fine-tuned beyond just data, to include more insights into consumer behavior and shopper activities."

Demographics were not long ago the only barometer most companies used to gauge "who their shoppers were and what they needed," says Millar. "There's been a definite shift to reduce the amount of hard data and focus far more heavily on consumers' shopping patterns and the related needs they're trying to fill. That's a lot different from what's been done in the past, which previously revolved solely around how many units sold on the shelf in any given period. A lot more sophistication is playing into the equation, which applies to any product, specialty or not."

But with sophistication comes the need for more precise execution. "It's a lot like having a great idea, which, if it can't be executed, is nothing more than just a great idea," notes Millar.

On the front burner

Part of the problem is fear of the unknown. "Any time one enters the realm of less factual/less tangible dynamics -- which are what specific lifestyle needs and family dynamics are all about -- inherent hesitation regarding the risk/reward proposition is bound to take hold," he continues.

Also, consumer-behavior-driven shopping insights are tricky to pin down in percentages, facts, and figures. "But the more factual information we can develop along those lines, the more people will be much more willing to take the chance," according to Millar.

As it relates to specialty produce, Millar says when category management first began picking up steam in the produce domain, "most thought that specialties would merely hitch the ride as a stepchild, after the larger categories were addressed. But we've seen a lot of change in this domain during the past five years -- and expect far more to come in next five years -- to move specialties to the front burner in the process."

At the heart of Frieda's category management menu is a category-builder schematic for the more than 500 items it offers. The company's team of business analysts tailors the schematic to be client-specific, based on particular shoppers' needs and buying habits.

Details are also key for Los Angeles-based Melissa's World Variety Produce, according to Robert Schueller, director of public relations for the major specialty produce distributor. "Melissa's deals with very specific 'categories' of produce, including ethnic, exotic, fresh herbs, and winter squash, to name just a few," explains Schueller.

Melissa's category management plans encompass the full spectrum of costing, productivity, merchandising, product performance, marketing and promotions, and profitability. Promotions are an especially important element in the continued growth of specialty produce, according to Schueller. Emerging category management strategies "must have a whole-store concept mentality. For instance, if a retailer offers ethnic Asian produce, then what's going on with the rest of that subcategory in other parts of the store -- meat, dairy, and grocery -- that relates?"

In the last five years, he says, "The produce department has seen up to 1,000 SKUs enter the picture, and in the next five years we expect to see up to 1,500. The bottom line before suppliers is the need to turn this very complex concept into an extraordinarily simple program for the retailer."

Shrink/sales balance

In that vein, says Schueller, better scorekeeping of movement in sales and shrink on a timely basis is crucial.

That sentiment is echoed by Larry Miller, president and founder of Scottsdale, Ariz.-based Trax Retail Solutions, a provider of loss prevention, store operations control, and profit optimization solutions.

"Most perishable shrink is caused by poor operational controls, failure to execute effective best practices consistently, and/or department personnel indifference," says Miller. "Individual perishable merchandising techniques and go-to-market strategies have a direct impact on shrink."

Miller contends that floral departments that operate as a subdepartment tend to experience 30 percent fewer sales and 18 percent to 27 percent higher shrink, for instance.

"When a product doesn't sell as anticipated, the natural reaction is not to reorder it, which then causes sales to suffer," continues Miller. "There must be a balance between shrink and sales."

When store managers are fully trained to inspect and manage for the proper execution of perishable department proper practices, shrink declines 22 percent on average, he adds.
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