Produce Marketers Embrace Category Challenges: PG Annual Report
Produce industry decision-makers are embracing the challenges of the day as they jockey to cultivate customer loyalty and grow sales in a highly competitive market. That’s a common theme that emerged among the compelling revelations in Progressive Grocer’s latest annual Retail Produce & Floral Review, which taps the insights and expertise of nearly 100 grocery retailers across the United States. About 43 percent of survey respondents are grocery owners, CEOs and executives, while store managers, merchandisers and buyers comprise the balance.
“This business is not for the faint of heart,” notes one respondent. “The demands and challenges in produce are what make produce such a great career,” says another.
The stakes are high in the often unpredictable fresh produce landscape. Nielsen estimates that fresh produce reached $68.7 billion in annual sales in 2016, and reports continued growth this year. The market researcher’s latest fruit and vegetable trend data show that both dollar and volume growth occurred across all categories of produce for the 52 weeks ending July 29, 2017.
“Produce got all-new refrigeration. It was a big part of the remodel budget, but it helped increase sales. If you keep the produce fresh, customers will buy it,” asserts Otis, who adds that weekly sales are up more than 65 percent in the department following the remodel.
PG’s 2017 Produce & Floral Review participants also cite growth. Sixty-four percent report that their company’s total produce sales increased for the first six months of the year ending June 2017, while 22.5 percent say that sales remained the same. Just 13.5 percent note a decline. Nearly 63 percent of respondents expect same-store produce sales to increase for the entire year.
While trends in produce-based snacking, home meal preparation and healthy-lifestyle aspirations have helped make the produce department an important destination for shoppers, the industry isn’t without its obstacles.
When asked to rank the most challenging issues facing today’s produce department, from “not serious” to “extremely serious,” 72 percent of survey respondents note that “profits” are a serious to extremely serious issue.
Competition from other supermarkets, which interestingly ranked low among challenges in PG’s 2016 survey, is the second-highest serious issue in this year’s study, with 70 percent of respondents calling it a serious to extremely serious challenge.
“High labor costs are going higher; couple that with lower retails, and something has to give,” observes Cady, who adds that Tops is revisiting its training program from an efficiency perspective. “We need to perform tasks as efficiently as possible, without compromising customer service or quality,” he explains.
Encouraging employees to feel invested in the company and compensating them for outstanding work may also provide a path to elevating the industry’s labor force.
“Somehow, we have to raise the status and the pay of our associates,” asserts Steve Pohl, produce director for Sullivan’s Foods, a family-owned and -operated retail grocery business with 12 stores in Illinois. “Training and cross-training would add to that goal, and promoting from within will give a sense that there is a way to advance in this industry.”
Sullivan’s employs several initiatives to help hire and retain qualified employees, including a grocery discount program, scholarships for associates, employee events and outings, contests, and employee recognition picnics and dinners.
“We try to hire and promote from within our organization, to keep a consistent environment for our consumers and employees,” notes Pohl. “We are always looking at ways to promote the industry’s positives.”
The bottom line: Well-trained employees increase sales. At Portland, Ore.-based Fred Meyer, part of the Cincinnati-based Kroger Co., a consistent and thorough training program on subjects such as cross-contamination and proper handling has resulted in a significant sales bump in organic produce, among other categories.
“The produce team has learned how to take care of organic produce, and customers are looking for that,” says Eric Otis, senior grocery clerk for Fred Meyer in Bremerton, Wash. “We’re supporting a culture that’s taking place with organics, and we’re getting clientele from [high-end neighboring supermarkets] to shop with us instead.”
“You have to establish consistency in training and messaging, so that every employee can run the department the same way,” continues Otis. Fred Meyer’s protocols and standards for each department are clearly indicated on signage in the employee area. “They give you the answers to the test,” he says. “It’s all right in front of you.”
Department Drivers
Which categories within produce are driving shoppers to a particular store? For Tops, they’re organic and local produce, value-added, and “new and exciting items like Cotton Candy Grapes and Amaize Sweet Corn,” according to Cady.
Can these categories make or break a store? “Short term? No. Long term? For sure,” he says. “Retailers need to get those categories locked down quickly, or the customers will gravitate to the retail outlets that can take care of their needs.”
Fast Friends
Convenience seekers are hungry for more than ever before from today’s produce department. According to the latest data from Nielsen, packaged salad continues to claim the dominant dollar share of the vegetable category, at 18.8 percent. Meanwhile, value-added vegetables is the fastest-growing subcategory among the top five vegetables.
“Customers are looking for something quick and easy to prepare, and we are trying to make more of those items available,” says Larry “Junior” Lovell, store manager of Appleseed IGA, in Arlington, Ohio. “I believe we can sell more if we look outside the box, because the consumer is looking for us to help them make their lives easier.”
Simplifying meal preparation and increasing produce consumption are also top of mind at Sullivan’s. “We have always done well with packaged cut vegetables and cut fruit, but in the last three to four years, it has exploded, and we continue to have very good success with these convenience-type items,” observes Pohl.
The 2017 Retail Produce & Floral Review found that grocers are also looking to offer convenience in the form of “vegetable butchers” that cut produce to order, and meal-kit programs in which fresh produce is featured. Thirty-seven percent of respondents offer a meal kit program, while more than 25 percent either offer a vegetable butcher or plan to add one in the foreseeable future.
“Produce is going to become much more exciting and a bigger contributor of total store sales as the convenience desires and health concerns of the population are realized,” predicts Pohl.