June/July, 2009

From the Editor

True Values

As the industry gathers in Atlanta for the annual International Dairy- Deli-Bakery Association Convention and Exposition, it finds itself, as America and the world find themselves, in a startlingly different position from last year.

Those whose businesses survived the financial implosion now find themselves in a nasty recession. Although some see signs of a recovery or at least stability, there is also a sense of fragility in the world. That a state such as California or a country such as Iceland could go bankrupt is not beyond the realm of possibility. If the federal treasury acts to support all the weak players, many worry about the prospect for inflation as massive amounts of money are created to fund the bailouts and to stimulate the economy.

Much effort has been expended this year as executives — on both the buy side and sell side — have searched for opportunities amidst the ruin. The most obvious one has been an attempt, particularly with prepared-food offerings, to capture the business of those consumers who have been “trading down” to retail from restaurants.

There has also been a revival of interest in private label, with more and more stores looking to offer an alternative to consumers looking to trade down from branded product in order to economize.

One also sees a change in promotion, with many more supermarkets offering draws such as 3-day specials over the weekend on large-size packs as they fight desperately to dissuade consumers from shopping at a club store.

Aldi opened its 1,000th store in America while Wal-Mart and McDonald’s proved consumers were still buying, maybe just not where they were buying before.

If we view the IDDBA as an opportunity for a collective huddle, we may come out of Atlanta with an industry game plan that leads to success in the current environment. We would suggest three useful points:

1. Reacquaint ourselves with the consumer.

“Focus on the consumer” may sound trite, but it is very possible one’s vision of the consumer is wrong or out of date.

In the bagged salad category, Dole Fresh Vegetable Company did a study of consumers of bagged salads. Conventional wisdom said the category was driven by “convenience,” with the predominant user being a harried working mother throwing dinner together for the family or a secretary stashing a bag of salad for lunch in the office fridge.

It turned out bagged salads are a rather upscale product and convenience purchasers are more epicurean; they valued that they didn’t have to buy seven different lettuces to get the base for their salad. They typically did not eat just the bagged salad but added many favorites to the base.

Their biggest frustration? They couldn’t open the bag without everything bursting out or having to use scissors! With this vision of the customer, Dole is launching new “easy-open” packaging for its bagged salads.

2. Reconsider the meaning of value.

It is easy to think value and price are identical terms but, in fact, consumers have many different concerns and look to their retailers to ensure everything from food safety to the fair treatment of employees all down the supply chain.

If consumers seem to value only price, that may tell you as much about your communication program as it does about the consumer. If you don’t differentiate between products based on values beyond the weight, it is hard for consumers to do so.

3. Try to sell quality in small quantities.

So often we think of the housewife with a bunch of kids as our best customer. Yet that consumer, very price-conscious and buying a lot of food, is likely to cherry-pick sales, use every discount and coupon, and thus produce small margins even if she buys a lot.

The effort spent pursuing this low-margin business may be better spent promoting opportunities to sell a nice piece of specialty cheese, a little smoked fish or a signature prepared entrée.

With obesity a big problem in America, we need to switch our value perceptions from a lot of cheap stuff to small amounts of good stuff, and this creates opportunities for retailers to jump on board the bandwagon.

There is, of course, no one answer. In a nation as diverse as ours, the offering of a uniform assortment across all demographics is bound to be a loser.

Today, though, we have tools to understand our customers better, and the sea change in the economy gives us a reason to reexamine old assumptions.

If we leave Atlanta as an industry more focused on our customers, prouder of the value our supply chains create and deliver, and more intent on aligning with quality and health, we will remember, long after memory of this recession has faded, the new burst of energy we derived from the annual conclave.  DB