December, 2012

Research Perspective and Comments & Analysis

Strong December Produce Sales Expected

By Kelli Eckel, Senior Marketing Manager, Nielsen Perishables Group

Despite fluctuating economic conditions over the past several years and recent drought challenges, sales of fresh foods have fared relatively well in 2012. Given the momentum that produce sales gained in the past year, the likelihood of a successful year-end wrap up is good.  To help quantify the momentum as we enter the final month of 2012, we examined sales during December of last year, as well as the key summer season this year. 

If December, 2011, sales are any indication, year-end sales for 2012 will trend upward. During December of last year, 31 of the 44 produce categories increased volume sales compared to the prior year. Categories such as berries and value-added fruit had strong growth during this period, with volume increases of nearly 30 percent and 10 percent, respectively, as did the smaller stone fruits category, driven primarily by plums.

Categories with historically high December sales include citrus, apples and bananas, as well as categories commonly used for holiday meals such as potatoes, packaged salad, tomatoes and onions. These core commodities show signs of maintaining, if not growing, sales based on high performance during the key summer season this year.

The citrus category had a 12 percent volume increase and modest dollar growth during the 2012 summer, thanks to an 8 percent dip in average retail price. With even stronger winter sales due to peak seasonality, citrus was a top category with high volume and dollar sales during December, 2011, despite a 13 percent average retail price increase from the previous year. Even if average retail prices for citrus rise during this holiday season, it’s unlikely to deter consumers from purchasing.

Value-added vegetables, a growing category that satisfies popular convenience and health demands, surpassed traditional categories such as potatoes, packaged salad and tomatoes in terms of dollar and volume growth during December, 2011. The increasing array of choices within value-added vegetables also contributed to category success. During December, 2011, the average number of unique items sold on store shelves for value added-vegetables grew a significant 12 percent from the previous year. The category’s popularity did not falter during summer 2012. Value-added vegetables had the period’s greatest growth among vegetables due to their perceived value with consumers (prices and promotions did not fluctuate significantly during either time period) and a 7.6 percent increase in average weekly unique items per store, suggesting continued category growth and product proliferation this December.

Traditionally, popular holiday categories could also achieve strong performance this season.  Fueled by their popularity as a snack and ingredient during holiday gatherings, as well as increased item count, nuts and seeds had strong performance during December, 2011, with a significant increase in dollar sales due to a 14 percent hike in average retail price. Despite the price increase, nuts and seeds increased volume 8 percent, proving their unwavering popularity with consumers. The summer also provided shoppers with greater variety within the category, as average unique item count increased 7 percent compared to the previous year. During summer, 2011, nuts and seeds continued their upward momentum. Unique item count increased 17 percent, and the category achieved high volume and dollar growth without notable price change, suggesting increased consumer demand will remain in December, regardless of price changes.

For more seasonally driven products like avocados, strong summer sales don’t necessarily assure high sales during December. However, maintaining consumer interest during December is possible. Avocados experienced modest dollar growth and nearly 8 percent volume growth during December, 2011. Their growing appeal continued during the summer months when a near 30 percent price drop drove avocado volume up a remarkable 46 percent. Produce beverages (which include coffee, ciders, teas and fruit juices) experienced a similar trend. Although dollar and volume sales were lower in December, 2011, than in summer, the category still experienced growth compared to the previous year. 

Several factors currently at play could impact the momentum gained during the past year.  Residual drought conditions and continued economic uncertainty could cause consumers to revert to more spend-conscious mindsets. However, a new Nielsen Holiday Shopping Sales survey cites factors including higher consumer confidence levels, increased impulse buying and consumer intent to spend more this season that could curtail possible challenges arising from economic or drought conditions.

Given the sustained success of fresh produce over the past year and particularly strong summer sales, conditions are favorable for a strong closing month of the year within the produce department.

Keep Rowing Even Under Best Conditions

A rising tide may lift all boats but retail is, most decidedly, a local business, and each store competes in a unique set of circumstances, with unique competitors, unique shoppers and unique economic conditions. So while it may be soothing to know that the overall trend is with us, it would be foolish to think that such a trend guarantees our success.

Indeed, for large chains, a willingness and ability to react to local market conditions is the key to success. It is no accident that Wal-Mart had its greatest growth as it trumpeted its “store of the community” initiative, while Tesco has bled red ink at its Fresh & Easy subsidiary as it insisted on placing a uniform assortment across a diverse population.

We have no idea if December produce sales — or those of any other month — will wind up rising or falling compared to last year. How could we know? Maybe the weather will be inclement and that will keep shoppers home, or it may be unseasonably balmy and this will keep people outdoors playing and unwilling to shop. Perhaps war will break out or, maybe, peace. Or there will be a freeze and crops will be short, causing prices to zoom. Or the stock market will crash and people will fear to spend.

For any individual store, the equation has other variables: Will a new competitor open or close? What about a new class of trade: A supercenter, a warehouse club, a natural foods store or an Internet shopping service?

For a chain, the big variable is new store openings. We’ve listened to CEO after CEO give speeches about how the goal is to double sales in five years or some such thing. Whether the chain achieves that goal or not is typically less dependent on operations eking a bit more out of the stores than it is on the CEO funding openings or acquisitions.

Indeed, sales success this month is often determined by how proactive management was years ago. There are a lot of towns in the United States that can support one Whole Foods store, but Whole Foods  hasn’t got there yet. One attitude is for a local chain to take solace from the idea that if Whole Foods ever comes, the community won’t support many outlets and keep doing what it is doing. Another attitude is to preempt Whole Foods. That might mean beefing up organic and natural offerings in a conventional chain, or it might mean coming up with a new banner and seizing that share of stomach and share of mind that Whole Foods occupies in the national scene and national psyche.

Internet shopping is another place where many seem to be just waiting for someone such as Fresh Direct to appear in their town and seize market share. Contrast that with a chain such as Coborns in Minnesota, which purchased SimonDelivers and turned into, seizing a market position that dissuades competitors from moving into the space.

Even in traditional stores, one of the things that the recent presidential election results reminded us of is that the ethnic composition of the country is changing; successful retailers have a razor-sharp focus on the clientele available for the store. Note that this is often different than the actual clientele visiting the store. It is easy to keep serving the same clientele even as that clientele becomes a smaller and smaller segment of the community.

Boosting sales is often counter-intuitive, because it often requires focusing on things that particular communities value. Research might show that the priority of consumers in selecting a place to shop might be things such as cleanliness and good prices, yet counting on these attributes to win shoppers might be fruitless because every other retailer is focused on these attributes as well. It just might be the kosher section or the organic assortment or the slightly overripe tomatoes available for salsa that can be the competitive edge that attracts the shoppers day after day.

Staying in sync with economic trends is important but difficult to do well. Many a supermarket has blurred its reputation by trying to show it “cares” during an economic downturn by carrying lower cost items, and no less a powerhouse than Wal-Mart messed up by thinking it could attract the readers of Vogue to its clothing lines.

Building sales requires A) a strategic approach to positioning the banner and the offer to capitalize on the market — possibly requiring multiple banners and micro-marketing in the different stores of each banner; and B) a tactical approach in which execution is excellent and the store turns on a dime to take advantage of opportunities.

It is always interesting to see how the market is trending, and nobody ever objects to having the wind in one’s sails, but if you are comfortable rowing a boat, you can keep moving ahead whatever the general weather report may project.