June, 2013

Research Perspective and Comments & Analysis

Fresh Enthusiasts Versus Elusives

By Kelli Beckel, Senior Marketing Manager, Nielsen Perishables Group

Women with children are undoubtedly a large and high-spending consumer group. They are often the shoppers the produce industry targets when creating marketing strategies and new products. But are these consumers truly the ones who spend their time and dollars in the produce department, or are we missing an opportunity to reach a more lucrative shopper?

Nielsen Perishables Group analyzed transaction data from FreshFacts  Shopper Insights powered by Spire to identify the core and opportunity shopper groups of fresh produce as well as the products that are most important to them. We examined consumers in the context of Spire’s 40 unique “Essence” segments, which were  based on demographics and purchase history throughout the store. Within these 40 consumer segments, the top five and bottom five groups for fresh produce were determined based on their shares of fresh sales compared to total store sales.

If the consumer groups account for a greater share of fresh food sales versus their total store sales, and they are a significant sized group (high group spending power), they were designated in the Fresh Enthusiast consumer group. The same methodology was applied to determine a Fresh Elusive group, where their share of fresh sales was lower than their share of total store sales. 

Fresh Enthusiasts

The Fresh Enthusiast group tends to be affluent, health-minded, food-focused, and are more likely to be couples than families. They account for 23 percent of total store sales, but 27 percent of fresh sales, or over $25 billion in fresh food sales, annually. 

Four of the five consumer segments included in the Fresh Enthusiast group are couples.  Premium Healthy Living Families are also in this group, but this segment is limited to households with incomes greater than $100,000. 

Among the Top 10 highest indexing fresh categories for the Fresh Enthusiast group, six are produce categories.

Highest Indexing Fresh Categories for the Fresh Enthusiast Group

• Specialty cheese

• Berries

• Packaged salad

• Cooking vegetables

• Tomatoes

• Fin fish

• Citrus

• Apples

• Shrimp

• Breads

This group translates to huge spending power in produce. The Fresh Enthusiast group accounts for approximately 37 percent of berry category sales, which equates to over $1.2 billion at retail each year. 

Fresh Elusives

The opportunity in fresh lies with consumers who are more convenience-minded, time-strapped, less willing to cook, and are more likely to be families than couples or singles. This is the primary consumer for many retailers and suppliers, but this group accounts for a somewhat smaller share of sales not only in the fresh departments, but also across the entire grocery store (21 percent for Fresh Elusives versus 23 percent for Fresh Enthusiasts).

The Fresh Elusive group benefits the store most by over-spending on convenience meat, but produce does not fall anywhere in their Top 10 indexing categories. In fact, five of their Top 10 lowest indexing categories are from the produce department: berries, cooking vegetables, packaged salad, tomatoes and citrus: 

• Packaged meals

• Fully cooked chicken

• Meat franks

• Processed lunch meat

• Cakes

• Deli pizza

• Fully cooked beef

• Breakfast sausage

• Fully cooked other meat

• Other miscellaneous meat items

Packaged salad is among Fresh Elusives’ lowest indexing fresh categories. The group accounts for 17 percent of packaged salad sales, compared to Fresh Enthusiasts’ 33 percent contribution. Intuitively, packaged salads should be a category that appeals to on-the-go families due to its convenience factor. If the industry can draw these busy families to packaged salads enough to raise their sales contribution from 17 percent to 21 percent (their share of total store sales), that would mean nearly $500 million in additional retail sales. 

As the make-up of American households continues to evolve, so must the produce industry’s understanding of whom should be considered when strategizing innovation, assortment, packaging and marketing.

Nielsen Perishables Group consults with clients in the fresh food space. Based in Chicago, IL, the company specializes in consumer research, advanced analytics, marketing communications, category developement, supply chain management, promotional best practices and shopper insights. For more information, please visit www.perishablesgroup.com.


Can Consumer Preferences Be Changed?

In the season of F. Scott Fitzgerald and The Great Gatsby, one remembers the apocryphal conversation Ernest Hemingway claimed to have had with his friend:

Fitzgerald: The rich are different than you and me.

Hemingway: Yes, they have more money.

Now, the Nielsen Perishables Group tells us that there are other differences as well, such as affluent people purchasing more, and different types, of fresh products.

One of the most significant changes in retailing has come from the use of UPC data to better understand the customer. Retailers once assumed that their “best” customers were the biggest customers. It was, after all, hard to get data much beyond the total ring. With more data came the opportunity to see that the highest volume customers were often from large families and were economically strained. 

Those large baskets were driven by items on sale, the use of coupons, and a focus on lower margin merchandise.  The shoppers of these larger baskets often were both aware of prices and driven by economy. The big buyers had a lot of dollars and a relatively high percentage of income at stake, so they studied ads, cherry-picked and shopped competitive outlets. It turned out these shoppers often bought a lot of stuff but the contribution to profitability was minimal.

It gradually became obvious that the “best customer” might need another definition entirely. A high-income urban bachelor wasn’t going to buy the copious amounts of paper goods and cheap hot dogs on sale that the largest volume customers were buying. Instead he ran in on the way home from work to pick up expensive prepared foods and bought premium beer and wine. He stocked his house with pricey olive oil and balsamic vinegar, and he didn’t hesitate to buy raspberries — regardless of cost. In fact, he wasn’t very aware of prices, didn’t check ads, use coupons or shop anywhere other than the convenient place near his home or office.

This study by the Nielsen Perishables Group provides an important additional perspective for both retailers and marketers to assess business opportunities. Why do certain people buy differently, and is there anything that can be done to change these habits? If so, what can be done?

For retailers, this is interesting, and retailers certainly would like to switch consumers to higher margin products. It is also in retailers’ interests to encourage consumption of fresh. After all, fresh produce requires frequent replenishment, which translates into more frequent consumer visits, which gives retailers more opportunities to sell more products.

Yet, in the end, the big win from this kind of focus is with marketers. After all, the study doesn’t show that Enthusiasts eat more than Elusives — it just points to differences in purchasing preferences. Changing those preferences switches a retailer’s sales around, but switching consumer purchases around — from products a given marketer doesn’t sell to one the marketer does sell — is the point of most marketers’ efforts.

So why are Enthusiasts and Elusives different? Well the obvious call is affluence. Products such as specialty cheese, seafood, fresh-cut salad mixes and berries all are on the pricey end of the spectrum. Beyond the actual price of the product, fresh produce always carries a financial risk. If a family buys frozen or canned spinach, and then things come up, and these items aren’t consumed, the consumption is deferred. Fresh meat can also be brought home and frozen. But that bag of fresh spinach, if not consumed, is money lost.

If the family is affluent, it is a small risk for a small expense, but if a family is living paycheck to paycheck, with every dollar budgeted out, it is a risk they may not want to take. It is also true that convenience produce items suffer because economical replacements are so accessible and obvious. So consumers can easily compare the price differential between bagged salad and head lettuce, and one doesn’t have to be a great chef to cut vegetables. In contrast, it is a big job to make one’s own sausage, and it is beyond the time and experience of many consumers.

There is, however, more than money involved in these statistics. There is a cultural gap. One wonders if a study has ever been done on how eating habits change in America when affluent families see their incomes go down. In desperation, people may eat anything to stay alive, but in less extreme situations, we would be surprised if the contours found in this study don’t stay the same. One culture finds it acceptable to serve bologna sandwiches and one does not. One culture is predisposed to eat meat and another to seafood and to produce.

The opportunities presented are many, and Kelli Beckel is right to point to things such as bagged salads as possible leverage points to increase consumption. However, the health and convenience messaging most common among produce marketers probably won’t do the trick for the same reasons it has never done the trick. The Elusives are likely to see appeals to convenience as self-indulgent, and the appeals to health won’t be sufficient to overcome cultural practices and budgetary concerns. So the challenge is to reposition produce with greater relevance to blue collar concerns. How to do that is, well, to steal a line from Churchill: “A riddle, wrapped in a mystery, inside an enigma....”       pb