August, 2014

Research Perspective and Comments & Analysis

Exploring The Specialty Fruit Consumer

Kelli Beckel, Senior Marketing Manager, Nielsen Perishables Group

It wouldn’t be a stretch to say that specialty fruit, which includes products such as mango, coconut and pomegranate as well as up-and-comers guava, sapote and Kiwano melon, is a produce category on the upswing. In a retail environment where consumers continue to seek “new” eating experiences and gain exposure to multi-cultural flavors and cuisines, specialty fruit offers a unique mix of flavors consumers know and love (think mango and pomegranate) as well as more exotic fare such as figs, passion fruit and Cactus pear. This valuable category is rife with opportunities for growth and department differentiation. While it currently accounts for just 2 percent of fruit sales, the total ring for baskets containing specialty fruit is 45 percent larger than the average produce basket.

Specialty fruit also offers a prime example of the power of produce as an influencer across the store. Flavors like coconut, mango, pomegranate, even kiwi and guava are popping up on labels from candy and juice products to sauces and packaged meat dinners.

But what do the numbers say? During the 52 weeks ending April 26, 2014, specialty fruit was purchased by more than a quarter of U.S. households, a figure that stands to increase as consumers continue to broaden their tastes and seek more adventurous ingredients for every-day meals and snacks.

Specialty fruit was also the third-fastest growing fruit category in terms of average dollar sales. Distribution increased for the majority of specialty fruit categories. Despite significant price hikes across the category during this time, specialty fruit volume sales remained stable from the previous year — hinting at shoppers’ willingness to pay a premium for “new” eating experiences.

Specialty Fruit Stars

With 21 colorful varieties, specialty fruit has room to grow. During the latest 52 weeks, the five top-selling specialty fruit categories were mango, kiwi, pomegranate, papaya and tomatillo. Of the Top 5, both mango and pomegranate experienced average dollar, and volume per store per week, increases of roughly 10 percent. Guava, a product featured heavily in Hispanic cuisine, outpaced growth of some of the larger sub-categories, up roughly 30 percent in both average dollar and volume sales. Like many of the smaller varieties, the sales jump with guava was aided by a significant increase in distribution points — up 61 percent compared to the previous year.

Despite a 12 percent increase in average retail price, “other specialty fruit” increased average dollar and volume sales 40 percent and 26 percent respectively — suggesting that shoppers are willing to pay a premium for products like dragonfruit and peacharines. “Other specialty fruit” growth was also aided by a nearly 40 percent increase in distribution. Though smaller than the more ubiquitous mango and pomegranate varieties, sub-categories including sapote and passion fruit increased average volume sales by more than 75 percent.

Reaching Specialty Fruit Buyers And Non-Buyers

The key to continued growth for this emerging category is shopper understanding — for both shoppers currently purchasing specialty fruit products and, perhaps more importantly, the shoppers who aren’t buying — and strategizing based on their needs.

Specialty fruit buyers are relatively varied in terms of demographics and shopping behaviors. The shopper group that indexes highest for specialty fruit is highly affluent and generally without children in the home. These shoppers are typically 55 to 65 years of age and purchase premium, high-quality fresh products. Affluent couples (ages 25 to 34 and 55 to 64) and families (ages 35 to 44 with children under the age of 10) who primarily purchase organic and natural products also heavily shop the specialty fruit category. Merchandising specialty fruits with recipe cards or demonstrations on “how to eat” could appeal to these adventurous shoppers seeking quality fresh ingredients and snacks. Couples and families that heavily shop Hispanic products (indicating a high likelihood of Hispanic/Caribbean heritage) also index high for specialty fruit. These households tend to skew toward the lower income ranges. Cross-promoting with other items typically associated with Hispanic cuisine could help drive incremental ales with these heavy buyers.

In-store education/signage can go a long way toward capturing shopper groups — especially around what the product is, how to select a ripe one, how to use/peel. These shoppers are typically from smaller middle-income households concerned with convenient meal options, and middle-income families whose purchases skew toward kid-oriented products (including convenience products). Merchandising specialty fruit as a grab-and-go snack option or cross-promoting as a fun way to spice up a pre-made or frozen meal could help bring specialty fruit into the mainstream for shoppers concerned with convenience.
 

Specialty Today, Mainstream Tomorrow

Specialty fruit is a category that is destined to always be relatively small. The reason is simple. If a specialty item takes off, gains universal distribution, almost universal household penetration and, most important of all, large sales, then it is no longer classified as a specialty fruit, thus removing its heft from the category.

In fact, even among the items currently classified as “specialty,” we would question if that were the best way of understanding these items. For example mangos, the largest specialty fruit, are probably better thought of as staples for many key segments of the population, from Mexicans to Indians, and specialty items for the rest of us.

Kiwi, which this study classifies as the No. 2-specialty item, is also a problematic case. If you go by shipper channels, kiwi started with distribution through specialty houses, such as Frieda’s; but today that is not the dominant distribution pattern. Besides, kiwis have been commonly sold in supermarkets for many years and have had plenty of exposure in baking. Is this really a specialty item or just a slow-selling mainstream item?

Perhaps the most shocking — and for the produce industry, the most hopeful thing about this list — is that pomegranates rank No. 3 — behind mango and kiwi. This is a big change. Had such a list been compiled 20 years ago, pomegranates would be included with “other specialty fruit.” So what changed?

First, you have the Resnick family and their keen marketing insight. As owners of Pom Wonderful, they supported medical research about pomegranates, and the results of that research helped to position pomegranates as a health “Super Food.”

Second, the development of machines to efficiently extract pomegranate arils, combined with modified atmosphere packaging, has made consumption of pomegranate much easier.

Kelli Beckel’s point that in-store education and promotion can help raise familiarity with these products, provide usage ideas, and boost sales is not arguable. Yet it is also possible that many of these products are specialty items because their inherent nature is less desirable on a mass-market scale compared to, say, bananas.

The experience with pomegranates teaches us that change in value perception — as with medical research finding hitherto unknown benefits from eating pomegranates — and changes in the product itself — as with pre-packaged pomegranate arils that save consumers time — are more successful methods of boosting consumption.

Indeed, it is not in these figures, but it is good to keep in mind that the real boom in pomegranate consumption is neither in the whole fruit, nor the arils, but in pomegranate juice — a still more convenient way for consumers to get the benefits of pomegranate.

The focus on the total value of the market basket and the fact that grocery shoppers, who include specialty items, have more valuable baskets is a key insight of this study. It is not a surprise. Years ago, the National Association for the Specialty Food Trade (now renamed the Specialty Food Association) sponsored research showing supermarket grocery baskets were larger for consumers who included specialty items in general, such as high-end cookies, balsamic vinegars and fancy chocolates.

Other research has shown that not only are these baskets larger, they tend to have higher margins as well. Filled with high-margin prepared foods, fresh seafood and, yes, specialty foods of all types fresh and non-fresh.

This insight adds enormously to the complexity of managing a store’s assortment. It may be easy for some category manager to study “his category” and ascertain that sales and profitability can both be increased by simply dropping the lowest selling cookie, cracker or apple variety. The problem, of course, is the store’s interest has little to do with maximizing the profitability of any one category.

If selling organic golden raspberries doesn’t maximize space utilization for the berry category, but the consistent presence of organic golden raspberries attracts a certain consumer who buys the store’s most expensive wines, prepared foods and upscale olive oils, a category manager just “doing his job” could easily discontinue the item and cost the store its most valuable consumers.

It turns out that assortment selection is more like three-dimensional chess than checkers, and retailers abandon these items at their peril.

Indeed the nature of specialty produce items, in which they start as ethnic specialties and pick up in sales as they gain broader distribution, means the changing ethnic composition of the country bodes well for expanded distribution of specialty produce. As with the growth of guava sales chronicled in the research, as specific ethnic groups spread across the country, their culinary favorites get distributed in more stores.

The broader distribution encourages trial by a broader population base and soon the transition from specialty to mainstream is well underway. That is why, say, avocado, is not on the list of specialty produce anymore — it just sells too darn well!