May, 2015

Research Perspective and Comments & Analysis

Produce Aisle Predictions

By Ms. Anna Saffer, Director Of New Product Development, DunnhumbyUSA

Consumers want to understand as much as they can about what is going into the products they purchase. While this isn’t a new trend — in fact, recent reports show the concern is relatively widespread in most markets — the desire for consumers to know the origin of their food and the process it goes through on the way to the store or restaurant remains a growing interest. Data leads us to believe that an “open door policy” with food will continue to be a relevant topic for consumers.

With packaged goods, consumers can easily look to nutrition and ingredient labels to clearly and thoroughly understand what is going into the products they buy. For produce it can be a little more complicated as the products often do not come with a tell-all label. Transparency is key with produce. This practice really boils down to not just ensuring the customers feel confident that they’re purchasing responsibly produced food, but rather that they feel the brand is making an effort to try and explain the what, where and how of produce.

In dunnhumby’s annual Food Trend Report, we developed a unique methodology — taking the best of food and culinary trends uncovered through research, online recipes, restaurant menus, industry journals, the news, purchasing behavior, and talking to consumers — and applied a rigorous model to truly understand and predict the big trends of 2015. We wanted a rich historical view and examined up to 5 years of actual purchase data on each of the trends identified. By understanding past performance and current performance, we could better predict the future of the trend.

Our first step was to build a bank of more than 150 food and culinary-related product trends. The trends we looked at stretched wide — from diet specific, such as Paleo; to packaging, such as pouches; from products, like leben (or Israeli-style yogurt); to product claims, such as “free range.”

Once we had a robust list of trends, we wanted to understand the factors that could impact them. We looked at hundreds of variables that were driving growth and could predict future growth. Specifically, we looked at metrics across key driver areas such as: Trend Acceptance, Shopper DNA, Proliferation and Digital Footprint.

All this data helped us obtain a good view and identify the trend drivers. By looking at what consumers are actually buying, we were able to reveal changes in behavior.

Based on our analysis, we identified the big trends we expect to continue to stay on top of consumers’ minds and affect their shopping list in 2015. These trends are: Natural Sweeteners, Responsibly Produced, Fermented Foods, Small Batch Goods and Religious Standards. Overwhelmingly most consumers (nearly 80 percent) believed they would engage with these specific trends going forward.

One key theme that emerged was produce consumers are interested in supporting the little guy, or in this case local farmers. Some consumers even told us supporting local farmers gave them a sense of nostalgia for a simpler time when people were closer to the production of the food they consume. Many shoppers also equated ‘locally grown’ with the perception of higher quality and/or fresher products.

Consumers value how their products are cultivated in advance of arriving on the grocery shelves. In our Food Trends research, consumers shared sentiments like “It is important to me how my food is raised,” and “Treatment, feed, and conditions are important.” In addition to valuing the treatment of the food they’ll be consuming, shoppers want that to be translated clearly on the product packaging. Unclear labels are a prevalent frustration amongst many consumers; one customer articulated it as, “I would not buy any of the above mentioned products unless it also said ‘organic.’ Otherwise, all those labels you are stating are meaningless.”

By purchasing sustainable grown foods, consumers felt they were doing something better not just for themselves and their families by monitoring and understanding what they put into the body, but they felt like this benefited the larger environment as well.

While price still remains important to consumers, we have seen a willingness to up-trade for higher quality products. One consumer stated it as “Price is still a factor in my choice, but if I find these products [organic, natural, etc.] at prices that are not totally out of line with traditional grocery prices, then I will buy.”

Consumers are placing a new, and significant, value on these claims of the what, where and how produce is grown and making purchasing decisions to reflect these themes.

The most important area for consumers remains not just what’s trending, but whether they should care about the trend. We believe by grounding innovation in the core values of the brand, consumers can help ensure brands and producers are focusing on the trends that are right for their brand specifically.


What Do People Really Want?

Nobody handles consumer data better than dunnhumby, so when it lays out a case that producers and marketers ought to focus on core values, one should heed its findings. Yet one is reminded of French statesman Georges Clemenceau, who repeated the common expression that the voice of the people was the voice of God and added that it was the function of leaders to follow that voice “shrewdly.” Into that one word, much cynicism and skepticism was packed.

For the industry, the challenge is how to reconcile the dunnhumby insights — “Natural Sweeteners, Responsibly Produced, Fermented Foods, Small Batch Goods and Religious Standards,” etc. — with the fact that the fastest growing retailer in America is the deep discounter Aldi. How will the industry reconcile the idea that “produce consumers are interested in supporting the little guy” with the fact that the largest retailer is Wal-Mart?

Items such as soda, processed meat products, and frozen dinners are among the top items sold by supermarkets, so how are we to reconcile that factor with the consumer desire, as dunnhumby reports, to care about how their food is raised, to support small producers, and do something for the environment?

Part of the issue is that ascertaining consumer preferences, in the absence of price, poses odd issues. Capitalism is different than democracy. Votes in a democracy tell us what people want, but votes in the marketplace are specifically designed to tell us what consumers want most.

Presumably, many people would, in the absence of price, prefer diamonds to cubic zirconias and Ferarris to Fords. When a consumer says, “Price is still a factor in my choice, but if I find these products [organic, natural, etc.] at prices that are not totally out of line with traditional grocery prices, then I will buy,” one is not certain what to make of it. A price that is “totally out of line” represents different thresholds for each person.

The USDA says organic sales account for less than 5 percent of food sales — and that is by dollars, not volume, which would be significantly less. It also includes a great deal of “accidental” organic purchases, which is when a retailer only stocks the organic item on low-volume SKUs to avoid having to procure and slot two items.

So, once again, when a consumer says, “I would not buy any of the above-mentioned products unless it also said ‘organic’ … otherwise, all those labels you are stating are meaningless,” how common could these sentiments possibly be?

Part of the problem is that none of these terms are value-neutral. There is a zeitgeist to the times, and asking consumers if they prefer “responsibly produced” is like asking if they favor helping blind old ladies cross the street. One can’t answer negatively without identifying oneself as a horrible person. Who precisely is in favor of “irresponsibly produced” food?

Many of these terms are so complicated that claiming affiliation with them is more an expression of an aesthetic preference than it is an explanation of what kind of food production one prefers.

Which is more responsible: a farm that hires foreign workers at higher pay than they could get at home, but still very little by U.S. standards; a farm that relocates to Mexico and pays even less than its American competitors do, but more than is common in Mexico; or a farm that invests heavily in automation and hires very few workers, but pays them much higher wages?

There is no possibility of a label that will explore this issue in any meaningful way. Indeed, it is unlikely that significant numbers of consumers are inclined or able to evaluate these issues even if websites and whatnot provide total transparency.

In this sense, the dunnhumby report simply gives guidance for marketers to position themselves so consumers of a product can feel good about being aligned with it. This is a wise reminder that consumers do consider more than the end product.

One suspects a lot of these things only impact purchase if there is a negative sentiment in the knowledge base of the consumer. In other words, it is hard to imagine how consumers would even know — much less that it would have much impact on purchasing — if a farm pays its workers 10 percent more. But a discovery that a farm illegally abuses its staff and withholds wages might lead people to boycott the products of that firm.

Many of the words used in this study have little real meaning. Local, for example, is not necessarily small-scale. And there are questions that presume consumers already have expectations for these “local” products, which could be defined differently by each individual: more flavorful, less expensive, or fresher condition.

We take the dunnhumby report, add to it feedback we get from retailers, and come up with this: Primarily consumers base their purchasing decisions on the same factors they always have: price, quality, variety and convenience. As the world becomes more sophisticated, people want to present a face to their community, to their family, to themselves, of doing the right thing and of being on the right side. In today’s world, that means being a foodie, supporting local, being pro-environment, and in favor of good conditions for labor.

So it behooves producers to position themselves this way, but the emphasis must remain on efficient production of quality goods as most consumers are not prepared to pay a premium on sub-par goods to support this ethos — although they might pay a premium to avoid being associated with an egregious wrongdoer. pb