September, 2015

Research Perspective and Comments & Analysis

FreshFacts On Retail Report Rundown

United Fresh Produce Association & Nielsen Perishables Group

Produce is a rapidly changing space. During the past 15 years, there’s been a revolution in the availability and applicability of performance and consumer data for fresh produce. With that in mind, Washington, D.C.-based United Fresh Produce Association, in partnership with the Chicago-based Nielsen Perishables Group, enhanced the FreshFacts® at Retail quarterly and Year in Review reports, sponsored by Miami, FL-based Del Monte Fresh Produce, to be more impactful and in line with the perspective and insights needed to help drive our industry forward.

Taking a look back at 2014 trends, U.S. households are spending more money on fresh foods than they did in 2013. The fresh produce department increased both average weekly dollar and volume sales in 2014 and growth outpaced the meat, bakery and seafood departments. Performance data remains a key element of measuring this growth with a spotlight on seasonal categories as a feature of each quarterly report. In Q1 2015, seven of the Top 10 fruit categories (berries, citrus, avocados, specialty fruits, melons, stone fruits and cherries) increased volume sales compared to Q1 2014, but only four of the Top 10 vegetable categories increased dollar and volume sales.

Generational data continues to be a strong factor in measuring merchandising behavior as the industry realizes there are more generational differences in buying behavior now than ever before. Boomers represent nearly 80 million people and account for nearly 39 percent of all produce sales with their significant spending power. They are more likely than the average shopper to purchase convenient items such as value-added fruit. Conversely, Millennials (born between 1980-1995) drive about a quarter of produce sales and buy apples more often, and packaged salad less often, than the average shopper.

“FreshFacts® on Retail provides our member companies with data they can use to understand consumer trends and develop their retail produce strategy,” says Jeff Oberman, vice president, trade relations and Retail-Foodservice Board staff liaison for United Fresh. “Increased category spotlights, deep dives into generational data, as well as insights on produce’s impact across channels and the total store will help our members drive their businesses forward.”

When taking specific commodities into account, the quarterly reports measures retail price and sales trends for the Top 10 fruit and vegetable commodities, as well as value-added, organic and other produce categories. The Q1 2015 report also features insights on organics and value-added produce, as well as category deep dives on popular summer items, including stone fruit, cherries and sweet corn.

Stone fruit sales struggled during the 2014 peak season (July-Sept.) but still generated nearly 60 percent of annual sales during this period. A national recall caused a supply shortage resulting in significant price increases and corresponding sluggish volume. Barring sudden crop issues, a return to normal prices should generate sales growth this year. Stone fruits also have an opportunity to expand into the precut area, which has continued its rapid growth.

Cherry sales soared during the 2014 peak season as a strong crop resulted in much lower prices than the prior year. With more than half of all cherry sales occurring on promotion, it’s important to advertise it’s cherry season. Cherries also have an opportunity to gain new households purchasing and increase trip frequency, given that both are low compared to other seasonal fruits.

Due to its price point, corn has wide appeal across income groups, yet it only reaches four in 10 U.S. households. Linking corn with other items purchased during grilling season could help increase corn sales. It’s important to remind consumers of fresh corn value versus year-round frozen and canned substitutes.

Produce item sales for salad bars, potato salad, cole slaw and other lettuce salads in the deli are at $405 million, which is up 9.8 percent. The report explores how produce in the deli provides solutions for shoppers seeking, healthy and convenient meal solutions. It also analyses a deeper dive into how the Boomer generation’s spending power impacts the fresh produce industry and a look at perceptions of how different income groups purchase fresh produce.

Value-added fruits and vegetable sales data from Q1 2015 shows they surpassed the $3.6 billion mark annually with 11.5 percent growth over the past full year. This is supported by the Boomer data stated above where value-added fruits and vegetables are most often purchased by this demographic. Although the most affluent households spend a larger share of their perishable spending on produce than the least affluent, produce is still frequently purchased across all income levels.



Data And A Dose Of Experience Create Best Path To Decision-Making

There is no question that the explosion in data available about fresh produce sales at retail creates an enormous opportunity for both retailers and vendors to use this data to find more effective ways to boost produce sales. Data, however, is not insight. Recognizing and appreciating the valuable contribution that United Fresh, the Perishables Group and Del Monte Fresh made in supporting such research, it still is easy to struggle to understand the meaning and significance of the reams of data now available.

Take a look at generational data; it is interesting to pinpoint behavioral differences between Baby Boomers, Millennials, Gen X, Generation Z, and other generational cohorts. But do the differences signify divergent attitudes of distinct generational cohorts, or do the differences represent the transition of attitudes as people age? What one would really like are studies of Baby Boomers when they were 14 years old so we can compare with Generation Z — but we don’t have such long-term data.

Increases and decreases in sales of individual items change dramatically based on crop quality, quantity and timing. Even the location of production can have a dramatic impact on sales channels and price. Let Washington have a bumper crop of apples, and the large grower/shipper/packers in that state will carefully manage sales using substantial cold storage facilities and other resources. The exact same volume in states with smaller shippers is likely to find apples being dumped in terminal markets all over the country with prices collapsing.

Sometimes getting a deeper under­standing of the data requires bringing in outside data. For example, if produce is picking up market share against meat, we want to know how prices of meat and poultry in that period stack up against price levels on produce.

Data also can’t be viewed in isolation. Did spinach sales plummet? One can’t just read the POS data; one needs to know that the FDA declared nobody should eat it that week.

And knowing the current news is not enough either. Food safety events, as an example, could have sales implications for years to come. And winnowing out the actual cause of data shifts is an exercise worthy of Sherlock Holmes.

Take the Alar crisis of 1988 — 60 Minutes ran a story that scared people away from apples, and apple sales declined. It seemed simple, and many surmised that consumers alone reacted to the 60 Minutes exposé and shied away from apples. But later, more in-depth studies said the situation was more complicated than that. Because of the news report, retailers shied away from promoting apples so they were removed from best food day ads and other promotions. A big chunk of the decline in apple sales seemed to have been due to retailers and their decisions to react to the Alar report as they did.

There are some things data can’t tell. We can’t sell more of a product than is produced. So if sales hold steady, that may be a sign of steady demand, or it may mean there is great untapped demand, because production is not rising.

The produce department also evolves, and only careful attention to the data can winnow out the details. Winter produce sales exploded as production centers in Latin America became prominent during the past 30 years. So evaluating one year’s data against a different year requires assessment of product availability in each year.

Merchandising can also distort the numbers. If retailers decide to carry only one organic SKU on low volume items, organic sales may rise — but that might not signal any particular increase in consumer demand for organic produce.

The weak-willed may desire to run away from this data, yet that path guarantees the industry will not advance. The goal, instead, is to deeply engage with data, and then interpret the data shrewdly. The subtext behind the word shrewdly is utilizing the experience of multiple analysts, gathered through working in produce and with consumers over the course of a lifetime.

In other words, the popular perception that data is best used as a replacement for decisions previously made based on gut instinct, or mentoring delivered by old-timers, is not quite right. Yes, of course, decisions made based on good data are likely to be closer to optimal than decisions blindly followed because one’s first boss said it was so. But data, in and of itself, never tells us what to do.

There is no decision that automatically flows from streams of sales statistics. So those who will use data best are those who leverage the experience of people long active in the trade, with new insights from collected data, to identify paths to optimal decision-making. Data doesn’t eliminate the need for experience. Data provides a new forum for experience to add value.

So get this most interesting report, and make it useful by adding a good dose of produce expertise.