March, 2016

Research Perspective and Comments & Analysis

Produce Consumption And Preparation: Finding Growth In New Meal Occasions

By Anne-Marie Roerink, Principal At 210 Analytics And Rick Stein, Vice President Of Fresh Foods At FMI

Produce is big, profitable and growing. In fact, produce sales are growing far ahead of most other departments as well as total edibles and the total store — giving credence to the perimeter outperforming center store. But how do you continue to grow a mature category with a household penetration of 98 percent? One way is finding strategies to move shoppers from lower to higher purchase frequencies by exploring new consumption occasions. These include increased produce snacking, juicing, smoothies and offering convenient solutions through value-added items.

Snacking

For vegetables, the biggest consumption occasion remains dinner, followed by lunch. For fruit, the biggest occasions are snacking and breakfast. But as America is increasingly moving away from three traditional meals to more frequent, smaller meals, produce has an excellent opportunity to grow the number of snack occasions throughout the week. In fact, produce snacking is already ramping up. In 2014, IRI documented robust growth for both snack-size vegetables (with dollar gains of 17-plus percent) and fruit snacks increasing by 9 percent.

Smoothies And Juicing

Other on-the-go produce solutions include juicing and smoothies. Currently, 33 percent of households prepare fruit smoothies at least on occasion, with 13 percent trying their hand at vegetable juicing.

These shares leave ample room for growth, and the industry is responding with convenient ready-to-blend mixes of fresh fruits and vegetables — borrowing a concept from the frozen aisle where these kinds of mixes have been offered for years. Smoothies and juicing are much more popular among families — as an easy way to introduce produce to young children. Organic shoppers are much more likely to prepare fruit and/or vegetable drinks.

Value-Added

Value-added fruit, which includes all items with some level of preparation (such as balled, chopped, chunked, cored, cubed, cut, diced, halved, pitted, shredded, etc.) is growing at a pace far ahead of the total market. In 2014, unprepared fruit gained 3.3 percent — versus 12.5 percent for value-added fruit. It is important to note, however, that value-added fruit makes up a relatively small share of dollars (8.7 percent or $2.6 billion) and an even smaller share of total pounds sold (4.2 percent or 0.9 billion pounds).

Value-added vegetables (which include chips, chopped, chunk, crowns, cut, hearts, microwave-ready, ready-to-cook, snack pack, sticks and so on) grew 4.5 percent, far ahead of unprepared vegetables, at 0.1 percent. Value-added vegetables make up about one-fifth of dollar (22.3 percent or $6.4 billion).

In the Power of Produce survey, shoppers described their habits regarding value-added vegetable/fruit items. Forty-six percent of shoppers said they purchase value-added produce sometimes or regularly. Shopper groups that are currently more likely to purchase value-added produce are shoppers working full time — particularly those with children, higher-income households, and men. Others said they only purchase value-added produce when in a time crunch (8 percent) or for special occasions (6 percent).

At the same time, about four in 10 shoppers (38 percent) remained on the sidelines for one of two reasons: No. 1 was cost (17 percent). One respondent explained price being a barrier as follows, “I’ve seen the products you talk about, but I’ve also seen the prices. I can usually do it for half as much myself. I prefer spending the money on a good dessert or meat.”

No. 2 was preference to cut or prepare the items themselves (15 percent). The open-ended comments revealed a number of reasons: Several respondents addressed their lack of trust in the quality of the product. One respondent wrote, “I feel the fruit or vegetables are older. For instance, the pre-sliced mushrooms always look dried out.” Another said, “I occasionally buy the fruit platters for parties and such. But it seems to spoil very quickly.” One last comment in this area was, “I always wonder about the cleanliness! How do I know the employees used good kitchen practices?”

Other shoppers addressed the flavor profiles and preference to their own product choices. “I occasionally check out the bagged salads, but I don’t like the dressing flavors.” Another said, “The vegetable mixes seem handy, but they usually have something in them I don’t like. Since they’re so expensive, I wouldn’t want to toss half of it out.”

With cost being the bigger one of the obstacles among those who do not currently purchase value-added produce, promotions, private-brand offerings or meal BOGOs, there may be alternative ways to introduce these customers to the category.

Continued economic recovery is likely going to place more emphasis on on-the-go solutions, as well as drive the need for increased speed and convenience for the more traditional meal occasions.

 

Dynamic Opportunities To Grow Consumption

Produce is an interesting category. It is presented as one department to the consumer but, in fact, is broken up into four very different offers:

1) Traditional Whole Produce

These are items that have always been sold in produce and in varieties that are either traditional or, if new, are not changed in significant ways that consumers recognize. So Red Delicious apples, Iceberg lettuce, baking potatoes, etc., remain constant in shoppers’ eyes — even though minor changes in these varieties are always occurring.

2) New Variety Whole Produce

These items look similar to traditional items, but they have different or enhanced flavor profiles or shapes. Examples include everything from Yukon Gold potatoes to Honeycrisp apples to Sun World’s Sable Seedless grapes to Driscoll’s Victoria blackberry to the Grapery’s Witch Fingers grapes.

3) Items that are Unfamiliar to Many Consumers

Even though relatively high-volume items, such as mangos, gain status from great popularity with particular facets of society, the majority of Americans have never purchased a mango. Then, of course, there is a massive range of specialty items available from companies such as Frieda’s and Melissa’s that the vast majority of Americans have never sampled, much less purchased.

4) Blends, Cuts, Assortments, Flavorings and Packed Items

Each year at The New York Produce Show and Conference, The Joe Nucci Award for Product Innovation in Service of Expanding Consumption of Fresh Fruits and Vegetables is presented at a general session. Winning products have included: Curry & Company’s Vidalia Sweet Carrot Program (2011), Ocean Mist Farm’s Season & Steam Brussels Sprouts (2012), Kerry Kitchen Gardens Micro Herbs (2013), Foxy’s BroccoLeaf (2014), and Love Beets Smoky-BBQ Shredded Beets (2015). Combine items such as these with other innovations, including from Joe Nucci’s company, Mann Packing, where they have released items such as broccoli coleslaw and broccolini, and one sees a whole industry in itself.

Although produce as a category does have 98 percent penetration, as Anne-Marie Roerink and Rick Stein point out in their “Produce Consumption and Preparation” research, if you look at produce through the lens of the four separate offers listed above, the penetration is much lower and thus the opportunity for growth more dynamic.

The snacking, smoothies, juicing and value-added opportunities mentioned by the researchers are certainly real. We would also add that we see a bigger opportunity in culinary changes: The stereotypical American diet is centered around a big chunk of protein, with produce served as side dishes such as a baked potato and green beans. Perhaps some additional produce comes into play if the meal starts off with a salad.

Yet many cultures, such as those in Asia and the Mediterranean, didn’t have access to such large servings of protein, so they worked on developing culinary techniques to enhance the taste and flavor of fresh produce. In the end, you have plant-centric dishes where protein was used sparingly as a flavoring — think stir-fry vegetables with a little bit of steak or seafood.

With public health and environmental experts both pushing for more plant-based meals, it is possible that the giant opportunity for produce is not the obvious trends but a more subtle pro-plant-based food movement that could alter consumption trends substantially.

Roerink and Stein were able to tease out key obstacles to consumers taking this path. One is cost, and just as retailers have to rethink their approach to consumers in light of the four different offers being made simultaneously, the industry needs to rethink its financial offer to consumers. The other issue is quality. Getting consumers to buy fresh-cut items, proprietary varieties, etc., can indeed run into these two obstacles.

Yet, the produce industry is not the only industry to face these issues. California Pizza Kitchen has a diverse menu, and it is in the interest of the restaurant to have consumers try a wide variety of items.

Yet California Pizza Kitchen found a dilemma among consumers who were interested in trying new items but were afraid of wasting money if they didn’t like the items. So the chain offers a guarantee: If you try a new item and don’t like it, the restaurant will substitute your “old favorite” for free.

As Roerink and Stein point out, one response to consumer concern over price may be to offer more deals (BOGOs, etc.). It also may be that concerns over cost and quality are really expressions of value concerns. Will the fresh-cut fruit be sweet? Will I waste lots of produce because of last-minute plan changes that lead me to eat out?

It would probably make sense for a retailer to do a test in a few stores to see exactly how much produce is returned if a store offers a product replacement guarantee. PMA has funded a number of efforts to enhance produce consumption; perhaps with the help of FMI, both organizations could chip in to help test whether reducing consumer anxiety as to the possible waste of fresh produce would move the needle on consumption.