Research Perspective and Comments & Analysis
Produce Fresh Trends 2016
By Haley Hastings, Associate Marketing Manager, Nielsen Perishables Group
In recent years, retailers have used fresh departments to differentiate their stores and boost perceptions of freshness, indulgence and quality with consumers, and the produce department can be a key element in this type of strategy. In a retail environment where consumers are increasingly looking for healthier, fresher meal and snack options, the inherently healthy produce department is well positioned for future success and growth.
The State Of The Department
Fresh produce accounts for 32% of total fresh sales, the second-largest fresh department behind fresh meat. In the U.S., produce is a $39.2 billion department, with a compound annual dollar growth rate of 3.7% from 2011 to 2015. It’s no surprise that produce is a widely purchased department with 99.7% of U.S. households purchasing annually, but the department is also tied to higher overall basket rings than baskets that don’t include produce, $62.40 for baskets that include produce versus $33.55 for those that do not. And though nearly everyone buys produce, what they’re buying and the values driving their purchases are evolving. We’ll review two of the key trends — consumer demand for health, wellness and convenience as well as “trendy” products — affecting the department today.
The Health Halo
The produce department is benefiting from a nation that is aspiring to better health, or more specifically, to losing weight. Fifty percent of Americans are trying to lose weight, and one of the top methods is incorporating more fresh foods into their diets. Produce obviously fits the bill for the significant portion of consumers seeking foods that are less processed (45%), with less fat (59%), and less sugar (57%). Twenty-first century health and wellness devotees also want to know where their food comes from and what it’s doing for them. In this sense, produce has a deep well of opportunity to draw from.
Take for example, the “local” movement — demand is linked not only to perceptions of superior freshness and quality, but also ideas that go beyond individual health — locally sourced food is good for the local economy, more sustainable, etc. A recent survey from the Harris Poll revealed that 67% of respondents consider it important to buy locally sourced produce. Retailers can and are taking advantage of this trend by carrying “local” fare, which presents fewer logistical challenges than in a fresh department like meat or seafood.
And we can’t discuss health and wellness claims without touching on organic, which accounted for 8% of total produce sales in 2015 (up from 5% in 2010). Organic produce has connotations of healthier, more sustainable product, and these factors are driving the sales of organic produce at more than four times the rate of conventional produce. In 2015, organic fruits and vegetables increased dollar sales 16% and 14%, respectively; while dollar sales for conventional fruit and vegetables increased 3%, respectively.
A final, critical component to capitalizing on the health and wellness trend in produce is consumer education. Retailers and suppliers can do the work for consumers by citing specific health benefits of produce products via in-store merchandising and advertising, while retailers and suppliers alike can tackle branding in traditionally unbranded categories and use packaging to tout health benefits.
The Convenience Factor
However, success in the produce department requires more than relying on the health benefits of produce, clearly communicated or otherwise. In fact, traditional staple categories (such as whole apples and bananas) had flat or declining sales in 2015; while products offering additional benefit for consumers (think convenience, bold flavor, snack-ability) or those gaining in popularity thanks to restaurant and social media trends are driving growth.
In 2015, consumers spent less annually on whole staples like whole apples, bananas and carrots (down 4%, 1% and 3% in dollar sales, respectively). They spent more on products that offer more convenient meal prep, like packaged salad and pre-cut vegetables (which increased dollar sales 9% and 8% respectively), along with more convenient snacking like berries (up 6% in dollar sales in 2015) and citrus (which increased dollar sales 8% — driven by the growth of mandarins, the “single serve” citrus option).
Shareable online recipe ideas and inspiration from restaurants are also pushing the boundaries of usage occasions for certain produce products. For example, cauliflower is becoming popular not only as a side, but as a base for pizza crust (cauliflower sales increased 9% in 2015, and increased volume sales slightly despite a 7% increase in average retail price).
Dates are becoming a popular snack and alternative to processed sugar, and historical trends reflect growing consumer interest, with a compound annual dollar growth rate of 15% from 2011 to 2015.
Popular flavor trends across the store are also trickling down to the fresh source and increasing sales for whole/cut commodities (such as coconuts), which increased dollar sales 12% and 15% during the latest 52 weeks.
Whether you’re a retailer or supplier, successfully navigating these trends for a winning produce strategy begins and ends with the consumer.
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 development, supply chain management, promotional best practices and shopper insights.
Nutritional Info Is A Moving Target
If the proverbial Martian came to Earth and simply read press reports on consumer desires — more fresh, more healthy, more local, more organic, etc. — our other-worldly friend would surely predict that Whole Foods Market is many times larger than Wal-Mart, and McDonald’s must sell but a small fraction of what Shake Shack does. Yet, of course, our Martian would have it exactly and precisely wrong, Whole Foods Market’s total sales are a rounding error on Wal-Mart’s financials, and Shake Shack is nothing compared to the sales of McDonald’s.
As we evaluate produce sales, it is worth keeping in mind that many treat the subject as some kind of moral arc bending inevitably toward goodness, so produce — healthful and fresh — must inevitably triumph. This is a beautiful thought, but there is not much evidence that it is true.
Indeed, sometimes the evidence seems to be shifting the other way. Certainly many people want to lose weight. Recently, though, there are indications that much of what we thought we knew about nutrition is wrong. The latest version of Dietary Guidelines for Americans abandoned an upper limit on total fat intake and dropped cholesterol as a “nutrient of concern.”
Although some of these changes make it easier to consume produce — no need to skimp on the guacamole because you are worried about total fat intake — the latest research indicates that one can eat poly-and mono-unsaturated fats (such as in nuts, avocados and fish) without concern. On the whole, though, the redirection poses some challenges for produce.
Dr. Walter Willett, the Fredrick John Stare Professor of Epidemiology and Nutrition and Chair, Department of Nutrition at the Harvard T.H. Chan School of Public Health, is widely recognized as the leading authority on nutrition and public health. At a recent talk, he explained that the old advice to avoid French fries because of the oil was now moot, especially since trans-fats have been basically eliminated from the food supply. He still urged people to avoid French fries, but now the professor said the oil was the best part of the French fry; it was the potato itself, with a high glycemic load, that gave the Professor concerns.
Even saturated fat, the avoidance of which has been a religion among nutritionists, is clearly more complicated than once understood. Today, we know there are many types of saturated fats and that some may even be beneficial. Basically saturated fats are strings of carbon atoms chained together at different lengths. But recent studies indicate that those strands associated with dairy, for example, have a positive effect on heart disease risk and reduce the likelihood of Type 2 diabetes.
None of this, of course, means the health halo of produce isn’t real — only that, as an industry, we have to be careful where we hang our hats, lest the hat stand be pulled out from under us as nutritional information evolves.
There is also a challenge with embracing causes that are trendy, but for which there is little evidence. Many are intensely opposed to GMOs, but we have no evidence that eating GMOs has any impact on human health. Organic does have connotations of a healthier, more sustainable product, but, again, there is miniscule evidence that this is so. Which brings into the spotlight the consumer education piece. It is, of course, wonderful, that retailers and producers help educate consumers, but the science has to be there.
The need to stay relevant with the lives of consumers cannot be doubted, and this research points to the importance of convenience with today’s consumer. Still, we have to be careful in assessing causality on some of these statistics.
Maybe consumers are rejecting whole items as less convenient, but it is also possible that higher margin convenience items are given a more prominent place in the department, more advertisement, etc., and that this marketing effort is what may drive consumption. Banana margins have been kept low, as most chains want to be competitive with Wal-Mart on this high-volume item, but low margins also discourage large placements, prime placements and advertising. It is a chicken-and-the-egg situation.
Staying on trend is important as it allows producers and retailers to ride the changes in consumer demand and come out winners. Unfortunately, there is little evidence that all these changes in demand for particular products (kale being the