April, 2001

Fruits of Thought

Innovation Blockage

Fresh-cut produce has become the true anchor of the produce department. Sales of the category are at a level that often beats out bananas and accounts for about 10 percent of total produce sales. Fresh-cuts are the “fairytale come true” in produce. That the category continues to grow at 15 percent a year means that the future of the produce department hinges on what is made of fresh-cuts.

More than in any other area of produce, though, retail has failed to belly up to the bar and do what has to be done to boost fresh-cut sales. With fresh-cuts having become so important and, with their importance growing, this increasingly means that retailers are stunting the prospects for the department.

The problem starts with space. Produce retailers traditionally have had enormous flexibility to move things around within the department. This flexibility was needed because of seasonal variations in production.

But good operating procedures and food safety concerns require that most fresh-cuts be kept in certain dedicated spaces. So, for practical purposes, the space dedicated to fresh-cut items is determined on the day the store is built. Since fresh-cuts are, by far, the center of innovation in produce with the most meaningful new products, virtually all stores, even when designed with adequate space for fresh-cuts, quickly find themselves short of such space.

This is especially true because one other booming area in produce is the so-called vegetarian market, often centered on meat substitute products, such as soy-based hot dogs and the like. These products attract an important consumer, but they also are stealing space away from fresh-cut produce.

We really need a concerted effort on the part of case suppliers to manufacture more flexible racks. And we also need a concerted effort by retailers to build flexible departments. Obtaining this flexibility may well be the single most important key to succeeding in the produce department of tomorrow.

What this means is that one day, and soon, that huge corned beef and cabbage promo for St. Patrick’s Day will wind up being built around some yet-to-be-developed product that provides single leaves or pre-quartered chunks of cabbage in a container. The store that will win will be the store that has a produce department with the flexibility to create prominent displays of fresh-cuts at department entry or at the end of the shopping path…or somewhere else in the store.

Of course, fresh-cut manufacturers can only do so much. Produce merchandisers increasingly need to think about the psychology behind the sale and be flexible enough to do more than just put product on the shelf.

The Wall Street Journal recently published a piece describing how Hamburger Helper has defined a whole category. Although originally created as a budget stretcher for expensive hamburger meat, it turns out that many customers prefer to buy a partially prepared item – Hamburger Helper requires the addition of chopped meat and a few minutes of stirring in a saucepan – instead of a fully prepared item.

Why is this so? Well it turns out that the people in the family responsible for meal preparation want to feel like they are doing their job. And it turns out that the “eaters” in the family want to feel like someone loves them and did something to prepare their meal. A few minutes of stirring that skillet, with the aroma wafting through the house, and everyone is feeling loved and loving.

A similar dynamic is playing out in produce departments all across the country. A number of stores are putting feta cheese on the fresh-cut rack, planting the idea of adding some nice feta and turning some of the bagged salads into a version of a Greek salad. Consistently, that feta sells at levels far above what it does in the deli.

It may be difficult to get produce directors hyped up about selling the deli department’s cheese, but the important insight from the story of the feta is not a yearning for Greek salad, but a yearning to be part of meal preparation.

So sales of bagged salads will be increased if our stores are designed so that we can provide the tools for enhancing fresh-cut items with fresh protein items. Simply putting tomatoes and cucumbers and onions near the fresh-cut case doesn’t do the job. Overt merchandising efforts that create salad centers are necessary to make consumers feel they can both buy a pre-made salad base and still be making the salad themselves.

On a recent visit to Tanimura & Antle, I walked through its Salinas headquarters and saw showcases of awards the company had won. I was present at the introduction of most of these products – wonderful soups, vegetable dishes with pastas and proteins, much more – and I was saddened when I realized that most of these items were withdrawn from the market because of a lack of demand.

Part of it is the internal politics in supermarkets: Did these products with both fresh vegetable and fresh-other-things belong in produce or deli? For the most part, to this day, they are sold nowhere. So both retailers and consumers lost out because top supermarket executives don’t understand the changing nature of the business and can’t seem to develop systems that accommodate these new hybrid products.

But produce departments also carry a good share of the blame for the failure of these products. Produce departments are used to selling either very well accepted items – apples, oranges, bananas – or really obscure specialties – kiwano melons, tamarillos, etc. But most innovative fresh-cut items are neither. They are new product introductions of mainstream items that need retail nurturing to succeed.

The innovations in produce are in the fresh-cut vein, so when retailers don’t nurture these products, they are strangling the children, the future of the department.  pb