November, 2003

Fruits of Thought

Paradigm Shift

There is little doubt that in the age of year-round product availability, retailers sell more of virtually every item than they would have otherwise. The “off-season” sales more than compensate for any diminution of sales caused by the muffled excitement at the start of the season.

This doesn’t mean that the move to year-round availability has had no victims. Growers traditionally had spikes in the prices they received at the beginning and the end of their season when availability was low. Today these spikes are often moderated as other growing areas, varieties, imports or storage product are around to put a damper on the market’s natural exuberance.

And at retail, at least, although it is clear that total sales of any given item are far higher because of year-round availability, it is not clear that sales in any given season are higher than they would have been had availability been limited to the traditional seasons.

In fact, the industry has abysmally failed to increase per capita consumption of traditional products during traditional seasons. Leaving aside population growth, all of the increase in produce sales at retail for at least two decades is a result of either new products, such as fresh-cuts, or expanded seasons due to the storage, imports or new varieties.

The great dilemma for the produce industry is how to get retailers to care. Within the produce trade, there has been a dramatic shift over the past half century. The industry went from a situation of almost chronic shortage, to a situation of almost chronic surplus.

Twenty-five years ago, growers from the Caribbean and Central America visited my father and asked him what items they could grow for the American market. He was able to point them to big market opportunities such as Honeydew melons and Cantaloupes. In time, he would sell millions of cases of these imported products.

I sat in on a meeting at PMA between another group of growers and an importer and the same question was asked. There were opportunities – a market window of three weeks here, a niche for some organic product there. But this importer at least was hesitant to recommend to the growers anything they could ship a hundred trailers a week for months on end without losing their collective shirts.

I remember being the only one in the country bringing in colored peppers from Holland and having supermarket chains begging me to grant them an allocation. Those days are almost completely gone.

There has been much rationalization of marketing within the trade. Though produce will always have its peculiar challenges, it is not quite the cowboy business it once was with loads of roller cars crossing the country and product being sent off to auction.

Now there remains a disconnect between most produce marketers and their retail customers. At the recent PMA convention, I was given a private presentation of a new pitch that a group would be giving to retailers. It was a carefully researched and expensively done study of how to sell more of this particular group’s items.

It was really a terrific effort except for one thing – no retailer really cares about selling more of this particular group’s product. And the study failed to answer the questions retailers might really care about: How will following the recommended protocol affect sales of other produce items? Are these sales more or less profitable than other sales that could be obtained by the same allocation of space, manpower, advertising dollars, etc?

Inevitably, the rise of the supercenter must mean that produce items will eventually be evaluated not just on their own contribution to sales and profits, nor even on how they enhance the overall produce department’s profitability, but on the nature of the consumer who the produce item appeals to.

Many studies show that specialty food items are crucial to supermarkets because they attract the kind of customers who are very profitable for retailers. This understanding of the roots of profitability is leading to a shift in understanding that the biggest customers – who may be heavily coupon-driven and buyers of loss-leading products – are not the most valuable customers. That crown belongs to those who buy high margin products – prepared foods, for example.

Therefore, many a store would be better off with a bachelor for a customer over the mother of a family of six, because the bachelor will buy what he wants without much regard to the price.

Yet just as this recognition is sinking in, the paradigm is shifting. General merchandise is usually a high profit opportunity compared to food. So the question becomes: Will your produce item attract the kinds of customers who also want to buy barbecue grills?

Who knows? Yet innovative marketers are experimenting with what they can do to affect the actions of the consumer. Dole, for example, made a deal to put “Finding Nemo” stickers on its bananas. Then Dole arranged for a card in each DVD of “Finding Nemo” to provide kids with a display pad for collecting all the stickers.

Will seeing the stickers on the bananas cause kids to nag Mom and Dad to buy the DVD? Will finding the display card in the DVD encourage grocery shoppers to buy Dole bananas? Will seeing peers doing both encourage greater awareness of both products? Maybe a bit of all three.

It is a first tentative step into a brave new world of produce marketing in which the demands on our marketing campaigns shift to consequences far beyond selling more of the product at hand.  pb