March, 2006

Fruits of Thought

Keeping It Clean

Why don’t things get better, faster? It’s a question that comes to mind after 18 years of doing the Produce Business Mystery Shopper Report on an annual basis (see this year’s installment beginning on page 18). Many of the problems we were talking about 18 years ago are still problems today.

A good example is the consistent fact that produce departments deteriorate during off hours. Problems such as this are not insolvable, but they tend not to get solved because the intellectual framework in which they are evaluated is limiting the solutions that can be considered.

The 5-A-Day program, for example, has a dilemma at its very heart. It has consistently shied away from doing anything focused on increasing the sales of any individual produce item. It takes this position for understandable reasons. The Produce for Better Health Foundation (PBH) depends on industry support to run the 5-A-Day program, and it would likely make growers quite angry if told the 5-A-Day program was taking their donations and using the money to increase consumption of commodities the growers don’t sell.

Yet it is a Catch-22, because produce sales in general can never increase if the sales of specific produce items don’t increase.

Retailers have the same problem. Although they may give lip service to using produce as the differentiating point and making it the draw, in almost all cases, produce department executives are given incentives to maximize departmental profitability.

Yet this position is illogical. If presented with a new microwavable fresh green bean package with sliced almonds, the most important question for the store is whether carrying that item will attract a consumer likely to buy highly profitable fresh fish, with a prepared potato dish from the deli and an expensive Chardonnay. Whether the green bean amandine actually sells much or makes money really isn’t that important — but scarcely a store has a system for even analyzing such decisions, much less integrating such issues with a compensation system to reward those who actually increase storewide sales and profits.

The direction for organizations looking to grow the produce industry should be to look at removing the structural barriers that inhibit good decision-making. Our Mystery Shopper Report gives the industry a place to start.

PMA has begun doing more research, and 5-A-Day is looking for some new positioning. United claims to want to interact with supermarket CEOs, so here is a great way for a progressive industry institution to increase produce sales based on 18 years of Produce Business experience with the Mystery Shopper Report: Let us fund research in which we take some stores that currently let produce departments go to pot and let us conduct a project in which those departments are kept sterling 24 hours a day or however long the store is open.

We should track sales of produce, various high profit items, such as prepared foods, and total store sales as well as do consumer intercepts both before and during the project to assess consumer attitudes toward the retail brand, the store, the department and the products in it. My bet is that in this world of hectic schedules, a sustained effort will pay off in many ways.

Sales of fruits and vegetables during after-hours will increase for two reasons. First, the customers who are already in the stores will buy more since they will enjoy spending more time in the department. The second reason is that new customers will come when they see the contrast between this store’s sterling produce department and the disasters the consumers encounter in many other operations.

Let’s suggest another possibility: Sales will increase during the day when the regular, full-time staff was already maintaining a nice store. Why? Well, the employees will do a better job because they will feel more pride in their operation, and customers will think more highly of the brand and the store.

To consumers, it is all a seamless web. They go into a store late at night, find rotting produce and think less of the store and the brand. They don’t necessarily discern that during certain hours this is a good place to shop and during some other hours it is a dump. They just remember their encounter with fruit flies.

So maintaining a great produce operation during whatever hours the store is open is likely to be the most effective ad a store can run to persuade consumers of the retailer’s commitment to quality. While produce sales will increase, the real winner might be total store sales and enhanced consumer esteem for the retail brand.

Of course, there would be a real cost for the produce department to sustain this effort, but that is what research is about — ascertaining if the benefit is worth the cost. We may find that it is very profitable for a retail operation as a whole to keep the produce department always looking spiffy but that by the old stricture of maximizing departmental profit, it doesn’t pay.

In which case the research would have uncovered a major flaw in the internal incentive structures of a supermarket, and the industry would be in a good position to persuade supermarket CEOs to make a change — a change to increase their own profitability and the sales of the produce industry at large.

It is that kind of change, in which everything starts to be viewed through a new prism, that enables things to get better, faster.  pb