February, 2007

Research Perspective and Comments & Analysis

Packaging Promotes Brand Loyalty

Experienced brand managers know there is real value to be had in getting and keeping customers’ brand loyalty. Loyal customers are repeat customers. They can also be brand evangelists, encouraging their friends and family to purchase.

However, it appears many consumers aren’t brand-loyal when it comes to produce, based on recent Produce Marketing Association (PMA) consumer research. According to our new research report, that loyalty lags in part because the produce industry hasn’t taken full advantage of the opportunity to harness packaging to promote brand.

More than eight out of 10 consumers (84 percent) we recently surveyed told us they don’t feel strongly about any particular brand of fresh produce; only 16 percent reported they were strongly brand-loyal. Twenty-eight percent told us brand of produce isn’t important to them at all. On the other hand, the 45 percent who reported brand of produce is important at least “somewhat” or “a lot” present the most immediate marketing opportunities to be had.

Why consumers buy a specific brand of produce offers insight into the types of branding messages used to communicate to consumers. Freshness and quality were cited most often and equally (24 percent of respondents each) as the primary reason for buying a

particular produce brand, while 22 percent cited taste.

Clearly, our industry could do better to harness the power of branding.

One area where the industry appears to be missing the branding mark is on produce packaging. By connecting with the customer at the point of sale, packaging offers the last and best chance to generate a purchase.

Last August, PMA followed up on our 2004 survey of consumer attitudes toward packaging and found there has been little change in the marketplace in the past two years. This tells us we haven’t done much to take advantage of the opportunities exposed.

Consumers haven’t increased their purchases of packaged produce; in fact, we may be losing ground. Consumers reporting packaged produce makes up 26 to 50 percent of their total fresh produce purchases fell sharply, from 32 to 12 percent between 2004 and 2006. Meanwhile, we saw a near tripling of reports that none of their purchased produce is packaged. One category in which this is not the case surely is berries, where the clamshell increases sales with its better product protection, increased availability and improved taste.

A key finding was that consumers perceive packaged produce, excluding salads, to be of lower quality and freshness than bulk produce; 78 percent think bulk produce delivers consistently better quality and taste. Conversely, consumers report they perceive packaged produce to be safer and cleaner than bulk. Companies need to communicate the quality, freshness and safety of their products to encourage consumers to pay the packaging premium if they are to grow their sales.

At the same time, we have to build an even greater awareness in the minds of those who handle and merchandise all packaged produce (beyond just salads) that the presence of packaging is no substitute for the responsibility of temperature and time control they all must share.

The most-cited reason consumers buy packaged produce over bulk was convenience. They want packages that can be re-sealed, offer a variety of sizes and provide a function. Almost one half (49 percent) of the total sample prefers flexible packaging to “rigid” or “other” options. This offers us valuable insight into packaging options and product line extensions. Speaking personally, I prefer salad mixes and fresh cuts in clamshells or rigid packs rather than bags because they seem to protect their contents better, reseal easier and keep fresher once opened. That’s the value equation for me; others will differ.

Consumers also told us expiration dating and nutrition information would help address their quality and freshness concerns. They cited that information, along with environmentally friendly messaging and storage and handling tips, as most important to them. And speaking of nutrition information, listen to Michael Pollan: “Don’t take the silence of the yams as a sign that they have nothing valuable to say about health.” Packaging used properly is prime marketing real estate.

So what are consumers willing to pay more for? More than three quarters said better freshness and taste. Resealable packaging ranked with 71 percent; 68 percent said environmentally friendly packaging and 57 percent said microwavable packaging.

We also interviewed a small group of supermarket, foodservice and produce industry thought-leaders to get their input. They agreed packaging had “some to a lot of influence” on consumer behavior with convenience being a primary driver. Most lauded the innovation of clamshell and modified-atmosphere packaging to extend product shelf life and reduce damage; others pointed to corn-based packaging. They projected demand for environmentally friendly, non-petroleum based and food-safety-enhancing packaging would increase and forecasted the “next big things” would be fresh-cut fruit and microwavable vegetables.

Given the industry’s recent food-safety issues related to packaged leafy greens, we need to do all we can as an industry to promote consumer confidence and loyalty — our future depends on it. That means working harder to establish brand identity with our customers and to promote product safety. Packaging can help on both counts. But packaging in and of itself is no substitute for proper care and handling through the chain.

Consumers Look Beneath The Wrap

Branding in the produce industry is a peculiar issue with a peculiar dynamic. Decades of studies on this issue have consistently borne out the obvious: Consumers do not value individual produce brands to the extent they will stop shopping at a store that does not carry their favorite brand.

This is very different from the dynamic on packaged goods and many other products where consumers can have such loyalty that they will switch rather than try another brand. Try to sell a family that grew up on Hellman’s mayonnaise Kraft Miracle Whip and you will probably lose the customer.

Retailers are sensitive to this dynamic, which is why retailers carry many types of the same packaged items. There might be dozens of brands in categories such as soup, mustard, cereal, etc.

In contrast, not one retailer in America feels the need to have side-by-side displays of different brands of fruit. There is no place you can go in America and select bananas from side-by-side displays of Chiquita, Dole, Del Monte and Turbana.

Why is this? Several reasons: First, most produce brands are identical product. Bananas are all Cavendish variety bananas with identical taste. This contrasts with many packaged goods where the brands represent substantively different products. A person who buys Gulden’s Mustard over French’s may be expressing a preference for a spicy brown mustard over a yellow mustard.

Very few produce items — Driscoll strawberries, many Sun World items, etc. — are literally distinct varieties from those sold by competitors. But for most, the items are exactly the same, and buyers know it.

Second, much produce branding has offered the consumer an unreliable quality proposition. Here is how it happens: A company promotes a brand and establishes a very high level of quality specifications for the label, perhaps marketing substandard product under a #2 label for the trade only. Then, unfortunately, the weather is bad, the crop is of poor quality, and no product meets the rigorous quality control specifications.

To maintain the value proposition that has been sold to the consumer, the shipper has to stop marketing product until new and better product is available. This is very difficult for a business. The company has salespeople who need things to sell. And, of course, there are bills to pay. So the company decides to change its quality standards from absolute to relative. It will sell the very best of what is out there — although it will be selling product it would have rejected last year. So consumers have an unsatisfactory and irregular eating experience with many produce brands.

Third, packaged goods manufacturers have gotten their shelf space as a result of either advertising direct to the consumer or by paying a slotting fee to the retailer. In either case, retailers feel obligated to carry the brand consistently. Many produce retailers juggle primary and secondary suppliers or buy on the free market and do not offer a consistent brand of most produce items to their customers. Without this consistency, there is little opportunity for brand preference to develop.

Fourth and finally, an important aspect of branding is that it provides consumers with an assurance of quality. This is very important if one is buying canned soup. With fresh produce, the product is sitting there available to be seen. So even if a consumer favors one brand of bananas over another, he can see which looks best.

Of course, this dynamic refers only to the relative merits of one brand over another. Although this issue was beyond the scope of this research, much research has indicated that consumers value produce branding in general and prefer branded product. In focus groups, consumers report that the brand makes them feel as if someone is standing behind the product — an important thought in these food-safety-conscious times.

Conflating branding and packaging is problematic because much produce packaging is done under trade brands that mean little if anything to consumers.

Consumer perception that packaged produce is lower quality may be accurate. In many items, we package a smaller size or lower grade.

It is also true that bags or clamshells containing products such as grapes force a consumer to buy shatter that previously would have been left on display.

And the chance of opening a clamshell of berries to find a moldy one is much greater than if they were buying bulk.

Convenience is also a difficult attribute. Bryan likes rigid packaging, but consumers tight on refrigerated space find it inconvenient to have a giant clamshell of grapes in the refrigerator half empty but still taking up its full allotment of space.

Few companies in the industry use their packaging effectively to promote the product and repeat consumption. No bag or clamsell should ever go out to consumers without recipes, nutritional information and website address for additional information.

Food safety isn’t only a matter of what goes on in the field. Too many people touching the produce can lead to adulteration, which means packaging is destined to increase in usage. We ought to work on doing it right.