May, 2010

Research Perspective and Comments & Analysis

Fresh Produce and Variety Can Drive Store Traffic and Build Loyalty

A new study by The NPD Group, shows 58 percent of primary household shoppers report that liking a store’s produce is one of the reasons they regularly shop at a particular store. Having consistently fresh produce and a wide selection is of great importance to getting these consumers to walk into the store. Furthermore, the emphasis on produce grows as we age. When looking at consumers 65 and over, liking a store’s produce as a main reason for loyalty rises to 62 percent among primary shoppers.

This research, an example of the Shopper Insights available from NPD’s National Eating Trends service, which has tracked the daily eating habits of Americans based on their personal food diaries since 1980, also reveals some channels are doing much better at attracting these consumers than others. For instance, a greater percentage of shoppers who are more loyal to conventional supermarkets/grocery stores say they like the produce at those stores more than shoppers of natural/gourmet stores who specialize in organic produce. At first it seems counterintuitive, but peeling back the layers of the onion shows that the natural channel is best at attracting people who are looking for unique items as well as organic food and beverages. However, this channel also pulls in produce-minded consumers who may be loyal to other food channels, but are willing to shop around for produce. This still emphasizes the importance of produce to the natural channel, but also highlights opportunities for other channels to increase their basket sizes with produce offerings.

In addition to the retail environment, it’s important to look at produce in the full context of eating since vegetables are often served as a side dish, particularly at dinner. Produce marketers and retailers should consider either cross-marketing or placement strategies that more closely align with consumers’ dinner plates. For example, when looking at all dinners containing a vegetable side dish, chicken, beef and pork are the top center-of-plate dishes served in those instances. According to NPD’s National Eating Trends, sandwiches and burgers are also top main dishes at dinnertime; however they are less likely to be consumed with vegetables.

There has also been much concern recently surrounding the eating habits of children and how this might be contributing to obesity. A recent study conducted by the University of North Carolina showed that kids are snacking on about 586 calories per day, which is up from 418 in 1977. While it is true that kids often snack on sweets and savory items, the silver lining is that parents seem to be taking charge of their children’s snacking habits. Over the last 10 years, fruit has grown to become the top snack food for kids, particularly kids between the ages of six and 12. This hints at opportunities for retailers to adjust their fruit sections to accommodate snack-minded consumers.

As we move into the next 10 to 20 years, producers and retailers alike must take into account the aging Boomer population. Making up roughly 25 percent of the U.S. population, this generation will see kids leaving the home and parents entering retirement years — or at least planning to retire. Fruit and vegetable consumption tends to increase as consumers age, in many ways related to NPD’s National Eating Trends reports the average older Boomer consumed fruit 173 times in 2009, while those same consumers averaged only 118 times in 1999. The same goes for vegetables. Now, older Boomers, those born between 1946 and 1955, consume vegetables about 175 times per year, but in 1999, their frequency was 149 times.

The findings from NPD’s National Eating Trends and its Shopper Insights data show that the quality and freshness of produce drive store traffic and builds retailer loyalty. Understanding the life stages of consumers and their mindset about produce will help increase store traffic, loyalty and dollars.

Put Consumers First

It is good news, and an important asset for the industry, that consumers value produce so highly that the vast majority identify liking a store’s produce as one of the reasons they select to consistently shop at a particular store.

The positive response to this question raises, as good research often does, another question: What does it mean for a consumer to “like the produce” at a particular store?

One interesting query: Is this a set-point question? That is to say… is there some base line of acceptability that must be reached for consumers to consider making a store their regular shopping venue, but once that set-point is reached, consumer concerns move on to other issues, such as location or the condition of the deli department, and further improvements in the produce department will no longer motivate that individual consumer? Or does further improvement of the produce department further motivate that consumer, perhaps outweighing an inconvenient location or poor meat department?

It is also not clear to what degree various elements contribute to “liking a store's produce.” Is this mostly about appearance, is it the historical experience with flavor and taste, is it assortment, is it price, or is it carrying organics?

It also is intriguing that consumers at conventional stores “like the produce” at those venues more than consumers at natural/organic stores “like the produce” at those stores. Perhaps the natural/organic consumers are more attracted to other things at their stores and experiment with various alternative-purchasing venues for produce — one can imagine this clientele not liking the produce as much in a natural or organic foods store because they prefer farmer’s markets or various forms of Community Supported Agriculture. The more obvious implication, though, is that stores that focus on organic produce either A) Are frequently out of stock on items or have a smaller assortment, B) Are in-stock only with conventional alternatives, C) That the quality standards are bent to allow the purchase of many organic items, or D) That “liking the produce” includes thinking the prices are reasonable and organic sometimes fails to meet that measure.

The study artfully notes that produce is not an island and that people often consume produce in the context of meals. Protein main courses are often served with vegetable side dishes, and burgers and sandwiches, though less often served with produce side dishes, often incorporate produce right into the item. Departmental merchandising makes suggestive selling more difficult. Here is a situation where consumer research runs straight into the bureaucratic inertia of old ways of doing things. No less a group than the Food Marketing Institute, the supermarket industry trade association, recognized this problem and tried to wrestle with it through its old Meal Solutions Conference.

There are a hundred problems to transcend — compensation schemes, accountability issues, etc. — but the bottom line is that the industry could sell a lot more produce if it could break the departmental barrier. Ramping up cross-merchandising efforts is part of the solution, and innovative programs such as the Publix Aprons program, which includes cross-departmental product being used in a meal demo and continuing recipe series, is also helpful. One day, though, someone will figure out how to put consumers first and that will be a win for them, and the produce industry.

It is interesting that the study finds that fruit is now the No. 1 snack for children between the ages of six and 12. Intentionally or not, the industry has been adjusting to this with the growth of products such as Clementines, which are lunch-box-friendly, seedless, etc. One challenge for the industry is how to extend those convenient offerings into the teenage years when the lure of fast food and junk food hits full stride.

The aging of the baby boom offers both opportunities and challenges. Demographics are always local, so it doesn’t matter to a retailer that the national average is getting older if its stores are in areas flooded with young immigrants. Once again, we confront the question of knowing a fact — that the older population is increasing — and still needing to define what will satisfy this demographic. One thing to keep in mind is that one person’s luxury is another’s necessity. So a sliced or diced onion may be a convenience item to young people, but as the so-called “old-old” population — those over 85 years old — increases, you increasingly have people for whom cutting is dangerous, painful or impossible. For those folks, the same product is a necessity.