February, 2011

Research Perspective and Comments & Analysis

Produce Expenditures By Ethnic Consumers

By Ramu Govindasamy, Associate Professor Of Agricultural, Food And Resource Economics At Rutgers New Jersey Agricultural Experiment Station

Americans generally eat less fruits and vegetables than recommended by the Federal Food Guide Pyramid. According to the Produce for Better Health Foundation, only 38 percent of Americans consume the recommended number of servings of vegetables, while only 23 percent consume the recommended number of servings of fruit.

A survey conducted by Rutgers University examined the expenditure on fruits and vegetables among ethnic consumers. In particular, this survey was conducted among Chinese, Asian Indians, Mexicans and Puerto Ricans. An outsourced firm specializing in telephone interviews was contracted to complete 1,084 questionnaires representing 271 respondents from each of the four ethnic groups. Bilingual telephone interviews were conducted and the responses were gathered from the principal grocery shopper of the household.

The survey collected three types of ethnic consumer expenditures: total produce expenditure; ethnic produce expenditure; and expenditures on specific ethnic produce items. Expenditures on specific produce items varied by each ethnic group. All three expenditure types were based on estimates  of average purchases during specified periods of time, over the course of the past 12 months.

Average Expenditures By Ethnic Group

Comparisons between average produce expenditures for each ethnic group and national averages for fresh produce expenditures for the corresponding race or origin were conducted. That is, surveyed Chinese and Asian Indian data were compared to national benchmarks for Asians, and surveyed Mexican and Puerto Rican data were compared to national benchmarks for consumers of Hispanic/Latino origin. In general, the average annual fresh fruit and vegetable expenditures by the Asian and Hispanic groups, both national and survey sample data, were higher than the overall national average (i.e. $357 for the entire population, irrespective of ethnicity).

Not accounting for demographic characteristics other than ethnicity, the comparisons of sample data to national benchmarks revealed that the average expenditures by ethnic consumers surveyed were as much as two to three-and-a-half times the respective national averages, depending on the ethnicity (See Figures 1 and 2). In the absence of a suitable national benchmark for ethnic consumers by demographic characteristic, an in-depth analysis of the survey data suggests that the average expenditures for ethnic consumers tend to exceed the respective national ethnic benchmarks by many folds. 

A Unique Target Market

The substantial disparity between the survey sample and national data can be partially attributed to the inconsistent definitions of ethnicity, due to lack of data availability by ethnic sub-group at a national level. Prior research suggests that the average fresh produce expenditure by all Asians is lower than that of the Chinese and Asian Indian sub-groups. A related ethnic produce study of the three primary Asian sub-groups showed that the average fresh produce expenditures by each of the Chinese and Asian Indians sub-groups exceeded the corresponding Korean average. It is plausible that the same logic applies to Hispanics, relative to the Mexican and Puerto Rican sub-groups, where a similar disparity in expenditures would be justified.

Another reason for relatively high survey expenditures is that the national expenditure averages may include consumers with no expenditures, whereas the survey data only includes responses of non-zero expenditures. Also, the survey data only includes responses from ethnic consumers who purchase ethnic produce, and prior studies have shown that these consumers tend to have higher fresh produce expenditures in general (ethnic and American combined) than their ethnic consumer counterparts who do not purchase fresh ethnic produce.

A more detailed analysis suggests that expenditure differences are also attributable to the different demographic profiles for each target (niche) ethnic market, relative to the profiles of the larger ethnic populations. The analysis showed that, on the basis of average national expenditures by region, education level, and/or household size, the demographic profiles of surveyed consumers for this study would result in even higher expenditures than the respective Asian and Hispanic national averages ($526 and $429, respectively). The exact magnitude of this expectation is not quantifiable, as the relevant cross-tabulations of demographics by ethnicity are not available as a national benchmark. Consequently, comparisons of national and survey data should be interpreted as relative (directional) information, as opposed to absolute data.

 

What Can The Industry Learn From High-Purchasing Ethnic Groups?

It is always interesting to see that households made up of members of particular ethnic groups exceed the national averages for fresh produce purchases. Those retailers who already serve these consumers well know that they are big purchasers and a big market.

For the overall industry, however, the interest encompasses broader questions: Will members of these groups continue to out-purchase the average American as time goes on? Can other consumers be brought up to these higher levels of purchase of fresh fruits and vegetables.

The answer to these questions depends crucially on why purchases are so high among these four ethnic groups compared to the national average. Here, unfortunately, we don’t have enough information.

Professor Govindasamy points to some clear reasons why the numbers may be as they are, namely that the ethnic numbers only include people who made at least some purchases and who bought some ethnic items.

The study also is not controlled by household size. So the primary grocery shopper may be purchasing for a larger number of people. It is also an expenditure study, not a consumption study, so if these ethnic families eat at home more frequently and so the national average reflects consumers who eat out at restaurants more often, that would also account for some of the numbers.

This is all meaningful because, if the reason for higher purchases is more children in the family or letting granny live with the children and grandchildren, there is no obvious path for the produce industry to take to bring procurement levels up to the norms of these ethnic groups. Pro-natalism — the belief that promotes human reproduction — seems unlikely to be a viable produce industry position. Even a goal of inducing a relative drop in foodservice consumption and seeing a revival in retail seems very ambitious as an industry goal.

Maybe some of this is just pricing. Perhaps these ethnic groups cluster in urban areas with higher food prices, and thus, higher produce expenditures. Or maybe more recent arrivals in America aggrandize their station by fictionally reporting high purchases. We don’t know.

One does suspects that there are powerful cultural influences at work here. Perhaps the primary shopper spends more time shopping because the family goes to the market together. Perhaps there is a cultural expectation that the family will have home-cooked meals. Perhaps the family’s taste buds desire foods and flavors not readily available unless cooked at home.

One reads this study and yearns for more data. Diving deeper into the produce expenditures of the following cohorts would reveal much for the industry:

• Immigrants vs. the second and third generation

• Urban vs. suburban vs. rural

• A cross-hatch against income and household size

Left to speculate, we would think that these high numbers would drop as we move into the second and third generations. All the characteristics that make for distinctive purchase patterns will start to dissipate as the American melting pot reduces the differences between members of these four ethnic groups and the general population.

The great hope for the produce industry is that the melting-pot analogy is correct and that just as these ethnic groups change — perhaps having smaller families, eating out more and enjoying many American staples — so the rest of America will change, perhaps adopting a more fruit- and vegetable-based diet and reducing the percentage of calories from meats.

The question is whether retailers and the broader industry encourage this shift through marketing and promotion. They can, but whether they will is a different question. The problem is that most marketing is about maximizing sales or profits this week or this year. This is about deciding to market to open consumers to the idea of more produce-centric eating, an effort that might pay off big — but over years or decades.

Sometimes, it is the very presence of particular ethnic groups that can change eating habits. Americans came to love Chinese food and Italian food because there were immigrants to open restaurants and introduce America to these dishes and flavor profiles. Many a consumer came to love mangos because a local ethnic group justified a large display at retail.

Perhaps this kind of research is most helpful as a kind of prod to the imagination. It reminds us that consumption patterns are not fixed and that purchasing can change dramatically as families evolve and culture is transformed.

The final question is: Do we have the wisdom to use our time, money and intelligence to not merely boost this month’s P&L but to shape consumption patterns for generations to come?