Poised For Growth

By Jim Prevor, Editor-in-Chief, Produce Business

Datassential always does interesting work, and this piece by Maeve Webster and Mike Kostyo raises important issues for the produce industry.

First, it points to the rise of a new business category selling meal delivery services. Although some produce companies are participating in this segment by actually assembling the boxes that go to consumers — and all these services are buying produce from somewhere — few shippers established divisions or sales desks with personnel specialized in these markets.

Much as like selling to foodservice depends crucially on influencing the menus of operators until these companies are persuaded to add these items to menus — after all, sales of sliced apples, blueberries, and Clementines to McDonald’s were zero a decade or so ago — the industry must engage with meal delivery services to highlight opportunities to use more fresh produce. After all, the Datassential research showing that consumers value fresh foods means that meal delivery services will be open to new opportunities. Yet how many produce shippers are organized to place a sales priority on this fast-growing industry segment? How many companies have the expertise necessary to credibly engage in assisting these meal delivery services in menu planning, delivery execution, etc?

The meal delivery service would seem to hold the potential for being a real boon to specialty produce vendors. After all, consumers typically refrain from buying specialty items because of: unfamiliarity with taste; uncertainty of usage and cooking techniques; cost; and fear of waste. Yet, if meal delivery services incorporate these items into their menus, all these “problems” are mitigated.

Consumers pay for meal delivery services to have chefs develop great recipes, so consumers will be inclined to give specialty items a try — even if they don’t know how they taste. Since whatever cooking required comes with a clear explanation, and the services wouldn’t allow anything too complicated, lack-of-cooking expertise will not be a serious problem for consumers. Relative to other produce items, specialty produce costs a lot, because retailers use these items as margin-enhancers and do have concerns on shrink.

Meal delivery services sell a meal at a fixed margin, don’t try to make more on one item than another, and there is no shrink due to lack of sales as the services buy exactly the quantity they need for the number of meals contracted. Finally, consumers buy exactly what they need — an individual meal — so there is no waste as there could be in cooking small quantities. Since many meal delivery services appeal to urban singles and couples, this is a big win.

One can imagine these services growing substantially. As the elderly portion of the population grows, these services, delivering meals with pre-cut portions, serve so many needs of the elderly: ease of transport, avoidance of waste, avoidance of too much knife work in cooking, etc.

Also, the growth in health concerns and specific diets will play into this trend as well. Ordering a gluten-free meal or one that conforms to the Paleo diet, a carb-free option, or a peanut-free diet for someone allergic is often easier than trying to cobble together such options at a restaurant. In the hullaballoo of a busy restaurant, it is much harder to really ensure that no knife used to spread peanut butter is used in a peanut-free meal without thorough sanitation. On an assembly line, this is less of a challenge.

The broader grocery delivery industry is obviously set to explode. Amazon, after years of experimentation, is now in a roll-out stage. This platform alone could become one of the largest grocers in the world. The reactions of other players, from Wal-Mart to Google, all demonstrate that this area is not only hot but perceived as a long-term growth strategy.

This growth offers the produce industry the potential for a more satisfied consumer. Fundamentally, the standard practice in stores — which is to remove items from their packages, disturb the cold chain, put them out in a venue where consumers can touch the produce — all lead to reductions in product quality and opportunities for food safety problems, all while increasing shrink.

The obvious next generation of produce packaging is consumer packaging. Just as shippers often prepare special boxes for warehouse clubs, if the typical consumer order is for six clementines, the ultimate outcome will be source-packing of small trays of six Clementines so that the delivery services can sell that unit without having to repack. This will allow for a much improved cold chain, more efficiency, and a more sanitary product.

These delivery services start out selling convenience, but in the end, they will deliver superior quality produce, and that will be a major cause of their triumph.

Although it may seem as if consumers will be hesitant to trust a delivery service with produce selection, the best research we have indicates the opposite is true. Consumers are so doubtful about their own ability to select a ripe pineapple or flavorful melon that they are happy to outsource this function to experts. Online retailers (with their various ranking systems), which almost always include some sort of message such as: “This is bad, but we make it available in case you really need it,” actually have more credibility with consumers than brick-and-mortar retailers who almost never speak so bluntly.