Opportunity To Concentrate On Increased Sales

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

The impact of price inflation on retail produce sales probably has a lot to do with relative price inflation across different departments. A 3.4 percent increase in produce prices may depress produce sales, but if meat prices increase at a quicker rate, produce can become relatively less expensive, even while more expensive in an absolute sense.

The effect of a drought on meat prices is often counter-intuitive — at least in the short term. The drought causes high grain prices, which leads cattle ranchers to liquidate their herds. This can mean more supply of beef in the short term, so higher grain prices can cause meat prices to fall. However, long-term, fewer cattle generally translate into higher prices. Now that summer is over and many ranchers are running out of grass, many herds are still bound to be liquidated, but the Bureau of Labor Statistics announced that the average price of ground beef hit a record high in July at $3.085 per lb. It is a good bet it will go higher still. So produce may yet be a bargain.

It is, of course, true that macro trends influence demand, but it is hard to know what to make of the boom in private label in terms of a driver of produce consumption. Although “the average price of private label produce” may well be “21 percent lower than the average price of branded products,” it seems unlikely that this is an apples-to-apples comparison. In many cases, private label programs do not encompass as extensive a line as branded items, so the numbers can easily be distorted by comparing the more basic private label assortment with a branded assortment including more specialty variants of, say, a bagged salad line.

Anecdotally, although it is true that there are many upscale private label items, we sometimes shy away from products because they are only available in private label format. At our local Publix, for example, other than Ready Pac Cool Cuts carrots and dip geared for schoolchildren, all the carrots are a typically private label. It is not a beautiful upscale label — just a plain white label on clear plastic; we would buy more and pay more for a branded alternative or even a more upscale private label.

Carrying the products that consumers want is a sure-fire way to boost sales, and so the internationalization of the produce trade, which keeps items such as avocados on the shelf, is certain to provide a leap to sales. Also having products that appeal to the changing ethnic composition of America and to new cooking and taste trends is, of course, a wise idea. Yet, even such obviously good things pose risks. The big risk is an improper or inadequate promotion. In the old days, seasons themselves provided natural merchandising and marketing opportunities: “Melons are Back” — now if they never really left, we have to consciously work to promote the product.

Staying in sync with consumer preferences for meal and snack times and venues is key. Yet we are hesitant to make too much of the boom in the deli and prepared-food sales. Although some of this may represent a change in consumer habits, a lot of it seems to represent a change in retail perspectives, with many retailers focusing on broader deli operations, including prepared foods, breakfast programs, etc., as a way to compensate for shrinking grocery sales in the face of supercenters, club stores, deep discounters, etc.

Perhaps the real lesson here is that the day when delis were small scale and could buy (or steal) the occasional green pepper they needed from the produce department is long gone. Now many delis have substantial cooking operations, at store level or via commissary or prepared food supplier. As such, delis now represent a third market — not quite retail, not quite a foodservice — and so there is an opportunity for those looking to ride the retail trend to focus on this market.

Here are four big opportunities for boosting sales:

First, have the product that consumers want to buy — that includes the imports and assortment, but it also includes having bananas at various stages of ripeness to appeal to different consumers.

Second, suggest usage opportunities. It is fine to remind folks of old standbys, say bananas or peaches or berries with cereal, but it is also important to suggest new usage ideas. We wrote elsewhere about making Banana S’Mores — by slicing a banana with the peel still on, putting in marshmallows, chocolate and crumbled Graham crackers, putting the whole thing in aluminum foil and throwing it in the fire. It is easy to sell an extra hand of bananas every day to some families during the summer as they go out every night to the fire pit.

Third, get produce out of the produce department with extra displays at key points throughout the store.

Fourth, tie into big trends and big ideas — it may be local, it may be greenhouse grown, it may be organic.

Rising prices tend to make all produce directors look good. The great ones are already thinking about their comparables when prices start to fall.