By Anne-Marie Roerink, Principal, 210 Analytics
We all know it: you cannot compete on price alone. Yet, when the store down the street drops their prices on produce, it is hard to fight the urge to follow suit. After all, we don’t like our competition to beat us on ad features or key seasonal items. The good news is, both the Power of Produce research by the Food Marketing Institute (FMI) and the Nielsen Store Choice Drivers Report show that price is important, but neither the sole nor primary purchase driver.
The produce purchasing decision tree underscores that most customers seek value versus just low prices when buying fresh fruit and vegetables. In both instances, appearance (the in-store reflection of quality) beats out the price in the buying decision.
Likewise, Nielsen found that “everyday low prices” is only a medium-level driver of loyalty in the perimeter versus quality, variety, ease of shopping and in-stock being much more important drivers. Yet, we cannot underestimate the importance of price either with six in 10 shoppers often comparing prices between different produce items in the store. This mixed emphasis on price on the one hand and appearance, ripeness, and variety on the other underscores that having the best prices without execution may result in a lost basket in the immediate term and lost customers in the longer term.
The Power of Produce research found that strong execution consists of eye-catching displays and solution signage/merchandising. But conquering the fundamentals is imperative as well, which include having clearly-marked prices, avoiding out-of-stocks, providing extensive item variety and in-item variety — with close to six in 10 shoppers voting for increased availability of items “grown in the USA” and/or locally sourced.
While new item introductions have always been the oxygen that drives growth for retailers, shoppers themselves deemphasize their importance in the produce department — [new item introductions] were deemed “very” important by just 24 percent. However, in reality, The Nielsen Perishables Group found many segments are shape-shifting, leading to an explosion of new products — with unique items per store up 3.5 percent versus past year. New trends include smaller packages for portability and smaller households, healthy snacking, meal kits that include produce, kid-friendly options/packaging, as well as smoothies and juicing. In reality, many of these new items are driving substantial incremental growth, according to insights firm IRI. For instance, mini bell peppers exploded in sales as consumers view them as tasty snacks and easy salad toppers — resulting in double the category dollar sales growth value.
Another good example is that of fixed weight versus random weight produce — with the former becoming a rapid consumer favorite to simplify both shopping and preparation. IRI found that fixed-weight products reached critical mass in many categories in 2014. Sales shares were at more than 70 percent in eight categories (including spinach, carrots, and peas) and more than 40 percent in 20 categories. These are just a few of many examples showing retailers that embrace new products (including packaging changes) are enjoying significant sales gains.
So how do we get shoppers to try new items? The Power of Produce found that recommendations of friends and family are the most effective, cited by 41 percent. But the trial is also often prompted in-store, by sales promotions, displays, sampling, as a recipe ingredient or by recommendation from a produce department associate. Shoppers like the idea of recipes, serving ideas, and how-to instructions with 41 percent saying they would absolutely use them. These solutions, along with new items, are met with particular enthusiasm by parents, Millennials, organic shoppers and those working full time.
All these findings show that with quality beating price, and ample room for impulse purchases, the door is wide open for our industry to be creative and purposeful in the execution of cross-merchandising and effectively using recipes and information to help educate shoppers and drive sales, both now and in the future.
Food Marketing Institute is a trade association that advocates on behalf of the food retail industry. FMI’s U.S. members operate nearly 40,000 retail food stores and 25,000 pharmacies. Through programs in public affairs, food safety, research, education and industry relations, FMI offers resources and provides valuable benefits to more than 1,225 food retail and wholesale member companies in the United States and around the world.
Source: The Power of Produce 2015 — Shopper research by the Food Marketing Institute, made possible by Yerecic Label and implemented by 210 Analytics.