Macro Trends Drive Produce Consumer Loyalty In The Face Of Rising Prices

By Kelli Beckel, Senior Marketing Manager, Nielsen Perishables Group

Price inflation is back in a big way, and this summer’s drought is setting the stage for further commodity costs. While the produce department has posted smaller price increases than some other fresh departments, its 3.4 percent increase during the 52 weeks ending June 30, 2012, is still significant. Although prices increased, the department also received less promotional support. The percentage of produce volume sold while on promotion declined 2.3 percentage points, and the average promotional price increased 5.9 percent. Each item in the Top 10 categories in the produce department showed declines in promotional volume, and all except bananas declined in the promotional lift. Fortunately, shoppers remained loyal to fresh produce, as volume sales remained steady (+0.4 percent).

While pricing is one consideration shaping the way consumers shop the department, macro trends are also playing a role in fruit and vegetable purchase decisions. The continued growth of private label products, greater preference for global products and shifts in everyday eating occasions are helping the produce department maintain sales in the face of rising prices. These growth drivers can be leveraged to draw in consumers even if prices continue their upward trend in the coming year.

The consumer preference for private label has remained strong this year, as lower price points remain attractive to consumers faced with economic constraints, and a rising emphasis on quality makes private label options preferable on multiple levels. Some private labels are even positioning an increasing number of items as “gourmet” or “specialty,” which has helped increase private label average retail prices. In the produce department, the average retail price of private label products increased nearly 2.8 percent, but this is still a smaller increase than the department’s price increase average across all products. Additionally, the average price of private label produce was 21 percent lower than the average price of branded products during the latest 52 weeks, a significant price differential for shoppers who are facing higher prices across the store.

Just as the availability of private label products is growing, so too is the availability and popularity of fruits and vegetables with global flavor profiles. Flavor preferences continue to evolve as more Americans seek out new cuisines and bold ethnic flavors. According to Nielsen’s State of the Hispanic Consumer: The Hispanic Market Imperative, Latinos will wield $1.5 trillion in buying power in 2015, or 50 percent growth over 2010’s $1 trillion. Their growing spending power is clear in the produce department, where items with Hispanic roots are increasing by double digits. Jicama and cactus leaves experienced dollar growth of 10.5 percent and 30.5 percent, respectively, while passion fruit increased sales 34.8 percent in the latest 52 weeks.

Some global products are even becoming mainstream, thanks in part to greater year-round availability and more attention in the foodservice sector. Avocados are the best example of this mainstreaming of global fare. Avocadoes now rank 17th in dollar sales among all produce categories, and they posted double-digit dollar (+10.3 percent) and volume (+13.3 percent) growth in the past year. Avocados are also benefiting from promotional activity, as the promotional volume and lift both increased — a trend only experienced by two other categories in the department.

It is evident that Americans are shifting their flavor preferences, but many are also shifting the time of day and quantity they’re eating. New eating occasions are forming around snacking and a renewed focus on breakfast. These trends are most evident in the deli department, but they reveal opportunities on which the fresh produce can capitalize. In the in-store deli, sales of prepared foods are growing in part because retailers are offering fresh quality product and the convenience factor associated with foodservice. Deli/prepared items such as deli snacks, sushi, and pizza each increased by double digits in the past year. Deli breakfast foods — items such as breakfast sandwiches, breakfast meals/combos, and quiche — grew sales by an impressive 24.2 percent.

While the produce department boasts the freshness factor that is helping to fuel deli prepared food’s success, creative merchandising and promotions may spur consumers to grab fruits and vegetables as part of their snacking and breakfast items. The department already offers a growing number of options for healthy fruit and vegetable snacks, but merchandising them in a central location can encourage shoppers to stock up or try new healthy snacking items. To generate thoughts of breakfast, cross-merchandising fresh fruits with cereals or fresh baked breakfast items can build incremental purchases.