By Rick Stein
Originally printed in the April 2022 issue of Produce Business.
Consumers have traditionally made buying decisions based on the look and feel of a particular piece of produce. Appearance is still important, but it isn’t everything — at least right now.
In an era marked by high inflation and still-shifting lifestyles, the value equation has come back to the forefront. According to the new 2022 Power of Produce report released by FMI, the Food Industry Association, and conducted by 210 Analytics, budgets and optimized usage are top of mind among consumers who buy produce across an increasingly broad range of channels.
How important is the wallet factor? Well, for the first time in recent memory, price outranked the previous top decision driver of appearance among shoppers. The 2022 Power of Produce reveals that 25% of consumers cited price as the No. 1 factor when choosing fresh produce, while appearance was listed by 19% of shoppers. Breaking it down more, 82% of consumers report that produce prices were somewhat or much higher during the fourth quarter of 2021, and a whopping 92% have made changes to accommodate for those price hikes by seeking out sales promotions and trying to extend or optimize shelf life.
The shuffling of price-based priorities is not surprising at a time when key inflation metrics have rocketed to levels not seen in decades. Within the category, total fresh produce prices rose 5.4% in 2021, with particularly higher inflation rates for melons, berries and apples. Add to that ongoing disruption and uncertainty on both a national and global scale, and you can see why shoppers are keeping a sharp eye on price.
Although price is a leading driver, that doesn’t mean it’s a total barrier for fresh produce or that it spells bad news for growers, suppliers and retailers. The fact is that consumers are still eating more meals at home, shopping more dynamically across retail formats and weighing other aspects of value when determining what to put in their carts.
One way to help price-conscious consumers fit more produce into their everyday diets is to make it easy for them to find and take advantage of promotions. According to the 2022 Power of Produce report, 40% of consumers react to higher prices by buying what’s on sale, and more than half (54%) say they check the produce sales specials at their primary store quite often. They are also sizing up the competition, with 37% reporting that they compare promotions across two or more retailers frequently or every time they buy fresh produce.
Grocers can ensure their customers find the most up-to-date prices by vigilantly maintaining signage and tags in the produce department, where consumers tend to rummage through displays and inadvertently knock around tags and signs. Having the latest details on promotional pricing is also crucial in digital platforms, as shoppers scroll for deals.
For the first time in recent memory, price outranked the previous top decision driver, appearance, among produce shoppers.
Even as customers keep their devices handy to browse online, retailers shouldn’t discount the traditional paper circular for sharing information on promotions and sales: The latest Power of Produce research affirms that 43% of shoppers — a majority of them baby boomer, Generation X and older millennial buyers — rely on the paper circular to find produce specials.
Another way to both attract and help consumers in the produce department is to be transparent and fill information voids on how people can get more value out of fresh fruits and vegetables. That’s important for growers and suppliers as well as food retailers who communicate with shoppers.
Next to buying what’s on sale, consumers reported that they react to high prices by focusing on shelf life. It would behoove produce brands and retailers to explain to shoppers the best way for them to store fruits and vegetables, so they can optimize shelf life and also cut down on food waste. This could be done digitally, via social media and online ordering sites and apps, or through a QR code on a package or at point of sale. In-store signage can be helpful in this effort; even something as simple as a chalkboard in the produce area can be used to provide tips on storage.
Many economists expect inflation to continue for the foreseeable future, another reason to shore up merchandising and promotional efforts and to continue to distinguish produce offerings that signal value, both on the basis of price and an enjoyable eating experience. Keeping tabs on what consumers want along with value — like locally sourced produce, convenience-oriented packaged produce and variety in flavor and format — can go a long way in sustaining produce sales while delivering sustenance to shoppers.
Rick Stein is vice president of fresh foods for FMI, based in Arlington, VA. You can get more insights on these and other factors contributing to the latest produce trends by visiting www.FMI.org/FreshFoods.
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How Will Retailers React To Inflationary Pressure?
By Jim Prevor, Editor-in-Chief
Most people alive never knew, or have forgotten, how high levels of inflation impact consumer behavior.
One impact is psychological. If one has always paid a set price for something, then a sudden leap may make that item seem overpriced or expensive. In real terms, this can be confusing, as inflation inherently means that money, the metric in which price is being expressed, is worth less. But the change in nominal price can be disconcerting and lead to behavioral change by consumers.
Another key thing to remember about inflation is that its actual impact varies. A working person may see prices climb, but wages are typically rising as well. In contrast, people living on a fixed income, say retirees without an inflation-indexed pension, may see real and dramatic decreases in what they are able to buy.
It is fascinating to see consumers suddenly reporting that it is price, not appearance, that will drive their produce purchasing decisions. This seems to be an extraordinary opportunity for creative merchandising and marketing at retail.
Yet, we confess that we are not certain many chains are up to the challenge. The problem is that simply going on ad or offering an in-store special is not enough. Buyers have to be given more flexibility. If the sweet spot in the market is a larger or smaller apple than is standard, will the buyer be empowered to make that move? Is the merchandising team ready to adjust layouts to accommodate the new bargain? Can marketing use new technology to instantly promote the win?
The same issues apply when taking advantage of looking at alternative varieties and different grades. Many vendors have told us that the buyers at Sprouts Farmers Market and customers at places such as the Hunts Point Market specialize in this, and are quite good at this kind of flexibility — but that most chains are simply not flexible enough to seize these opportunities on the procurement side and then offer great opportunities to their consumers.
The whole issue of inflation in produce is a bit of a quandary. Retail prices of produce items have risen more slowly than other items at the supermarket. The CEO of one of the biggest banana companies in the world told us that he is less concerned about retailers raising prices on bananas than about retailers being slow to do so. The bigger fear is not that consumers will avoid bananas, an incredible value even with a significant price rise; the fear is that retailers won’t be willing to pass on inflation-driven increases in the cost of production, and this will compress, or eliminate, margins.
One wonders how consumers, confronted with inflation in food costs, will think about online ordering. My son is a college student and buys his groceries via Instacart from Wegmans. When you go to the Wegmans site, you get this message about pricing:
Higher than in-store prices
We keep our prices consistently low, every day, so you can save on the items your family uses most. Our online prices remain about 15% above in-store prices. This includes our costs of shopping your order. There is also a $35 order minimum.
If food prices rise disproportionately — say because the war in Ukraine puts a squeeze on corn and wheat availability, which rolls through to cause higher prices on bread, cookies and many other products — one way to make up the difference is to cut back on luxuries such as food delivery. After all, it is not just the 15% above in-store prices that Wegman acknowledges, but most users also pay a gratuity to the driver. This varies, but even at just 5%, this means consumers can probably save 20% by doing the shopping themselves.
Buyers have to be given more flexibility. If the sweet spot in the market is a larger or smaller apple than is standard, will the buyer be empowered to make that move?
The consumer focus on shelf life that is reported as a result of financial stress makes sense, and education may help a bit. We suspect, though, that if consumers become more concerned about the shelf life of produce, there is likely to be increased interest in canned, dried and frozen fruits and vegetables. After all, fresh is inherently more vulnerable to Mom having to work an extra shift, Dad being called away on business, or a kid’s basketball game going into overtime. So if any of this is perceived to be a blow to the family budget, many prudent families will lean toward purchasing less of their produce in fresh form.
Another big fear, of course, is that the slow rebound of foodservice sales will be held up even further as consumers look to save money. Indeed, lifestyle changes expected post-pandemic may themselves be held back. Even if people might want to go into an office, the fact is that doing so often has commuter costs, restaurant costs, costs for babysitters or pet sitters — the social and networking benefits of being at work might well drive people to pay these prices — but if times are tough, money worth less than it used to be, wages not keeping up with the rise in prices, then the idea of hiring a babysitter is suddenly a lot less compelling.
The world will be what it is, but the question is whether modern produce retailers can be flexible enough to serve consumer needs when the need is to seize the advantage of opportunities, rather than consistently present the same things. There is reason for doubt.
