A recent study caught my attention stating that over the past four years, produce sales at retail in California grew 14 percent. And over the same period, the average checkout receipt rose 22 percent in dollar amount, driven principally by higher-priced organic and processed items (including fresh juice). On the surface, these numbers would be received quite positively, especially at retail. Sales and margin are key matrices by which a buyer’s performance is measured. Each year, a buyer compares his/her performance to the same period the previous year.
While I’m certain this data is being received quite well, as I considered it, a thought occurred to me: if sales are up 14 percent and average receipt is up 22 percent, then unit volume (or tonnage) is down—as the increase in total tonnage is not keeping pace with the increase in sales. And if certain categories are increasing, i.e. organic, processed, and juice, then other categories are actually declining. So what’s taking the ‘hit’? Clearly, it must be in the conventionally produced fruit and vegetable space, or what we would historically call ‘fresh produce’—and this has both near- and long-term ramifications.
In the near term, this information suggests organic producers will continue to see good returns. Organically produced fruits and vegetables remain in a ‘demand-exceeds’ market, with buyers scrambling for limited supply. Not only does this bode well for market pricing, but it provides some degree of isolation from the logistics requirements many retailers are trying to impose on suppliers.
In many respects, buyers approach the organic industry in much the same way as they approach locally grown produce, in that they are willing to withhold certain requirements they might otherwise like to impose to secure the supply they need. This suggests there may be some variance in requirements, depending upon the product itself.
Regarding further processed items and fresh juice, these segments should continue to see growth. As more consumers demonstrate a comfort level with a packaged or juiced form of fruits and vegetables, these items lend themselves more readily to online shopping. Produce in a processed or juiced format provides a more consistent consumer experience, albeit one could argue they do not provide the same eating experience as their fresh counterparts.
A recent study caught my attention stating that over the past four years, produce sales at retail in California grew 14 percent. And over the same period, the average checkout receipt rose 22 percent in dollar amount, driven principally by higher-priced organic and processed items (including fresh juice). On the surface, these numbers would be received quite positively, especially at retail. Sales and margin are key matrices by which a buyer’s performance is measured. Each year, a buyer compares his/her performance to the same period the previous year.
While I’m certain this data is being received quite well, as I considered it, a thought occurred to me: if sales are up 14 percent and average receipt is up 22 percent, then unit volume (or tonnage) is down—as the increase in total tonnage is not keeping pace with the increase in sales. And if certain categories are increasing, i.e. organic, processed, and juice, then other categories are actually declining. So what’s taking the ‘hit’? Clearly, it must be in the conventionally produced fruit and vegetable space, or what we would historically call ‘fresh produce’—and this has both near- and long-term ramifications.
In the near term, this information suggests organic producers will continue to see good returns. Organically produced fruits and vegetables remain in a ‘demand-exceeds’ market, with buyers scrambling for limited supply. Not only does this bode well for market pricing, but it provides some degree of isolation from the logistics requirements many retailers are trying to impose on suppliers.
In many respects, buyers approach the organic industry in much the same way as they approach locally grown produce, in that they are willing to withhold certain requirements they might otherwise like to impose to secure the supply they need. This suggests there may be some variance in requirements, depending upon the product itself.
Regarding further processed items and fresh juice, these segments should continue to see growth. As more consumers demonstrate a comfort level with a packaged or juiced form of fruits and vegetables, these items lend themselves more readily to online shopping. Produce in a processed or juiced format provides a more consistent consumer experience, albeit one could argue they do not provide the same eating experience as their fresh counterparts.
All of this speaks to the evolution of how consumers purchase and eat fruits and vegetables. The very definition of what constitutes ‘fresh produce’ is changing quickly. To get a sense of this evolution, consider this: who takes the time to chop up and prepare a salad anymore? For those on the store operations side, would you trust any produce clerk to take a knife and trim head lettuce or romaine!?! And on the buy side, today’s produce buyer does not approach produce procurement as being significantly different than buying dry grocery—all of this is happening before our very eyes.
Does this mean the marketing efforts for organic, processed, and juice will make conventional produce departments go the way of vinyl records and phones with cords? Perhaps as buyers don’t know how to buy it, store clerks don’t know how to handle it, and more importantly, consumers are looking to acquire their produce in a different form with a different delivery model. At last year’s trade shows, I was continually struck by how little bulk produce was on display. Plenty of packaged products, further processed, and juice, but very little produce was displayed in a traditional way. This means smaller produce departments, fewer trained staff, and less differentiation between retailers.
None of this is ‘bad’ necessarily, but it does cause me to reflect with interest—where is the industry headed? And if the California study is reflective of the industry in general, it would be well worth giving thought to a decline in tonnage and how to support numeric growth.
