Fresh food central to retail differentiation, FMI report says

A new report from FMI says that fresh food departments are central to retail differentiation, driving significant consumer engagement and loyalty.

Retailers overwhelmingly cited fresh departments when asked about 2024 priorities, according to the 26-page report released at FMI’s Aug. 5-7 FreshForward event in San Diego.

“Fresh is a big driver in retailer differentiation,” the report said.

One hurdle to the fresh food department includes shrink, and the report said retailers reported a slight increase in fresh shrink over the past year. Unfilled managerial roles are also a concern, with seafood and dairy departments topping the list.

Investment is increasing in fresh, according to the report.

“Food retailers are actively looking to expand space for various fresh or perimeter departments in the next two years,” the report said, noting that some operators expect to increase their labor allocation in foodservice and specialty fresh (such as in-store meat or produce butchers and cheesemongers).

Meat and produce departments are the fresh leaders in sales per labor hour, the report said.

Fresh departments play a key role in online sales, with the report stating an average of 41% of food retail dollars in total online sales were generated in 2023 by fresh or perimeter departments.

Food retailers cater to shoppers' needs by expanding space allocation for fresh grab-and-go options, and nearly all food retailers offer local assortments throughout their stores, the report said.

Price is growing in importance among fresh consumers, influencing their decisions on where to shop for this category. For food retailers, promotions, price comparisons and channel-shifting are key areas of emphasis for shoppers, according to the report.

Topics addressed in the report include how consumer trends drive company strategies, technology and artificial intelligence, waste reduction, online fresh sales, food safety, in-store experiences and more.

The report said more than 40% of food retailers and nearly 70% of food suppliers are using AI for applications. Technology is helping to support a range of functions for fresh foods operations, including inventory and demand/production planning and foodservice ordering and delivery.

To enhance in-store shopping, retailers are giving more attention to foodservice, private brands and online fulfillment.

“Leaders are pursuing experimentation in store development and eyeing local sourcing opportunities,” the report said.