PALM DESERT, Calif. — Daniel Bell, director of produce at Grocery Outlet, kicked off the retail panel he moderated at West Coast Produce Expo by asking the panel of industry professionals about the trends they’re seeing the first quarter of 2024.
Those panelists included David Dudley, senior category manager for Sprouts Farmers Market; Charchil Shah, senior product manager and business lead for Amazon Fresh Private Brands; and Shonna Williams, vice of produce and floral with Heritage Grocers Group.
Shah said he’s noticed a shift in consumers opting for lower-price items, like a different variety of apples, for example.
“If we lowered our sales price by just maybe 10-15 cents, we immediately see a customer shift in terms of increasing units towards that lower price,” he said. “Customers are becoming more and more price-sensitive and more and more mindful as to where they’re spending their dollars.”
Bell said a lack of education also makes retailers look like they’re price gouging when consumers don’t understand how the cost of farming has skyrocketed.
“If that doesn’t scare you, I think it really should,” he said. “We’re not educating the public on what goes into taking something from the farm to the table. We’re not educating the consumers that you’ve got freight increases, you got fertilizer increases, all these things that go into growing and farming the product and get it to the consumers.”
Williams said her company has also noticed a shift to more thrifty purchases. Dudley said one category that seems to buck the trend is organics and e-commerce.
“[Consumers are] price-sensitive but willing to pay more for the convenience of having the product delivered or gathered for you in the store where you can pick it up,” he said.
That notion of convenience has also changed in the last few years. Dudley said salads are down for Sprouts, but convenience vegetables are flat to slightly up, and convenience fruit is up.
It’s an entirely different story for Amazon, Shah said, noting an increase in salad kits, packaged greens and value-added fruits and vegetables for the last three to three-and-a-half years for the company. He said this is an interesting point, because value-added produce sells at a higher price point, so his company looks to find that sweet spot of price and demand.
“From a retailer’s perspective, it’s about how to price those products, because we don’t want to shoot up the prices yet provide the convenience and at the right price,” he said.
Dudley said Sprouts has noticed a shift toward frozen produce. To combat this, the company is highlighting the seasonality of produce and the benefits of eating fresh produce through POS signage and digital advertising. Williams said the company also focuses on key demographics with merchandising and digital offerings to attract those shoppers.
Shah said enticing shoppers comes down to price, quality, merchandising and education, but the most important element is to keep shoppers coming back to the store.
Other shifts included generational trends, such as an increase in e-commerce shopping by millennials and how social media drives produce purchases through viral recipes. Williams mentioned a trend with chicharrónes and guacamole.
“You really got to watch the social media presence out there,” she said. “We have to really just get out there to know your consumer. They like fun foods and to try new things. So, how can we get them to shop at our stores to purchase those items to make their new creative meals?”
Dudley expanded on his earlier comment that he’s noticed a shift toward e-commerce sales for millennials and younger generations. He said he sees great potential to educate consumers on the concept of “food is medicine” digitally.
Williams said QR codes could potentially help consumers understand the flavor profile of produce offerings and even recipes.
“We have to get it out there to market to the consumer to educate them, especially if there’s new varieties and things people don’t know about, sampling demos, etc.,” she said.
Bell said he probably opened a can of worms by asking the panel about sustainable packaging. Shah said Amazon is on the cusp of transitioning some produce to packaging that is sustainable or backyard compostable. Amazon has an initiative to be carbon neutral by 2050, which drives some of these changes.
“You’d be surprised, working closely with your partners and your packaging teams, that transitioning to sustainable packaging could be cheaper,” he said, noting that using packaging with less resin helps cut costs as resin prices continue to increase.
He said it seems like retailers are all waiting for the first big company to make the jump when instead the industry needs to work together on the solutions.
Williams said plastic packaging in the produce industry has helped with food safety and labor efficiency. She said with a call for banning plastic packaging, produce stands could look a lot more like a farmer’s market where produce teams have to package half-flats of strawberries, bag cherries or band celery.
“We made everything more labor-friendly, but what has that done to our costs?” she said. “You take it on the labor spend. You’ve taken on the packaging spent. We got to reduce plastic and all the packaging, especially here in California, and we’re going to need to go back to the old-school days.”
Williams said her company trialed a more eco-friendly produce bag in a store, and it didn’t pick up GS1 codes in self-checkout. Williams said the industry also needs to be more transparent about these mandates. She said customers need to understand that retailers do care about the planet, but also how these mandates will impact pricing, food safety and more.
Bell asked about the labor market for the panelists' companies. All said they struggle to find and keep good labor. Williams said she remembers attending a job fair at Stater Bros. Markets with a line wrapped around the store — and she had to know someone at the store to get a job. Now, Heritage Grocers offers signing bonuses to keep employees coming back.
“There’s plenty of instances where we train someone for two weeks, which is an investment on our end,” Dudley said. “And the third week, they don’t show up.”
Dudley said to combat this, Sprouts hosts a yearly Sprouts Con, an annual conference to help produce managers understand their role and understand the opportunities for the future.
In a Q&A portion of the session, an attendee asked the panel about promotions to keep customers coming back, Shah said many consumers now expect everything to have a promotion.
“There’s a promotional fatigue that’s happening with our consumers,” he said. “You have a Labor Day Sale, Black Friday. Our customers already know that there’s some other promotional discount going on all the time, every other week.”
Williams remarked on how through the pandemic, customers were interested in only buying the essentials and were less interested in promotions. And with a tougher market, she expects to see an uptick in promotions. Shah agrees.
“Over the last three to four months, we are seeing customers being more receptive to those coupons and promotional drivers,” he said.