CHICAGO — Apple marketers must defend their share of stomach against other commodities and pay close attention to new alternative retail formats to fully exploit consumer demand for apples.
That is the view of Steve Lutz, Wenatchee, Wash.-based senior vice president of insights innovation for Category Partners.
In a presentation spanning an hour at the U.S. Apple Association Outlook Conference on Aug. 19, Lutz talked about apple category performance during COVID-19 and what implications changing consumer habits have for apple marketers.
In viewing data from the past several years, Lutz said dollar stores are showing the biggest long-term and short-term expansion. In fact, Lutz said that in 2020 there were more dollar stores operating in the U.S. (34,215) than supermarkets (33,282).
From 2019 to 2020, the number of dollar stores in the U.S. expanded by 1,030 stores, while the number of supermarkets declined by 556, he said.
Dollar stores appeal to consumers who want to save money, he said.
“If we don’t think cost is a significant factor to a significant portion of population, we’re deluding ourselves,” he said. “I think it’s an industry we have to recognize that we need to serve all those customers.”
" ... as marketers, we have got to be thinking a little bit differently about how we sell our products."
Discount retailer Aldi also has added more than 1,200 stores from 2015-20, he said.
While supermarkets have been the traditional focus for produce sales, Lutz said that view may have to be adjusted.
“Consumers are buying food in a lot of places that are very, very different than they were just a few years ago,” he said, noted that increasing numbers of dollar stores have been investing in adding fresh produce departments.
“It doesn’t mean supermarkets aren’t important,” Lutz said. “But it suggests that, as marketers, we have got to be thinking a little bit differently about how we sell our products. We’ve got to be much more creative, innovative, and aggressive about identifying strategies and opportunities that we can be successful in — not just supermarkets but in these (alternative) formats that are cropping up.”
While online purchases of food and produce lag well below other categories of online purchases such as electronics and clothes, Lutz said apple marketers must make their offerings more accessible to online shoppers.
“If we don’t think cost is a significant factor to a significant portion of population, we’re deluding ourselves."
In terms of retail sales growth, Lutz said commodities like apples, bananas and grapes have been flat over the past few years, while categories such as salads, avocados and blueberries have shown strong growth.
Those trends, he said, reflect a “much more diverse shopping environment” consumers are experiencing.
“(Consumers) only have one mouth, but there’s a lot more products available,” he said.
The apple category is complex for retailers to manage because of the many varieties and seasonality issues that come into play.
Lutz discussed the approaches to market foundation varieties (galas, red delicious, golden delicious, granny smith, fuji, Pink Lady), traditional regional varieties (mcintosh) and branded varieties (20 or more niche premium varieties), and Honeycrisp, which he called a category of its very own.
While apple per capita consumption increased from 1970 to 2000, in the past 20 years it has shown a trend line pointing slightly lower.
Lutz said domestic demand-building apple promotions from the Washington Apple Commission ended about 2000, which took away more than $20 million per year in advertising for apple consumption.
He challenged apple marketers to think how they will build demand going forward.
“I think all of us in this room need to be thinking about that (per capita) trend line of where we’re going with our production and where we’re going with our new varieties,” he said, noting the importance of moving consumption higher in the years ahead to coincide with expected bigger U.S. apple crops.
Reasons to be optimistic include the fact that apples are the second leading category in the produce department, Lutz said, and retailers are keen to grow sales. The category offers consumers great variety and options to consumers, he said.
With more data tools available, Lutz said marketers now have the opportunity to better manage the complexity of the apple category to build sales.
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