VANCOUVER, BRITISH COLUMBIA — Following his State of the Produce Industry remarks during the Canadian Produce Marketing Association Conference and Trade Show, association President Ron Lemaire brought three U.S.-based produce buyers to talk about some of the challenges and opportunities in the retail space.
That included Daniel Bell, director of produce for Grocery Outlet; John Haycox, produce department buyer for Costco Wholesale; and David Dudley, senior sourcing manager for Sprouts Farmers Market.
Lemaire asked the trio about differentiation, noting Sprouts' extensive organic SKUs. Dudley said while Sprouts Farmers Market caters to keto, gluten-free and dairy-free shoppers, the produce department treads a fine line.
“Personally, I think we need to be very careful about alienating the majority of our shoppers, which still buy conventional,” he said. “It depends on the item and categories. Some are more abundantly organic, and others are not.”
Haycox said Costco typically carries only about 95 SKUs, so his focus is on offering the best varieties of produce to his customers.
“We’re bringing new [companies with] varieties to market that are obsessed with our scale, so we can validate the entire variety being planted in a larger amount,” he said.
Haycox shared how important the relationship Costco has with its customers. He said customers know when Costco launches a new category such as durian, lychee, dragon fruit, guava, passion fruit or coconut, and they trust Costco’s selections.
“A lot of consumers trust us, and they know that Costco has done their homework,” he said.
Consumer influence
Lemaire asked Haycox about how the consumer influences what stores stock. Haycox said he watches trends and reports to see how each produce SKU performs.
“It's long been known within our company that our members vote with their dollars,” he said. “We can see pretty quick if an item that we decided to bring in isn't right, or maybe it's because we've had things that have been ahead of their time and then we try it again a couple of years later and it works.”
Dudley said he’s seen the growth in the digital influence in produce marketing, from Sprouts’ app, social media, e-commerce, surveys and more.
Haycox said he’s seen the ups and downs of quick social media trends, such as one last year about eating dragon fruit.
“These trends fade away faster, but they also gain steam faster,” he said. “So, you have to be able to react and make pretty nimble decisions.”
Sustainability
Lemaire asked the group about the challenge of meeting consumers' sustainability demands and feasibly managing a produce department.
Haycox said he’s come to see sustainability as more of a journey. He acknowledged challenges in meeting the sometimes inconsistent regulations of municipalities and recycling programs, adding that there’s a lot of misinformation circulating about sustainability and recycling.
“Sustainability is a great topic for everybody, but it has to work from the bottom up,” he said, noting it has to work for the farmers, for the produce being packaged and for the retailers.
Haycox said he likes when companies approach Costco with new sustainable packing solutions, but it has to be something where the whole produce industry works to solve the challenge.
“It’s not a one-shot fix-all. It's going to take everybody working together across party lines and boundaries to make it precompetitive,” he said.
Sprouts customers definitely want less plastics, Dudley said, but he’s also seen how shoppers prefer products based on sales.
“We continue to see good movement, good results on clamshell items, putting a clamshell there for items only offered in bulk,” he said.
Dudley said he leans on supplier partners to start the conversation about eco-friendly packaging and a realistic timeline for the transition.
Inflation and product availability
Lemaire then asked the trio about inflation and the ongoing conversation in the general public about the cost of goods. Bell said the industry can work to improve efficiencies and play with pack sizes to make produce items more affordable to the customer, but the cost of labor, freight, goods, etc., continues to increase — and it’s made for tighter margins.
“We'd all love to sit up here and say, yeah, retail is going to go back down to the pre-inflation levels, but that's just not the real world,” he said. “It's not just a retailer-driven conversation, it's an across-the-board conversation.”
Lemaire also asked about supply chain stability and issues. Dudley talked about the challenges of meeting a growing demand for tropical produce with inconsistent supply. Haycox said there’s a change, too, in how produce businesses manage supply.
“I think everybody's been a lot more careful about what they're doing, and they're being a lot more planned and thoughtful about how they manage the market and the returns that they're getting,” he said. “You're seeing that all-sized companies are smarter [with] data and everything that's out there; they're realizing that there's these opportunities to be more profitable and more efficient, and they're using it to their advantage.”