Inflation, the sky-high cost of goods and the ever-changing retail landscape in America has triggered a seismic shift in the way consumers shop for produce — presenting both new opportunities and new challenges.
To learn how inflation is influencing purchase decisions and how retailers can leverage those insights to drive store visits, bigger basket rings and repeat purchase, The Packer recently sat down with Jonna Parker, Circana principal and fresh foods team lead.
“Shopping in a post-inflation world in America means more frequent and smaller trips,” Parker said. “On average, we make 10.5 more trips per year to the store than we did in 2019 for anything food and beverage — for groceries.”
Trip frequency is up, and shop size is down for two reasons, Parker says. One is the ubiquity and availability of fresh in a wide variety of store formats.
“Think about how different c-stores look now than they looked three years ago. Think about how much more Trader Joe's, Costco, Walmart — all stores [have expanded in fresh],” Parker said. Add to this the availability of fresh produce at every Starbucks, airport, hotel, online, etc. “All of that adds up to more frequent trips and therefore for retail, a more split ticket or dollar.”
More frequent trips equate to smaller trips.
“Consumers are now just buying what they need,” Parker said. “We're calling it ‘just-in-time shopping,' which means you don't overspend on things you don't eat.”
Fresh produce is particularly well positioned for this trend as shelf life has been a traditional barrier to purchase. If consumers only buy what they're going to eat immediately, it's no longer a factor in the purchase decision.
“What we've seen in our data is that there's less stock-up trips where people are walking every aisle and getting what they need for the week — especially among younger consumers,” Parker said.
Instead, Circana data points to shoppers making purchases for a specific meal or to replenish something they're out of, and perhaps picking up a few snacks while they're at the store.
“Produce is the most frequently purchased department of any fresh foods department now and it's enjoying increased sales,” Parker said. “Bakery can't claim that. Deli can't claim that. Produce is really benefiting from this new reality of increased consumer engagement — more trips and depth or share of baskets. The total spend is bigger in produce than in the total store. This new phenomenon is actually favoring produce naturally and that is a huge opportunity for the department.”
Parker points to an August report from Circana that revealed the top 20 fresh foods with the most engagement in summer, as consumers make smaller trips and buy more often. Eight of the top 10 and 15 of the top 20 were produce items. Salad/fresh lettuce, bananas, tomatoes and berries all made the top 10.
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What does the change in produce purchasing behavior mean for retailers?
“The merchandising concepts behind this new produce reality are infinitely different than the way we've marketed anything before,” Parker said.
Consider promotions for example. Rarely, if ever, are more than two of those top sellers in produce offered on promotion at the same time.
While some digital asset deals have started to offer shoppers $1 off a produce purchase or $1 off a bakery purchase, imagine the sales impact of doubling down by offering a $2 discount when you purchase two items from the produce department, Parker says.
“They're doing that in the health and beauty aisle and the laundry detergent aisle,” she said. “Those promotions have helped retailers stave off channel shifting because you're incenting someone to buy more while they're in the store — at your store — which is $1 more gained that you would have lost to somebody else if you didn't incent them to make a purchase.”
When it comes to the changing way consumers are shopping, “we should ride that wave versus doing the traditional trade planning where the onion guy only promotes onions and the tomato guy only ever thinks about tomatoes,” she said.
Produce volume sales are flat — mediocre results given today's heightened level of consumer engagement with fruits and vegetables, Parker says.
“The way we're shopping all points to a stronger produce department and stronger-than-average sales, and yet in total food and beverage, produce is underperforming on growth,” she said.
A variety of packaging and size formats also helps drive produce purchase by appealing to a multitude of households.
“Given the current trends, produce should be doing much better than we're doing,” Parker said. “The barrier is not consumer demand. I think the barrier is that we're doing what we've always done and getting where we've always gotten. We're still running promotional strategies that have become ridiculously outdated.”
Why isn't produce embracing digital?
When it comes to successfully reaching today's consumer and driving produce sales, digital is a powerful tool.
“Digital is so incredibly targetable,” Parker said. “You don't have to waste impressions or dollars. You can literally serve an ad to someone who has bought your product before directly to their phone.
“I firmly believe that is what's so exciting about this new reality,” she continued. “The reality is that 100% of American households buy fresh produce, and no one commodity, variety, brand or store commands 100% household penetration. So, in this new digital reality, now is the time to focus your marketing distribution sales strategy on the consumers you know will buy from you and stop wasting energy and effort on those that don't.”