Because of the pandemic and the inflationary period that followed (and is still with us), the past five years have been volatile ones for all corners of the grocery store, fresh and center-store.

The performance of the fresh produce department, however, has been fairly steady, said Jonna Parker, principal and fresh foods team lead for Circana.

“Produce has always been a vital department the past five years. It’s had its ups and downs, but the growth and the losses haven’t been as great as in other departments. It’s been a point of consistent demand and performance.”

Thanks to the convulsions created by the pandemic and inflation, prices in most grocery departments are currently up more than 30% over where they were in 2019, Parker said.

Fresh produce, by contrast, is up just 18%.

“Produce has weathered inflation pretty well.”

Consumers are “very engaged” with fresh fruits and vegetables, driving robust demand that not only exceeds last year’s levels but also 2022, said Anne-Marie Roerink, principal of 210 Analytics.

 “That can’t be said of many departments. Only produce and meat are running ahead in volume sales over the latest 52 weeks in comparison to last year and the year before.”

And of those two departments, only produce is notching strong gains in both units and pounds. (For meat, consumers have shifted to larger pack sizes — pounds are up, but units down.)

Fruit at the forefront… 

Fruit has taken the lead in annual sales and growth, Roerink said.

“Fruit price inflation has been relatively mild over the past few years, certainly in comparison to total food and beverages. And several commodities are experiencing deflation.”

 Engagement with fruit, meanwhile, has been “spectacular,” she said, with unit and volume sales 

over the latest 52 weeks up against the year before, 

as well as the two and three years before that.

Fruit movement at retail has benefited from the greater number of shopping trips consumers are making, Roerink said. On those additional trips, people are making more impulse purchases of fruits.

“Chasing sales promotions combined with an effort to reduce food waste at home has consumers shop more often. That means they’re walking past the eye-catching and seasonal produce displays more often.”

…but veg holding its own

Vegetable demand is also strong, with continued dollar growth and unit and volume gains over the past two years, though a bit lower than those seen in fruit, Roerink said.

Tomatoes, cucumbers and peppers have all had “tremendously good” years, Parker said. A lot of that has been driven by the boom in snacking, and producers that can tailor their products to snackers, and retailers who know how to merchandise them, have a lot to gain.

Potatoes and onions have also performed very well in this inflationary era, Parker said.

In a recent video on budget dining that went viral, one of the main images was of a woman slicing potatoes.

“There’s a real value play in potatoes,” she said. “There’s a lot of consumer demand for great, classic stomach stuffers.”

Volume sales of onions are up, and it’s not just the traditional buyers of a big bag of yellows that accounts for it, Parker said. With more consumers now confident in the kitchen after COVID, they’re trying recipes that call for shallots, reds and other varieties.

Variety and value

A big part of produce’s success during COVID and inflation, Parker said, is due to the flexibility consumers feel it offers.

For instance, during the pandemic, if there was a certain vegetable a shopper needed for a recipe and their store didn’t have it, they typically didn’t have a problem with substituting another one for it.

“Maybe they didn’t have the exact thing you were looking for, but you could find a close cousin of it that left you feeling good,” Parker said.

Contrast that with an item like a certain brand and flavor of cereal. When it comes to things like that, we consumers have been “trained” to crave that very particular variety, Parker said. If it can’t be found on the shelf, consumers are less likely to sub in something else.

But the average American buys 18 different fresh produce items per year in their grocery store. That’s a lot of variety, she said, and it makes it easier to find substitutes.

There’s so much variety in the produce department, and most consumers are so open to exploring it, that they can also find great savings there — a huge boon in today’s high-price climate.

“Produce still an aisle where if you have a budget, you can be savvy and stay within it.”

It all adds up to this: produce, Parker said, is now the most frequently shopped fresh food department in grocery.

“We’ve seen dramatic growth in the number of trips that involve buying produce.”

That’s also meant steady volume growth, Parker said. While other departments that might be seeing sales jumps because of higher prices are losing volume, that’s not the case with produce.

“Produce is still seeing traditional volume growth.”

A “trip magnet”

While prices for fresh fruit and vegetables have increased a little bit, inflation has been far less than that of other food and beverage categories, especially center-store, Roerink said.

“Consumers are in a constant balancing act to measure their budget against putting meals on the table. That means price and promotions are important, and fresh produce has always led in the weekly circular, whether online or in print.”

Fresh produce, she added, is a “trip magnet.” As the cumulative impact of inflation lingers, produce’s power to attract primary and secondary shoppers to the store will be even more important.

All produce industry staples are doing well, as consumers try to avoid buyers’ remorse during inflationary times, Roerink said.

That said, younger consumers continue to want to try new things. One recent example from a trade show that stood our for Roerink as a good example of a new twist on a familiar theme was a dark purple tomato.

“It had a fantastic flavor but also a color that provides a completely different pop and visual on a salad or any other meal,” she said.

It was the kind of produce product that can “premiumize” a meal or salad made at home to give it more of a restaurant feel, she added. And as consumers are pulling back on restaurant spending yet again, many are looking to create a bit of a fancier meal every once in a while.

Beyond the overall higher numbers, there are ups and downs across commodity types, channels, value-added versus whole, organic and other factors, Roerink said, showing just how complex the marketplace remains, despite overall growth.

Over the past few years, for instance, traditional supermarkets have lost some ground in their share of total produce dollars. Supercenters, mass, club and other value-focused stores have picked up share, she said.

Size matters

Fixed weight, pre-packaged produce, meanwhile, continues to have a better-than-average performance.

Retailers have been reducing bulk sets, but the strength of fixed-weight is also driven by the growth in self-checkout and online sales, where packaged is easier to ring up as well as the channel shifts, Roerink said.

That said, it’s important for retailers to keep in mind that bulk displays bring important impulse power.

“There’s nothing like the visual beauty of produce, or the power of seasonal fruits and vegetables,” she said. “It’s important to find the right balance between bulk and pre-packaged operationally and as a sales tool.”

There’s been a little less focus on convenience-based solutions in the past year, both in produce and other parts of the store, Roerink said.

Value-added produce makes up about 16% of produce dollar sales, and year-on-year sales are down slightly, whereas no value-added dollar sales are up 3.9% over the past year.

“The same is true for units and volume,” Roerink said. “The below-average performance is certainly not due to lack of interest — life is as busy as it’s always been.”

Instead, inflation is the culprit. Value-added tends to be more expensive. In addition, she said, consumers oftentimes reference the limited shelf life and higher chances of waste with value-added.

“This means in-store callouts like ‘made fresh daily’ or ‘ultimate freshness’ are important, along with proper shelf rotations to not feed into this belief.”

Tweaking the marketing formula

While produce at retail is holding its own — and then some — there’s always room for improvement.

Marketing, Parker said, is one big example.

“(The category is) still pretty rudimentary when it comes to marketing.”

One trap produce can fall into is branding, she said. When mandarins and clementines started being branded as Halos and Cuties, many deduced that branding was the answer for produce in general.

But produce commodities aren’t like Coke and Pepsi. A Coke drinker may not stoop to drinking Pepsi, but the purchaser of one brand of berries won’t likely have the same reservations about buying another brand.

And when it comes to mandarins and clementines, it’s not primarily the brand that people buy. It’s the fact that those fruits are easy to peel. 

That said, produce also shouldn’t also be treated as just a commodity that you promote when volumes are big and are quiet about they’re not. And volume isn’t everything.

“We really need to break through from the ‘Stack ‘em high, watch ‘em fly’” philosophy of merchandising, Parker said.

Who is the target consumer? Why choose this over that? Those are questions CPG companies are great at answering those and other questions that drill down into consumer preferences, Parker said. Produce would be wise to follow their lead.

“The sea change is about understanding who is your target consumer today and who are you trying to get next.”

It’s not enough just to say that your fruit or vegetable produce is the “freshest,” or “tastes the best,” Parker said. Those are old messages, and too many of your competitors can make the exact same claim.

Frozen fun

One recent example of a stunning marketing success story in produce, Parker said, is grapes. The practice of rolling grapes in sugar and freezing them has gone viral, and grape sales are up as a result. One TikTok frozen grape video has 36 million views, driving 20% growth in category volumes.

"It really changes the taste experience," Parker said. "One of the biggest gaps between produce and CPG foods is that CPG companies really know what their point of difference is.”

Who’s to say that couldn’t work with other fresh fruits, added Roerink. “What if more people knew you can freeze, say, blueberries and use them over time so they can truly partake in the seasonal prices and promotions and benefit over time?”

Organic demand steady

Organic produce sales are holding strong, Roerink said. They still account for about 12% of sales, and financial pressure has not led to lower demand.

Organic produce is driving above-average gains in both unit and volume sales, she said. And the core organic consumer spends more on organic by choosing the claim in more commodities.

210 Analytics has not, however, seen growth in household penetration of organic produce purchase in the past few years. The category’s strength, Roerink said, is due in large part to who the organic produce shopper is. “Organic purchases skew toward higher income households, and while we’re seeing money-saving measures and other changes among those households, a lot of the current change is driven by lower-income households.” 

This article is an excerpt from the September 2024 issue of Supermarket Perimeter. You can read the entire Produce Power feature and more in the digital edition here.