Fresh produce, more than any other department — fresh or center-store — plays the biggest role in helping consumers decide which brick-and-mortar grocery store to shop.
If your department brings them in via their eyes and keeps them there by engaging their other senses and their minds, chances are you’ve got a successful store.
But retail fresh produce is at a crucial juncture in its history, said Bruce Peterson, president of Bentonville, Ark.-based Peterson Insights Inc. How it responds to this moment will play a huge role in determining whether it continues to enjoy its coveted status.
At the height of COVID, online shopping — including for fresh fruits and vegetables — soared. Will online produce sales continue to expand? That’s the million-dollar question retailers are facing, Peterson said.
Older shoppers will continue to buy their produce predominantly in brick-and-mortar sales, but there’s probably no changing younger consumers’ shift toward online.
“I think produce departments are very vulnerable,” Peterson said.
One reason is that, traditionally, buying fresh fruits and vegetables has always been a sensory experience. You see it, smell it, squeeze it and maybe even taste it before you buy it. How your senses react at point-of-sale is enormously important, and their numbers to prove it.
“About 80% of produce sales are made on impulse in the store,” Peterson said.
Online shopping, by contrast, is an intellectual experience. Another contrast: produce departments are designed to make people slow down and take their time picking out their fresh fruits and veggies. That’s the opposite, Peterson pointed out, of how most people shop online.
Brick-and-mortar produce departments are also facing serious labor-related problems. For starters, there’s the worker shortage that’s affecting so many industries worldwide right now. On top of that, the workers that grocery stores do have are increasingly being taken out of produce and other departments to focus on filling orders for customers taking the online route.
It all points to a retail grocery produce feature that could be two-tiered, Peterson said. On one tier, you have people buying their bananas, potatoes and other staples that don’t vary much online from Walmart or another relatively low-priced industry giant.
On the other tier, they’re supplementing those staple stockup orders with the occasional visit to a smaller, more boutique brick-and-mortar store for the items they still want to see, touch, smell and maybe taste before buying.
Those stores will be smaller and will invest in the staff necessary to help people make their produce-buying decisions. To buy a lot of produce effectively, you have to be knowledgeable, and consumers have always relied on educated on-site produce clerks and managers to fill their knowledge gaps where necessary.
For those stores caught in between, expect the produce departments to get smaller and the SKUs fewer, Peterson said. They’ll be more diverse, with more salad dressings, nuts and other products that have migrated from other departments. But don’t expect them to have 25 varieties of apples.
Meal kits: opportunities and challenges
Meal kits could become a huge opportunity for produce departments to successfully adapt in the new online world, Peterson said.
One huge barrier to that growth is the territorialism that often plagues departments. Every one wants to credit for the sale if it includes something from their department, which can make it hard to cross-merchandise from different departments — pulling disparate items together for a meal kit, for example.
“It’s why you don’t always see cabbage merchandised with corned beef for St. Patrick’s Day,” Peterson said, citing an extreme example of the lack of cooperation that can plague the perimeter.
“You have to have somebody who can look at things horizontally across the different departments.”
Private labels: getting the upper hand on brands
Look for brands to play a smaller role in the produce departments of the future, Peterson said.
Brands like Driscoll’s continue to have strong connections to quality, especially on raspberries, and regional brands like Andy Boy (in the Northeast) are still strong, but overall, brands aren’t nearly as powerful as they used to be, he said.
The number of private-label products in grocery stores has exploded in recent years, and produce has been no exception. Add to that inflation, and now consumers have even more reasons to opt for an alternative to more expensive branded products.
When Peterson ran the fresh produce program at Walmart, he bought bananas exclusively from Chiquita. And if Walmart’s bananas were the same price as those from another shipper at another retailer, they were considered a better value because of the Chiquita name.
That was from a period of time where retailers knew the produce shippers well enough, often personally, to know the difference an established consumer or shipper brand could make.
“When it’s just numbers on a balance sheet, you lose all of that,” he said.
That same level of brand importance no longer exists. Peterson himself is a frequent brick-and-mortar grocery shopper, and he may see bananas from Chiquita one day, Dole the next, One the next, followed by product from a brand he hadn’t even heard of.
American grocery stores, with the shift to private-label, are resembling European stores more and more, Peterson said. You need look no further than the success of Aldi and Trader Joe’s for proof.