Supermarkets’ Best Weapon Against E-tailers: Produce
Physical stores are sprucing up their fruit and vegetable offerings to drive traffic and keep Amazon at bay
Ahold’s new Bfresh stores bought branded green and wood cases to hold its produce, for a premium touch. PHOTO: BFRESH
Bernie Dave, a regional manager for Wal-Mart Stores Inc. near Detroit, starts his weekly store visits in the backrooms of the produce departments.
Mr. Dave checks the “crisping” stations where workers keep lettuce fresh longer by washing it, cutting off the browned ends and culling any crushed leaves. It is one of several upgrades Wal-Mart is making to its produce areas—improving lighting, training staff to better care for fruits and vegetables, and putting produce in bins that mimic wood grain and aim to give the section the feel of a farmers market.
“There has been a massive improvement on fresh from where we were at,” says Mr. Dave, who started at the company managing stores nine years ago.
While Wal-Mart and other retailers, including Ahold USA and Meijer Inc., are pouring money into ramping up online sales, the grocers are also buckling down on the basics of the produce department. That’s because high-quality fruits, vegetables and other fresh foods are emerging as a physical store’s best defense against growing competition fromAmazon.com
Online food and beverage sales are growing fast, up 20% since 2013, but still make up a tiny 0.16% of the $670 billion food and beverage market, according to Commerce Department figures. Only 4% of consumers said they purchased some produce through online grocers in the past year, a 2015 Nielsen survey found.Many customers decide where to shop based on the quality of the produce, and—for now—most shoppers want to pick their own ripe tomatoes or perfectly green heads of lettuce, say grocers and industry researchers. Shoppers who don’t buy groceries online most often cite the desire to pick their own produce as the reason, according to an online survey fromMorgan Stanley earlier this year.
Produce also is often part of “fill-in” trips, those moments a shopper dashes to the store for a last-minute ingredient and might not wait for an online order. Produce itself isn’t usually a big moneymaker, but it draws people to stores to buy higher-margin packaged food, apparel, electronics and other items—products customers increasingly are buying online. Even Amazon wants part of the valuable market. It plans to build small stores that sell perishable foods and allow shoppers to order shelf-stable items for same-day delivery, say people familiar with the matter.
Improving Wal-Mart’s fresh food is “a huge priority for us because it’s a big traffic driver,” says Steve Bratspies, chief merchandising officer for Wal-Mart U.S. in a March call with investors.
Ahold USA—the U.S.-based unit of Ahold Delhaize NV and owner of Stop & Shop, Giant and Peapod, an early online grocery-delivery company in the U.S.—is investing heavily to make its supermarket produce departments more appealing, says John Ruane, senior vice president of fresh for Ahold.
Over the past two years, Ahold moved seasonal products and easy meal additions like cut vegetables to the front of its stores to make shopping faster, Mr. Ruane says. Ahold now trains employees to ask “WIBI” (Would I Buy It?) when stocking, to weed out products that are past their peak. Ahold also is adding unusual items like yucca and dragon fruit, and store workers have stopped stacking produce into neat pyramids, a costly effort that also can damage produce, Mr. Ruane says.
Ahold has also created a new brand of store called Bfresh, a chain of smaller stores in cities meant to attract young, urban dwellers, who are “big Amazon customers,” says Paul Kneeland, lead fresh merchant for the new chain. In the two locations open so far, both in Massachusetts, produce gets more space than any other department and makes up the largest chunk of sales, Mr. Kneeland says.
Aesthetics are particularly important in the produce department because most purchases are impulsive, grocers say. “People go into the produce department with a list that says ‘fruits’ and ‘vegetables,’ versus specific products,” says Michael Castagnetto, director of fresh sourcing for Robinson Fresh, which is owned by C.H. Robinson, an Eden Prairie, Minn., logistics company that supplies produce and transports other goods to retailers including Wal-Mart.
Even the containers that hold produce out on the store floor are getting more attention. At Midwestern supercenter chain Meijer Inc., managers found metal carts on wheels perfect for moving seasonal fruit and vegetable displays to high traffic areas to grab attention and keep sales moving. But metal doesn’t have a “farmers market” feel, so the company is building its own versions with wooden exteriors that hide the metal frame, says Jamie Postell, director of produce for the company.One way to grab attention is with a “local” moniker. That has Robinson Fresh working with a wider variety of farmers, often a higher-cost way to source. “The global supply chain might be easier to execute than getting 20 items from 20 places around Illinois to the same distribution center,” Mr. Castagnetto says. To control costs, the company encourages farmers to supply crops when demand is high, and ensures full trucks by adding fresh juice, yogurt and other products to delivery routes.
“We are working on developing an ideal display,” Mr. Postell says. “It is somewhat of an art.”
Wal-Mart has long struggled to become known for the best produce, not just low prices on bananas, onions or other staples. Greg Foran, Wal-Mart’s U.S. CEO of two years, is pushing stores to change. During a surprise visit to a Wal-Mart in Dearborn, Mich., earlier this year, Mr. Foran spent “80% of his time in produce,” says Mohammed Saleh, co-manager of the store.
The executive walked workers through new produce requirements. To draw shoppers’ eyes, the department should always use ”color blocking,” alternating the color of fruits and vegetables on display. The “wet wall” now starts with leafy greens, not bagged salad, to convey freshness. Seasonal fruit should get prime placement in front to spur impulse buying.
“We want to be known for having fresh all the time,” says Mr. Saleh. “We have very little room for error.”
