THE STATE OF FRESH: ARE FRESH FOODS REALLY STEALING SALES FROM NON-FRESH FOODS?

CONSUMER| 06-25-2015

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During the past four years, U.S. fresh food sales have increased 5%, along with consumer buzz and interest in eating and living well. In fact, according to a recent Nielsen Global Health and Wellness report, a significant portion of respondents interested in losing weight report doing so by eating more fresh foods and even using such foods as medicine.

With sales growth in fresh perimeter departments (meat, deli, produce, bakery, and seafood) surpassing that of center-store mainstays (including dry and frozen grocery), the retailer landscape is changing. However, some retailers and suppliers are misinterpreting consumers' enthusiasm for fresh as the reason behind soft sales in consumer packaged goods (CPG) products and other aisles across the store. Although fresh growth does have implications for the entire store, its relationship with the center store is often more complicated than simple rivals.

FRESH HELPS RETAILERS DIFFERENTIATE

Today's retailers can't afford to ignore fresh. With 99% of U.S. grocery shoppers buying fresh products, fresh perimeter aisles have become key places where grocers can establish their identities. Whether it’s sophisticated restaurant-style foodservice offerings in deli or a wide variety of fresh produce, retailers can use fresh to win consumers within an increasingly crowded retail market.

But retailers still need to be strategic in how they add fresh. While assortment is important, retailers must tie their offerings to consumer’s unique priorities.

FRESH STAYS FRESH WITH SHOPPERS

The recent strong growth in the fresh perimeter departments—particularly when compared to struggling center store departments—lends context, and hard numbers, to consumers' desires surrounding fresh foods.

 

Shopper purchase frequency and spending drove the recent success in fresh.–I In 2014, the average American household made more trips for produce and deli products and spent 3% more across fresh departments than in 2013. Meanwhile, during the same period, U.S. households decreased the number of trips for center store products by two or more trips, and their spending in the grocery, frozen and dairy departments remained stagnant.

But when we dive into the categories with the greatest growth and declines, it becomes clear how consumer habits are driving these changes.

In 2014, berries, packaged salad and deli prepared chicken had the largest dollar and volume velocity growth (dollars sold per $1 million in all commodity volume or ACV distribution) year-over-year. Each of these categories has evolved in various ways to stay relevant with consumer demands. Berries' health messages, easy snacking, quality ingredients and increased availability continue to drive its position as the No. 1 produce category. Packaged salad growth is propelled by creative kits and completes, which—similar to deli-prepared chicken—offer easy, fresh meal solutions.

Conversely, categories with the largest dollar and volume velocity declines came from the center of the store. However, that doesn't mean fresh is taking sales away these products. In fact, carbonated soft drinks, ready-to-eat cereal and ingredient sugar are far from direct substitutes for the fastest-growing fresh products. And by positioning soft drinks as a meal-companion to deli chicken and showcasing cereal products topped with fresh berries, retailers and manufacturers can actually leverage fresh success for their own benefit.    

BEYOND FRESH VERSUS CENTER

So, is fresh really “stealing” sales from center-store?

The impact of fresh growth on the total store is more complicated than the old “fresh vs. center” myth. Fresh’s gain doesn’t always equate to stagnant or declining sales of center-aisles counterparts.

For example: Vegetables. Fresh produce vegetables pulled in $20 billion in 2014, and grew 5% compared to the previous year, while canned and frozen veggies are declining slowly.

But a vegetable buyer is a vegetable buyer regardless of the aisle, as 88% of all shoppers purchase fresh, frozen and canned vegetables, creating tremendous opportunity for retailers and suppliers for partnerships and creative marketing and promotion strategies across aisles.

That’s not to say fresh never cannibalizes sales of CPG products. Products like frozen dinners and entrees are losing sales to fresh products like ham and ground beef.

More than ever before, shoppers don’t shop individual aisles, they shop for solutions or needs across the store. In 2014, 62% of trips to grocery, mass and club stores included items from both the fresh perimeter and center departments, making “fresh versus center” a tired storyline.

Fresh can be both friend and foe to CPG products, but the relationship is rarely that simple. Rather than focusing on the ‘fresh vs. center’ dynamic, retailers and manufacturers can use their understanding of how consumers shop and how various products can solve specific needs to produce a complete solutions for the customer.