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Balancing The Geographic Pendulum: Seminar Looks At Top Fresh Trends

IRI Balancing the Pendulum Fresh

by Treva Bennett/staff writer

Fresh is imperative to the industry. This was the message from IRI’s Sally Lyons Wyatt, EVP and practice leader, during the recent IRI/Food Marketing Institute (FMI) seminar, “Top Trends in Fresh: Balancing the Geographic Pendulum.”

“Competition and complexity are fiercer than ever, but fresh remains critical to differentiate for your store, differentiate for your consumer, to be able to grow and then win in this competitive environment that we live in,” Wyatt said.

Over the last year, fresh sales have slowed a bit, due primarily to broader competition and the complexity of the perimeter, she said. “Starting in 2017, while fresh is growing, the trajectory has not been nearly as strong as in the past few years,” Wyatt said. “In fact, in December, we saw center store departments outpace the sales growth of fresh for the first time.”

She said IRI selected the pendulum because, depending on the angle picked to look at trends, some channels look to be doing well while others are struggling. “We’re using the pendulum analogy so that we can find balance and identify growth today, tomorrow and in the future,” Wyatt said.

IRI’s mid-winter seminar focused on the consumer, while this one focused on regions and markets poised for growth, and also on how to overcome obstacles facing other regions, she said. Key learnings from the consumer-based seminar included: “2018 was a tipping point. Fresh sales grew only 1 percent in 2018 vs. 2017, three percentage points less than in 2014. Center store sales growth outperformed fresh foods for the first time in a decade. Consumers are key…What you’re going to find is it isn’t necessarily about wide distribution; it’s about being distributed perfectly.”

While fresh is increasing in importance, the interest in buying fresh at alternative channels also is up from past years. “Fresh is important to every consumer in the U.S. but yet for different needs and different demands,” Wyatt said. “The future is here, and it is disruptive.”

Millennials and Gen Z are the “most culturally diverse” generations ever, and understanding the compelling impact of those generational, multicultural and socio-economic lenses can lead to additional paths for growth, Wyatt said.

The narrative has changed

Jonna Parker, IRI principal with Fresh Center of Excellence, said IRI has been closely tracking the growth of fresh because theIRI balancing the pendulum fresh fastest growing categories narrative has changed. Total store sales now are nearly $800 billion, up $12 billion from the previous year. Of that, the fresh perimeter also is growing, adding about $2 billion or 23 percent of total store sales, Parker said. While that number basically has not changed since 2015, today fresh is only 14 percent of that $12 billion, whereas in 2015 it was at 31 percent of new dollars being added to total store. “So this pendulum swing of still growth, but not great growth, is really important context to look at,” Parker said. “And context is also important when we think about relative size. The perimeter we’ll discuss, especially across the country, is why people choose to shop where they’re shopping.”

For the fresh perimeter, IRI looked at the following departments: produce, bakery, deli meat and cheese, meat, deli prepared and seafood. Parker said while fresh departments are growing, they are being outpaced by center store departments such as beverages, frozen, general food, liquor, refrigerated and dairy.

“If you haven’t been down a frozen food aisle recently, whether it’s entrees or side dishes or ice cream and novelties, the products you’ll find there look and feel almost entirely different than they did 10 years ago and also entirely different than they were even four or three years ago,” she said. “Yet if you walk through most produce departments or meat departments of those same stores, you’re selling a lot of the same foods…That’s really the narrative we’re finding in this pendulum series. Other departments are innovating fast, resonating with consumer needs, changing what consumers can expect from them, and in fresh we’re still very much in demand but we’re still looking and feeling a lot like we did, even though we’ve changed as a society.”

Parker addressed the top eight categories that have incrementally gained sales in the perimeter within the last 52 weeks: pre-packaged refrigerated entrees, pre-packaged refrigerated meats, fresh bakery cakes, fresh berries, deli-prepared appetizers, pre-packaged refrigerated side dishes, fresh beef loin and deli-prepared entrees. “…health, indulgence and convenience are pervasive across these top growth categories,” Parker said.

A look at regions

By following how the pendulum shifts region by region, additional data and insights become available. IRI focused on some key strategies and tactics for balancing the geographic pendulum, Wyatt said, looking at how fresh consumers differ by region; which regions are successfully growing, which are struggling and why; where and how to connect with consumers who feel the growth; and what actions may be considered to grow in each region. Freshness and health and wellness are the top reasons consumers buy fresh, but the specifics of that vary regionally, Wyatt said.

In the Northeast, top factors are local—local farmers, benefiting the local area—along with convenience in portability and preparation. In the South, consumers are looking for deals in ads. However, deals won’t get them to switch from their favorites.

In the North Central, nearly six in 10 consumers will choose what and where they buy based on competitive pricing alone, double that of the South, Wyatt said. Price is critical in that region. The West “has a higher propensity toward taste exploration and transparency factors,” she said.

These differences in regions should be taken into account when thinking about how to entice and engage consumers. Overall perimeter growth for the 52 weeks ended March 24 was 0.9 percent in dollar sales across U.S. regions, Wyatt said. The Northeast and West regions actually are declining.

“There’s a lot of complexity that’s driving the disparity in growth performance,” she said.

Looking at average velocity, the Northeast and West have the highest sales velocity, “which points toward the fact that we must return the pendulum to growth in sales strength to capitalize on fresh in total store potential,” Wyatt said. “Now we’re not saying the other regions aren’t important, but it is very troubling to think that the two largest are indeed struggling for growth.”

Value is king

Wyatt went on to share information to help retailers begin brainstorming actions to take. One-third of all consumers across the country rated “value for price” as much more important than last year. However, she said, value means different things to different people.

IRI balancing the pendulum value is kingIn the Northeast, fresh and health are more important this year and “free-from” attributes are a bit less important. She encouraged retailers in the Northeast to talk about freshness and different types of offerings with benefits for health, especially from a caloric content. And to remember consumers are looking for local, portability and convenience.

In the South, taste is more important along with protein-rich foods. Less important this year are antibiotic- and pesticide-free foods. “Again, they are motivated by price and taste,” Wyatt said, encouraging retailers to think about that when thinking of promotions, targeting or store events.

In the North Central region, value-priced convenience was much more important this year than last year, she said. Less important was health and wellness “free-from” claims. She said price remains very important in the region, “therefore you’ve got to get it priced right and you want to offer some convenient offerings.”

In the West, it’s more price and value than other regions, along with taste and transparency.

“They’re looking for better price and the value is going to be around this taste and transparency,” Wyatt said.

Channel selection varies

In the Northeast, traditional grocery still rules, coming in at 10 percent higher than any in any other region. Traditional grocers are in a very competitive space and have to make sure to do what they can to attract consumers to their stores.

In the South, mass/supercenters are the primary fresh buying locations for 30 percent of consumers. If you’re not in mass/supercenters, look at what consumers are buying, get that assortment and communicate to them that you have what they’re looking for, she said, so they actually walk into your store and begin to buy fresh.

In the North Central region, six out of 10 consumers primarily buy fresh at supermarkets. In this region, there is the highest number of farmers markets. Wyatt suggested bringing the farmer’s market to consumers in your store.

In the West, the majority are going into supermarkets but there’s a higher incidence of club and specialty. “They’re most curious about alternative means such as delivery and meal kits,” Wyatt said. “So you’ve got to figure out that convenience.”

She said retailers have to figure out the best ways to attract consumers in both urban and rural areas and deliver and/or provide convenience in ways to outpace the competition.

The channel selection can be beyond traditional, Wyatt said. There are 8,600 farmers markets in the U.S., which is 5,000 more than in 1994. The highest concentration of farmers markets is in the North Central and East. “There is a huge amount of options out there for consumers when it comes to fresh, so that competition we talked about very early on, this is right in the heart of it,” she said.

Discount grocers also are impacting the North Central region and other areas for fresh foods.

“They have limited assortment, but Aldi draws 11 percent of their national fresh sales from the Great Lakes,” Wyatt said. “That’s 4 percent higher than any other region. Therefore, that limited assortment is working. It’s working because, again, they’re able to get the consumer in, offer it at a price that they’re looking for and they feel that it is delivering against their needs.”

In the Northeast, there is a higher concentration of bodegas, smaller independents and specialty stores. “That channel selection is broad, complex,” Wyatt said. “But I will tell you there is a chance most any retailer can win at fresh if you offer some differentiation and you are delivering against the needs of your shoppers and your consumers around your store.”

Part of that is understanding the shopper, especially when talking about diversity, she said. This means having different selections and understanding what those selections need to be.

Top categories

Parker addressed the fastest growing categories across U.S. regions, looking at what consumers say they want from fresh and also where they’re shopping, their attitudes and their cultural differences. She said of the fastest growing categories, the top six are the same in all regions: pre-packaged refrigerated entrees, pre-packaged refrigerated meats, fresh bakery cakes, deli prepared appetizers, fresh berries and deli prepared entrees. Parker said while they are seeing different growth rates by region and different ranks of retailer success within each region, they are all using the same categories to grow.

“So really the differentiation below this level is what’s critical,” she said. “It’s different tactics, different products, different distribution and different strategies, because if everybody is carrying more deli prepared appetizers how are you going to get the consumers to pick your store to choose this fast-growing food?”

She said finding that answer takes a little deeper digging. Not every region has the same sales philosophy or the same growth rates, “so truly there’s a pendulum of performance nationally by region,” Parker said. “We wanted to take a look at three regions that are different ends of that pendulum.”

The West has extremely high growth and high sales; the Northeast has more moderate sales and growth; and the Great Lakes region is truly struggling, she said.

In the West, this analysis excludes California. The West is a region that is not afraid to change, Parker said. Fresh is growing in these states because consumers are buying fresh products more often at supermarkets as well as in discount supercenters, super premium or health grocery stores. More consumers are buying fresh at brick and mortar stores in this region. Retailers aren’t afraid to change their assortments and dedicate more space to what’s growing, she said. Also, these are states where the population is rapidly changing, with younger people and different types of ethnicities moving in. “We’re seeing this really relate in high item count and very frequent assortment changes,” Parker said. This region also “gets it” when it comes to health options, varieties and flavors.IRI balancing the pendulum fresh 3 fresh segments

The Northeast falls in the middle. It is the region where supermarkets were born. The region also is a population story, with shoppers under 35, single or married without kids, and those over 65 having the highest rates. “The go-to-market strategy in the Northeast should be very much tailored not on the traditional American nuclear family but on these interesting pockets of single younger and single older consumers that are very prevalent in this region,” Parker said.

In this region, the supermarket is still king, although competition is coming in the form of discounters, super center and many store openings in different formats that plan to lead with fresh, she said, which will erode the core produce and meat commodities. Supermarkets can differentiate by having different types of offerings and wide assortments that smaller discounters can’t carry. “This is where selection experimentation and truly making fresh a destination (and) an anchor will come into play for the Northeast,” Parker said.

She said the other big takeaway is that this year is about solutions, not silos, and that fresh alone cannot win in the Northeast. Retailers must connect fresh to center store in order to build bigger baskets.

In the Great Lakes region, 2014-15 were years of rapid growth. Now, the Great Lakes is losing sales of fresh year over year. Much of that is due to alternative formats taking away from traditional grocery, Parker said. Walmart has outpaced many of its other regions in the Great Lakes area, as its differentiated offerings have done extremely well. There also have been dramatic increases in fresh at Aldi, dollar stores and Whole Foods. Supermarkets in the region are carrying a lot of items but the assortment is stale. Also, the region is very promotional dependent. “Experimentation, new ideas, changed assortment would truly transform the Great Lakes,” Parker said.

Digging deeper

Taking a look one level down, at below region, Parker compared specific markets—Phoenix in the West and Chicago in the Great Lakes. The markets are similar at face value, with diverse populations, fresh products available in a multitude of different channels and similar fresh and center store velocity per store. However, Phoenix is growing at 3 percent and Chicago is declining at 2 percent. Why?

Phoenix is carrying more items in critical departments, like meat, seafood and produce, Parker said. It’s also that the specific types of categories and items that Phoenix is carrying look very different than what Chicago stores are carrying. Two of the fastest growing categories “are doing gangbusters” in Phoenix, she said. Pre-packaged refrigerated entrees have 48 percent more items in Phoenix than seen in Chicago, leading to 58 percent higher average weekly sales. Similar numbers are seen in pre-packaged refrigerated meats.

Parker, who used to live in Chicago and now lives in Phoenix, said the western market includes quick change, new ideas and focus on solutions. There are a lot of store resets and excellent merchandising ideas; a lot of rapid change and experimentation.

‘Who’ matters for future fresh growth

Wyatt addressed three of the fresh segments that represent $5 billion over the next three years. High-income, multi-generational families represent 5 percent of U.S. households but make up 11 percent of the fresh and food and beverage dollars. Diverse, middle-class families represent 7 percent of U.S. households and 6 percent of fresh and food and beverage dollars. Small urban or small low-income households make up 4 percent of U.S. households and 2 percent of fresh and food and beverage dollars. But this segment is increasing its spend per week.

Wyatt said multi-generational households have many faces, such as Millennials moving back home or adult children caring for aging parents. Because they are multi-generational, they have different needs, she said. This segment is projected to grow 4 percent over the next four years and IRI is predicting it will maintain its current spending on fresh.

“Therefore, the opportunity that lies in front of you is $1.1 billion of potential incremental spending,” Wyatt said. “If we just maintain or even improve, this number could go up. So this is a group worthy of attracting because they are everywhere, and there’s some great opportunity from an incremental dollar growth potential.”

She suggested focusing on several points, such as value for price and health and wellness benefits, being sure to have the variety needed and communicate about their benefits. This segment uses online delivery and/or curbside pickup and these consumers enjoy natural, specialty and premium experiences. They are looking for a store that will be engaging and exciting to them. Also, they are planning their shopping trips online and using mobile applications.

IRI balancing the pendulum fresh key shoppersTo drive traffic in stores, Wyatt suggested developing in-store experiences, such as party-ready deli trays with pairing suggestions and an in-store cheese monger; advertising, including online recipe ideas for four-plus portions and mobile coupons to boost meat and deli baskets; and having fresh juice stations with a variety of choices, as this group loves fresh juices. For the all-around middle-class diverse families, Wyatt said retailers want to make sure they engage with this group, as they, too, are everywhere.

“They represent 3 percent annual projected population growth and we are predicting that it is 2 percent increase on fresh spending annually, which will equate to one of the largest segment incremental increases at $1.8 billion over the next three years; a great segment to go after,” she said.

To attract these consumers, she suggested offering convenience—prepared meals and organic offerings. Retailers should be sure to have click and collect and/or other delivery options. This segment is not necessarily influenced by price but is looking for more variety, more brands, in- or on-pack coupons, and they will go out of their way to find stores.

For this segment, Mother’s Day is its highest spend of any week during the year. Wyatt suggested retailers come up with a breakfast-in-bed promotion during that week and leverage their bakery department. Find some way to leverage the entire week, Wyatt said. And this can be done for other holidays or seasons where a retailer can leverage multiple departments in fresh and across the store to boost traffic and sales.

For the small, low-income household segment, Wyatt said tailoring programs to these households are vital in the South and the Great Lakes regions, especially. These households are going to increase their fresh spending, making them the second highest in the group at $1.7 billion of incremental sales over the next three years. To focus on what matters to this segment, Wyatt suggested retailers make sure they have the right assortment, from a fresh perspective. These households are looking for local products and discounts. Supermarkets should promote local and make sure to give them the store format and delivery innovations they are looking for. Also, give them ways to solve the meal, she said. These consumers have said they will go out of their way to find new stores or travel to their favorite, so become their favorite, even if they’re not right in the immediate vicinity, Wyatt said.

They use paper circulars and websites to plan where they shop, so retailers should talk up their promotions and use a variety of coupons—online, in-store, mobile. She also encouraged cross promotions with some of their more popular items, promoting beverage and meal solutions for different dayparts as well as different occasions.

Balancing the pendulum

As stores are changing rapidly, balancing the pendulum is about balancing and meeting new and different consumer needs, Parker said in closing. She gave some examples of what stores across the country are doing to promote new changes in their fresh departments. In Boston, a sign was located at the front of a grocery store detailing its new departments. In Ohio, a deli became very focused on solution-based needs, with an entertaining section, a snacking section, a sandwich section. And demonstrating that the concept of fresh is everywhere, she gave as an example a drug store with a small fresh produce section, sourced from the nearby chain grocery store they were partnering with. She also mentioned offering value-added meats that aren’t carried anywhere else; grab-and-go deli; and advertising the fact consumers can use their EBT for these products.

Retailers can’t think of fresh as the old commodity items they had before. “…embracing diversity and change is absolutely the way to win in fresh today and our growth regions are doing that,” she said. “Finding those opportunity consumers, thinking about today’s new ways to connect, that’s going to be the path to win in 2020 and beyond.”

About the author


Treva Bennett

After 32 years in the newspaper industry, she is enjoying her new career exploring the world of groceries at The Shelby Report.

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