S P E C I A L R E P O R T

®

FRESH FOODS SURVEY

2017To request the complete 2017 Fresh Foods Survey and data tables contact us at:

GUARDINGTHEPERIMETERGUARDINGTHE PERIMETERT

raditional food retailers face an onslaught of competitive pressure as they seek to aid consumers in their quest for fresh, clean and convenient food, said respondents to Supermarket News’ third-annual Fresh Foods Survey.

Nearly one-third (32%) of food retail-ers indicated that big-box stores such as Walmart are the fiercest competitors for supermarkets’ perimeter sales, followed by natural/organic retailers (25%), club

stores (14%), online retailers (10%), farmers’ markets/CSA (7%), convenience stores (3%), dollar stores (3%) and other competitors (6%) — with several mentioning rival discounters Aldi and Lidl in particular. Only 1% of retailers felt there was no competition to supermarkets’ perimeter sales.

One independent retailer offered this advice: “Don’t be afraid of the big guy down the street. You have your core customers. Use them as a base and find out what they want and then build from there. Word of mouth can often be the best type of advertising for these departments.”

Still, price is a big concern among retailers and was the most frequently cited — by 47% — when asked about the advantages that competitors have. Price was followed by selection (39%), convenience (31%), service (26%) and location (20%).

Pressure has also come in the form of commodity price de-flation with two-thirds of retailers agreeing that it has impacted retail prices and/or promotions in the perimeter.

Produce and meat — which retailers coincidentally ranked as their top signature departments — have been most affected by de-flation, retailers said, with many citing a negative impact to their bottom line.

“Cost deflation continues to erode profitabili-ty and therefore the ability of grocery companies to aggressively price against the competition,” said one retailer respondent. “Customers don’t consume more product simply because of lower prices.”

One also noted the difficulty of striking a bal-ance between pricing too low or too high.

“Competitive stores can be all over the board on pricing. It’s hard to know if what you’re doing is going to be competitive as well,” the respondent said.

One noted that its strategy of passing on sav-ings to customers might be helping to improve consumers’ value perception. “It’s leading to more sales and experimentation,” the respon-dent said.

Food retailers are shoring up their fresh food offerings with new product introductions, more specialty and space reallocationBY JULIE GALLAGHER

Which do you consider your signature department?

Produce

38%

Meat

30%

Deli/prepared foods

25%

Bakery 4%Floral 1% Seafood 1%

SOURCE: SUPERMARKET NEWS FRESH FOODS SURVEY 2017.

RESPONDENTS INCLUDED RETAILERS.

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HOW WE DID IT: SN’s third-annual Fresh Foods Survey was conducted online March 15-31. It was emailed to close to 40,000 Supermarket News subscribers and distributed by the National Grocers Association to its members. SN received 221 competed surveys, of which 27.6% were completed by manufacturers, 17.2% by chain food retailers, 15.8% by independent food retailers, 12.2% by food wholesalers, 8.6% by sales agencies and 18.6% by other respondents such as consultants.

To request the complete Survey and data tables contact us at:

Many food retailers are DEVOTING MORE SPACE to the various perimeter departments. Walmart accentuates fresh foods at its new Myrtle Beach, S.C., store with wider aisles and updated signage.

Despite these challenges, the majority of food retailers (69%) indicated that perimeter sales have increased in the last 12 months, with the average in-crease at nearly 4%.

Retailer respondents attributed the growth to a number of factors, such as enhanced natural, or-ganic, clean label and convenience-oriented offer-ings that came in response to consumer demand for nutritious foods that fit into their hectic life-styles.

Close to three-quarters of retailers (73%) project there will be an increase in perimeter sales in the coming year, with the average projection of a 5% increase.

Two-thirds of retailers (64%) endeavor to achieve that growth, in part, by switching up their perimeter assortment.

“We think we need to stay on top of what our cus-tomers are looking for. We do see a trend where they want to try something new, especially if they recog-nize the health and wellness benefits,” said a retailer respondent.

Among the specific strategies cited by respon-dents:

• “More natural, organic, meat/dairy/deli, morericed and spiraled vegetables.”

• “I’ll continue to drop the bottom [performing]20% quarterly until I find an equilibrium.”

• “More Hispanic fruits, vegetables, breads, meatsand cheeses.”

• “Offering more prepared, grab and go, fresher,clean label items.”

Space considerationsIn addition to experimenting with new products, retailers are reshuffling the space they dedicate to fresh departments.

“We’ve already reworked the produce depart-ment,” said one respondent. “Next is deli/bakery, then meat. We’re updating some equipment and add-ing in more ready-to-go ideas.”

Nearly three in five (59%) retailers’ prepared food departments are more spacious this year versus last.

And more space is be-ing dedicated to morethan half (55%) of re-spondents’ produce de-partments.

The majority of re-tailers (54%) said that when adding space for perimeter depart-ments, it came at the expense of center store, which seems to reflect a

cultural shift in eating behavior. “Consumers are moving towards fresh in a big

way; center store grocery space can be reduced to further support the growing food trends,” noted a retailer respondent.

One respondent suggested incorporating more perishable foods throughout the store versus segre-gating it to the perimeter.

“Customers want fresh, less processed food, not food in boxes,” said another respondent.

4% increase is the average perimeter sales change projection by retailers.

Compared with last year are you devoting more, less or the same space to these departments/categories?

KEY: MORE SAME LESS

PREPARED FOODS

59%40%

1%

BAKERY

35%

60%

4%

CHEESE

20%

80%

0%

MEAT/SEAFOOD

16%

83%

1%

PRODUCE

55%45%

0%

DELI

30%

66%

4%

FLORAL

19%

66%

15%

DAIRY

4%

93%

3%

SOURCE: SUPERMARKET NEWS FRESH FOODS SURVEY 2017. RESPONDENTS INCLUDED RETAILERS.

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2017freshfoodssurvey

To request the complete Survey and data tables contact us at: