opportunities to build hass avocado retail sales · each year hass avocado board (hab) tracks and...

Opportunities to Build

Hass Avocado Retail Sales

Hass Avocado Board | 230 Commerce, Suite 190 | Irvine, CA 92602 www.hassavocadoboard/retail

2012 ANNUAL TRENDS REPORT

2

Key Opportunities & Suggestions 4

Retail Facts, Figures & Trends 5

Rising Retail Prices 5

Fruit & Vegetable Prices 5

Food Drought & Increased Food Prices In 2013 6

Retail Store Performance 6

Changing Retail 8

New Store Formats 8

Other Shopping Experiments to Watch 9

Retail Produce Performance 10

How Retailers Reach their Consumer Base 10

Nutrition, Locally Grown & Flavor Trends 12

Other Retail Trends & Highlights 15

Consumer Facts, Figures & Trends 17

The Economy 17

The Changing Consumer: Quick Thoughts 18

Technology at Retail 20

Food Safety 20

Sustainability 21

Targeting Consumer Demographics 22

Consumer Trends Projected for 2013 24

Appendix 25

Top Fruit Categories 25

Retail Top 25 25

Retail Expansion, Consolidation & Streamlining 26

TABLE OF CONTENTS

Hass Avocado Board | 2012 ANNUAL TRENDS REPORT

Each year Hass Avocado Board (HAB) tracks and monitors the retail trends, changes and challenges that impact the retail and produce industries. The year 2012 has seen some dynamic shifts in an already vibrant industry. Increasing food prices, store closings, consolidation, new store formats, and economic pressures are just the tip of the proverbial iceberg. Next add droughts, mega-storms, politics, and more, and it suggests that everyone needs to keep their collective “eyes” on retail. Time is a valuable asset – and in order to minimize your time reading, HAB has developed this report to provide you with key learnings in a quick and easily digestible format. The report will focus on retail with an emphasis on fresh produce.

While this report cannot highlight every issue facing retail today, it does recap the industry trends for 2012 and calls attention to factors that may impact retail grocery, and in turn, Hass avocado sales in the coming years.

Visit hassavocadoboard.com/retail to learn more about HAB’s retail research and data program and how it’s helping stakeholders increase category performance.

Emiliano EscobedoExecutive Director

PREFACE & OVERVIEW

3Hass Avocado Board | 2012 ANNUAL TRENDS REPORT


• With healthful eating and heightened consumer awareness on nutrition, avocados can be easily marketed and cross-promoted with other healthy food items.

• Consumers are mixing produce items with protein to stretch dollars to improve healthful eating. In fact, research indicates that when meat is on sale, it drives this consumer behavior and incremental sales.

• As the economy improves, consumer demand for new, interesting, innovative products will increase.

• There will be a continued demand for fresh fruits and vegetables to meet consumers’ desire for healthful options along with increased snacking opportunities—help retailers understand that avocados are an important healthful choice.

• Provide retailers with easy-to-understand information to tell the avocado success story, both in nutritional value and retail sales value. Build the category and increase consumption.

• Consider building out communication campaigns targeted to the aging Boomer population, Millennial Moms, Hispanic shoppers, and Cosmopolitan Kids with tremendous spending influence.

• Utilize digital technology to help consumers use their devices to find recipes and usage ideas online.

• With the addition of online shopping, the playing field is bigger, tougher and more demanding. It will be important for retailers to integrate online and in-store models of a multi-channel platform to increase market reach.

• Be an industry leader and consumer advocate regarding sustainability and food safety initiatives.

KEY OPPORTUNITIES & SUGGESTIONS1

4

With the addition of online shopping... It will be important for retailers to integrate online and in-store models of a multi-channel platform to increase market reach.

Rising Retail PricesLeft unchecked, rising prices could represent a threat to all produce commodities. Rising food prices reduce the spendable cash of the consumer, and many have already been hit hard in the past few years. With less disposable income, consumers will need to decide where best to spend their dollars at the grocery store and, in particular, in the produce department.

Fruit and Vegetable Prices Inflation from increased prices and transportation costs has impacted the supply chain all the way through to the retail shelf. According to the Bureau of Labor Statistics, prices for food purchased for at-home consumption increased 5.3% during 2012. Moreover, the USDA is projecting further pricing increases for fruits and vegetables into 2013 with estimated increase of 3-4% in 2013 (see Fig. 1). 1

Changes in Food Price Indexes, 2010 through 2013

RETAIL FACTS, FIGURES & TRENDS2

5

Fig. 1. Source: Bureau of Labor Statistics, 2012.

Inflation from increased prices and transportation costs has impacted the supply chain all the way through to the retail shelf.



Fusion Marketing_2

Typewritten Text

The 2012 Drought Impacts Food Pricing in 2013The severe drought of 2012 (considered by many to be the worst since the 1950s) has damaged corn and soybean crops in the Midwest and may lead to further food price inflation in 2013. While the full impact of the drought isn’t expected to affect food prices across all parts of the store until 2013, many grocers faced the 2012 summer with low supplies of locally grown crops. 2

• The United States is the world’s biggest producer in the corn market, and the drought could impact the world’s corn supply by 60 billion tons as a result. Food prices in the United States may have an impact on prices worldwide. 3

• Animal-based food prices may be hardest hit. The USDA projects that poultry products may increase 3-4% in 2013. Beef and veal may increase 4-5% from 2012 averages. Dairy products may increase to 4.5%. 4

• Higher prices in these key protein areas may reduce the consumers’ purchase of produce items.

Taking ActionSome companies and commodity groups have already started to combat these inflationary pressures with marketing strategies that emphasize the nutritional value of their produce. One example is the mushroom industry, which has been developing alternate uses for mushrooms. For example, mushrooms make a good substitute for a portion of the meat used in a hamburger, thus reducing the cost of protein while improving the overall nutritional value of the meal. Other commodities are introducing alternative uses for their produce such as replacing an ingredient in a dessert recipe or snack item with a produce item. For instance, avocados can be added to cake, ice cream and smoothie recipes for added texture and flavor. Keeping commodities, and their alternative uses, front of mind with the consumer can be important during a period of inflation.

Retail Store PerformanceConsumer shopping in multiple channels continues to grow and change.

• Supermarket sales increased 3.8% from March 2012 to March 2011 to reach $584.37 billion in retail sales. Growth was generated by two key factors: an increase in the number of stores and price inflation, as noted above. Total store count was up 1.2%, and per store sales increased 2.7%. 5

Hass Avocado Board | 2012 ANNUAL TRENDS REPORT 6

While the full impact of the drought isn’t expected to affect food prices across all parts of the store until 2013, many grocers faced the 2012 summer with low supplies of locally grown crops.

The U.S. is the world’s biggest producer in the corn market

The drought of2012 could impact

the world’s corn supply by

billiontons60


• Conventional format supermarkets continue to make up the largest portion of the sales pie, with 68.24% of total sales, compared to 65.65% last year. The continued encroachment of supercenters, limited-assortment stores and natural/gourmet food formats continues to produce positive gains. 6

Supermarket Sales by Format

There are nearly 40,000 stores with over $2 million in sales, yet the total number of outlets in the U.S. with some level of produce distribution during the year is 177,000 including small neighborhood stores, convenience stores, etc. 8

• Stores with over $2 million in sales: Traditional chain stores dominate independents in sales by store count, up slightly to 82.26% of the total count in 2011. Grocery chain operators had a net gain of 354 units (up 1.2%), compared to a gain of 66 units for independents (up 1.0%). Chains garnered an even stronger share of sales, capturing 94.3%, compared to 5.7% for independents. 9

Average Per Store Supermarket Performance Measures

Total Supermarkets ($2 Million or More)Supermarket – ConventionalSupercenter (Grocery and Mass Merch)Supermarket – Limited AssortmentSupermarket – Natural/Gourmet FoodsWarehouse GroceryMilitary Commissary

Sales Volume ($ Millions)Selling Area (Square Feet)Number of CheckoutsNumber of Full-Time Equivalent EmployeesAverage Weekly $ SalesDollars per StoreDollars per Square FeetDollars per CheckoutDollars per Full-Time Equivalent EmployeesDollars per Full-Time Equivalent Employee Hours

36,56926,8303,6452,9092,531 476 178

$15.9833,320

9.768

$307,306$9.22

$31,681$4,519

$112.98

Number of Stores

2011

Percent of Total

2010

Sales $ (Millions)

2009

Percent of Total

100%73.37 9.97 7.95 6.92 1.30 0.49

$15.5733,300

9.766

$299,373$8.99

$30,863$4,536

$113.00

584,369398,776136,218 14,259 26,357 3,817 4,942

$15.6433,250

9.667

$300,769$9.05

$31,330$4,489

$112.00

100%68.2423.31 2.44 4.51 0.65 0.85

Fig. 2. Source: Progressive Grocer Market Research, 2012 7

Fig. 3. Source: Progressive Grocer Market Research, 2012 10

Retail sales performance increased in 2011. Dollar sales per square foot (total store) increased to $9.22, an increase of +$0.23 from 2010 and +$0.17 from 2009. Sales per checkout grew $31,681 in 2011. This represents an increase of +$818 from 2010 and +$351 from 2009. 11


Changing RetailPrior to the recent recession, retail growth was often accomplished by adding square footage. Convenience stores, supercenters, and dollar stores expanded rapidly adding approximately 150 million square feet of grocery category space from 2009 to 2011. However, traditional grocery stores have not grown in terms of square footage (see Fig 3.), but are focusing on the premise that smaller may be smarter. Smaller store formats are used for a quick trip, fill-in function. This smaller store format is becoming more significant as the distinction between the stock-up trip and the fill-in function becomes less defined. Small store formats are viewed as having price or value, assortment or convenience. Differentiation is a significant factor. The more successful stores have two or more of these attributes. 12

• Since 2005, square footage of dollar stores and discount stores both grew by 23% and supercenters grew by 48%, while supermarkets have grown by 4%. 13

• Warehouse clubs, drug stores, dollar stores, ethnic food stores, and convenience stores have had an increase in patronage while traditional supermarkets, limited assortment stores, and discount stores have seen a decrease in visits. 14

• Target stores have expanded the food section at 1,100 of its 1,772 stores. 15

• Dollar General offers 20 SKUs of produce and has 50 feet of frozen and refrigerated space. 16

• Club stores are the top channel for stock-up trips; drug and dollar channels are luring customers away from club and grocery stores for stock-up and fill-in shopping trips. Consumers may shop several stores in one day. 17

More about New FormatsRetail chains are searching for new ways to attract shoppers. One method, mentioned above, is through new smaller store formats (neighborhood stores) designed to compete more directly with the local independent retailer. These smaller footprints are designed for a quick, limited assortment shopping experience. But these new formats are still a “work in progress” as evidenced by Tesco’s decision to end their “great American experiment.” Despite an investment of $1.6 billion in December 2012, Tesco put all of their U.S. outlets (Fresh & Easy stores) up for sale. 18 While these small format stores were never able to catch on with the American shopper, another small footprint store, Trader Joe’s, has been flourishing. Obviously, there is more to successful retailing than store size.

Smaller store formats are becoming more significant as the distinction between the stock-up trip and the fill-in function becomes less defined.

Ultimately, we believe that smaller formats will succeed as an aging population begins to alter their shopping behavior in ways that save time, effort and transportation costs.

These limited assortment stores, by definition, carry fewer products. Staying “front of mind” with retailers will be more important than ever to ensure that Hass avocados are on hand at these locations.

Other Shopping Experiments to Watch

KiosksTesco successfully experimented with virtual grocery shopping in South Korea. Consumers entering the subway were met with large interactive video screens loaded with images of grocery items. Consumers used their smart phones to snap QC codes for the items they wanted to purchase. The items are then delivered to their homes.

In the United States, Peapod developed a similar method using static billboards positioned in local train stations. Again, shoppers utilized their smart phones to place orders for delivery.

As these new limited-item formats and methods of shopping become more prevalent, it may become increasingly difficult to maintain a high level of presence for some commodities. For avocados, however, growing demand helps to give Hass avocados an edge over many other produce items in these new store formats.

Best Food Day AdsRetail promotional methods or tactics have changed. According to Grocery Headquarters, supermarket circular ads decreased in four of the five fresh departments, except the produce department, which increased retail ads by 2%. Additionally, promotional pricing increased at a faster rate than non-promotional pricing. This is especially true in produce where the promotional price increased by 7.1% compared to a non-promotional price of 3.4%. 19

• Volume is growing in products that appeal to the flavor and convenience needs of shoppers. Pre-cut and globally inspired fresh products, such as mangoes, specialty peppers and tropical fruits that appeal to food enthusiasts seeking unique flavors, are part of this growing trend. 20


Retail Produce Department Performance

• Year-to-year total department produce sales generated $52 billion versus $50 billion a year ago, which is a 3.6% gain. 21

• Retailers are adding more quality-focused, value-added, convenience-oriented products developed for immediate consumption and quick preparation. 22

• The top five concerns in produce departments are the summer drought; competition from Walmart and traditional supermarket rivals; wholesale prices; and profits. 23

• Between fruits and vegetables, fruits accounted for the most significant growth in 3Q produce sales with berries, cherries and avocados driving a 5.3% increase compared to the same period last year. 24

• The avocado category grew 14.5%, outpacing total fruit’s trend (12.4%) by 2.1 points for the 13 weeks ending 12/2/12 (see Fig 13., page 34).

How Retailers Reach their Consumer Base

SamplingSampling products at retail is once again increasing in importance with consumers. Sampling was, at one time, a key method of introducing consumers to new products. While these methods waned in more recent years, the proliferation of produce items at retail has created a need to return to sampling as a powerful way to initiate trial among consumers.

SignageSignage also appears to be making a comeback. For years, many traditional retail chains preferred a clean and clutter-less look in their stores, limiting the amount of in-store signage and messaging. On the flip side, an alternate method used by many independent stores and Hispanic chains is the strong use of signage to help create a shopping experience that is full of colorful point of sale materials carrying product messaging. This successful use of signage among the independents and small regional chains may impact the larger chains’ acceptance of adding POS back into their merchandising mix.

Based on a nationwide retailer survey from Progressive Grocer, retailers use the following methods to promote new products: Source: Progressive Grocer, August 2012 edition (see Fig 4). 25


Price Promotions

Sampling

Signage

On-Shelf Prmotions

In-Store Coupons

Suggestive Selling by Employees

Other In-Store Promotions

Digital Coupons

Mail Coupons

Other

Other Digital Promotions

Ranking of Categories by New Product Activity

78%

71%

69%

55%

35%

29%

22%

12%

8%

2%

2%

Fig. 4. Source: Progressive Grocer Media Market Research, 2012

Social MediaSocial Media is certainly a well-received medium. Consumers have adopted a number of social sites for their use on a daily basis including Facebook, Pinterest and many others. However, it appears that retailers overall have been less infatuated with social media. Fifty-one percent (51%) of retailers reported using social media to promote themselves and only 25% considered it to be an effective medium to entice consumers into trying new products. 26

We fully expect retailers to completely embrace social media as time progresses.


Percentage of Retailers using Social Media to Promote New Products

Retailers Rate the Effectiveness in Attracting Consumers to try New Products through Social Media

49%No

51%Yes

Fig. 5. Retailers were asked, “Do you use social media to promote new products?” Source: Progressive Grocer Media Market Research, 2012

Fig. 6. Retailers were asked, “How would you rate the effectiveness of social media in attracting consumers to try new products?” Source: Progressive Grocer Media Market Research, 2012

Not Verry Effective

Not At All Effective

Somewhat Effective

Very Effective

Extremely Effective

50%

25%

11%

5%

9%

Nutrition, Locally Grown and Flavor Trends

Nutrition, locally grown and flavor are three trends that continue to be the most prominent among consumers.

Retailers ranked the following new product attributes in importance to their appeal to consumers: 27


Nutrition, health and wellness have become a more integral part of the grocery industry. Fresh food has become the health “halo” for the grocery store. The perimeter of the store drives consumer perceptions of the entire store.

Whole Health / In-store NutritionistsWhole health (tying health throughout the entire store) was presented to the industry 15 years ago as a $42 billion opportunity. The $2.6 trillion in health care spending (Medicare & Medicaid and health and wellness at all levels) in the United States in 2010 is projected to grow to $4.6 trillion by 2020, according to figures from the Washington D.C.-based Office of the Actuary at the Centers for Medicare & Medicaid Services, and reported by health policy journal Health Affairs. 28

Fresh food has become the

health “halo” for the grocery store. The perimeter of the store drives consumer perceptions of the entire store.

Retailers Rate of importance for New Product Attributes and their Appeal to Consumers

Fig. 7. Retailers were asked, “How important are each of the following new product attributes in their appeal to consumers?” Source: Progressive Grocer Media Market Research, 2012

New Size

Organic

Ethnic

Sustainable Packaging

Familiar Brand Extension

New Flavor

Locally Sourced

Healthy

22%

31%

31%

39%

52%

53%

58%

65%

Many retailers are leveraging this interest to benefit both their shopper base and their own sales. As an example, Hy-Vee stores began by investing in dietitians in 2000. The chain, which has over 200 stores, makes dietitian services available at more than 85 of their stores. The services include counseling and health information, cooking classes, and demos throughout the various departments in the store. 29 Many other chains have added nutritional services, information and assistance to their stores. Several stores provide shoppers with healthful food ratings posted at point of purchase. These ratings are designed to help consumers make more nutritious purchasing choices.

Obesity / Health and Wellness Centers Food retailers are emphasizing the many products and services their stores offer that support a healthy lifestyle. Some retailers are opening health clinics. The in-store health clinics may be useful in addressing the obesity epidemic, which affects nearly a third of Americans and the related diabetes that could impact 75 million Americans in 10 years. 30 Supermarkets are in a position to enhance the value of clinics by leveraging their food connection as part of nutrition and weight counseling.

Food Allergies and IntoleranceMore than 75 million people have food allergies and intolerances, including peanuts, soy, dairy, eggs, fish and shellfish. Another 25 million U.S. consumers are affected by gluten intolerance. In less than five years, gluten-free has gone from a category sold in natural food stores to a broad-based offering sold in mainstream food stores. 31

• “Free From” claims may become more prevalent. Gluten-free is relatively mainstream, with lactose-free set to follow. Other emerging products will include meat-free lines, with technology allowing the development of innovative vegetarian foods, as well as fat-, sugar-, and salt-free alternatives.

• The current gluten-free category size is $3.3 billion and the “free-from” (foods eliminating ingredients) category represents $0.5 billion. The free-from business grew $63 million, a 25% increase in the past two years (from $210 million in 2008 to $365

million today). 32 • Due to the awareness of food allergies and intolerances, this

business could be $10 billion by 2020. 33

Produce companies and commodities may have an excellent opportunity to leverage their fresh fruits and vegetables as a part of a healthy lifestyle for consumers avoiding gluten and other food-based allergens.


In-store health clinics...could

impact 75 million diabetic Americans in 10 years.

25 million Americans are affected by gluten intolerance. Produce companies and commodities can leverage their fresh fruits and vegetables for those avoiding gluten and other food-based allergens.


Locally Grown A leading trend of fresh fruit and vegetables is locally grown or hyper-local produce offerings from foodservice and retailers. Many independent grocers are turning to locally sourced foods because of freshness and sustainability. Procuring products from nearby locations means less fuel in transportation costs and local community support for the area the store serves. Some smaller grocers are taking local sourcing to the next level by becoming suppliers themselves by growing herbs from their rooftop gardens. Local sourcing is also easier for Independents than for the big chains. Big chains are built around efficient supply chains, and small, local deliveries are often not efficient for that business model. 34

According to a survey by the National Restaurant Association, chefs believe fresh produce and nutrition will rank among the top restaurant trends for 2013. 35 Chefs are moving toward local sourcing because it has become top of mind for consumers. Restaurants tend to be more respected and trusted when they use local sources for fresh produce and other commodities.

Organic ProduceOrganics is the fastest-growing sector in agriculture and the high growth rate is expected to continue. Sales of organic products have increased annually by as much as 20% and represent a $31 billion sector, according to Certified Organic Farmers (CCOF). Fruit and vegetable sales, which represent 39.7% of total U.S. organic food value, have experienced the most growth, reaching almost $10.6 billion in 2010, up 11.8% from the previous year. Organic produce represents 12% of all fruit and vegetable sales. 36

Organic sales continue to increase and the term organic is still significant in generating sales. However, industry observers indicate that the marketplace is becoming too crowded with labels, claims and stories and the term organic is being used less often. 37

Organic avocado sales represented 2.23% of the total avocado category with $27,928,194 for 46 weeks ending 11/4/12, per Symphony IRI/FreshLook Marketing data (see Fig. 12, pg. 33).

Organics is the fastestgrowing sector in agriculture.

Sales of organic products have increased annually by as much as 20%

Other Retail Trends & HighlightsGrocery retailers are adopting store innovations designed to keep shoppers returning. They are turning categories into small departments, developing merchandise solutions, and re-thinking assortments on the shelf. For example, retailers are linking items that represent a shopper-needs state into solution sections such as cough and cold and well-baby or a salad section with packaged salads, croutons and dressing all merchandised together to make easier shopper decisions.

ArtisanLocal, sustainable, and artisan are today’s marketing terms that help sell produce. The word artisan, which used to mean handcrafted, is printed on many food items and is used in the foodservice industry. For example, Dominos’ Pizza promotes an Artisan Pizza. This use of the term in so many sections of the food industry may actually be diluting its meaning. Datamonitor has found more than 800 new food products dubbed “artisan” in the past five years. The consumer draw is the desire to break away from the over processed, mass-produced foods. 38

• “Natural” products have had solid growth over the years. However, due to lawsuits and regulatory pressure, the definition of “natural” and whether highly processed foods can use that description is under scrutiny. As a result, some companies are using “additive- /preservative-free positioning. The use of GM-free (Genetically-Modified) claims is also growing. 39


Local, sustainable, and artisan are today’s marketing terms that help sell produce.

SnackingSnacking is an ever increasing trend not just in the U.S. but worldwide. Fruit is near the top of this growing trend. Many fruits are convenient, on-the-go items, and are easily consumed with minimal preparation and mess. Since 2003, the frequency of snacking (annual snack meals per capita) increased by 15 snacks per person. Morning snacks are driving growth within the snack occasion, possibly due to a more healthful choice of items. Healthful snacks are among the fastest growing occasion. Snack selections such as fruit, yogurts and bars are growing the fastest. Healthful behaviors encourage more frequent snacking. Snacking accounts for one of every five consumption occasions. 40

• The $1.6 billion frozen snack market grew by 21.6% between 2006 and 2011. Part of this can be attributed to cash-strapped consumers switching from restaurant meals to more at-home entertaining and eating. 41

• Snacking accounts for 53% of all eating occasions. Adults snack as much as children do, and women snack more than men. 42

• The top snack foods consumed during the in-home/carried snack occasion in ranked order include: 43

1. Salty Snacks2. Fruit (fresh and dried fruit and nuts)3. Frozen Sweets4. Cookies5. Candy/Gum6. Crackers


Snacking accounts for 53% of all eating occassions.

Healthful snacks are among the fastest growing occassion.

The Economy The recent recession had an impact on retailers. In 2012, as the economy steadily improved, 42% of consumers remained convinced it would get worse. Consumers plan on discount shopping permanently, which represents an additional 19 million households adopting this “new normal” behavior. Those households that were more impacted by the recession report that they will continue seeking value once the economy improves. 44

• Shoppers are more focused on value • Consumers are looking for lower prices in general (61%) 45

• Consumers are looking for lower prices on specific items (53%) 46

• Other value-seeking habits include seeking discounts, buying private label brands, and acceptance of living with less. 47

However, due to the recession, consumers have shown a renewed interest in saving money by eating meals at home. This trend is helping push growth for produce items that support consumers’ desire to create restaurant-quality meals at home while placing a greater emphasis on fresh food.

Consumers are more engaged with fresh foods. This interest in food is reflected in better sales performance on items with unique and new flavors; products reflecting global tastes and interest; and information on food production methods, sourcing, and origin. The produce department represents about 10% of total store sales, and more than 40% of baskets include an item from the produce department. This underscores the power that fresh foods have in driving consumer trip behavior. 48

• USDA’s Economic Research Service (ERS) estimates total food expenditures for all food consumed in the United States was $1.14 trillion in 2011. Food purchased for home consumption accounted for $659.4 billion. 49

CONSUMER FACTS, FIGURES & TRENDS3


Due to the recession, consumers have shown a renewed interest in saving money by eating meals at home. This trend is helping push growth for produce items.

• U.S. consumers are spending a smaller percentage of their income on food. According to USDA, food expenditures by families and individuals as a share of disposable personal income were 9.8% in 2011, versus 11.5% in 1991. Food purchased for home consumption accounted for 5.7% of total U.S. disposable personal income in 2011. Food purchased away from home accounted for 4.1% of disposable personal income in 2011. 50

The Changing Consumer: Quick ThoughtsMobile phone apps, 24/7 access to the Internet, the proliferation of new and exciting products, and multiple sources and outlets to purchase products are all changing the way people shop. Consumers no longer shop in a straightforward, linear fashion. Shopping is now a 24-hour, seven-day-a-week activity. Shoppers today are busy and tech-connected. What once appeared to be a “direct purchase path” (see it, want it, buy it) has become a series of events managed by the consumer, not by retailers and manufacturers.

• Simplicity of the shopping experience remains a key factor affecting the shopper’s choice of stores.

• Grocery shoppers claim they are more likely to shop with coupons, search out discounts or lower prices at their primary store and alternative grocery stores, and to stock up on sales items. 51

• Top factors in 2012 that were important to a person’s selection of a primary store included: price, cleanliness, high quality produce, and a great selection of items (especially produce, meats, and frozen/prepared items). Consumers are also looking for sales or specials, high quality meat, accurate shelf tags, and easy to find “use” or “sell by” dates. 52

• Fresh and natural foods have broad appeal and are sought after by 40% of consumers. 53

• Shoppers are interested in nutrition labels, organic products and locally sourced products. Research from the University of Michigan indicates that food labels making organic, locally produced or fair trade claims can mislead consumers into thinking foods are healthier. The altered perceptions are attributed to the power of the health and wellness message. Health halos evoked by social ethics can promote higher consumption recommendations for poor-nutrient food. 54


Food culture is shifting with the rise in technology. Shoppers

are busy and often tech-connected.

Consumers are looking for:• Simplicity• Price• Cleanliness• Quality • Variety• Information

• The demand for organic produce is part of a more comprehensive trend in ethical retailing. Consumers want supermarkets to treat their employees fairly, to care about green store design, and stock products their customers can believe in. Research indicates that 59% of consumers want a connection to the farmer; 79% of consumers want environmentally friendly foods; and 75% want a reduction in pesticide use. 55

• Food culture is shifting. The average consumer’s knowledge of food has evolved to have greater meaning. Words such as fresh, natural, organic, local, and ethical all fall under the concept of “good food.” 56

• Consumers are looking for positive nutritional benefits such as high fiber content or whole grains over seeking out products with “reduced” negative attributes such as sugar or carbs. Women were more concerned about health overall, and younger consumers showed a preference for “emerging” nutritional attributes such as gluten-free, dairy-free and vegetarian or vegan. 57

All of these are excellent signs for the future growth of the produce industry.

Consumers tend to eat healthy food to: (multiple responses allowed) 58


Fig. 8. Multiple responses were allowed for the survey. Source: Progressive Grocer Media Market Research, 2012

Men Women

To stay well 61% 73% To live longer 49% 49%Because I feel better throughout the day 41% 51%To lose weight 26% 36%To maintain my weight 29% 30%

As an aid in treating illness/disease 21% 20%I don’t eat healthy food 13% 6%Other 3% 3%

How Consumers Choose Healthful Foods


Technology at RetailTechnology is changing the way consumers shop for groceries. Consumers find online shopping to be an easier way to find items, read reviews, compare prices, and research products. However, online purchases of fresh foods, produce, groceries and beverages are made by very few shoppers. Consumers who do purchase groceries online do so for the convenience, home delivery, and lower prices.

• Online purchases of grocery items typically include items such as health and beauty, health care, pet products, and home essentials. More than half of consumers purchase groceries online occasionally, but mostly in specific, non-food categories including books, music, electronics, clothing and footwear. 59

• 52% of consumers use technology while grocery shopping. 60

Shoppers use technology most often to obtain lower prices, research products and make lists.

• 32% use online coupons 61

• 31% use mobile technology for tasks such as making shopping lists, finding recipes, or researching products 62

• 23% check prices at multiple stores online before they go grocery shopping 63

• 82% of shoppers are using more online coupons in 2012 than 2011 64

• 41% of shoppers use coupons on most shopping trips 65

•Supermarket News issued a report citing top categories where consumers are most interested in finding coupons, coupon codes and deals. Groceries were the top coupon requested at 90% (see Fig. 9) 66

• Retailers are expanding their outreach with customers by linking social network data to customer loyalty programs, primarily revolving around fuel discounts. Gas prices have a direct impact on retail spending so fuel discount programs are expected to continue to secure loyalty in a meaningful way. 67

Food Safety Confidence in food safety has grown from 2007 when it was at its lowest. Consumers are moderately confident in the safety of produce, meat and poultry items; however, confidence is less than it was in 2011. Consumers see grocery stores as the least likely place for food safety problems to originate. According to Food Marketing Institute’s U.S. Grocery Shopper Trends report, more than 90% of shoppers “strongly” or “somewhat” agree with the statement that they trust their grocery stores to ensure the food they eat is safe. 68 More than

Groceries Top Coupon Quest

Fig. 9. Source: Supermarket News, Coupon Use Shows Volatility, 12/10/12

Groceries

Dining Out

Clothing

Cosmetic/Beauty Products

Pet Items/Services

Entertainment/Activities

90%

49%

34%

29%

18%

16%


half of shoppers named food processing and manufacturing to be where the food safety breaches occur. 69

• According to the NPD Group, during the period from January through August 2012, 60% of U.S. consumers were “somewhat” or “slightly” concerned about the food supply; 25% were “extremely” or “very” concerned; and 15% were not concerned at all. 70

• Foods produced or grown in the United States and Canada have thehighestconsumerconfidenceat97%and93%,respectively.Foods produced or grown in Africa and China have the lowest consumerconfidenceat34%and33%,respectively.71

• Contaminatedfoodmakes48millionAmericanssickeveryyearand costs over $77 billion in aggregated economic costs. 72

• 2012 has had nearly twice as many illnesses due to recalls as 2011, with recalls of cantaloupes and hundreds of thousands of jarsofpeanutbutter.73

• Consumersdemonstratealevelofsympatheticcategoryavoidance. For example, the salmonella outbreak in cantaloupes in 2011 caused some consumers to avoid honeydew and watermelon, and to reduce or avoid purchases of all three of these melons for up to 12 months. 74

Sustainability A product’s sustainability impacts shopping decisions including product and retailer choice. Some consumers consider retailers’ corporatesustainabilitypracticeswhendecidingonpurchasinganitem from them.

• Foodappeal,health,wellness,sustainability,andsocialjusticeareissuesinfluencingconsumerstothinkmorecriticallyaboutfoodvalues—the quality of their food, where it comes from, how it’s produced and what it’s really worth. 75

• Fewerplasticgroceryshoppingbagsareenteringthewastestream. 76

• Krogerpublisheditsfirstsustainabilityreportfiveyearsago.Sincethen,publicawarenessofgreentechnology,wastereductionandenergyconservationhasincreased.Krogerhasreducedoverallenergyconsumptionby30%since2000;haskept159millionadditionalplasticbagsfromenteringthecommunity;hasimprovedfleetefficiencyby8%;andhaseliminated22millionpounds in solid waste. 77

• Consumerswanthelpfromretailerstofindandchooseeco-friendlygroceryproductsthatareconvenient,affordableandpracticalfortheirlifestyles.78

A product’s sustainability impacts consumer shopping decisions including products and retailer choice.

Consumers want help from retailers tofindandchooseeco-friendly products!

Contaminated food makes 48millionAmerican’s sick every year and costs over $77 billion in aggregated economic costs.


• Most shoppers believe a healthier planet means a “healthier me.” Seventy-six percent (76%) of grocery shoppers expect that better personal health is a big benefit of an eco-friendly lifestyle. 79

• Consumers consider the following grocery chains to be the most eco-friendly: Whole Foods (81%); Trader Joe’s (74%); Wegmans (65%); Publix (51%); and Harris Teeter (50%). 80

• The top three eco-actions for shoppers are: to limit the amount of garbage their household produces (67%); to choose foods or beverages that are packaged responsibly (65%); to use less plastic (62%). 81

Targeting Consumer Demographics

Baby BoomersBaby Boomers (born between 1946 and 1964) share a similar affinity for products that help them stay in good health. At nearly 80 million strong, this generation is one of the most influential generations of all times. It is estimated that 10,000 people will turn 65 every day for the next 20 years. 82

• Overall, the boomer generation is huge, wealthy and known for its individuality and diversity.

• At a macro level, boomers spend similarly on private label goods versus the average shopper, yet the drug and dollar stores are winning a disproportionate share of private label spending among this group. 83

• Spending on health care and produce increases with age, influenced by an increasing concern with a proactive approach to healthy living. Eighty-seven percent (87%) of consumers over the age of 65 are trying to eat healthier food. 84

Hispanic Shoppers The Hispanic population now numbers approximately 50.5 million. The Hispanic population increased from 35.3 million in 2000 when this group made up 13% of the population according to the U.S. Census. By 2015, it is projected that total Hispanic spending will hit $1.5 trillion, up from roughly $978 billion in 2009 according to the Selig Center for Economic Growth. 85 On average, Hispanics spend $300 more per year on groceries than non-Hispanics, according to the Bureau of Labor Statistics’ Consumer Expenditure Survey. They allocate the most money for meat, followed by dairy, fruit, vegetables, poultry, and eggs. 86

Baby Boomers• 80 million strong• Wealthy• Diverse

Hispanic Shoppers• 35.3 million

strong• Spend the most

on meat• Shop at mass

merchandisers

Millennial Moms• 82.5 million

strong• $2.4 trillion in

spending• Heavy online

and social media users

Cosmopolitan Kids• $215 billion in

spending• sophisticated

shoppers• Tech savvy


• Both Hispanics and non-Hispanics are equally likely to shop at supermarkets, while Hispanic primary grocery shoppers are more likely than non-Hispanics to shop at mass merchandisers. 87

• Supermarkets offer a variety of ethnic foods and will likely expand their selection of foods that appeals to the Hispanic consumer in light of the expected increase in the Hispanic population over the coming years. 88

• Hispanics are more likely to be responsive to in-store announcements compared to non-Hispanics. 89

Millennial Moms Millennials (born between 1977 and 1996) are starting to raise families. In fact, 68% of all births are to Millennial Moms according to The Parents Network. Today’s “mom market” is made up of 82.5 million mothers and represents $2.4 trillion in spending power. Traditional marketing efforts are giving way to the digital age, as moms’ time is harder to come by. This group doesn’t clip coupons or check the local ads for what’s on sale. This group can be reached through Facebook, Twitter and Pinterest with integrated messaging between them. Pinterest is the new popular social platform offering quick visual resources. Retailers and suppliers can create boards for products, weekly ads and recipes, which can then be followed or re-pinned to share with followers. Additionally, 18.3 million moms read blogs every month. 90

Cosmopolitan KidsAccording to the Division of Nutritional Sciences at Cornell University, Cosmopolitan Kids (the new generation of kids that are more sophisticated than previous generations) have tremendous purchasing influence. Their research indicates that three- to five-year olds have an annual purchasing influence of $15 billion; six- to eight-year olds influence $45 billion in spending; nine- to 11-year olds influence $65 billion in spending; and 15- to 17-year olds influence an amazing $90 billion in purchases.91 Kids spend seven hours a day in the e-world and are the most sophisticated consumer. Supermarkets are using mobile apps, website pages, QR codes and in-store promotions to get kids and their parents involved with fresh produce and to build relationships with their youngest consumers now.


• Some retailers (Whole Foods) offer Kids’ Club sections to their website with a range of events for kids that involve produce and healthful eating, as well as story time, tours and classes. Additionally, kid-themed birthday parties and specialized “Kids Platters” offering such selections as Honey and Banana Roll-Ups, Peanut Butter and Fruit Roll-Ups, and Fruit and Nut Rollups are on the rise. 92

• Today’s kids are more sophisticated than previous generations because they are media- and tech-savvy. They travel, go out to dinner more often than ever before, take cooking classes, and host catered parties. 93

Consumer Trends Projected for 2013

Emerging trends expected to impact the food market through 2013 and beyond include:

• Fruits used with savory flavors will be incorporated into appetizers, soups and meat dishes. 94

• Chefs will create better-for-you food that actually tastes good by exchanging butter and bacon for broth and beets. 95

• Vegetables will star as the main dish rather than just a side or salad dish. Vegetable dishes will cater to vegetarians, vegans, flexitarians, foodies, and nutritious-conscious consumers. Beverages will also be infused with vegetables such as celery juice cocktails. 96

• More and more restaurants will offer all-inclusive menus and services to accommodate vegetarians, vegans, gluten free and wheat free diners, eco-conscious diners and children. 97

• A greater emphasis will be placed on the aging population driven by a rising consumer understanding of the role of a healthful diet. Established medical brands may enter into mainstream aisles as well as the promotion of nutrients in anti-aging products. 98

• The continuing emphasis on local and seasonal foods will lead toward a local, seasonal and more distinctive regional style of cooking. 99

• Consumers will continue to use mobile technology when grocery shopping to make shopping lists, find recipes or research products.100

• The top four menu trends from the National Restaurant Association are projected to be: (1) locally sourced meats and seafood, (2) healthful kids’ meals, (3) environmental sustainability as a culinary theme, and (4) children’s nutrition as a culinary trend.101

2013

Vegetableswill star as the main

dish rather than just

a side or salad

dish!


APPENDIXRetail Produce Department PerformanceApples took the number one position as the top fruit category for the 13 weeks ending 12/2/12 based on total $ sales. Avocados held the number one placement in pounds versus a year ago. Overall, avocados placed sixth out of the top 10 fruit categories.

Top Fruit Categories

Retail Top 25For the first time ever, all 75 companies on Supermarket News’ list of the top 75 food retailers in North America achieved annual sales in excess of $1 billion. Industry observers attributed the increases this year primarily to the impact of inflation. 102 The top 25 list of retailers:

1. Walmart Stores2. Kroger Stores3. Costco Wholesale Corporation4. Target Corporation5. Safeway Stores6. Supervalu Stores7. Loblaw Cos.8. Publix Super Markets9. Ahold USA

10. C&S Wholesale Grocers11. Delhaize America 12. 7-11 Stores13. H-E-B Stores14. Sobeys Stores15. Dollar General Corporation16. Meijer Inc.

123456789

APPLESGRAPESBERRIESBANANASMELONSAVOCADOSORANGESTANGERINESPEARSTOTAL FRUIT

16.1%14.2%20.7%

3.4%15.5%14.5%13.3%

14%4.3%

12.4%

CategoryRankPoundsDollars

Percent Change vs. Year Ago

TOP FRUIT CATEGORIES(Ranked by $ Sales)

1.5%2.5%

16.7%5.3%6.7%

30.7%7.2%

10.5%-0.5% 6.0%

Fig. 10. Source: SymphonyIRI/FreshLook Marketing, 13 weeks ending 12/2/2012


17. Wakefern Food Corporation18. BJ’s Wholesale Club19. Metro Inc.20. Whole Foods Market21. Giant Eagle Stores22. Trader Joe’s Co.23. Family Dollar Stores24. Associated Wholesale Grocers 25. Aldi Stores

Retail Expansion, Consolidation and StreamliningOpenings 103

• 99 Cents Only – 28 stores opened • Costco – 10 stores opened • Family Dollar – 500 stores opened • Walmart– 100 stores opened• Walmart Neighborhood Markets – 8 stores opened • Walmart Supercenter – 135 stores opened• Walgreens- 198 stores opened

Closings 104

• Family Dollar – 100 stores closed • Food Lion -113 stores closed • Genuardi’s – sold 16 of their stores to Giant, closed several stores, and only has 4 stores left under their

Retailer Banner• Marsh Supermarkets – 3 stores closed • SuperValu (Albertson’s / ACME / Save-A-Lot) – 60 stores closed • Pathmark, A&P, Superfresh & Waldbaums closed a combined 14 stores which took place in NJ, NY, PA

and CT

Acquisitions105

• Whole Foods will be taking over the lease at Foodmaster’s Charlestown, MA location along with five other locations in the Boston area.

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2 Chamil, D. (2012, October). Shaking the Tree. Retrieved October 26, 2012, from Progressive Grocer: http://www.pro-gressivegrocer.com/inprint/article/id3260/shaking-the-tree/

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OTHER SOURCES

$212,073,836$4,186,898,039

13,275,496

974,205,124

17,198,390

1,159,507,231

$26,263,795

$1,302,902,884

$27,928,194

$1,250,151,416

$242,766,594 $4,706,773,543

+14.5%+12.4%

Last 13 Weeks, Prior Year

2011 Units

2011 Units

OrganicAvocados

ConventionalAvocados

2012 Units

2012 Units

2011 Sales

2011 Sales

2012 Sales

2012 Sales

Last 13 Weeks, Curr Year Last 13 Weeks % Chg vs YAG



The Total U.S. Avocado category retail dollars for the 13-weeks ending 12/2/2012 were $242 million,* which represented 5.2 percent* of the Fruit category.

The Avocado category retail dollar growth of +14.5 percent versus prior year outperformed the Fruit category’s trend of +12.4 percent.

Avocado Category Weeks Ending 12/2/12

Organic Avocado Sales Weeks Ending 12/2/12


HAB Top Categories


opportunities to build hass avocado retail sales · each year hass avocado board (hab) tracks and...

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