The past two years have posed a lot of challenges to produce departments. Like most other fresh food categories, produce experienced steep price increases in 2008, forcing many shoppers to scale back their purchases. More recently, prices on many produce items have been falling quickly, forcing many retailers to focus on moving more volume to maintain dollar sales.
But through all of this, the berry category has been a real bright spot — one of the few categories to enjoy both dollar and volume sales growth under both scenarios.
“As we came through the trough of the recession, almost every category in the produce department declined in volume,” noted Steve Lutz, executive vice president of the Perishables Group, a West Dundee, Ill.-based research consultancy. “A lot of products had dollar growth, which was driven by higher retail prices. So, volume declines were offset by higher prices. But berries bucked that trend. The category was a leader in 2008 and has continued to be in 2009. That's pretty significant — a product that was resilient in the face of a really nasty economic downturn.”
During the third quarter of 2009, sales of berries averaged $3,239 per supermarket, per week, making it the most popular category in the produce department by a sizeable margin. Packaged salads were second, with $2,769 in sales per week, according to Perishables Group data provided by the United Fresh Produce Association's Research and Education Foundation via its quarterly “Fresh Facts on Retail” report.
And, as Lutz noted, the category posted strong growth throughout the recession. For example, during the second quarter of 2009, dollar sales were up 5.7%, while volume rose 16.4% compared with the same period a year earlier. In the third quarter, dollar sales were up again by 5%, while volume rose 20%.
A combination of factors is responsible for the category's performance, noted Leigh Vaughn, director of produce and floral for Salt Lake City-based Associated Food Stores.
“There's more consumer awareness of the high nutrition value of berries — in particular blueberries and blackberries, the darker berries and antioxidants,” he said. “But, I think it's also due to increased availability. A lot of growers are diversifying their growing operations so that we can procure these products nearly year-round domestically.”
And demand for berries has continued to grow despite the downturn, particularly in higher income areas. Vaughn said that AFS services stores in several resort cities, including Aspen, Colo., and Park City, Utah, and noted that demand has been especially strong in those areas.
“They want the very best berries, and they want them year-round,” noted Vaughn. “We work very hard to build a pre-commit system with those stores to address their particular needs. The average store will want one or two cases of strawberries at this time of year, but a store near a ski resort will want 50 cases.”
Berries have enjoyed a strong run of positive health news, which is one factor driving demand, Lutz noted. Antioxidants and phytochemicals have been buzzwords in consumer health magazines for years now, and berries are frequently cited as a top natural source of these compounds. And researchers have continued to uncover benefits of these fruits. For example, the U.S. Department of Agriculture's Human Nutrition Research Center recently discovered that feeding blueberries to lab animals prevented age-related loss in their mental capacity.
“It's just one story after another,” said Lutz. “Consumers are getting hit from a lot of different angles [with news that] this is really a healthy product to eat, and that definitely helps.”
The Perishables Group conducted a consumer survey in 2009 that asked shoppers whether they were eating more fruits and vegetables, and why, Lutz added. About one-third of respondents said they were eating more produce than they were a year ago, and most of those respondents said that they were doing so out of concern for their health.
“So, if you've got a large percentage of consumers who are thinking about how food contributes to health, and you have a string of positive consumer messages in the marketplace about the health benefits of berries, it's not a stretch to put those together and understand how consumers would respond to those messages,” Lutz said.
News about health benefits may have helped boost demand, but it wasn't so long ago that berries were a highly seasonal category. Even if shoppers wanted blueberries, blackberries, strawberries or raspberries during the winter, they were hard to find and were typically packaged in small containers. Improved year-round availability is largely responsible for the category's rapid growth in recent years.
“Blueberries are now coming from all over the United States, which extends the North American season,” Lutz said. “You've got blueberries coming from Mexico and Argentina and Chile, which creates greater availability. And blackberries and raspberries have had significantly greater availability than they've had in the past, primarily due to exports coming out of Mexico.”
Growers, in turn, have gotten good returns on the category, and have reinvested their profits in expanding production, he added. Expanded production means better availability, and better quality because there are more products and more producers to choose from. This gives retailers the option to promote the category more frequently, and merchandise the category with more prominent displays. Consumers also become more accustomed to seeing the products in store.
“Berries are getting more space,” Lutz said. “When you have more products available, when you have more products available for a longer period of time, the season is longer. And when you have new package sizes available, that gets translated into store-level space. … Obviously, when the products are in the store and they're popular and available, you get increased retail promotion. You're seeing more widespread and more consistent promotion of the berry category.”
And, taking advantage of the category's growth might hinge on ensuring that the products are regular fixtures in the produce department. One retailer, who requested anonymity, said that their produce departments focus primarily on local and organic foods, and thus have limited options for purchasing berries when they are out of season. As a result, the chain did not see any notable growth in the category during the past year.
“A lot of retailers are more than confident in their strawberries, and more than confident in other berries seasonally, but we've found that when you promote them together year-round, [variety berries] become incremental sales,” Vaughn said. “The strawberry consumer is a blackberry consumer, and just because you have both of them out there, it doesn't cannibalize the category. They buy them both. They want to make mixed berry items. Smoothies are huge because of the health craze. We've found that blocking them together in refrigerated cases has been extremely valuable in some of our stores.”
Vaughn added that AFS also serves several price-sensitive markets, and that he had tried promoting and advertising more specials on berries in those stores.
“We've tried to focus on additional promotions on a quarterly basis. Rather than have two or three promotions [on berries] during a 13-week quarter, we'll do four to seven berry promotions. And we mix them up — it's not just strawberries every week.”
This could be a growing trend. According to United Fresh, during the 52-week period ending June 27, 2009, melons, berries, grapes and cherries were the leading categories promoted in the produce department. Berries alone accounted for a 16% share of dollar sales for items sold on promotion during this time, and the category had an average gap of almost 80 cents between non-promoted retail prices and promotional retail prices.
An expanding variety of pack sizes has also given retailers new options when merchandising and promoting the category, and has given shoppers more options to select products based on their price and value priorities when items are not on sale. Lutz pointed out that two- and four-pound packages of strawberries aren't new, but that these larger pack sizes were practically unheard of for variety berries until recently.
“You don't have to go back very far, to when if there were blackberries on the shelf, it was one size, and it was small,” he said. There was one package size, and it was there for a very short window. Blueberries may have had one-pint containers, and maybe in some select, local markets, where there were local producers, you may have seen something larger, like a one-pounder. But mostly it was pints. Pints or smaller.
“Now, that one-pound package is standard in a Costco. It's there a long time throughout the year. I think it goes to a two-pounder during peak season in North America. So, those package size options are really significant.”
Regardless, the category has had a very good run during a very difficult economic period, and Vaughn sounded bullish on the category's future.
“There's just more consumer awareness of the health benefits, and I think customers know that berries are a quick and easy way to get something healthy not only on their plates, but onto their children's plates as well. I don't know any kids that don't like berries,” Vaughn said. “It's a fantastic category with a lot of growth potential. … It becomes a destination stop. If a consumer knows that a store has the best berries, they will go there.”