Driving Perimeter Growth

TrendsinFreshProduce

Retailers playing into the top five consumer trends will see further growth in perimeter sales.

By Janice Hoppe

The perimeter of grocery stores is the epicenter of growth at a six percent rate while the rest of the store sees a three percent increase. Although still in the early stages of adoption, transparency, new supply chains, convenience, fresh prepared and a connected consumer are the major trends contributing to this growth. 

“We need to start embracing these trends,” Executive Vice President of Industry Insights for IRi Larry Levin said last Wednesday during FMI Connect in Chicago. “If you can get consumers to spend 12 to 13 minutes in your produce department, it’s a good one and has become a destination.” 

Along the perimeter, the deli section is up 6.5 percent at $6.2 billion, cheese is up 4.8 percent at $2.7 billion, produce is up 3.6 percent at $60.5 billion and prepared meals are up 9.8 percent at $10.8 billion. The bakery department has remained flat at 1.9 percent and $6.4 billion, which Levin says is an area that could experience greater growth by playing into our senses. Who isn’t drawn to the smell of freshly baked bread or cookies baking in the oven? 

Tapping the Trends

If we learned nothing else during FMI Connect last week, retailers should know that transparency and convenience are the keys to success. “Consumers believe that if you don’t tell me you’re hiding something,” Levin explains. “Be open and honest and put the claims that matter on the label.” 

Important claims today are organic, antibiotic-free and all-natural. For example, seafood sustainability or aquaculture is a major social issue that consumers are paying attention to. In one week’s time, Levin says there were 1,290 posts on average around seafood sustainability. Sixty-one percent came from microblogs, 28 percent was in the news and 8 percent were on traditional blogs. “Consumers want to scan and learn about the product,” he notes. “There is a lot of information the consumer wants to know.” 

TrendsinProducePrepackagedConvenience was the No. 1 recurring theme during the show this year because consumers want foods that are quick and easy to cook and eat. “Households are more fragmented today,” Levin explains. “Twenty percent of married couples have kids, 28 percent of singles live alone and 58 percent of consumers are eating their meals away from home one to two times per week. Twenty percent of millennials are eating out three to four times a week.” 

This consumer demand is the reason the fresh prepared section of grocery stores is taking off and is the fastest-growing perimeter department. About half of the younger millennials, ages 18 to 24, are embracing ready-to-heat meals, Levin says.  He adds that at more than $10 billion, the fresh prepared department generates more annual sales than Olive Garden, Burger King and Dunkin’ Donuts, and is growing faster than Starbucks, McDonald’s and Panera.

“A good fresh prepared department can bring in new shoppers,” Levin says. “Thirty-one percent of fresh prepared buyers have a different primary chain for fresh prepared than total grocery. The consumer spends an incremental $47 in the rest of the store when they buy fresh prepared. The fresh prepared department is where the money is.” 

Supply and Demand

New supply chains have emerged as the food industry evolves with consumer demands. Today, we are seeing farmer direct to consumer, integrated local networks, retailer direct, vertical farming and greenhouses and omnichannel. 

Farmers and consumers are directly linked when it comes to farmer direct to consumer. Farmer’s markets and community supported agriculture are two such examples of this supply chain. “In 10 years, the number of farmer’s markets has doubled and they bring an important social aspect with them,” Levin says. 

Integrated local networks is where retailers have the opportunity to deliver their own farmer-to-consumer experience. Retailer direct is retailer-owned or managed food production operations for resale in store and vertical and local greenhouse farming has become more prevalent. 

“Think about supply chains differently,” Levin urges. “Localization is driving revenue and retailers can now manage or own their own food production. How much more local does it get than growing produce on the roof?”

In terms of omnichannel, Levin says e-commerce will be critical to retailers moving forward. Today there is a small percentage of shoppers using “click and pick,” but when they do 80 percent are buying produce, 62 percent are buying from the bakery, 50 percent from the meat department and 20 percent from the deli. “This means they are asking a trusted source to pick something [like produce] for me,” he adds. “We are earning their trust.” 

Staying Connected

Staying connected with the consumer is vital as they are looking for simple, convenient and savings. Levin says coupons are still very important and retailers should not do away with their weekly circular and have a good website with deals available. 

When communicating with today’s consumer, Levin recommends email correspondence as opposed to texting, which is too personal. “As retailers we have a business relationship with the consumer,” he adds. 

In addition to the top five trends, Levin suggests retailers also begin to focus on reducing their food waste and improving their shopper personalization. “That’s where everything we do is about ‘me,’” he says. “Plan big to win big.” 

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