Category Offers Promise for Processors, Retailers

With processors and retailers putting new offerings on store shelves, the fresh-cut fruit category is expected to reach $1 billion in the near future. And consumers are slowly coming to the category with hopes of getting over the hurdles of whole fruits.

Consumers can be leery of whole fruits and vegetables because of price, spoilage and availability, said Bruce Axtman, president and CEO of Perishables Group. And fresh-cut fruit, when the category matures, can offer answers to all of those questions.

“Salads and fresh-cut veggies give consumers consistent, reliable quality,” Axtman said. “Fruit has been more difficult because it has a higher degree of perishability. There’s more variability in quality as well.”

Due to these factors, the fresh-cut fruit category has been slower to develop than that of vegetables. And it could take another five years or so before the category is mature. In the meantime, there’s a lot of promise.

Axtman broke the fresh-cut fruit category into three segments: over-wrapped cut fruit, which is halved or quartered in a retailer’s back room and is sold random weight; refrigerated cut fruit, which is in juice and/or preservatives and typically refrigerated; and fresh-cut fruit, which is cut by a third party and pre-packed in a clamshell or tray, typically with a UPC.

Consumers are not necessarily comfortable feeling they’ll be able to pick the right product, Axtman said.

“If a retailer or supplier is able to provide a consistently high-quality line of fresh-cut products, it can make it a lot easier for a consumer to pick the right one.”

Enter fresh-cut processors.

In 2004, 3.5 million units of fresh-cut fruit were sold, bringing in $719 million in sales, according to Perishables Group. And between January and February of 2005, those numbers were up 17 percent over 2004.

Of those numbers, watermelon was the highest-selling item used in fresh-cut fruit. But watermelon isn’t the only fruit.

“As you look at things like papayas and mangos, many consumers don’t have a lot of experience with those products,” Axtman said. “Picking and cutting the right pineapple can also be quite daunting to a consumer.”

Another popular category is fruit mixes. In these products you can add grapes and berries, which don’t need to be cut to add convenience, but can be added to mark one fruit mix as just a little different from the next.

In fact, McDonald’s recently unveiled its newest offering: Fruit and Walnut Salad. This salad includes apple slices, grapes, candied walnuts and yogurt. McDonald’s also offers Apple Dippers, which are apple slices that come with caramel dip. But McDonald’s isn’t the only one. Wendy’s also has a fruit plate on its menu, and many quick-serve restaurants are offering more gourmet-type salads that incorporate fresh-cut fruit.

“It’s interesting to see how that will enhance the category and get (consumers) to buy in the grocery store,” Axtman said. “Grape tomatoes benefited a great deal from being in the Wendy’s salad. They really exposed that product to a lot more consumers, and it’s probably helping spur growth in the tomato category.

“There’s so much crossover between retail and foodservice – it’s an important way to look at the business.”

But foodservice isn’t the be-all, end-all.

“We have to continue to work with the quality, the assortment, the packaging and distribution,” Axtman said. “How does the retailer build a year-round program that has the right mix, pricing and promotion that embraces and develops the whole category?”

There is a lot of research being done with fresh-cut fruit. Both on the consumer side and by processors looking to enter – or improve – the market.

One thing being looked at is packaging and how it can be used to improve shelf life and reduce shrink. People also are researching different varieties – and types – of fruits to use for fresh-cut.

“There’s quite a bit of excitement and investment going on,” Axtman said. “If you go back five or 10 years, you saw the same activity in the salads with new mixes, new varieties and new brands.”

Next Steps

Though the fresh-cut fruit category is improving, Axtman said he sees some areas for improvement. For one, fresh-cut fruit processors and retailers need to find the balance between the summer and winter product mixes. In the summer, when whole, fresh fruit is available, sales for fresh-cut product dip. To combat that, he said, retailers will need to focus promotions around the seasonal swings.

“Retailers have got to be very proactive,” he said, “(and) rely less on in-store programs and invest more in third-party programs.

“(Processors) need to work in conjunction with retailers. What’s the overall sales dollars? What’s the impact on shrink? How’s the performance by season, by store cluster and across the entire offering? They have to look at how to implement programs that maximize the total value of the category. I think we’ve got a long way to go to get our arms around that.”

The biggest problem for fresh-cut fruit is shrink. Axtman said, of the branded items, 30 to 50 percent of the product is routinely lost to shrink. To combat that, both the retailers and the processors need to do research to see what works in each store. In some areas, personal-sized products will be more popular, but in other areas family-sized packages will be biggest sellers.

“The industry needs to understand the true meaning of value-added and provide it for consumers,” Axtman said.

Offer new fruits in the mixes. Axtman said consumers are looking at international mixes that include kiwi, papayas and other products they may not eat on a regular basis. Look into packaging. Cup-sized packages that fit in cup holders in the vehicle are proving popular. Some companies are packaging their products with utensils. And, Axtman said, dips are big. By adding a dip to the fruit mixes, companies can create a snack or meal package.

“We’ve got the next three to five years where we’re still going to be in that growth and innovation stage,” Axtman said. “For those who can bring understanding in as well as a total program perspective, I think it’s a great opportunity.

“I think the bottom line is that we’re going to make a tremendous amount of progress and the whole category will continue to grow over the next several years.”



Be sure to check out our other specialty agriculture brands

Organic Grower