State of the industry 2012

Like most fresh produce categories in grocery stores across the nation, value-added fruits and vegetables took a noticeable dip during the U.S. economic recession. However, frugal-fatigued shoppers are abandoning restrictive recession purchase habits, and value-added produce has rebounded in a big way. Unlike other categories that have struggled to gain footing amidst rising food prices, value-added produce has maintained sales, even flourished as a category, despite record high prices across departments.

From 2006 through 2010, the value-added fruit and vegetable categories increased supermarket dollar sales by nearly 10.9 percent and 18 percent respectively. After slight dips from 2008 to 2009, each category posted consistent yearly increases in dollar sales and volume. Trends including steady development of new products, healthy snacking alternatives and convenience each lend to the continued success of value-added produce.

Shopping behaviors clearly reflect the high value consumers place on fresh, time-saving produce options. Despite value-added fruits’ higher price points compared to whole fruit, consumers increased their number of purchase trips by 2.8 percent on average during the 52 weeks ending Sept. 24, 2011, according to the Perishables Group’s FreshFacts Shopper Insights powered by Spire. The category also held steady in household penetration.

Considering shoppers are purchasing value-added fruit more often, it’s no surprise recent sales are trending upward. In 2011 (through Oct. 29) the average retail price of value-added fruit experienced a slight 0.8 percent increase compared to a year ago. Of the three value-added fruit sub-categories – fresh-cut, overwrap, and jars and cups – two displayed atypical behavior in the face of rising average prices. The fresh-cut fruit sub-category accounted for the largest percentage of total value-added fruit category dollar sales (70 percent) in 2011 year-to-date, and was unaffected by a 2.1 percent average retail price increase; both sales and volume increased, by 5.9 percent and 3.7 percent respectively. The overwrap fruit category had the largest increase in average retail price (4.6 percent); however, neither sales nor volume was affected, with increases of 10.3 percent and 5.5 percent respectively. Jars and cups, which made up a relatively small percentage of total category dollar sales (11 percent), was the only category with declining prices. They posted a predictable increase in volume (7.2 percent) and a slight decrease in dollar sales (0.7 percent) thanks to their declining retail prices.

Buyers remained loyal to fresh-cut fruit segments like grapes in 2011, which had a 27 percent volume increase and 30 percent dollar increase despite a 2 percent increase in average retail price.

In certain cases, value-added fruits out-sold traditional bulk offerings. Throughout 2011, bulk watermelon held steady in dollar sales and decreased in volume after a 5.0 percent increase in average retail price from the previous year. Value-added watermelon also saw a rise in average retail price; however, unlike bulk watermelon, consumers continued to purchase despite the increase. Average dollar sales for value-added watermelon rose 8 percent, while volume increased 3 percent.

Value-added vegetables also fared well in the past year. The average retail price of value-added vegetables remained unchanged in 2011, which had a positive effect on category dollars and volume. Both volume and dollar sales for value-added vegetables grew by 7.2 percent.

The value-added vegetable sub-categories – side dishes, trays, meal prep and snacking – behaved similarly to value-added fruit. Value-added vegetable side dishes, like the fresh-cut fruit in the value-added fruit category, accounted for the largest share of dollars in the category (52.9 percent), and continued to grow despite a slight increase in average retail price. This sub-category drove dollar and volume sales for value-added vegetables, with significant increases in both dollars and volume. Trays, the second largest value-added vegetables sub-category, experienced a slight decrease in average dollar sales and an increase in volume thanks to a dip in average retail price. The meal prep sub-category had the category’s largest increase in average retail price compared to a year ago, and still exhibited growth in volume and dollar sales. The snacking sub-category posted the largest decrease in average retail price, which led to predictable increases in volume, but also in dollar sales
Within the value-added vegetable sub-categories, several segments experienced similar patterns of rising prices having little impact on volume and dollar increases. Rutabaga had a 27 percent increase in average retail price and a 21 percent increase in volume, resulting in 54 percent growth in dollar sales. Other categories within fresh-cut vegetables exhibited similar behavior, including sweet potatoes and Brussels sprouts.

The steady expansion of value-added fruits and vegetables in supermarkets is hardly surprising when examined against consumer trends and the increasing number of value-added items on grocery shelves. The impressions (number of unique items on store shelves) of fresh-cut fruit and vegetables increased by 7.2 percent and 3.6 percent respectively in 2011, as retailers dedicated more space to these valuable products.

Value-added fruit experienced impression growth across the board. At 11 percent, the overwrap sub-category posted the greatest increase in impressions, which corresponded with the category’s largest increase in dollar sales (10.3 percent). With a 7 percent increase in impressions, fresh-cut fruit continued growth as value-added fruit’s largest sub-category. Even the category’s smallest increase in impressions was significant; jars and cups had a 6.5 percent increase in impressions.

Value-added vegetables experienced similar growth in impressions. The side dish sub-category, accounted for a full 52.9 percent of value-added vegetable dollar share, driven by impressions growth of 3.3 percent. Meal prep items had the largest increase in impressions compared to a year ago (6.0 percent), followed by side dish items (3.3 percent), snacking (2.5 percent) and trays (1.4 percent).

The continued success of value-added produce is evident in their expansion on grocery store shelves and prominent place in consumers’ shopping carts. With the stamp of approval from retailers and consumers alike, value-added fruits and vegetables weathered the economic storm, responding to consumer demands for health and convenience, and ultimately flourished in the aftermath.

Unless otherwise noted, sales data is for year-to-date 2011 (through Oct. 29). Sales data was compiled from grocery stores nationwide, representing 61.5 percent of national supermarket ACV share. For more information, call Kelli Beckel at the Perishables Group at 773-929-7013 or email kelli.beckel@perishablesgroup.com.

—The Perishables Group

The Perishables Group (PG) is a Chicago-based fresh food consulting firm offering a full spectrum of products and services geared toward complete market and category understanding. Solutions include research, analytics, marketing communications, category development, promotional best practices and shopper insights. We have more than 10 years of experience refining tools and strategies for maximizing success in the perishables departments. For more information, visit www.perishablesgroup.com.