"not sustainable for retailers and their suppliers"

Steve Lutz of The Perishables Group shot me an email today with produce retail sales and volume numbers from the month of November. The gist, in Steve's words,

The general story—volume off in every produce category except for berries grapes, avocados and lettuce. Prices up nearly 6% for total produce. Net result…higher overall dollars (+3.8%) but volume continues to decline. The trend is not sustainable for retailers or their suppliers.

TK: More coming on the specific numbers, but is interesting to note that while grape volume per store/per week was up nearly 23% in November, total grape dollars were actually off by 0.2% compared with last November. Average retail grape prices in November were off 18% compared with a year ago.

For more info on The Perishables Group:at www.perishablesgroup.com

You can't shrink your way to prosperity

I mentioned last week that Steve Lutz and I visited about October retail numbers in the produce department. Steve shared that overall produce sales in October (4 weeks ending Oct. 25, precisely) were up 3.8% in volume but off 4.8% in volume compared with year ago numbers.

Among the laggards: Specialty fruit were off 12.9% in dollars and 30.1% in volume compared to a year ago, while tomatoes were off 9.9% in dollars and 12.7% in volume compared with a year ago. Grapes, pears, melons, carrots and citrus all were among the items down both in dollar sales and volume for the four week period. Amazingly, higher prices for bananas and potatoes allowed dollar sales to climb by 19% and 28%, respectively, despite volume decreases of 3.2% and 0.9%.


Look for some coverage in The Packer about produce department retail trends and how much of this performance is related to the economy versus supply and demand conditions.

By the way, we added a member to our Fresh Produce Industry Discussion Group (and about five to the companion www.linkedin.com group) over the weekend, and there is more good insight from Luis on the retail market share question I asked last week, too.

Audio files

Just added a few audio files to the Fresh Produce Industry Discussion Group. Steve Lutz, Desmond O'Rourke and Kelly Jones are among the new additions from the U.S. Apple show. What follows is Steve Lutz powerpoint from the show:

Apple show update

Posting here again from Chicago, where last night I had the honor of presenting the 2008 Apple Man of the Year Award to George Lamont of New York. George certainly won the praise of many in the industry for his relentless and tireless work on behalf of apple growers, including his lead role in the Premier Apple Cooperative. Check out Andy Nelson's coverage on The Packer's Web site.

Also yesterday, Steve Lutz had an insightful presentation on U.S. apple retail sales performance and Desmond O'Rourke reviewed the effect of the slowing economy on apple sales. The production outlook for China and Europe were presented yesterday, and this morning is the U.S. regional crop overview, discussions of sustainability, consumer motivation and more.

Produce Pricing May 2008 - Perishables Group

With bananas and onions at opposite ends of the spectrum, Steve Lutz of The Perishables Group passes on information on retail produce pricing in May. From Steve:


Attached is the latest retail price information through the end of May 2008. I pulled the four week average for May compared to the same period last year. As you can see, the average retail for total produce is about 3% higher….with a lot of variation.

Let me know if you have any questions.

Steve Lutz
Executive Vice President
Perishables Group

Deal shopping

I visited with Steve Lutz of the Perishables Group earlier today about consumer behavior in a scenario of rising prices. He pointed out that fresh produce isn't necessarily in a position of strength; consumers already tend to think fresh fruit and vegetable prices are on the high side. In that context, this story from The Houston Chronicle speaks to how retailers are positioning themselves for the value choice:

It's vital for grocers to "show customers they're on their side," said Kit Yarrow, professor of business and psychology at Golden Gate University in San Francisco. "Consumers want to feel like they can trust that their grocer is doing everything they can to help them."

Among retailers, grocery stores have some of the most loyal customers. But now that fuel costs are taking a bigger chunk than ever out of people's income — at the pump and in their light bills — those bonds are in jeopardy of breaking.

"Consumers hate to switch grocery stores and tend to be very loyal, but all that's up for grabs right now, and every smart grocer knows that," Yarrow said.

On marketing new fruits and vegetables

I was called up today by a writer of a feature article that will publish at some future date in the NYT Sunday magazine. The angle of the story, as far as I could tell, was a question: How would a marketer best purpose to introduce a new fruit - such as an unknown foreign heirloom variety or even a transgenic fruit or vegetable - into the U.S. market? He already had a list of the "usual suspects" of Frieda's, World Variety, PMA and others. I don't know if I was much help, but I did give him the name of Steve Lutz with The Perishables Group.

I think the assumption of the feature is that the marketing of transgenic fruits and vegetables will be much more common in the future. How, then, will the products be introduced and sold in the marketplace?

I told him that marketers who control their own retail operations - for example, some importers in Hong Kong also have their own retail shop - would obviously have more control over the decision on whether or not to sell transgenic produce to consumers.

As an aside, the author also mentioned the work of the Plant Transformation Research Center at the University of California Riverside It sounds if we may hear more about their work in future years. Here is what the center's Web site says about their work:

The goal of the Plant Transformation Research Center (PTRC) is research on efficient procedures for transforming plants of interest to researchers at UCR. This includes species of economic interest in California , and model systems used to investigate gene function. The PTRC facilitates the research of many UCR scientists who are investigating genes important in metabolic, physiological and developmental processes. The PTCR can provide cost-effective access to biochemical and molecular methods utilized in the analysis of genetically modified plants. The PTRC also serves as a resource in training students, post docs, and staff in technologies related to plant transformation.

On user fees and traceability

David Acheson, assistant commissioner for food protection for the FDA, meets with reporters after his Jan. 14 session in New Orleans.

After the session, I asked him about the idea of charging each food facility an annual registration fee that would be used to help fund the cost of food safety inspections. Some consumer groups are lining up behind that proposal as a way to provide resources to the FDA. Those groups believe that an annual registration inherently has less conflict of interest than a fee for service approach.

Acheson said that the FDA's Food Protection plan mentions two fees, and both are fees for service. "We haven't taken a position on user fees per se, but at the end fo the day we will have to have resources and it is up to everybody about where to generate resources," he told me.

Acheson also praised the produce industry for "stepping up to the plate" for their efforts to make traceability work. While the FDA would like to prevent future outbreaks rather than react to them, he said traceability is a critical component to limit damage to an industry if an outbreak does happen.

Meanwhile, here are highlights from a joint press release from PMA, CPMA and United about the traceability steering committee:

The steering committee of the Produce Traceability Initiative, an industry-led effort to adopt traceability throughout the produce supply chain, met for the first time Jan. 9 in Atlanta to develop an action plan for establishing industry traceability best practices and goals for their adoption and accountability.
The initiative was launched in October 2007 by Produce Marketing Association (PMA), Canadian Produce Marketing Association (CPMA), and United Fresh Produce Association (United Fresh). It is guided by a steering committee of more than 30 companies with balanced representation from the buying and selling community, including participants from all segments of the supply chain.

During its first meeting, chaired by Food Lion LLC Chief Operating Officer Cathy Green and facilitated by Perishables Group Executive Vice President Steve Lutz, the committee addressed a broad range of traceability issues facing the produce industry today. Overall, the group concluded that systematic and consistent application of common standards across the supply chain is needed to enhance chain-wide traceability, building the next critical step beyond many of the excellent internal traceability systems that exist within many different companies.

The committee reached agreement on four key elements for implementing industry-wide traceability standards.

First, the group confirmed past industry support that the GS1 produce traceability standard developed by the international standards organization GS1 (formerly known as EAN-UCC) is the most efficient worldwide approach to achieve system-wide (i.e., both internal and external) traceability, and should be widely adopted as the produce industry standard.

Second, it was agreed that a formal industry timeline for adoption of standards is needed. Steering committee participants agreed to begin evaluating what might be required to implement GS1 standards within their own operations, and will report back at the next committee meeting on recommended implementation timelines.

Third, the committee agreed to discuss ways in which companies could best show their support and commitment to adoption.

Fourth, the group agreed that traceability standards should be adopted at the case level initially, as the backbone of supply chain traceability. However, the committee encourages companies to move toward item-level coding as feasible, as many produce products are now packaged for the consumer, thereby offering a viable option for providing traceability to the item level.

The steering committee will meet next in February or March to form subcommittees that will address specific elements, such as setting timelines for adoption.

TK: No huge surprises with the traceability steering committee's first meeting. It will be significant, as subcommittees meet in February and March, if the group can quickly produce a timetable for adoption of traceability implementation.

Experience retailing

Cooking class, singles night, wine tasting....
Retailers such as Wild Oats and Whole Foods try to be much more than the local supermarket, and this feature story from Maine shows several ways they get it done.

Grocery shopping is a chore for many people; their priority is speed and price. Others see a trip to the supermarket as an experience. Tempting foods and recipes to ponder. Healthier ways to eat. Purchases that help form relationships between local growers and the community. It's likely that the thousands of people who mobbed the sneak preview tour and grand opening last week of the new Whole Foods Market in Portland fit into the latter category. These folks also are apt to eat in the store's trattoria or sushi bar, attend a cooking or nutrition class, or meet in the community room. What's more, while only 15 percent or so of shoppers are loyal to a single store, those customers generate between 55 percent and 75 percent of sales, according to a study cited by the Food Marketing Institute.

TK: Steve Lutz of The Perishables Group says the company will be releasing a big organics study about the time of FMI and United. Lutz said that one of the central points of focus is understanding the differences in behavior between light and heavy users. How can traditional supermarkets take light organic users and turn them to heavy users? What do traditional supermarkets have to do to compete with Whole Foods and Wild Oats? Demographics of each store location are a key indicator in determining potential of organic sales, Lutz said. Perhaps cooking class and singles night help, too.

Apple wax and consumer awareness

As I work on an update on fresh cut salad sales, I was visiting yesterday with Steve Lutz of The Perishables Group. As we talked about whether the sales slide in packaged salads and packaged spinach reflects a change in consumer behavior, he brought up the case of wax on apples.

"There is a huge difference between consumer awareness and action," Lutz told me. "It can have a zero impact on behavior." He recalled from his days at the Washington Apple Commission when surveys showed a high level of awareness of wax on apples. In fact, some consumers were "concerned" about wax on apples.
But the correlation of the issue at store level showed that consumers in fact preferred waxed apples over unwaxed apples. They would buy more waxed apples than unwaxed apples if given the choice.

Lutz cautions against drawing too many conclusions about consumer behavior relating to bagged salad and bagged spinach until more time is passed. How much of the current decline in sales is attributable to demand and how much is related to supply? We may be better to tell in a few months, he believes.

Related to consumer confidence, here is a story about how consumers are returning to a Houston restaurant where patrons were possibly exposed to Hepatitis A.

From the story comes a quote from a trusting soul:

“My mom had warned me that there was a problem about a week ago, I guess, but I figured it was probably a pretty safe bet since it was on the news and in the paper that they probably have everything cleaned up by now,” diner Paige Gutierrez said.

TK: The chicken of demand or the egg of supply? In any case, The Perishables Group has figures that show bagged spinach sales for the 19 weeks ending Jan. 20 were down 47.8% compared with the same period a year ago.