Perishables Buyer January 2012

8

PRODUCE : Capitalizing On Shoppers' Embrace Of Local

13

FROZEN: The Pizza Sector Seeks To Regain Its Footing

26

DELI: How To Succeed In An Evolving Environment

JAN12 vol.2 iss.1

the

2012

PERISHABLES TRENDS FORECAST

Pinpointing the

Growth Opportunities also

inside CATEGORY UPDATES:

www.PerishablesBuyer.com

+ Bakery

+ Foodservice

+ Dairy

+ Infrastructure

+ Meat

+ Refrigerated

+ Seafood

TABLEOFCONTENTS

This Month's

21

Cover Story

The 2012 Perishables Trends Forecast The New Year brings new revenue opportunities for perishables merchandisers. Here are some of the key elements that will impact retailers’ bottom lines.

CATEGORY SPOTLIGHTS

8

Produce Going Loco For Local

Consumers, on a quest for healthy, or at least not harmful, foods, are embracing local as good for them. The challenge for retailers is to define local, and then find consistent sources of supply.

pizza chains and from more in-store pizza operations. But frozen could be poised to regain lost market share. RETAILER PROFILE

16 Walmart Thinks Small

13

Wal-Mart Stores Inc. is expanding its perishables reach with the launch of its smaller-format Walmart Express outlets.

Frozen Slicing Up The Market

ROUNDTABLE

The frozen pizza segment is facing increased competition from national

Departments 7 editor's note 29 category updates 37 numerology 38 ad & company index 4

8

26 A New Plan Of Attack

Deli operators are battling a host of aggressive competitors for share of stomach. Experts say success will require a change in operations and attitudes.

16 January 2012 • Perishables Buyer

WEBTOC

This Month on

.com

Feature >> THE COMFORT ZONE

Consumers want to be confident that their stores’ perishables will always be fresh, safe and high quality. Experts detail how retailers can gain—and regain— such trust.

Retailer Profile A FRESH APPROACH

Fresh & Easy Neighborhood Market is working to attract the growing base of shoppers who are seeking quick, healthy and affordable meals.

Packaging MAKE IT WORK

Perishables packaging has to deliver on features promised, such as reasealability, all the while being environmentally friendly and informative.

<< Deli

Dairy

THE RIGHT STUFF

SOURCING FOR SUCCESS

Deli operators can prosper by leveraging the products that sell. Pinpointing those items requires resolve.

Maintaining an efficient supply chain is vital for reducing shrink and out of stocks.

Seafood

Meat

A PRODUCT PUZZLE

WHAT A DEAL!

Changing global seafood demand is making sourcing more complex for merchandisers.

Meat shoppers are leveraging a variety of tactics to cut costs.

Frozen << Produce

EATING OUT WHILE EATING IN

A PLETHORA OF PRODUCTS

Restaurant brands are proliferating in the freezer case; use them to capture more consumer food dollars.

New offerings were attention-getters at the 2011 Fresh Summit.

For more stories, go to

www.PERISHABLESBUYER.com 6

January 2012 • Perishables Buyer

EDITOR’SNOTE

» VOL. 2, ISS. 1

ON TOP OF THE TRENDS

PUBLISHER Brion Palmer Group Publisher EDITORIAL Rich Mitchell Editor-In-Chief [email protected] John N. Frank Editorial Director [email protected] Betty Vandenberg Art Director Scott Hilling Senior Art Director ADVERTISING Brion Palmer Group Publisher [email protected] 847-405-4072 Peter Hansen Regional Sales Mgr. [email protected] 847-405-4033 Jill DeVries Corporate Reprint Mgr. [email protected] 248-244-1726 Rosemary Weiss Advertising/Production Mgr. [email protected] 847-405-4021 SUPPORT SERVICES Drew Matthews Marketing Mgr. [email protected] AUDIENCE DEVELOPMENT Peggy Perez Audience Development Mgr. Stacey Noocha Multimedia Coordinator Carolyn M. Alexander Audience Audit Coordinator

CORPORATE DIRECTORS John R. Schrei Publishing Rita M. Foumia Corporate Strategy Ariane Claire Marketing Vincent M. Miconi Production Lisa L. Paulus Finance Michael T. Powell Creative Nikki Smith Directories Marlene J. Witthoft Human Resources Scott Wolters Events Beth A. Surowiec Clear Seas Research

T

he New Year brings with it a host of added revenue opportunities for perishables merchandisers. And as our cover story which starts on page 21 illustrates, retailers can seize the moment by responding to pressing shopper needs and demands. A greater consumer focus on convenience-oriented products, for instance, will be occurring in most perishables departments, analysts say. As a result, W. Frank Dell III, president and chief executive officer of Dellmart & Co. Inc., a Stamford, Conn.-based retail consultancy, predicts that astute retailers will respond with an “explosion” of new valueadded products. While some items, such as pre-marinated and preseasoned proteins, already are fi xtures in many supermarket meat cases, Dell notes that prepared offerings also will become prominent in produce sections. More retailers, he says, will be offering greater arrays of pre-cut and packaged fresh fruits and vegetables. “The consumer wants value, which is the relationship between what they are paying and the perceived quality of the product,” Dell notes. “Just doing a little more for the consumer—it does not have to be drastic—will keep them coming back.” Adding value to offerings, he adds, also will “increase the price and the gross margin for suppliers and retailers.” Meat departments also will likely feature additional value-added selections in 2012, says Michael Uetz,

principal of Midan Marketing LLC, a Chicago-based marketing, communications and market research firm. “There also will be a greater emphasis on customer service, with retailers educating consumers on the products,” he states. “And not only will more retailers be setting up education programs for their internal staffs, but they also will provide information on packaging and Websites to make sure shoppers are more comfortable purchasing the items.” Retailers seeking to optimize revenues also must respond to a host of other consumer trends, he says. They include the growing role of men in meal-planning decisions; a greater use of smart phones for meal planning; enhanced shopper interest in hot home-cooked meals that do not have to be prepared from scratch; and a stronger desire to learn where products were developed and how animals were treated. “There is not one protein opportunity for everyone, but convenience continues to be a strong growth platform,” Uetz states. “Any offering that cuts preparation time and helps the shopper get close to the final product, such as pre-marinated meats, will have a huge impact.” O

RICH MITCHELL editor-in-chief

Also publishers of Beverage Industry, BrandPackaging, Candy Industry, Dairy Foods, Flexible Packaging, Food & Beverage Packaging, Food Engineering, Independent Provisioner, Industria Alimenticia, The National Provisioner, Prepared Foods, Private Label Buyer, and Snack Food & Wholesale Bakery. BNP Media II, L.L.C 155 Pfingsten Road, Suite 205, Deerfield, Illinois 60015 (847) 405-4000 • Fax: (847) 405-4100 PERISHABLES BUYER, formerly R&FF Retailer (ISSN 2164-1404) is published 12 times annually, monthly, by BNP Media II, L.L.C., 2401 W. Big Beaver Rd., Suite 700, Troy, MI 48084-3333. Telephone: (248) 362-3700, Fax: (248) 362-0317. No charge for subscriptions to qualified individuals. Annual rate for subscriptions to nonqualified individuals in the U.S.A.: $178.00 USD. Annual rate for subscriptions to nonqualified individuals in Canada: $216.00 USD (includes GST & postage); all other countries: $228.00 (int’l mail) payable in U.S. funds. Printed in the U.S.A. Copyright 2011, by BNP Media II, L.L.C. All rights reserved. The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations. Periodicals Postage Paid at Troy, MI and at additional mailing offices. POSTMASTER: Send address changes to: Perishables Buyer, P.O. Box 1080, Skokie, IL 60076. CANADA POST: Publications Mail Agreement #40612608. GST account: 131263923. SEND RETURNS (CANADA) TO Pitney Bowes, P.O.Box 25542, London, ON, N6C 6B2. CHANGE OF ADDRESS: Send old address label along with new address to Perishables Buyer, P.O. Box 1080, Skokie, IL 60076. FOR SINGLE COPIES OR BACK ISSUES: contact Ann Kalb at (248) 244-4699 or [email protected]

www.PerishablesBuyer.com

LIST RENTAL > Postal Contact Kevin Collopy 845-731-2684 [email protected] > Email Contact Michael Costantino 845-731-2748; 800-223-2194 X748 [email protected] CUSTOMER SERVICE Phone 847.763.9534 Fax 847.763.9538 Email [email protected] BNP Media Helps People Succeed in Business with Superior Information

7

CATEGORYSPOTLIGHT

PRO DUC E

GOING LOCO FOR LOCAL Consumers, on a quest for healthy, or at least not harmful, foods, are embracing local as good for them. The challenge for retailers is to define local, and then find consistent sources of supply. BY JOHN N. FRANK editorial director

KEY POINTS O Consumer concerns about food safety and quality are fueling the buy local trend. O Define local in a way that resonates with your shoppers. O Marketing produce in season and from specific locales also can address consumer worries about quality.

T

he steady drumbeat of headlines about food recalls, salmonella outbreaks and other food scares have shoppers increasingly hunting for what they perceive to be safer, and hopefully healthier, foods. For a growing number of Americans, that’s starting to mean buying locally raised produce. Local, for these shoppers, evoke images of family farms that take more care with their crops and stand behind everything they grow. It also connotes environmental benefits of not transporting produce hundreds or thousands of miles. Retailers seeking to cater to this new consumer urge for local have several challenges to overcome before they can profit from the trend. Issues include finding suppliers across a range of produce categories who can sell you the quality and volume you need in your stores. And perhaps the

larger challenge is making sure you define local in a way that consumers will embrace. Do all that, and you could see produce sales rise as “loca-vores”—those wanting to shop local—f lock to your produce aisle. “The first challenge is to understand what the consumer is truly asking for,” says Maria Brous, director of media and community relations with Lakeland, Fla.-based Publix Super Markets Inc., a chain of 1,041 supermarkets in Florida, Georgia, North Carolina, South Carolina and Tennessee. “Local means something different to everyone you ask.” Lee Ann Head, vice president of research at the Shelton Group, a Knoxville, Tenn.-based research firm, says, “there is a sense that consumers really are worried about not knowing where their food is coming from. Locally grown food is probably the next best thing to growing it yourself for many consum-

A

A Demand for locally grown produce is rising, so much so that a New York company, Bright Farms LLC, is advocating putting greenhouses on supermarkets to grow local.

8

January 2012 • Perishables Buyer

Boosting Sales, Benefiting Children, Bettering Communities

We bring the produce industry together to support worthy causes for children while educating families on the benefits of healthy eating. PFK’s new Ideal Meals program provides healthy, delicious, easy-to-prepare meals for the entire family. This new innovative series includes colorful merchandising displays and so much more.

Visit us at produceforkids.org for more information

PRO DUC E

CATEGORYSPOTLIGHT

ers. They see it as fresher, they see it as safer. Those are two very powerful drivers.” Those concerns about food safety apparently are translating into new buying patterns for some consumers, according to London-based Mintel International Group Ltd. In a March 2011 report (see table, below), Mintel notes that “34 percent of survey respondents indicate that they buy local vegetables when they are in season. The oldest consumers [65+] are 11 percentage points more likely to purchase local vegetables in season.” Aff luent shoppers, those with household incomes of $100,000 or more, are nine percentage points more likely to buy local than others, Mintel finds. As might be expected, millenials raised in an environmentally conscious world are interested in local produce as well, Mintel notes. That group is the most likely to buy local “when the price is not too high,” one of the conditions Mintel asked its survey respondents about. “It is important to watch these younger millenials as they grow up thinking local and begin to inf luence their families and friends,” Mintel advises. “Local has become the new organic,” says Steve Lutz, executive vice president with the Perishables Group, a Chicago-based fresh food consulting firm. “It feels like now what consumers are saying is the highest level of trust goes toward local products. Most consumers will say grown in my state qualifies as meaning local.” Retailers need to take care in how they define local, Lutz warns. Pick a definition of local that doesn’t resonate with your shoppers—say products coming from several states away or across the country—and you may fracture that trust and lose local-vores in the process, he says.

B

Local Produce Buying Habits Do you buy local produce…

B This Bashas in Arizona promotes local tomatoes, emphasizing their freshness and also noting that local produce costs consumers less. Chart Source: Mintel Group Ltd. November 2010 online survey of 1,723 adults age 18 and older who had bought vegetables in the past month.

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Age of Respondents All

18-24

25-34

35-44

45-54

55-64

65+

Usually

10%

9%

9%

7%

11%

9%

12%

Always

10%

14%

10%

11%

9%

8%

7%

Rarely

9%

9%

12%

7%

10%

8%

6%

Never

3%

5%

3%

5%

3%

3%

1%

When they are in season

34%

22%

26%

30%

35%

43%

45%

When the price is not too high

14%

18%

15%

16%

14%

11%

10%

1,723

197

311

328

353

256

278

Number of respondents

January 2012 • Perishables Buyer

CATEGORYSPOTLIGHT

C Publix defines local as coming from its five-state Southeast operating region, explains Brous. So strawberries from Plant City, Fla., a locale that considers itself the strawberry capital of the United States, are offered in various Publix stores during strawberry season. Sourcing locally means Publix buyers need to be constantly up on market conditions, she notes. Publix also emphasizes selling produce at its seasonal peak, Brous says. Seasonality carries implications that produce is coming from the United States, which may be considered more local than shipping the items from South America or elsewhere when the U.S. growing season is over. Other retailers seek to answer consumer concerns about produce place of origin by emphasizing the locale in which it was grown, even if it would not be considered local, Lutz notes. Cincinnati-based The Kroger Co., for example, features corn from Colorado during its three-tofour week seasonal selling period, merchandising the products in California and Washington, he says. Apple growers in certain regions of the country also have done a good job playing up the story of their locale or variety, Lutz adds.

www.PerishablesBuyer.com

Seasonal marketing provides shoppers with a call to action—buy it now before the season ends—and can allow retailers to charge higher prices than on other produce, Lutz contends. With 34 percent of survey respondents telling Mintel they look for local when in season, the trend has growth potential among U.S. shoppers, Mintel notes. Agrees Lutz, “It’s absolutely here to stay and it’s going to continue to grow. Retailers will continue to figure out ways” to call attention to local and seasonal products on their shelves. Indeed, a New York company is so convinced local demand will grow that it’s marketing the idea of retailers putting greenhouses on store roofs and outside distribution centers to grow their own premiumgrade lettuce and tomatoes. Bright Farms LLC was close to signing a deal with a 100-store Midwest food retailer as 2011 drew to a close, says Paul Lightfoot, Bright Farms chief executive officer. “The industry has what I think is an inefficient model where it ends up giving consumers products that are not good enough,” says Lightfoot. Consumers who agree are ready to buy local. O

C Publix emphasizes seasonality for some of the produce it sells, such as these apples. Seasonality is another way to attract shoppers worried about product freshness and quality.

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CATEGORYSPOTLIGHT

PRO DUC E

For more information on the products featured below, visit www.PerishablesBuyer.com/Products.

new products:

PRODUCE

Crunch Pak Apple-tizers

Crunch Pak Dipperz Trays

River Ranch Fresh Foods Heritage Blend Salad Kit

Ready Pac Fresh Fruit Parfaits

$4.57 What the average American spent on berries in a given shopping trip this year, reports the Perishables Group.

Top 3 Potatoes, lettuce and onions are the top three purchased vegetables in the United States, reports Mintel International Group Ltd.

Fresh & Easy Brown Sugar & Pecan Sweet Potatoes

12

$10 million The maximum Whole Foods is willing to lend under its Local Producer Loan Program to encourage local produce production.

Jacobs Farm/Del Cabo Padrón Peppers

January 2012 • Perishables Buyer

CATEGORYSPOTLIGHT

FRO Z FOO EN D

SLICING UP THE MARKET The frozen pizza segment is facing increased competition from national pizza chains and from more in-store pizza options. But frozen could be poised to regain lost market share. BY JOHN N. FRANK editorial director

A KEY POINTS O Frozen pizza sales stalled in the face of increased competition from national chains and in-store alternatives. O Lo-cal offerings and exotic flavors appeal to certain consumer segments. O Expect frozen sales to rise this year as consumers continue to hunger for pizza.

P A Frozen pizza makers are bringing out lower calorie offerings, such as this DiGiorno 200 Calorie Portions product, as a tactic for regaining lost sales.

izza pie is as American as apple pie for most consumers. And that has spelled good news in recent years for food retailers offering frozen varieties of the ubiquitous Italian dish. But a rosy picture of constantly rising sales for frozen ran into the realities of the stagnant economy in 2010 and 2011, category watchers agree. National pizza carry-out chains such as Domino’s and others, which had lost market share when the recession began, struck back with reformulated offerings and lower prices. Frozen sales fell as a result. At the same time, retailers were stepping up their offerings of take-and-bake or made-in-store selections. Warehouse outlets such as Costco and Sam’s Club, for example, used in-store offerings to draw consumers away from their pizza freezer cases. Frozen pizza makers have responded to the competition by bringing out new varieties and flavors to show they can again entice consumers to pluck down

www.PerishablesBuyer.com

their dollars for frozen offerings. Expect more new choices as 2012 unfolds. A slice of life in the pizza case today means anticipating consumer wants and offering enough variety and quality to keep them coming back, experts state. The frozen pizza sector is “still going to be and always will be a very strong category within retail,” says Tom DeAngelo, director of national sales with Home Run Inn Foods, the Woodridge, Ill.-based maker of Home Run Inn pizzas. The chains can’t continue to offer the low prices they’ve been promoting, DeAngelo forecasts, and that should be good news for frozen sales. “At some point, they’re going to need to make money,” he says, only half-jokingly. The impact of chain promotions could be seen in 2010 when sales of frozen pizza fell 0.9 percent to just under $4.7 billion, according to a June 2011 report on U.S. retail pizza sales from Mintel International Group Ltd., a London-based research firm.

13

CATEGORYSPOTLIGHT

One of the biggest developments in frozen pizza during 2010 was the sale of several leading brands, including market leader DiGiorno, by Kraft Foods Inc. to international food powerhouse Nestlè. A Nestlè executive contacted by Perishables Buyer would not comment on Nestlè’s plans but competitors have seen it experimenting with direct store delivery of frozen pizza rather than sending shipments to distribution

B

B Take-and-bake pizza offerings, such as these at a Walmart Neighborhood Market store in Chicago, have cut into frozen pizza sales, as have increased marketing from national pizza chains.

14

centers. Combining delivery of pizza with other products likely could lower costs, an important consideration in a pizza market that has been dealing with rising commodity costs for much of 2011. Costs of bulk mozzarella, a pizza staple, went from $1.36 a pound in January to $2.13 a pound in June before retreating at year-end to around $1.65. Home Run Inn responded to the increased competition last year by stressing quality, DeAngelo says.

FRO Z FOO EN D

“We feel that people will always see the value in quality,” he contends. At Milwaukee-based Palermo’s Pizza, “we’ve really focused on delivering innovation,” says Chris Dresselhuys, director of marketing. While most people will opt to buy the pizza stalwarts— cheese, pepperoni, multi-meat and supreme—Palermo also has rolled out such exotics as a chicken fajita variety, a spinach, bacon and feta cheese offering, and a ham and pineapple pizza, Dresselhuys notes. “It’s an opportunity to have something different,” he explains. “You have the opportunity to deliver new flavors in a familiar product.” Palermo’s also claims to be the first frozen pizza maker to have an ultra-thin crust variety, its Palermo’s Primo Thin. Others have brought out similar frozen offerings, appealing to consumers looking for lower-calorie options. Demographics, in the form of more emptynester baby boomers, are driving growth of such offerings, Dresslehuys says of the ultrathin crust variety. Americans’ appetite for pizza isn’t likely to go away anytime soon, and that bodes well for future sales of frozen, says Harry Balzer, vice president with research firm NPD Group Inc., Port Washington, N.Y. “I have yet to see an end to where pizza will go with the American diet,” he states. Younger adults, the so-called millenials, have grown up eating pizza and are likely to continue doing so as they establish their own households, Balzer contends. Expect to see more exotic pizza variations in the freezer case, but also expect that most sales will remain in the tried-and-true varieties, Balzer says. “We are all explorers in our diet but we never leave the coast,” he jokes, referring to the practice of ancient mariners to only sail within sight of land. Agrees Home Run Inn’s DeAngelo, ‘there’s an interest in different flavors but by a very, very select group; the items that continue to drive the category are the classic versions of cheese and pepperoni and sausage.” Expect sales of those to rise in frozen during 2012 and beyond. Mintel predicts frozen sales will grow at a 4 percent rate each year through 2015 after stagnant sales in 2010. The old saying that the dough is in the bread could soon change to saying the dough to be made in the world of pizza is in the freezer case. O January 2012 • Perishables Buyer

CATEGORYSPOTLIGHT

new products:

For more information on the products featured below, visit www.PerishablesBuyer.com/Products.

FROZEN 3.8% Annual rate of growth for U.S. frozen pizza dollar sales from 2000 to 2010, says British research firm Datamonitor

Nestlè DiGiorno Pizza Party Pack

Schwan Food Company Red Baron French Bread Pepporoni

$6.4 billion U.S. retail pizza market size in 2015, estimates Mintel International Group Ltd.

Mystic Pizza Food Company Fire Roasted Veggie

Roundy’s Thin and Crispy

#2 Where private label ranks in frozen pizza sales for the 52 weeks ended Jan. 23, 2011, according to dollar sales data compiled by SymphonyIRI Group. DiGiorno ranks number 1.

Palermo’s Primo Thin Crust

www.PerishablesBuyer.com

Food Emporium Trading Company Artichoke

15

RETAILERPROFILE

A

RETAILER PROFILE

Walmart Thinks Small

BY RICH MITCHELL editor-in-chief

KEY POINTS O Wal-Mart Stores Inc. has started operating smaller-format food outlets. O Locations merchandise private label and supplierbranded perishables. O The limited space presents inventory and cost-containment issues.

A Walmart Express sells its store-branded Great Value ice cream at a substantially lower price than comparable supplierbranded selections.

16

Wal-Mart Stores Inc. is expanding its perishables reach with the launch of its smaller-format Walmart Express outlets.

W

hen one hears the name “Walmart,” the first word that might typically come to mind is “huge.” Bentonville, Ark.based Wal-Mart Stores Inc. is the world’s largest retailer with fiscal 2011 U.S. revenues of $260.2 billion. Walmart also is a powerful presence in the perishables merchandising market. It operates more than 3,000 U.S. Supercenter outlets with full grocery sections that have an average of 185,000 square feet of space and are open 24 hours. In addition, the company has more than 600 Sam’s Club warehouse outlets selling groceries. Yet, Walmart’s already significant perishables presence is being solidified with its rollout of comparatively dinky outlets called Walmart Express.

Positioned as test stores, the first two locations opened in June 2011 in Northwest Arkansas. Walmart reports that Walmart Express was created to offer low prices every day in a smaller format store that provides convenient access for fi ll-in and stock-up shopping trips. “The stores give Walmart flexibility in serving customers, especially in rural and urban areas where shoppers may not have access to larger stores,” the company notes. Walmart Express outlets average 15,000-square-feet and offer groceries and general merchandise, including assortments of fresh produce, dairy products and meats, as well center store items. Non-foods include health and beauty aids and over-the-counter medicines, and some stores have pharmacies One of the newest locations is in the Lakeview neighborhood on Chicago’s north side. January 2012 • Perishables Buyer

RETAILERPROFILE

Those area shoppers also have access to larger supermarkets as two major conventional stores operate within several blocks of Walmart Express—Jewel-Osco and Dominick’s, which are owned by Eden Prairie, Minn.-based Supervalu Inc. and Pleasanton, Calif.based Safeway Inc., respectively. Walmart Express, however, is convenient to the thousands of nearby consumers who primarily reside in apartments and condominiums and usually walk to neighborhood stores. Ben Ball, senior vice president of Dechert-Hampe & Co., a Northbrook, Ill.-based sales and marketing consultancy, says Walmart Express strengthens Walmart’s ability to compete with newer food competitors, such as dollar and drug stores. And unlike most convenience stores, Walmart Express pricing is comparable to that of traditional supermarkets or larger Walmart outlets. He notes that while the Supercenters “definitely made Walmart a more acceptable food destination,” it is challenging for the company to effectively merchandise

specific perishables in those locations. All Walmart meats, for instance, are case-ready— which can be discouraging to shoppers seeking the freshly cut or cut-to-order proteins available in many competing supermarkets. Supercenter operators also must manage the potentially large amount of shrink common to expansive produce departments. While Walmart Express outlets have much fewer SKUs than most food retailers, stores still carry a mix of national and private label brands. And similar to the Supercenters, Walmart Express’ store-branded Great Value items typically cost less than similar supplier brands. The frozen case in the Chicago store, for instance, features seven varieties of Great Value ice cream in 48-ounce containers for $3.28: Mint Chocolate Chip, Chocolate, Cookies & Cream, Chocolate Fudge Brownie, Butter Pecan, Chocolate Chip Cookie Dough, and Vanilla Bean. Also available are five types of Dean’s-branded ice

B As illustrated by signage over the refrigerated case, Walmart Express is being positioned as a lower-price retail alternative. Photos by Rich Mitchell

B

www.PerishablesBuyer.com

17

RETAILERPROFILE

cream in 48-ounce containers for $3.96: Chocolate, Butter Pecan, Homemade Vanilla, Moose Tracks, and Mint Meltaway. Most frozen meats also carry the Great Value brand, including 4-pound bags of chicken thighs, drumsticks, wings and wing drummettes, for $5.28, $5.28, $8.98 and $9.98, respectively, and boneless/skinless chicken fi llets in 3-pound bags for $6.48. Frozen cook-and-serve entrées primarily feature national brands, including Banquet, Stouffers, Boston Market, Marie Callender’s, Kid Cuisine, Birds Eye, P.F. Chang’s, Lean Cuisine, Healthy Choice, and Smart Ones. Great Value also is prominent in the dairy case (Great Value milk sells for $2.98 a gallon vs. $3.98 for Dean’s milk), and refrigerated section ($2.33 for a halfgallon of Great Value organic juice vs. $2.98 for Minute Maid and $2.98 for 59-ounces of Florida Natural juice). The Walmart Express meat case is close to the front entrance and features about 30 SKUs of beef—the most prevalent protein in the case. All selections are generic and include 1-pound ground beef chubs—73-percent lean for $2.98, 80-percent lean chuck for $3.28 and 93-percent lean all-natural for $3.98. There also is 96-percent lean ground beef in overwrap packaging for $5.28 a pound, and 85-percent lean all-natural ground beef patties for $4.28 a pound. Also being merchandised are about 15 steaks and

roasts—including flat iron steak for $2.98 a pound, top sirloin steak for $5.18 a pound and chuck roast for $3.98 a pound—and about 12 SKUs of fresh chicken. Most chicken carry the Tyson brand, but also available is generic boneless/skinless chicken breast for $2.98 a pound. The outlet’s most prominent emphasis, however, is on convenience. Shoppers, immediately upon entering the Chicago Walmart Express, encounter a large refrigerated case labeled “Ready-to-Go Meals.” The case contains boxes of 16-inch take-and-bake pizza that carry the company’s Marketside brand. Varieties, which range in price from $7.98 to $9.98, include Pepperoni, Sausage, Supreme and Ultimate Meat. Also available are 12-inch Supreme and Ultimate Meat pizzas for $5.98 and $6.98, respectively. In addition, the case contains selections of Walmart Deli-branded salads, and heat-and-serve entrées and side dishes. Brands include Hormel, Bob Evans, Lloyd's, Oscar Mayer and John Soules Foods. Directly opposite the entryway is a four-sided refrigerated grab-and-go display featuring sandwiches, salads, sushi and heat-and-serve meals. The heat-and-serve offerings in 12-ounce packages that are priced from $3.48 to $3.88 include Enchilada Chicken Casserole, Lemon Butter Chicken with Linguini, Macaroni and Cheese, Breaded Chicken Parme-

C

C An aisle display in front of the entrance in a Chicago outlet features sandwiches, heat-and-serve meals, sushi and other graband-go selections.

18

January 2012 • Perishables Buyer

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RETAILERPROFILE

E

D

D Neighborhood Markets typically carry wide varieties of produce, meat, dairy products and frozen foods. E Exterior Walmart Express signage spotlights the store’s focus on price and freshness. Chart Source: WalMart Stores Inc. Figures are as of November, 2011. Supermarkets include Neighborhood Market, Amigo, and Supermercado banners. Smaller formats include Walmart Express, Walmart on Campus, and Super Ahorros banners.

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Walmart Becomes A More Prominent Neighbor

san with Spaghetti, Chicken Alfredo with Penne Pasta, Chicken Tika Masala with Biryani Rice, Chicken with Artichokes, Four-Cheese Mostaccioli, and Turkey Meat Loaf with Mashed Potatoes. By offering similar selections in each store, Walmart will bring the uniformity to convenience-food shopping that is missing from other outlets, Ball states. “There are many independent neighborhood markets serving the population and shoppers don’t know what to expect when they walk into a store,” he says. “Walmart Express’ two main selling points, however, are location and price, and no one does those things better than Walmart.” The biggest Walmart Express challenge will be maintaining low costs while dealing with limited store space and a relatively small amount of products, Ball notes. “The only way to keep narrow inventories fresh, such as produce, is to increase service to the store,” he states. “But delivering three times a week rather than once adds to your expenses. Turnover will be the key to maintaining freshness and keeping prices down.” O

The Wal-Mart Stores Inc. Lineup description

retail units

entry

Supercenters

3,014

1988 (Washington, Mo.)

Discount Stores

635

1962 (Rogers, Ark.)

Supermarkets

195

1998 (Bentonville, Ark.)

Sam’s Club

610

1983 (Midwest City, Okla.)

Smaller Formats

12

While Walmart Express is Wal-Mart Stores Inc.’s latest retail concept, the merchandiser still is expanding its perishables reach in its other banners. Walmart, for instance, in September opened a Neighborhood Market outlet in downtown Chicago in an area dominated by office buildings—but one that also is close to the plethora of condominiums and apartment buildings that were constructed over the last decade. Altogether, there are about 167 Walmart Neighborhood Markets with an average store size of 42,000 square feet. Perishables include fresh produce, meat and dairy products, frozen selections and deli foods. Similar to Walmart Express, the Chicago Walmart Neighborhood Market is targeting convenience-minded shoppers. Close to the front entrance of the outlet, for instance, are refrigerated heat-and-serve entrées, as well as take-and-bake and hot pizza. Also near the front checkouts are hot cases with rotisserie chicken, chicken tenders, macaroni and cheese, and potato wedges. Walmart reports that Neighborhood Market sales for its third fiscal quarter of 2012 were 3-percent higher than the year-earlier period and that the chain posted year-overyear sales increases for 15 consecutive months. Also active is Walmart’s Sam’s Club warehouse stores. There are more than 600 Sam’s Club locations, and the banner is increasingly emphasizing fresh foods. Indeed, Sam’s Club for the third consecutive quarter recorded double-digit increases in bakery and bread sales, and a single-digit increase in produce sales. “More and more of our members are skipping the restaurant trip and eating at home,” notes Brian Cornell, Sam’s Club president and chief executive officer. “This trend is driving significant sales increases in categories such as home meal solutions and prepared meals.” He adds that members increased their trips to Sam’s Club outlets during the third quarter, which led to double-digit sales increases in the freezer/cooler, vegetable and fruit categories. Sam’s Club in 2011 also introduced its Artisan Fresh store brand in the deli and bakery areas, and Daily Chef in frozen foods.—Rich Mitchell, editor-in-chief

January 2012 • Perishables Buyer

COVERSTORY

the 2012 Perishables Trends

forecast

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The new year brings new revenue opportunities for perishables merchandisers. Here are some of the key elements that will impact retailers’ bottom lines. BY RICH MITCHELL editor-in-chief

orecasting consumer purchasing behavior and the best ways to generate food revenues is an inexact science. Such issues as rising prices, an uncertain economy and evolving shopper interests are contributing to make perishables merchandising in 2012 an increasingly complicated and challenging endeavor. Yet, industry analysts see some of 2011’s core consumer and market trends continuing into the new year— and they note that it is up to retailers and manufacturers to respond accordingly if the perishables sector is to

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achieve it growth potential. “Consumers want value, quality, convenience, and health and wellness,” says H.V. “Skip” Shaw Jr., president and chief executive officer of the Harrisburg, Pa.-based National Frozen and Refrigerated Foods Association (NFRA). “And they are looking for retailers and manufacturers to make life easier for their busy households.” Todd Hale, senior vice president of consumer and shopper insights for The Nielson Co., a New York-based market research firm, notes that frozen and refrigerated food growth will be dictated by innovation and the ways that merchandisers connect with shoppers in creating

A Signage at an H-E-B meat case in Austin, Texas, is intended to attract the growing base of shoppers seeking wellness-oriented foods. Photo by Rich Mitchell

21

COVERSTORY

KEY POINTS O Value, convenience and health and wellness are major shopper interests. O Rising prices will impact

buying behavior and revenues. O Locally produced

products will become increasingly popular.

demand across diverse population segments. Frozen and refrigerated items already are being sold at an increasing amount of unconventional food outlets. Nielsen notes, for instance, that the top-10 fastestgrowing drug store categories are all edible, and six are frozen or refrigerated: frozen prepared foods, frozen novelties, refrigerated juices and drinks, frozen pizza, frozen snacks, and milk. Yet, while overall category revenues are growing, much of the increases are due to rising product prices— which also are helping to hold down unit sales. Refrigerated and frozen revenues totaled $100.4 billion for the year-ending Sept. 3, 2011, up 3 percent from the year-earlier period, Nielsen reports. Unit volume was 38.8 billion, down 2 percent. The average unit price was up 5 percent. Figures are for UPC-coded products for food, drug and mass-merchandise outlets, including Walmart. Nielsen states that retail prices are rising in many supermarket departments, and large increases are occurring within the dairy and meat categories. Indeed, dairy prices rose about 4 percent in the 26week period ending Sept. 3, 2011, while fresh meat prices were up about 3 percent, Nielsen notes. And the largest revenue growth is in categories where prices have risen to cover increased input costs, Nielsen

states. Dairy, packaged meat and fresh produce sales, for instance, have risen 6 percent, 5 percent and 4 percent, respectively, for the 52 weeks ending Sept. 3, 2011 compared to the year-earlier period. Yet, unit volume sales fell over the last year for dairy (down 2 percent), frozen foods (a 2-percent decrease), packaged meat (down 3 percent), and fresh meat (a 6-percent decline). Such trends could continue in 2012 unless there is job growth to boost consumer confidence, Hale notes. He adds that shoppers will continue to look for value, but good prices and promotions will not guarantee success. “Manufacturers and retailers need to innovate and work harder than ever to differentiate and give consumers a reason to buy,” Hale reports. The NFRA in 2012, meanwhile, will focus on communicating to consumers how the quality of refrigerated and frozen foods is improving, Shaw says. Its March National Frozen Food Month promotion will carry the tag line, “Take a Quick Look at Frozen.” “Frozen foods in some instances are fresher than fresh foods,” Shaw states. “Our challenge is to get consumers to understand how frozen foods have changed over the years and the ways they can be part of a daily

B

B Freshly prepared grab-and-go meals, such as these at a Giant Eagle Market District store in the Pittsburgh area, are a response to consumers’ greater interest in convenient eating. Photo by Rich Mitchell

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January 2012 • Perishables Buyer

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COVERSTORY

lifestyle. Consumers are willing to pay for quality.” He adds that it is important to spotlight how the foods are developed. That includes noting, for instance, that vegetables are packaged frozen minutes after being har-

our consumer research shows that shoppers are going beyond price when looking for value,” she says. “For many it means buying local. Consumers want to be connected to the people that grow the foods. That gives them more confidence in the fresh foods and vegetables.” (For

“One of the great opportunities is for frozen and refrigerated manufacturers and retailers to work as a team to keep track of consumer trends and then focus on solutions.” —NFRA President H.V. “Skip” Shaw

vested on the farm. “One of the great opportunities is for frozen and refrigerated manufacturers and retailers to work as a team to keep track of consumer trends and then focus on solutions,” Shaw states. “Areas such as health and wellness and portion control are becoming more prominent.” Nutrition also should be a key focus for produce merchandisers, says Lorna Christie, executive vice president and chief operating officer of the Newark, Del.-based Produce Marketing Association (PMA). That includes promoting how produce can serve as a healthy and tasty snack for kids in the fight against childhood obesity. “Snacking is a great opportunity, particularly as there have been packaging innovations that makes it easier to market berries and other delicate foods as an easy-to-grab snack,” she states. Merchandisers also can benefit by leveraging the increasingly stronger shopper interest in locally grown foods, Christie notes. “There is a tendency to define value based on price, but

more on the trend toward buying local produce, see story, page 8.) She recommends that retailers use in-store promotions to highlight the individuals and companies that supply locally developed produce. Quick Response (QR) codes—matrix barcodes that contain data which shoppers can access with mobile devices—also are effective vehicles for communicating product information, Christie notes. In addition, retailers can spotlight products via instore samplings, which also enable associates to tell consumers how the food is produced. “The perception of many retailers is that consumers

C

C Increasing food prices are affecting perishables revenues and unit sales. A sign at a Fry’s supermarket in Arizona targets the cost-conscious shopper. Photo by Rich Mitchell

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January 2012 • Perishables Buyer

COVERSTORY

are just focused on price,” Christie says. “But there are a large group of shoppers that want to be connected to the food. Value is determined based on price and the story of the people who grow the food.” Social media also will be an increasingly crucial avenue for marketing produce and other perishables. Merchandisers, for instance, can use the Internet to make kids aware of the different produce flavors, Christie states. Indeed, Bruce Axtman, president of the Perishables Group, a Chicago-based fresh food consulting firm, says astute merchandisers can reach customers via blogs, through Facebook, and with online promotions. Such promotions can include private label perishables, which Axtman says will remain a strong growth area in 2012. Store brands accounted for a record 19.1 percent of supermarket dollar sales for the year-ending 5/14/11, the Perishables Group reports. “Retailers are continuing to put more emphasis on store brands in order to become unique and offer better value to consumers,” he states. “It also helps them to better manage profit margins.” That focus on profitability also will result in fewer perishables promotions, Axtman predicts. Shoppers have been cutting their grocery bills by buying less, using coupons and searching for sales, Axtman notes. He also agrees that the appeal of locally produced items will continue to grow in 2012. The Perishables Group reports that Grand Rapids, Mich.-based Meijer Inc., which operates about 200 supercenter-type outlets in Michigan, Illinois, Indiana, Ohio and Kentucky, increased the amount of fruit and vegetables it sourced from Midwest farms by 5 percent in 2011. Wal-Mart Stores Inc., the world’s largest retailer, also is adding more locally grown produce, the Perishables Group states. “Locally grown products, which apply more to produce than any other area, is very big and important,” Axtman says. “Retailers want it and consumers buy it hook, line and sinker.” Indeed, such items have the halo of being fresher and better for the environment. “The local farmer is seen by many consumers as good and the big corporate farms as not, even if that is not fact based,” Axtman says. The meat sector, meanwhile, will face some of the biggest perishables merchandising challenges in 2012. Supply issues, for instance, are likely to increase the retail cost of proteins, says Michael Uetz, principal

www.PerishablesBuyer.com

of Midan Marketing LLC, a Chicago-based marketing, communications and market research firm. “Retailers have struggled over the last few years to maintain prices and not pass [increases] on to shoppers, but the input costs will not go down,” he states. Patrick Fleming, director of retail marketing for the Des Moines-based National Pork Board, notes, for instance, that the price of corn and soybean meal have

D doubled over the last two years. Drought and increased protein exports also are contributing to higher domestic prices for pork and beef. Uetz says the merchandising of convenience-oriented meats for time-conscious consumers, such as premarinated proteins, provides the strongest growth opportunity for retailers. “We need to think about the consumer mindset— the factors that are driving their purchasing habits,” he states. “Consumers are being more selective on how they spend their dollars. So there must be new merchandising platforms that make the products more interesting. Fleming agrees: “It is a never-ending cycle of engaging and educating shoppers and meeting their changing needs. There is a new form of retailing in which shoppers are becoming more engaged with who they buy from.” Such changing shopper attitudes will have a major impact on perishables merchandising in 2012. Those retailers that rapidly respond to consumer expectations will be in the best position to thrive in the New Year. O

D Value-added proteins, such as these preseasoned meats at an A & P store in New Jersey, are designed to simplify meat preparation.

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ROUNDTABLE: DELI

A NEW PLAN OF ATTACK Deli operators are battling a host of aggressive competitors for share of stomach. Experts say success will require a change in operations and attitudes. BY RICH MITCHELL editor-in-chief

S

upermarket delis are positioned to be increasingly stronger revenue generators. Yet such factors as economic issues and enhanced competition from the foodservice sector are holding down activity. Two food retailing experts detail the state of the deli sector, the challenges facing operators, and how merchandisers can best succeed in the evolving environment. Jack Li is managing director of Datassential, a Los Angeles-based food industry research firm. Harold Lloyd is president of Harold Lloyd Presents, a Virginia Beach, Va.-based consulting fi rm.

PB: What are the major trends in supermarket deli merchandising? Li: A wider variety of items are being featured. Retailers are moving beyond rotisserie chicken, fried chicken and fried appetizers to more complete meals that include en-

keeping things interesting and offering a greater variety of selections. Many shoppers go to the deli for chicken, but stores need to attract customers more regularly with other items. Lloyd: It is the resurgence of the fast-casual eateries where everyone seems to be offering a value meal. Many delis are not changing their marketing approach. It scares me that more operators in the restaurant industry are offering packaged meals that are quick, delicious and affordable and delis sit back and say, “that’s not us.” Sandwich shops like Panera Bread offer great, inexpensive quick meals. But supermarkets are in a retrenchment mode where they see a need to cut costs. Rather than being proactive, the industry has cut labor and you can’t have a sandwich program succeed if there are not enough employees to quickly serve the customers that are waiting in line.

Jack Li

“Consumers are getting exposed to a wider variety of foods, ingredients and especially ethnic influences so they want comfortable experimentation.”

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trées and side dishes. There also is cross-merchandising with such items as bread, wine and desserts that come from other areas of the store. In addition, there are more health and better-for-you selections and stores are highlighting full-family feeding options with signage that might say “feed a family of four for twenty dollars.”

PB: How can deli operators best meet such challenges? Li: They need to better understand what is happening at foodservice chains and local independent restaurants and apply some of those strategies to their operations. Delis also should provide restaurant-quality meals at reasonable and more affordable price points.

PB: What are the major challenges facing deli operators in attracting and retaining shoppers? Li: Having to compete with the fast-casual and quickservice operators that are trying to get more of the dinner dollars; competing with more casual dining chains that are offering take-out and carry-out meals; and

PB: How have shopper sentiments and buying behavior in delis evolved in recent years? Li: Consumers are getting exposed to a wider variety of foods, ingredients and especially ethnic influences so they want comfortable experimentation. One major trend we’ve seen in foodservice, which lends itself well January 2012 • Perishables Buyer

ROUNDTABLE: DELI

A

to the deli, is “twisted comfort,” adding a new spin to a familiar item or platform. Lloyd: Everyone is expecting more. Restaurants are teaching customers to expect meals faster and consumers are getting food faster through drive-up windows and within the locations. Fast-food operators also have digital clocks in the work areas that time every transaction. Few in the supermarket world do the same. It confuses me why we let speed of service go away to the competition. In addition, more of the foodservice items are being promotionally priced. PB: What factors have led to changing shopper actions? Li: Aside from the economy and how it has driven consumers to try to shop smarter, there also is wider exposure to foods and flavors through television cooking shows, lifestyle publications and trends happening in the restaurant industry. PB: What technologies, tools or strategies can deli operators leverage to attract shoppers? Li: Social media, in-store cooking demonstrations, and demonstrations outside the store to showcase offerings at such events as food festivals and local fairs. I also would look to leverage the marketing and menuing tools used in foodservice, such as combo meals, special price promotions, and perhaps limited time items to keep things interesting. Lloyd: Cross-merchandising, which can include offering rotisserie chicken in a basket along with corn bread, salad and a drink. Very few delis have the entire meal together along with an easy way to transport it. Many www.PerishablesBuyer.com

consumers will drive up to an Applebee’s restaurant where there is curb-side service on takeout and they are willing to pay twice as much for the convenience. PB: How is greater consumer interest in health and wellness affecting what they seek from delis? Li: Shoppers want the healthy option available even if they don’t always choose it. Consumers also are often not very well informed about what is actually “healthy.” Our research shows that few can identify the amount of calories or sodium they should have each day. Health and wellness also has expanded beyond just nutrition. Organic, natural, humane treatment of animals, fair trade and other factors are now all part of a “feel good” movement that consumers often sweep under the umbrella of health and wellness. The key for the industry is to adopt a broader view of the opportunity. PB: How crucial is it to have well-trained deli employees? Lloyd: It is very important. Really good operators have great training programs and their employees know the products. But with companies’ attitudes of cutting payroll under a recessionary attack, the idea of employee training is kind of a dream for many. I worked for five hours in a deli and bakery last year and I was so busy I couldn’t do half the things that needed to be done and also have time to teach. PB: What other issues are impacting deli merchandising and sales? Li: Pricing remains a key factor as consumers perceive the deli to be an expensive alternative to the aisles. Oth-

A More retailers, such as Metro Market in Milwaukee, are emphasizing prepared foods in an effort to attract the growing base of convenienceoriented shoppers. Photo by Rich Mitchell

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ROUNDTABLE: DELI

old Lloy ar

er emerging and growing away-from-home channels also are adding competitive pressure—from fast-casual restaurants to food trucks. Lloyd: Many stores do not have enough products on hand. I recently was in three delis between 6:30 p.m. and 7 p.m. and there were a total of three rotisserie chickens in the cases—a time when people are driving home from work. Do you think Kentucky Fried Chicken would be without chicken at 7 p.m.? Every perishables supervisor should work in a perishables department of their

ing the same thing. Delis might just put the date on the package and the next day you don’t know whether it sat out for 12 hours or 36 hours. When the convenience stores out-fresh us we’re in trouble. Anything sold fresh or in a bag should have a date and time on it. PB: What will supermarket delis have to do over the next few years to remain competitive? Li: There will be a need to offer a wider breadth of food and experiences.

d

H

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“When the convenience stores out-fresh us we’re in trouble.” choice as a clerk and rotate among the departments every month to see what can be done to increase sales and not cut payroll in a blanket fashion. They also should work in the busiest stores and the outlets that have the best cost control to see what those locations do differently. B Hot take-out meals enable delis to better compete with foodservice operators. This Wegmans outlet in the Washington, D.C. area spotlights its pizza offerings. Photo by Rich Mitchell

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PB: Are there additional steps that delis can take to become more attractive options? Lloyd: There needs to be more freshness management. The Wawa convenience store chain has dating on its packaging that lists when the food was prepared by the hour and I don’t know of many supermarket delis do-

Lloyd: Darwin had a great theory with his natural selection—he could have been a retail consultant. The strong will see the important trends, such as greater consumer interest in health and wellness, and will respond. I’m dismayed that too many retailers are not responding. If they spend time like I did working as a clerk they would see when is happening and be more willing to dig in and make the necessary adjustments to their operations. Walmart, the recession and the Wawa-type operators will make them respond. The good ones will get it in time. Competition is a great motivator. O January 2012 • Perishables Buyer

Category Updates 30

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JANUARY 2012 30 Meat To Cut Or Not To Cut 31 Foodservice The Battle For Breakfast 32 Refrigerated What’s Your Sign?

33 Bakery Will The Cupcake Craze Crumble? 34 Seafood In The Tank

35 Dairy Opting For Organic 36 Infrastructure The Eco-Friendly Future

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CATEGORYUPDATE: MEAT

TO CUT OR NOT TO CUT In-store butchers can enhance customer service—but at a price. BY RICH MITCHELL editor-in-chief

KEY POINTS O The popularity of case-ready meats is contributing to the decline of in-store butchers. O Store-cut meats help to differentiate retailers and can accentuate protein freshness. O It is becoming increasingly difficult for merchandisers to find qualified butchers.

A In-store butchers, such as these cutters at an A&P outlet in New Jersey, help stores stand out from competitors who primarily offer case-ready proteins.

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he in-store butcher is part of a declining breed. While butchers years ago were common to the vast majority of supermarket meat departments, their numbers have been steadily dwindling as more outlets embrace case-ready proteins as a way to reduce operating expenses. Indeed, instead of having butchers cut and package meats—particularly beef—in back rooms, more stores are maintaining inventories of pre-packaged proteins. By leveraging case-ready selections, operators can eliminate butchers’ salaries, minimize shrink and cut down on out of stocks. Rather than waiting until butchers are on duty to replenish supplies, any store employee can stock the meat case at any time with case-ready packages. Yet, meat operators that eschew butchers also are reducing their levels of customer service. Many shoppers, for instance, seek product and preparation information and view butchers as important resources, notes Kari Underly, president of Range Inc., a Chicago-based meat training and education firm and the author of the new book, The Art of Beef Cutting. “Customers are relieved when they can talk to someone in the department,” she states. “And meat also has the perception of being fresher when it is handcrafted. Some shoppers say they feel like they are getting locally produced items when cut by butchers, even though the meat might be shipped from out of state.” David MacVane, assistant vice president for the Wooster, Ohio-based Certified Angus Beef brand, agrees that store-cut meats typically are perceived by consumers as fresher—in part because the proteins can have half the shelf lives of case-ready meats. “Butchers also can cut meat to meet shoppers’ specials needs in terms of weight, thickness and trim,” he says. “That helps retailers to differentiate themselves in the market.” Yet, while butchers can strengthen meat merchandising, finding qualified cutters is becoming increasingly challenging. The growth of case-ready has cut into the demand for butchers, resulting in fewer persons seeking out the posi-

A

tions. And as older cutters retire, there are fewer qualified individuals available to train novice cutters. “Cutting meat is hard work and the next generation is not looking for all that physical labor,” MacVane states. “That is one reason a lot of stores are looking at case-ready.” Underly notes that some chains even have butchers travel among different stores because of the labor shortage. While more culinary schools are starting to train butchers, she says it also is important for retailers to devise their own instruction programs. And retailers with butchers should spotlight the individuals via store signage and through social media, Underly states. “Retailers have been hurt by not having meat department experts who can talk with shoppers,” she adds. “If there is a meat cutter, promote it. Stores can even imply they are keeping jobs in the community by having butchers on staff. It’s another way to emphasize ‘local.’” O

January 2012 • Perishables Buyer

CATEGORYUPDATE: FOODSERVICE

THE BATTLE FOR BREAKFAST With competition for breakfast dollars heating up among fast-food restaurants and coffee shops, can supermarket foodservice become a morning destination? BY JEFF BANOWETZ

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he latest trend in breakfast is one of the oldest trends in breakfast: oatmeal. That’s right, the most basic staple of your grandparents’ generation is now back in the spotlight. Food giants like McDonalds, Burger King and Starbucks have added oatmeal to their menus in hopes of attracting more people to eat their fi rst meal of the day away from home. But while fast-food restaurants and coffee shops are drawing in more customers with breakfast offerings, supermarket foodservice operations have been slow to adopt the trend. According to research by the Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA), breakfast sales at foodservice were actually down 3 percent in 2010. “Foodservice has definitely been slow to the breakfast trend,” says Jon Hauptman, a partner at Willard Bishop, a Barrington, Ill.-based retail consultancy. “You figure that grocery stores have the locations, they have the hours— they all open early, and they have the products available. But they tend to focus on other areas.” Success in the breakfast market isn’t just a matter of having the food available. “There are some challenges,” says Jenny Anderson, a director at Technomic, Inc. a Chicago-based company that offers research and consulting to the food industry. “Opportunities vary by store location because convenience tends to be an over-riding consideration. Breakfast during the week is a hurried meal for most consumers, and a stop at a supermarket may be less convenient than a quick meal at home or going through the fast-food drive-through or even to a convenience store.”

“These days, it’s all about value, convenience and taste,” agrees Alan Hiebert, IDDBA information specialist. Outside of foodservice, breakfast is booming, at least in terms of restaurant sales. After a slight decline during the recession in 2008 and 2009, breakfast sales at restaurants rose 2.2 percent in 2010 and are expected to rise 4.1 percent in 2011, according to Mintel International Group Ltd., a London-based research firm. And the future looks bright, with Mintel forecasting nearly 5 percent growth for every year through 2015. Supermarkets with coffee outlets such as Starbucks inside their stores may have a leg up in attracting breakfast patrons. “Younger people aren’t as willing to put up with what we might have called diner coffee,” Hiebert says. During the week, however, breakfast offerings should emphasize convenience. “Supermarkets can offer chilled offerings that can be purchased the night before and reheated in the morning,” Anderson says. “Breakfast burritos and microwaveable bowls with eggs and different omelet-style ingredients are two examples. She notes that breakfast sandwiches have been a major emphasis for restaurants and retailers alike because the portable format makes them more suitable for those on-the-go. But again, supermarkets need to compete with the speed of service, Anderson states. “Separate checkouts in the deli department help to get foodservice customers in and out more quickly.” The weekends are a different story, as breakfast becomes more of a sit-down activity. Some groceries have been able to transform their usual salad bar into a breakfast buffet. O

KEY POINTS O Supermarket breakfast sales haven’t kept pace with those at fastfood outlets.

O Emphasize convenience to capture more breakfast business.

O Heavily promote breakfast offerings to plant the seeds of future purchases.

A

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A Oatmeal has become the new battleground for breakfast business.

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CATEGORYUPDATE: REFRIGERATED

WHAT’S YOUR SIGN? When it comes to promoting refrigerated items, retailers, and their shoppers, have to see the sign. BY LYNN CELMER

KEY POINTS

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O Make the message simple. O Make it visible, without being intrusive. O Keep signs current— after a week or two, shoppers won’t see them anymore.

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igns that grab shopper attention and give them reasons to buy can be as effective in the refrigerated case as in other parts of the store but there are some critical rules to follow to make refrigerated signage work for you. Ninety-three percent of consumers say that in-store signage and product displays—which typically point to promotional and sale items—can influence them to purchase items not on their shopping list, according to an August, 2011 survey by Southfield, Mich.-based AlixPartners. Effective use of signage is a critical component of effective merchandising, says Jeff Weidauer, vice president of marketing and strategy, for Little Rock, Ark.-based Vestcom, a marketing consulting firm.

93% A Signs should be a constant presence, but they should be changed frequently.

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One of the challenges of merchandising in the refrigerated section is the limited amount of space, however. “We use the two-foot halo effect as our rule of thumb,” says Leslie Brown, director of in-store marketing for Livonia, Mich.-based media and marketing company Valassis. “What that means is that a sign should be hung at eye level, if possible, and there should not be another sign within a two-foot radius of it.” Keeping the clutter to a minimum is key to achieving sign effectiveness. Having too many signs on the shelf will have the opposite effect you want, causing consumers to become disengaged rather than eager to buy, Brown notes. Signage goes way beyond just paper and cardboard as well. “I like the idea of vinyl floor graphics,” says James Tenser, principal at consumer products consultancy VSN Strategies in Tucson, Ariz., and executive director of the membership organization In-Store Implementation Network. “They [vinyl signs] don’t interfere with the view of the merchandise and you can see it from some distance down the aisle. If you position it correctly, and it points to the front of the refrigerated case, then I think it can be an effective tool.” Because we live in a technology-driven world, retailers also can look into electronic or video options when it comes to their signage, says Richard George, professor of food marketing at Saint Joseph’s University, Philadelphia, Pa. “Instead of one dimensional, retailers can use signage that is multi-dimensional with sight, sound and motion. I don’t think the sign necessarily has to be in the section or on the section door, I think it could be on the product

The percent of consumers that say that in-store signage can influence them to purchase items not on their shopping list.

“It’s well-known that products without a sign won’t sell, and there are so many things beyond just item and price that can be incorporated to add value to the shopper and drive extra sales.” In addition to price, retailers also can use signs in the refrigerated section to tout things such as a mix and match promotion or a theme such as a holiday or other type of occasion.

as well, such as a QR [quick response] code that people could scan to get additional product information.” Signs should be a constant presence, but they should be changed frequently, adds Weidauer. After a week or two, they become just part of the décor and so don’t attract shopper attention any longer, so they need to be switched out to offer something new. More is rarely better though, so be very particular about which items warrant a sign. O

January 2012 • Perishables Buyer

CATEGORYUPDATE: BAKERY

WILL THE CUPCAKE CRAZE CRUMBLE? Consumers still crave cupcakes but some signs are emerging that demand may be slackening. To keep sales strong, try exotic flavors and keep on eye on the competition. BY PIET LEVY

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he last few years have been a whirlwind period for the cupcake. Cupcakes were the top Google search term in September 2008 and the inspiration for reality television shows “Cupcake Wars” and “DC Cupcakes.” And with the rise of cupcake boutiques around the country and market leader Crumbs Bake Shop going public in May, cupcakes have practically transformed from chic treat into industry cornerstone — and have become tasty business at grocery retailers’ bakery departments. With demand now high, retailers can get a bigger slice of sales with the right recipe of fair prices, diversity of displays and variety of offerings, says Jonna Parker, director of account services at fresh food industry consultancy Perishables Group in Chicago. According to Perishables Group data, U.S. cupcake sales at grocery stores have grown a staggering 74 percent from 2005 to 2010, garnering a projected $320 mil-

A www.PerishablesBuyer.com

lion in sales in 2010. The average number of unique cupcake item codes—each of which can be connected to a variety of styles and serving sizes—was 9.5 per store in 2010, up from 6.2 in 2006. “That is a lot of item code shift in just four years,” Parker says. And retailers, by offering higher quality products, have raised the average cupcake package price from $3.99 in 2006 to $4.48 in 2010, she notes. “Cupcakes were the hot thing because they’ve hit lots of boxes,” Parker says. “They appealed to consumers who wanted three things: indulgence, variety and portion control.” But there are crumbs of evidence that cupcakes won’t sell like hotcakes forever. According to an October survey by Seattle-based online culinary destination AllRecipes.com, 37 percent of consumers claimed they were eating fewer cupcakes than last year. Cupcake sales grew 11 percent in 2010— down from a 14 percent increase the previous year, the Perishables Group reports. “Double-digit growth is still growth,” Parker says. “But we can’t expect a doubling of numbers every year. You have to hit a max point.” That’s why Parker warns that retailers shouldn’t continue to raise prices “just because,” stressing that they should study cupcake prices at area bakeries to make sure their prices remain competitive. She’s also concerned that many retailers keep cupcakes behind a service case, noting that while a retailer can better control presentation, products behind glass aren’t as accessible. She recommends for cupcakes to be in display areas where consumers can serve themselves. And retailers need to keep innovating with a variety of flavors and package sizes. Stephanie Robinett, director of communications at AllRecipes, says the best rated cupcake recipe in early November was pumpkin ginger. Parker and Robinett also foresee mini cupcakes becoming bigger sales items. O

KEY POINTS O Consumers are looking for increasingly exotic cupcakes. O Mini-cupcakes could be the next hot trend in the bakery. O Watch local standalone bakeries for new flavors to imitate.

A Cupcakes have earned major space in many supermarket display cases, such as this one at a Safeway in Tucson, Ariz., thanks to strong consumer demand. To keep sales robust, however, you need to remain innovative with new varieties and sizes. Photo by Rich Mitchell

33

CATEGORYUPDATE: SEAFOOD

IN THE TANK Live lobsters can drive business to your store’s seafood counter. BY JEFF BANOWETZ

such as a whole lobster. But today’s lower wholesale prices present opportunities for retailers to showcase lobster specials in an economy when shoppers are constantly on the lookout for deals. “The biggest thing is the added value at the seafood counter,” says Dane Somers, executive director of the Maine Lobster Council, a Portland, Me.-based lobster promotional body. “It’s your marquee product. You can’t get any fresher than that. And when people buy lobster, they shop around, pick up a bottle of wine. They spend more in the store than just the lobster.” The council’s research shows marketing lobster can be beneficial to the store’s bottom line, Somers contends. “You put pork chops on sale, it’s not that exciting,” he says. “But advertise a lobster special and that’s different. People think of it as a celebration food.” Properly cared-for lobsters can live practically indefinitely in the tank. “Eventually you’d have to feed them,” Billings says. “But they’re sold long before that.” Lobster tanks vary greatly in price, from $5,000 to $20,000 and up, according to Richard Tokosh, owner of Lobster Life Systems, a tank manufacturer and distributor in Lodi, N.J. “It just depends on how big you go and how much you want to customize it,” he says. Retailers can also expect to pay several hundred dollars a year to maintain tank filters and other parts. Or hire an outside vendor to clean and maintain the tank, usually with monthly visits. In New England, retailers close to the ocean can increasingly deal directly with fishermen to get their freshest catch. “It’s a lot like the trend of farmer’s markets and eating locally,” Billings says. “People like to know where their food is coming from. It means the fisherman is cutting out the middleman, and the consumer knows he’s getting a great local product.” O

A KEY POINTS O Lobster prices are down at wholesale because of a large Maine harvest. O Lower prices present retailers with opportunities to feature lobster specials. O A lobster tank gives a fresh aura to the seafood counter and so attracts business. A • A live lobster tank can draw consumers to a seafood counter and boost overall sales in the process. Tanks can cost from $5,000 to $20,000 or more depending on size.

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W

hen it comes to seafood, there’s only one word that matters as far as consumers are concerned: fresh. So what better way to emphasize the freshness of your seafood than a tank full of live lobsters? Last year produced a record lobster catch in the state of Maine, which produces 90 percent of the lobsters in the United States. Combined with imports from Canada, nearly 200 million pounds of lobster are brought to market each year, according to the Lobster Institute at the University of Maine in Orono. “There’s no quota on the number of lobsters,” says Cathy Billings, associate director at the Lobster Institute. “There are other regulations to ensure a sustainable fishery. But everything that’s brought to the wharf is sold.” The high volume has managed to keep prices relatively low at the wholesale level. In today’s sluggish economy, consumers might not necessarily be thinking about buying a luxury item

January 2012 • Perishables Buyer

CATEGORYUPDATE: DAIRY

OPTING FOR ORGANIC Demand for organics is up but retailers need to determine the right mix. BY LYNN CELMER

D

emand for organics, which tend to cost consumers more than non-organic dairy offerings, is at an all-time high, despite the troubled economy. That presents an opportunity to increase your dairy case sales with the right mix of organic dairy products alongside your standard offerings. Total revenues for organic milk/ cream reached an estimated $2.1 million in 2010, up 10.2 percent from 2009, while sales of yogurt reached $1.03 million in 2010, up 8.5 percent, according to the Organic Trade Association’s 2011 Organic Industry Survey. So, what will be the most profitable mix of organic and non-organic offerings in your dairy case? You can start formulating your answer to that question by looking at your customer base, says Cindy Sorensen, vice president, strategic information and relationship management, for the St. Paul, Minn.-based

The percent of respondents that use organic dairy. (Mintel International Group Ltd.)

25

Midwest Dairy Association. “Retailers should understand that there is a need for a range of options to satisfy differing shopper needs. Organic milk will appeal to certain shoppers. If they are in your target market, than organic milk is a must have for you. For many years, organic and natural items had been relegated to a separate place in the grocery store, such as

www.PerishablesBuyer.com

A KEY POINTS O Optimize flow and adjacencies by grouping like products, like all organics, together, the way a shopper naturally shops. O Use signage that calls out the health and wellness benefits of dairy products, including organics. O Targeted in-store couponing can boost sales.

the natural foods department in a small cooler, which presented a challenge for merchandising, says Eric Newman, vice president of sales for La Farge, Wis.-based Organic Valley, a farmed-owned organic dairy cooperative. “It didn’t really make sense for the shopping habits of consumers. Consumers are going into the dairy aisle to shop for dairy and if they couldn’t find the organics, then they got passed by. What I’ve heard from several different retailers is that they are going to take more space out of their conventional dairy set to allow more space for specialty products.” Shoppers are seeking more engagement in the dairy department and are looking for cues to help them make purchase decisions, according to The Future of the Dairy Department is Now!, a report from Dairy Management, Inc., a Rosemont, Ill.-based dairy marketing organization. One way to do that is through in-store marketing programs that include coupons at checkout. “Maybe it’s a new mom and you’re going to generate a coupon for them when they purchase Gerber brand organic baby food,” says Newman. “We’ve seen a lot of success with in-store marketing.” O

A • Organic milk new product introductions increased in 2011 to 22 new products launched.

35

CATEGORYUPDATE: INFRASTRUCTURE

THE ECO-FRIENDLY FUTURE

Eco-friendly packaging isn't an option, it's a necessity to connect with concerned consumers. BY JORDAN BRANDES

KEY POINTS O Consumers have come to expect eco-friendly packaging. O A variety of new eco packages debuted in 2011, pointing the way toward future innovations. O Eco-packaging that reduces waste and shipping weight can save you money.

B A Consumers are coming to expect ecofriendly packaging. The more you have, the more goodwill, and sales, you’ll realize. B Brassica Sprout Group switched to a new tamper-resistant clamshell container to improve food safety. C A Wisconsin company has developed this calculator to determine the ecofootprint of a product.

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I

n an ever-changing market, anticipating trends can give retailers a competitive edge. That’s certainly true in the world of eco-friendly packaging where consumers increasingly are coming to expect packaging that does the minimal harm to their environment. Retailers who stay on or slightly ahead of trend when it comes to eco-friendly packaging can gain increased consumer goodwill, which will hopefully translate into higher sales, says Kevin Williams, principal brand strategist for the North Hampton, Mass.-based research and analysis branding firm Pure Branding, Inc. Agrees Wendy Sancewich, director of the McGladrey National Manufacturing Industry Team at the Bloomington, Minn.-based consultant firm McGladrey & Pullen, LLC., “If a company decides to start carrying or producing eco-friendly products, it can not only reduce spending by reducing the amount of materials used in creating or disposing of a product’s packaging but find favor among consumers as well by being socially responsible.” The packaging world has seen a variety of new products in recent days that point toward a greener and more environmentally conscious future for perishables, experts agree. Danvers, Mass.-based seafood supplier Fishery Products International announced last year that it had completely converted all of its U.S. produced items to 100 percent recycled packaging and is in the process of converting its items produced overseas as well. Watsonville, Calif.-based Monterey Mushrooms was awarded the 2011 Produce Marketing Association’s Impact Award for its new sustainable packaging approach. The company’s new packaging replaces the standard styrofoam with corrugated paperboard that is approved by the Food and Drug Administration. Richmond, Calif.-based Excellent Packaging & Supply in 2011 introduced compostable produce bags into the market. The bags are made from GMO-free cornstarch and can be branded by any retailer. Last September, Baltimore-based Brassica Sprout Group switched to a new tamper-resistant clamshell con-

A tainer in an effort to improve food safety and become more sustainable. Each container is made from low-carbon, 100 percent recyclable PET plastic. Kalamazoo, Mich.-based thermoformed plastics manufacturer Fabri-Kal last year introduced its new line of Greenware cups, lids and portion cups made with 50 percent post-consumer recycled plastic. Elgin, Ill.-based Fisher Nuts last year introduced its new lightweight can which is made using up to 75 percent less greenhouse gas emissions annually compared to the company’s standard composite can. “In this economy, companies are looking for new ways to save money. In an environment where it is necessary to work as lean as possible, reducing packaging will reduce the expenses necessary to make and sell a product,” explains Sancewich. Companies can now quantify exactly how much each package they use helps or hurts the environment. Brooklyn Park, Minn.-based Menasha Packaging introduced the Environmental Sustainability Calculator in 2011 as a way for companies to document just how much of an impact they are having on the environment. O

C

January 2012 • Perishables Buyer

NUMEROLOGY

TAKE A NUMBER

5,700

$320

The number of people in Maine who harvest lobsters for a living. (Lobster Council of Maine)

The dollar volume of cupcakes sold in supermarket bakeries during 2010. (The Perishables Group)

million

6.2%

The projected compound annual growth rate for fruitt and vegetable sales in the United States through 2015. 5. (Mintel International Group Ltd.)

3 4 #2 out of

The portion of shoppers buying in-store bakery items who are Caucasian. (International Dairy Deli Bakery Association)

Milk’s ranking in sales among beverages sold in the United States. Carbonated soft drinks are No. 1 with a 37% sales share, followed by milk at 27%. (Dairy Management Inc.)

75%

34.2

82%

29 T8

(Produce Marketing Association)

The projected per capita cheese consumption, in pounds, for every American in 2019. (USDA)

Percent of consumers who like to visit supermarket delis that feature new and exotic products. (IDDBA)

The number of years the National Frozen & Refrigerated Foods Association has been promoting March as National Frozen Foods month. (NFRA) A type of lighting that will be used less frequently in refrigerated cases as retailers and equipment makers conform to new federal energy usage standards that went into effect Jan. 1, 2012.

78%

29

Percent of consumers who look for useby or sell-by dates on produce packaging.

Percent of U.S. households buying organic foods as of late 2011. (Organic Trade Association)

The number of cuts of beef. Americans ate meat from 33.3 million cows in 2009, the latest year for which stats are available. (American Meat Institute)

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37

AD&COMPANYINDEX

AD INDEX COMPANY

WEB/EMAIL

PAGE

Diversified Business Communications........................www.bostonseafood.com ..........................................................5 ECRM ...................................................................................www.ecrm.marketgate.com .................................. Back Cover Perishables Group.............................................................www.perishablesgroup.com .....................................................3 Produce for Kids ...............................................................www.produceforkids.com .........................................................9

Perishables Buyer (formerly R&FF Retailer) reaching an average qualified circulation of 10,000 copies. Source: June 2011 BPA circulation statement. BNP Media II, L.L.C 155 Pfi ngsten Road, Suite 205, Deerfield, Illinois 60015 847-405-4000 Fax: 847-405-4100

READER & MARKETING SERVICES

COMPANY INDEX COMPANY

PAGE

AlixPartners...................................................................................32

PAGE

Palermo’s Pizza ............................................................................14

AllRecipes.com .............................................................................42

Perishables Group......................................................... 10, 25, 42

Brassica Sprout Group ...............................................................36

Produce Marketing Association ..............................................24

Bright Farms LLC ......................................................................... 11

Publix Super Markets Inc. ...........................................................8

Certified Angus Beef LLC ..........................................................30

Pure Branding Inc. ......................................................................36

Dairy Management Inc. .............................................................35

Range Inc.......................................................................................30

Datassential ..................................................................................26

Saint Joseph’s University ..........................................................32

Dechert-Hampe & Co.................................................................17

Shelton Group ................................................................................8

Excellent Packaging & Supply .................................................36

The Kroger Co. .............................................................................. 11

Fabri-Kal ........................................................................................36

The Nielsen Co. ............................................................................21

Fisher Nuts ....................................................................................36

The NPD Group Inc. ....................................................................14

Fishery Products International ................................................36

University of Maine ....................................................................34

Harold Lloyd Presents ................................................................26

Valassis ...........................................................................................32

Home Run Inn Foods ..................................................................13

Vestcom .........................................................................................32

International Dairy-Deli-Bakery Association ......................44

VSN Strategies .............................................................................32

Lobster Life Systems ...................................................................34

Wal-Mart Stores Inc........................................................... 16, 25

Maine Lobster Council ...............................................................34

Willard Bishop..............................................................................44

McGladrey & Pullen LLC............................................................36 Meijer Inc. .....................................................................................25 Menasha Packaging ....................................................................36

38

COMPANY

NEW PRODUCTS

PRINT & INTERNET ADVERTISING Peter Hansen 847-405-4033 [email protected] Brion Palmer 847-405-4072 [email protected] LETTERS Rich Mitchell [email protected] Perishables Buyer 155 N. Pfingsten Road, Suite 205 Deerfield, IL 60015 REPRINTS Jill DeVries [email protected] 248-244-1726 CUSTOM MEDIA Chris Wilson [email protected] 248-244-8264 BACK ISSUES Ann Kalb [email protected] 248-244-6499

Crunch Pak ....................................................................................12 Food Emporium............................................................................15

Midan Marketing LLC.................................................................25

Jacob Farm/Del Cabo .................................................................12

Midwest Dairy Association .......................................................35

Mystic Pizza Food Co. ................................................................15

Mintel International Group Ltd. ......................... 10, 13, 35 44

Nestlè .............................................................................................15

Monterey Mushrooms................................................................36

Palermo’s........................................................................................15

National Frozen & Refrigerated Foods Association...........21

POM Wonderful ...........................................................................12

National Pork Board ...................................................................25

Ready Pac ......................................................................................12

Nestlé .............................................................................................14

River Ranch Fresh Foods ...........................................................12

Organic Trade Association ........................................................35

Roundy’s.........................................................................................15

Organic Valley ..............................................................................35

Schwan Food Co. .........................................................................15

Also publishers of Beverage Industry, BrandPackaging, Candy Industry, Dairy Foods, Flexible Packaging, Food & Beverage Packaging, Food Engineering, Independent Provisioner, Industria Alimenticia, The National Provisioner, Prepared Foods, Private Label Buyer, and Snack Food & Wholesale Bakery.

January 2012 • Perishables Buyer

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Solving The Merchandising Riddle

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STATE OF THE INDUSTRY REPORT

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