Supermarkets Pick Fruits, Vegetables for Healthy Growth
December 26 2019 - 1:47PM
Dow Jones News
By Jaewon Kang
Grocers are freshening up their produce sections to draw in more
health-conscious shoppers.
Fruits and vegetables are an increasingly important source of
sales growth for U.S. food retailers eager to capitalize on rising
consumer demand for fresh food. Grocers are expanding produce
sections, stocking them with new and exotic varieties, and adding
such services as juice bars and precut fruit and vegetable
packs.
Produce sales in the U.S. rose to $62 billion this year from
$60.8 billion in 2018, according to research firm Nielsen. Those
sales are a bright spot for an industry facing myriad challenges.
Heavy investment in delivery is straining an already-low-margin
business model. Cereal, canned soup and other packaged products
that historically drove profits are fading out of popularity,
forcing grocers to find new ways to attract customers.
"Produce is what creates the trust between customers and
neighboring retailers," said Suzy Monford, vice president of fresh
merchandising at Kroger Co.
Kroger's organic-produce business reached $1 billion in sales
last year, making the supermarket chain one of the largest
organic-food sellers in the country. The Cincinnati-based grocer is
offering more seasonal products such as Cosmic Crisp apples, which
made their debut this fall. Kroger is also working with startups on
plans to grow herbs at its stores and make produce last longer.
Walmart Inc. is widening aisles and installing bins to have its
produce sections look like farmers markets. An organic grocer,
Sprouts Farmers Market Inc., is carrying more specialty items such
as Cotton Candy Grapes.
Kristian Willingham, a university admissions counselor who lives
in Atlanta, said the freshness of produce dictates where she shops
for groceries. "If it doesn't look great, I'll go and buy it from
somewhere else," said Ms. Willingham, 24 years old. "I'm really
particular about produce, especially leafy greens."
Produce presents challenges for retailers. Cold-storage trucks
and storage facilities are expensive and complicated to operate.
Produce is easily bruised in transit, leading to higher loss rates
than for other products.
Still, retailers that are expanding their produce offerings say
the risks are worth it.
"It is still the number one reason why a consumer chooses to
shop at a given retailer," said Pete Poutre, senior vice president
of fresh merchandising and procurement at Koninklijke Ahold
Delhaize NV's Stop & Shop.
Stop & Shop, which operates more than 400 stores in New
York, New England and New Jersey, said last year that it would
invest about $70 million to remodel 21 stores and allow more space
for produce.
Expanding produce sections has increased traffic to other aisles
because customers who buy produce spend more, Mr. Poutre said.
Related items such as precut produce and juice bars are showing
healthy signs of growth.
Aldi and Lidl, German discounters that are expanding in the
U.S., are adding more produce. Produce made up much of the hundreds
of items on which Whole Foods cut prices in April. The price
reductions were among the biggest at the chain since its merger
with Amazon.com Inc.
A warehouse-style retailer, Smart & Final Stores Inc.,
doubled space for produce in the past four years, said Chief
Executive David Hirz. The California-based company, which was taken
private by Apollo Global Management LLC this year, has added
packaged salads, prepared vegetables, new refrigerated cases and
about 140 organic-produce items.
"The upside is they will have customers that will want to come
back again and again," said Rick Stein, vice president of fresh
foods at the Food Marketing Institute, a trade group.
Write to Jaewon Kang at jaewon.kang@wsj.com
(END) Dow Jones Newswires
December 26, 2019 13:32 ET (18:32 GMT)
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