Despite inflationary heat impacting many of our wallets, fresh foods continue to maintain healthy sales contributions at retail. In fact, fresh foods can comprise between 30 and 60 percent of the total food, grocery and personal care expenses on average, depending on country and type of fresh product. What sets stores that sell fresh food apart from other retailers or even from other areas within the same store? Freshness, quality, pick-your-own varieties, and importantly, the human connection are important factors that keep shoppers coming back for more. Applying some of these same characteristics to other product categories and to other parts of the store can bolster profits.
While fresh foods constitute a key portion of our shopping baskets, they are not immune to price pressures. Price fluctuations for fresh products are driven mainly by supply and demand factors, with weather conditions, seasonality changes, and cultural habits chief issues. These challenges are endemic to the fresh retailing industry. However, understanding consumer demand drivers provides a critical link in building successful strategies to improve both loyalty and profit margins. More than half (52%) of respondents to a 2012 Nielsen Shopper Trends Survey said that rising food prices affect their purchasing of fresh foods, with meat and poultry categories impacted most (54%), but fresh foods continue to perform well in all parts of the world. In Asia-Pacific, fresh foods contribute as much as 60 percent of food, grocery, and personal care expenses across all retail channels on average. In Europe, fresh foods contribute 53 percent of expenses on average, in the U.S, 30 percent, and in Latin America, 25 percent.
In a measure of retailer equity, the availability of fresh foods was ranked among the top 10 drivers among 25 criteria measured throughout Europe and Asia. In particular, the quality of fresh foods and the range of availability were most significant. Not all fresh foods are created equal, and the impact of economic pressures can vary greatly when talking about steaks versus deli lunch meat versus bananas. Understanding where consumers are quick to go for a lower priced option and where they are willing to trade up because they perceive the value to be worth it is critically important.
As cultural shopping habits and preferences around the world vary, so does where and why we shop at favoured retail channels for fresh foods. While good value for the money and convenience are most important store choice factors among Europeans and North Americans, freshness is paramount among Asia-Pacific, Latin America and Middle East/Africa respondents. High-quality fresh products, ample selection and the ability to self-select meat, produce and bakery products are other important drivers for selecting where to shop for fresh foods.
Fresh is best in Asia-Pacific
The Asia-Pacific retail landscape is uniquely diverse and alive with bountiful wet and open market options where fresh foods are typically delivered direct from the source. It comes as no surprise that most Asians typically shop daily for their meals as fresh foods contributes more than 50 percent of food, grocery and personal care spending in most Asian countries and as high as 60 percent in Taiwan and Vietnam.
When it comes to shopping for fresh meat, fish and produce, wet and open markets are the most popular destinations in the region among all consumers, but supermarkets are growing in importance among the modern trade shopper. Among one-third of Asia-Pacifi c Internet respondents in the Nielsen survey, which skews to a more affluent, educated and younger demographic, modern trade supermarkets are a favoured channel. The convenience of supermarketsand hypermarkets make these the stores of choice for buying dairy products and the bakery is the top shop for bread and baked Goods.
“While modern trade fresh food shoppers are motivated by freshness and convenience, their view of these attributes is different from a traditional shopper’s,” said Peter Gale, Managing Director of Retailer Services, Nielsen Asia-Pacific and Middle East. “Freshness relates to cleanliness and food safety and the belief that they can trust the quality of the product. Convenience is about one-stop shopping rather than location.”
Food culture is customary in Europe
Buttery croissants, succulent olives, pungent cheeses, cured meats… Europe’s diverse multi-cultural region is a food lover’s playground and offers the best of both old and new world shopping options. From countries in the north, where weather factors can often dictate a more limited selection of fresh products to those in the southern Mediterranean, where a copious supply of fresh fruits, vegetables and meats are nearly always on hand, average monthly spending contributions for fresh products range from a high of 50 percent in Italy and Spain to a low of 33 percent in Norway.
The supermarket channel reigns supreme in Europe among online respondents with 42 percent shopping this outlet for meat, fish and produce. Good value, fresh products and the human connection make specialty retailers, such as the butcher for meats and poultry, the fish shop for seafood, the wet/open market for fruits and vegetables, and the bakery for breads, important destinations throughout Europe.
“Fresh products are key to the success of the retailer, and razor-sharp expertise on shopper expectations is the key to unlock the potential,” said Jean-Jacques Vandenheede, Director, Retailer Industry Insights, Nielsen Belgium. “It is of paramount importance to map shopper expectancy clusters, eating habits and supply patterns of fresh products. Finding this balance is a task for merchant expertise. Consumers purchase fresh products with their eyes and as such, the display and presentation is of utmost importance. After selection and presentation comes the ultimate judge: the price. Those who find harmony in this maze will be rewarded with purchases and loyalty.”
Convenience is king in the U S
With large cars, huge refrigerators and big box retail formats dominating the U.S. landscape, Americans shop for fresh foods less frequently compared with shoppers in other regions —1.4 times per week on average, compared to 2.5 times globally.
But make no mistake, fresh foods are increasingly valuable to shoppers and to retailers, accounting for nearly 30 percent of total store sales, with meat taking the largest share of the fresh space with 39 percent of dollar sales, according to the Nielsen Perishables Group.
While the grocery channel is the leader in fresh foods, accounting for two-thirds of the retail market, fresh is increasingly growing in non-grocery channels as a greater availability and assortment of fresh products across retail channels respond to consumer Demands.
Savvy retailers understand that consumers want the option to choose fresh foods anywhere, and they are fighting for the fresh share of wallet. By 2016, the retail fresh dollar market share is expected to grow to 15 percent in the hypermarket channel and to 12 percent in the warehouse club channel, according to Nielsen.
“Fresh as a commodity market is changing and can no longer just rely on strategies that are determined by supply and commodity prices,” said Bruce Axtman, President, Nielsen Perishables Group. “Suppliers and retailers are slowly but surely transitioning to the consumer-packaged goods style of category management based on the knowledge of both consumer and performance data to better understand how various consumer groups purchase fresh foods differently, at which stores, and at what price points.”
Tantalizing fruits and vegetables are a staple in Latin America
Warm climates and a sustainable agriculture make Latin America a region ripe for tantalizing fruits, such as pineapples, guavas, strawberries, papayas, avocados, blueberries and plantains. Latin Americans shop for fresh foods an average of three times per week, with trips for bread and bakery products most frequent at four times per week on average. While fresh foods contribute roughly 25 percent of modern trade grocery store sales in the region on average, from a high of 40 percent in Mexico to a low of 13 percent in Colombia. Open air markets and agricultural centers of distribution are also important destinations for shoppers in Latin America. While seasonality factors impact fresh purchasing behaviour, buying patterns stay relatively consistent in the region due to the variety and availability of fresh categories throughout the year. When prices rise for out-of-season fruits and vegetables such as potatoes, tomatoes, or onions, consumers switch to other products like beans, which are inexpensive and used in cooking.
Traditional, small self-service mom and pop stores are most common throughout the region, but supermarkets are popular destinations for fresh foods with about one-third of respondents making trips there to buy fish and produce, four-in-10 for meat and poultry, and more than half (54%) for dairy products. Specialty retailers such as butchers, bakeries and open market fruit and vegetable shops are the channels of choice among roughly one-third of respondents. “As retail competition intensifies between grocery chains and traditional trade retailers, the key differentiating factor for Latin American shoppers will be a focus on the quality and freshness of fruit, vegetables, and meat,” said Rick Parra, Director, Retail Service, Nielsen Latin America.