It was the inaugural year of The New York Produce Show and Conference, and we had put together a unique exchange program, where we invited students from premier universities to gain contacts and consider careers in the industry, while also allowing professors at these same universities to reach out and disseminate the results of their research throughout the trade.
We wondered, though, whether industry members would be receptive to these high-end presentations. Well, we ran a piece profiling what Professor John Stanton of St. Joseph’s University would present:
It was just a few minutes later that the first letter of praise came over the transom:
With great excitement and anticipation, I await The New York Produce Show and Conference and the presentation on Local Preference Versus Organic, by Dr. Stanton.
John Stanton, undoubtedly in my book, is one of the best, if not the best authority on consumer behavior when it comes to purchasing foods and produce.
He continues to “Delight” his audiences with thought-provoking data, information and advice on how to reach consumers in a way that will influence their purchase decisions. Time after time, Dr. Stanton has identified consumer traits that if properly applied in marketing, will end in success!
His presence, along with the other outstanding presenters at the New York Produce Show, is certainly worth the registration fee alone, while the excitement of the show will be a bonus!
— Jim Allen
New York Apple Association, Inc.
Fishers, New York
So when the good professor said he had a broad and important topic to speak on this year, we quickly asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Q: We’re grateful you’ll once again be gracing us with your expertise and strategic direction, following a series of excellent educational micro sessions over the years, including a lively, no-holds-barred presentation earlier this year at the London Produce Show and Conference. Could you give us a sneak preview of what issues you’ll be tackling this time?
A: The topic I chose to speak about in New York is: “The Changing Retail Environment: Opportunities and Obstacles.” The talk will address how the population is changing and how these changes are affecting what people buy and why and where they shop. It will cover the gamut from smaller supermarkets to new vending machines and continuous ordering. At the same time, we will look at how traditional supermarkets have been suffering at the hands of the new channels of distribution.
Q: In painting this scenario, what is the fate of traditional supermarkets, and how will this impact the different players within the produce industry? Will you be addressing ways to better compete?
A: The produce industry can either embrace the new channels, or see the decline of the supermarkets as a major obstacle. I’ll give examples of how the produce industry can take advantage of these new channels.
For the longest time, people bought food in two places — a supermarket or restaurant. Over the past 30 years or so, there have been more and more alternative retail outlets. We know big box stores have come in; we know convenience stores are starting to sell more and more stuff besides cigarettes and newspapers, and becoming foodservice outlets.
Big supermarkets are using lots of different formats. Many of them are creating smaller supermarket formats, much smaller. We know the dollar stores and pharmacies are all looking to sell more food. The question is, what can the industry do to facilitate and help drugstores, convenience chains, and dollar stores get into the fresh produce business, because basically, these formats are focused on the center store, but they want to get into this fresh industry.
Here’s the dilemma… one of the things I say, if you’re a produce marketer and you’re fighting for more space in supermarkets, to me that’s like fighting for the best stateroom on the Titanic.
Q: Thank you for giving attendees who haven’t had the pleasure of hearing you present before a preview of your candor, as well as your sense of humor!
A: The point is, your biggest customers, which are traditional supermarkets, are really declining, not only in the numbers, but there is a worse thing happening: They’re declining in the number of visits people are making. If your primary customer is supermarkets and people are going to supermarkets less frequently, there’s less chance they end up buying produce at your store.
Q: And it’s perishable, so if they’re coming less often, it goes to reason they’ll buy smaller quantities to avoid spoilage…
A: So the question is, where are they going? Well, they’re making a lot more stops at convenience stores, dollar stores, and these other places moving into the fresh food categories.
One produce marketer in the Midwest told me, he now is selling more produce to some pharmacies than he is to some supermarkets.
Look at Target, and I’m not talking about Target superstores, I’m talking about traditional Target stores adding more and more fresh food all the time. So more channels are adding fresh food, what’s the big deal here? It’s a different model than a supermarket. They have limited SKUs, and most product is prepackaged.
They don’t want displays of loose tomatoes. They just want bags of tomatoes that any staff member can put on the shelf and leave. They don’t want to invest in a specialized labor force that is trained in handling produce.
On top of that, there is a whole other group of people trying to sell fresh product. The next wave coming in is vending. I have pictures of people selling milk in vending machines, and just about everything you can imagine.
There are some supermarkets now that learned from the banks. The banks have the ATM inside the door so if the bank is closed, customers can still use the ATM. Now instead of staying open 24 hours, some supermarkets look at shopping patterns and what people buy late at night and have vending machines in their vestibule with products people typically buy at 2:00 in morning.
Q: That’s a clever strategy…especially since supermarkets already have the infrastructure and expertise in handling perishables, alleviating some of the challenges faced when trying to integrate vending machines with fresh produce in schools, for instance. What other alternative venues show potential for fresh produce?
A: I’ll tell you another really interesting area is the TV shopping networks; QVC or the Home Shopping Network (HSN). If you go to one of these shopping network websites and search under food, how many items do you think they sell? It’s hundreds. You’ll see meat, seafood, cakes…virtually every food item except produce.
Q: It looks like at least one produce company figured it out. On QVC, with smart marketing, Cushman’s sells its “Sugarbells” seasonal citrus in 6-pound and 12-pound boxes at specific times of year, encouraging the customer to sign up for an autoship option, where the product will be automatically shipped to them again when it comes back in season.
A: Oh yes, I do remember this, but it’s really the exception. It’s like those places where companies get customers to sign up for the fruit-of-the-month club.
Q: It’s interesting you bring up these TV shopping networks, as the industry doesn’t talk much about this channel of distribution…
A: For you to sell your product on QVC, you have to agree to sell something like $250,000 in sales every 15 minutes.
Q: I guess that kind of commitment could be intimidating in this industry because of uncertainties and fluctuations in supply availability, pricing, etc.
A: You’ve got to figure that out. You can’t just ignore a channel of distribution because the way you currently do it doesn’t fit that model.
One of my messages will be, you have to change the way you do business to satisfy the needs of the new emerging customers. Now someone might ask, how do I do that? Well, I’m not a produce expert and my role here is not to be a consultant because that would be too complicated. I’m here to show the opportunities.
Q: Will you be talking about Fresh Direct, and Amazon Fresh and the realm of growth here?
A: Yes. Let me give you an example. A typical supermarket, a big one, may have 60,000 SKUs to 70,000 SKUs. Amazon has about 500,000 food items available.
Q: That’s a huge number, although most of that is not perishable…
A: But you have to think about this. If you’re in a supermarket, you have to have space available for all those items. The more items you have, the bigger your store has to be. Amazon doesn’t need all that space for their units. Many items are directly shipped from the producer.
You can have five different kinds of beets. When Amazon gets an order, it sells the order directly to the produce supplier, who sells those beets to the consumer. A supermarket couldn’t afford to carry five different kinds of beets because they’re not finding space for them, but Amazon could.
Q: Are there differences in the type of consumer who is shopping on a Fresh Direct or Amazon Fresh versus a supermarket? For years, people thought shopping online for fresh produce was a bust because consumers desired the exciting sensory experience of buying produce in the store, as well as the control over selecting their items, in addition to problems with inconsistent quality upon delivery.
Fresh Direct was on the cutting edge of successfully overcoming all these issues…Tenley Allen, marketing manager at Fresh Direct, did a forward-thinking presentation in London highlighting how the company is winning over millennials.
A: One of the really interesting things to take place was when people first thought about home delivery, it was about buying toilet paper and Campbell’s Soup, but not perishables. They discovered the opposite. The young people, the millennials don’t know what a good cantaloupe is. They would rather have the professionals pick a good head of lettuce; well of course they buy it in a bag now.
The joke is, many people who buy perishable products actually prefer to have an expert pick it out.
Q: And of course, companies such as Fresh Direct have become extremely market and social media savvy, steering customers to what’s the freshest, tastiest, in season, as well as what to hold off on ordering until next week, customizing recipes, etc.
A: You have the ability to do all kinds of creative things online you might not be able to do in the store…The opportunities are immense. There are a lot of openings.
During the presentation, I’m going to go channel by channel and talk about the opportunities and what the issues are. But the key message is you have to start adjusting how you sell and distribute to how the customer wants you to sell and distribute.
Q: Going back to vending machines, we’ve covered ambitious attempts by companies including Dole early on to bring healthy vending machines filled with fresh produce to schools, but results have been mixed for several reasons; the additional labor and strict monitoring to insure turnover of product, administrative and student buy in, etc.
A: With vending machines, there are absolutely issues that have to be addressed that are not part of the current world of produce distribution. First you’ve got to decide, do I believe if I put fresh produce items in vending machines they will sell. If the answer is yes, then you have to figure out how do we do it. You don’t say, “OK, I have a system, and I’ll have these guys stop at vending machines on their way from the grocery stores.” It probably won’t work that way.
You probably have to sit down from scratch, and say, if we believe this is going to be an effective channel of distribution, how do we get this product to the locations, and so on.
My guess is 80 percent of people in the produce industry won’t believe this is a viable channel. But for the 20 percent who do, I would make appointments to see people whose primary business, or a part of their business, is selling through vending machines. Ask the guys at Frito Lay how do you make this work rather than saying how do we get our current system to deal with vending machines.
Q: But isn’t Frito Lay’s experience in vending a very different scenario than a produce company dealing with perishable items like apples and bananas, which require variable temperature controls, and face faster product deterioration, etc.
A: Not really. I don’t think it’s that different. If you’re selling produce, you have to be in climate-controlled vending machines, but they are as common as can be today. What’s nice; these are all computer-run, so you can sit in your office and know what’s happening with vending machine a, b, and c, and when a product is going out of date because everything is computerized.
Q: So it’s more about jumping outside the box and approaching things in a different way.
A: Exactly. We have to rethink how we’re taking product to market because the market isn’t the same as it was 25 years ago.
Q: Do you think certain produce companies or channels are better positioned to capitalize on these opportunities?
A: I think anyone can really jump in. You have two scenarios; you have the big companies that have a little bit of capital and they can invest in how to stay ahead of the game. You have the small company that is desperate, and says if we don’t find a way to start selling our product, these bigger and more famous distributors are going to tie up all the supermarkets.
Desperation is what often breeds innovation.
Q: You mentioned earlier you’d be linking into your discussion the impacts of the changing population.
A: My argument of why this will become important to all these other channels… I’ll be making the case that it’s because the population is changing. There are more single person households, more Hispanics, the millennials are coming into becoming key buyers and they have very different purchase patterns than the traditional baby boomers. They’re the three big consumer segments to watch for.
Also the time famine has continued, so even baby boomers, Gen X and Y are more likely making a stop at a convenience store to pick up a few things for tonight’s dinner.
Even Target basic stores are bringing in more food products, not to be the primary shopping location for consumers, but enough to say, on your way home we have enough stuff to make a meal.
Someone wants to make tacos, and you’ll be able to get the taco shells, ground beef, they may only have one SKU or two SKUs of ground beef, they’ll have lettuce and tomatoes, something like that. You can run in at 5:30 tonight and pick it up and be out of there. You would never go there to do your two-week food shopping.
Q: These alternative shopping channels need to know their customers well to target the right food items…
A: If I were doing a speech to the traditional grocery store, I’d have a slightly different bent. I’d say you have to figure out how to get these people to come back to your store and not go to the pharmacies and Aldi’s.
For the supplier side, hey, I’m a produce marketer and I want to be where the consumers are. And the consumers now aren’t in grocery stores — well they are, but their numbers are declining.
Q: That’s why traditional supermarkets are branching out into these different formats…
A: And most of these different formats are smaller. So, how can a produce marketer help them deal with fewer SKUs, but the right SKUs, and the most profitable SKUs, etc.? In the past, mostly what they argued for was, please just let us be in your store, but now there is a real need for collaborative thinking.
Supermarkets have been selling produce for so long, they get set in their ways. Basically they’re holding auctions for produce — whoever has the cheapest price, we’ll take that because we know what we’re doing, we know how to display it, market it, promote it. But these newer formats don’t have 50 years selling fresh produce, so they’ll be wanting help.
This is really a chance to get in on the ground floor and become a partner. They’ll have loyalty for sure.
Q: In terms of scope, percentage-wise, are these alternative channels an important chunk of produce sales, or confined to niche segments?
A: It’s still small. This is a dilemma you have with not just produce people but food people in general. They say, you know, you’re talking about dollar stores selling our product. They represent two percent of our sales… My comment is, well how much were they two years ago, and the answer is they were virtually nothing, so that’s extraordinary growth.
So many people waited to get involved with Wal-Mart, saying, they’re not a grocery store, they’re not what we think of as a food store, etc. Companies like Proctor & Gamble were late to get into Wal-Mart because their biggest sales were in supermarkets.
What we’re talking about is the future. We’re not saying some of these alternative channels will be your main customer in the next six months. We’re talking about preparing for the future. Just recognizing it, working on it, and building the platform for it, as far as I’m concerned this is a major step forward.
Q: At the conclusion of your talk, what is most important for attendees to remember?
A: The major takeaway is, the world of produce marketing is not going to be the same. The question is, when are you, the audience, going to start to make a change. When do you begin? I make the point; Noah started to build the ark before it started to rain.
Q: Your talk this year is very different from your talks in previous years, which were more “micro” in nature. You shared highly targeted consumer marketing/brand research and specific strategic and tactical directions based on your findings that could then be applied more broadly. Here you’re addressing a sweeping “macro” trend toward alternative retail channels and changing consumer shopping patterns with a plea to industry executives to capitalize on the opportunities.
A: I’ve been working on this research over the years. One of the things I’ve done with the New York Shows, and even at the London Show, was talking about specific things, and action-oriented steps, where people could walk out of the conference and make changes the next day; putting up different merchandising signage, etc.
This time, I decided I’d like to talk about the future, and just look at what the world of produce marketing may be like 10 years from now. All these things are going to happen at different times. But the fact is, most produce marketers sell virtually everything to grocery stores and have very little interest in all of these other emerging channels. My message is, don’t disregard the emerging channels, because someday they may be major channels.
Q: While it’s arguably risky for a company to put all one’s eggs in one basket, is there a concern of spreading oneself too thin?
A: Certainly, no one should be doing everything or they’ll fail. Pick something you could do well and make that an area you’ll move into, something more likely profitable three years from now versus 10 years from now. For instance, think about how you could get on the Home Shopping Network in the next year and really own that fresh business, rather than getting involved in dollar stores.
Pick what you want to do, but just don’t do the same thing. Be strategic about it. Where you think you can make a difference, and also, where the market is going to be heading for you. The main point is capitalizing on these emerging channels can mean big success.
One of the issues we are discussing in the Foundational Excellence program this year is the whole idea of distribution channels and classes of trade. Because most produce companies — even the large ones — are small compared to the total food business, their success is more dependent on their own abilities to execute than on any overarching industry trend.
Yet the big opportunities for individual companies are often to hitch their wagon to a particular star. Bruce Peterson will be at the New York show, including the Foundational Excellence program and the student mentoring program, and he can tell the story of many who didn’t see opportunity during the early days of Wal-Mart when he rang them up on the phone, because opportunity came disguised as a lot of work for just ten stores.
Yet the great fortunes built in the produce industry in the last 30 years were those who latched on to grow with Wal-Mart. Similar stories can be told of Costco and Whole Foods and it seems likely that they will be told one day of dollar stores, drug stores, online portals, meal delivery services and more.
Consumers are changing; technology is creating new opportunities, and if all one does is think that supermarkets are the competition for existing supermarkets and the customer for the industry, one is blind to the way things are going.
We’ve been pointing this out for a long time; back in 1993, we wrote in Pundit sister publication PRODUCE BUSINESS a piece called Death by a Thousand Cuts that made the point.
And The New York Produce Show and Conference is the perfect place to explore this Brave New World of produce. The new class buyers are there, the sellers are there, the thought leaders are there.
And you should be there too!
Book a discounted room in our headquarters hotel at this link.
And get travel discounts here.
We look forward to seeing you in New York!