Now that we are in 2021, and with vaccines being distributed, we can see a light at the end of the COVID-19 pandemic tunnel, still, for a long time to come, there will be nothing normal when it comes to supplying supermarket shoppers with the fresh produce they want, when they want it and how they want it supplied.
So much has changed due to the COVID-19 pandemic. For example, more consumers are eating at home. An analysis of U.S. Department of Agriculture’s ERS Food Expenditure Series data projects a $250 billion annual shift to a food-at-home spend. What’s more, there’s been a 300% jump in online grocery sales, according to the 71st annual The Food Retailing Industry Speaks report, by the Washington, DC-headquartered Food Marketing Institute.
A recently released customer research study on changing grocery shopper habits — led by C.H. Robinson’s Robinson Fresh team — reveals some of the biggest change-drivers in retail are here to stay.
To help retailers and suppliers successfully navigate these changes and the unprecedented demand they represent, Carol Bareuther, RD, contributing editor with the Pundit’s sister publication, PRODUCE BUSINESS, talked with Gina Garven, Eden Prairie, MN-based C.H. Robinson’s vice president of commercial development and analytics, about the global logistics company’s latest research and what it means for the future.
Q: Let’s start with the most immediate — We just finished the holiday season. What were food retailers experiencing during the lead-up to Christmas and the holiday season?
A: People were having several smaller gatherings rather than big holiday parties. We saw this at Halloween and at Thanksgiving and it continued into Christmas and New Year’s Eve and New Year’s Day gatherings. Obviously in some areas, this was dictated by law; in other areas it was a function of personal caution. Therefore, cooking was in smaller quantities, and therefore buying was too. One way this translated is to smaller pack sizes. Greens, for example, are a big holiday item. The smartest retailers were, say, stocking more 12-ounce packs of greens rather than the 24-ounce size. And, they were prepared to sell the smaller packs at a greater frequency throughout the season.
Q: What produce items were in demand for the holidays? What does your research reveal about demand?
A: The top 10 categories in sales growth during the pandemic were cooking items like potatoes, onions, tomatoes and mushrooms. People are cooking more at home, and they want healthier ingredients like vegetables. The numbers aren’t all in yet, but I expect the data will show that there has been a heavy focus on these staple commodities during the holiday season. It will also show that there was more of an SKU reduction as retailers and producers both sought to assure ample inventory of these core items.
According to data provided by C.H. Robinson for year-to-year as of November:
● Top 10 Categories by Dollar Growth: Dry Veg, Berries, Tomato, Potato, Citrus, Tropicals, Salad Mix, Onion, Lettuce, Stone Fruit
● Top 10 Categories by Dollar Percent Growth (at least 0.5% $ Share or more of Produce): Garlic, Brussels, Potato, Corn, Mushrooms, Tomato, Sweet Potato & Yam, Dry Veg, Citrus, Onion
● Top 10 Categories by Pound Growth: Potato, Citrus, Tropicals, Dry Veg, Onion, Melons, Berries, Bananas, Tomato, Apples
● Top 10 Categories by Pound Percent Growth (at least 0.5% LB Share or more of Produce): Onion, Citrus, Sweet Potato/Yam, Potato, Tropical, Cabbage, Dry Veg, Mushrooms, Broccoli, Asparagus
Q: You mentioned people are cooking more at home now. In addition to safety precautions with the pandemic, this was certainly driven by restaurants being closed or having curtailed service. However, USDA Monthly Expenditure numbers are now showing a steady increase of Food Away from Home since an all-time low in April. Are restaurants slowly coming back?
A: We leverage a lot of information from Technomic. One of the points they’ve made recently is that there’s an improvement in the foodservice industry. Their Best-in-Class sales scenario for 2021 is still projected to be 13% below 2019, but they are seeing that creep up. I think this stems from consumers like myself.
I’ll give you a personal example. I see multiples of me out there. Here goes: I am so bored with what I’m cooking every single day. I thought this was going to be a month-long thing back in March. It’s now multiple, multiple months, and no matter how much support I get from my half- and full-prep meals, whether it’s from my retailer or the different companies I engage, like Blue Apron, it’s still not doing it for me.
I still need someone else to create something for me. I think a lot of the growth in foodservice stems from how restaurants have accelerated online ordering and delivery. I can order online and get my meal delivered curbside, so I don’t even have to get out and put my mask on. I think we’ll see an uptick in foodservice sales driven by consumers who need a little bit more, a desire to change up their meals.
Of course we don’t have data for the recent increase in cases and the actions by many states to close or restrict restaurant capacity. It is very possible that things in this area have gotten worse lately though may improve as people start to get vaccinated and as we move into warmer weather in the spring.
Q: Even though your research revealed 7 out of 10 consumers say they will shop online in the future, with Food-Away-from-Home expenditures increasing, do you think that online shopping will become less important over time?
A: No. Convenience is one of the biggest trends impacting retail grocery and foodservice today. This is nothing new. It’s been around for over 30 years. I think people lose sight of the fact that trends are not something that happen overnight. Take the trend toward convenience. I think of this starting back in the late 1980s when mass merchandisers came in, got into grocery retail and disrupted the whole supply chain of the food network.
We saw that with fast-casual dining in the early 1990s. Fast-casual came in and took charge because consumers wanted convenience, and they wanted an experience. Now, you see that with omnichannel. We’ve seen food dollars get to the near 50/50 point between expenditures at-home and out-of-home. I’m talking about pre-COVID. We saw this convergence come in, and you saw retailers start to offer a lot more foodservice.
The number of value-added products grew in stores as well as fully prepared and semi-prepared meals and meal kits. Now we’re seeing foodservice get into this. Chick-fil-A came out with a meal kit earlier this year. What the pandemic did was to accelerate the trend for convenience that we were already seeing.
As I said, this isn’t new. We are recycling this trend. But it means something different to us today. So, with the growth in omnichannel, I think we can anticipate consumers, 7 in 10, are going to continue buying online even after we get the all-clear from the pandemic. This is going to disrupt both foodservice and retail supply chains and transform what happens in these areas over the next five years.
Q: When it comes to online food shopping, to what extent does this apply to perishables — especially fresh fruits and vegetables?
A: Perishables, in general, and produce, were among the last departments in the store to get into this space. I think that’s because food, especially fresh produce, still has a very emotional connection for people, unlike electronics or other consumer goods. People still like to pick out their own fresh fruits and vegetables, and that’s across any demographic. But because of COVID, we had to get comfortable quickly with someone else doing this for us.
Our primary research stated 54% of consumers bought produce online for the first time during COVID. That’s remained constant because most of them have had a relatively good experience. That’s the other thing we got from our research… the fact that people had a decent experience buying their groceries including fresh produce online. I’m not sure if some of that was because expectations were lower.
After all, safety was the priority, but I do think overall that many online shoppers had a good experience. Some of this may be because even if an item was out of stock, some retailers substituted, and often did so with similar or higher quality to keep customers loyal. As a result, produce has seen growth overall, whether we’re talking online or in-store purchases. We’re talking nearly 11% in volume and in sales, year over year.
According to data provided by C.H. Robinson:
● There has been double-digit dollar and volume sales growth in 2020, while previous calendar years, like 2019, saw dollars grow by just +0.9% and pounds dipped -1.2% versus the previous year.
● Produce’s positive volume (+10.8%) and flat price mix (-0.1%) resulted in increased dollar sales growth (+10.7%) for the Year-To-Date period ending October 6, 2020, as seen in IRI for US MULO (Multi Outlet).
Q: Looking at your research, 1 in 3 online shoppers want the ability to review recipes on retailer sites and add specific ingredients directly to their cart from the recipe page. Shoppers also would like nutrition and tips for their produce after the purchase, such as how to store and cook, and yet another finding is that consumers value the ability to directly communicate with their retailer during purchasing. Can you tell us if retailers are doing this?
A: I would say that several retail customers are doing a fantastic job of rising to the occasion. They’ve had this in Consumer Packaged Goods (CPG) for many years, so they’ve been able to partner with suppliers in CPG to bring high-resolution images and the 360-degree views to life for online shopping. With produce specifically, there’s a need to bring the in-store experience online. Every retailer is trying to figure out where to focus first. How do I achieve that and bring what’s established in these other departments to the forefront in fresh?
Some big-name customers that are in the news daily have done this extremely well under the circumstances. But I don’t think there is a winning strategy yet. I don’t think there is an absolute best-in-class that we all need to follow. I think that is evolving, and that’s because these things take time, trial and pilot. But I think there are certain things… there are attributes and elements… of really being best in class. That is, are you are making it easy for a person to click on a recipe and add all items? Or, if someone wants to boost their immune system and eat more vitamin C, do you have a platform to curate and personalize this information for the consumer? Or can pickers in-store maybe engage with customers while filling their order?
Perhaps retailers can text a picture of the bananas to show the ripeness. If it’s not what the shopper wants, they can say skip the bananas and take me to the berries. These are some of the things retailers can do and act on quickly and easily to bring those experiences. And that’s what the shopper is looking for.
Q: So, how can retailers satisfy consumers’ need for immediate supply on demand. And especially when this spans from stocking in-store displays to delivering online orders curbside? I saw in Robinson Fresh’s Fresh Perspective blog that consumer expectations are necessitating the shortening of the inventory replenishment window from days or weeks down to hours. How will this work?
A: We’ve been looking at how to advance supply chains to satisfy the consumer’s expectations of supply on-demand from a Robinson Fresh perspective for the past 3 to 4 years. We’ve even partnered and worked on a project with a couple of universities to figure out where this is going. Is it through a warehouse? Is it through the store and then out to the consumer? What’s most efficient from the supply chain perspective?
From what we’ve seen, it is really propelled closer to the side of through-the-store. This is very similar to what Best Buy did several years ago as they were feeling the pressure from Amazon. Best Buy reduced their front floor space and added space to the backroom in their stores. This gave them room to have more inventory on hand. So, they could get products out to customers direct from the store by operating as a micro fulfillment center.
I think we are going to see that evolution in grocery through retail as well. We’re starting to see that now. For example, I sometimes see more personal shoppers or pickers in the store today than I do shoppers. I think that’s going to evolve the footprint of the store. It’s also going to evolve the supply chain that supports it. Most customers I see today are moving toward the front end of the store executing on that inventory.
The inventory is being picked from the store. It’s continuing to evolve, but I don’t think anyone has determined what is best-in-class yet. That’s why we need to keep a pulse on this going forward, to drive the most efficient supply chain so that a fruit or vegetable is at its most fresh, and that we have the right items at the right time at the right place.
We were honored to have Gina Garven participate in our Amsterdam event. Very few companies in the industry are able to provide customers with the kinds of insight that she can surface. It is also true that many produce companies are so focused on meeting the business needs of the day that they don’t have time to examine the broader questions of how the business needs to evolve to be successful in the future.
The pandemic, of course, makes the future more difficult to ascertain. There is some evidence that those who have not been laid off or suffered financially from the pandemic might be inclined to go out and celebrate once vaccines make it safe. After all, the Roaring 20s followed the great influenza pandemic of 1918. So, very possibly, foodservice is the segment that will come roaring back, and retailers will be scrambling to explain declines in sales compared to the previous year.
The future also looks very different if one approaches it de novo. In other words, delivery from a retail store, where rents are high, might make sense — as the rent is covered, and necessitated, by the street traffic. If, however, the world transforms and the business switches so that most of it is delivery, then why pay for high rent locations? Indeed, it seems a little odd to bring in produce in bulk, then put it out on shelves, often out of refrigeration, then repackage it in a bag, so it can then be delivered. It would probably be much cheaper and higher quality to prepack typical sizes and quantities, assemble the orders in a heavily automated facility in a low rent district and then deliver either to each home or to depots where consumers can pick up.
The whole idea of bulk produce doesn’t really make sense if there is no consumer there to be enticed by the look, and it has to be packaged anyway for delivery.
The question is more whether it is cheaper and better to have packinghouses pack things in consumer-size packages or better to ship in bulk and have re-packers place things in consumer-size packages. In either case, this is likely to be a highly automated process.
Some things that happened during the pandemic, say an increase in online ordering, were already happening before the pandemic, and the pandemic may have just accelerated what was going to happen anyway. Other changes are likely just temporary. Retail sales zoomed both because consumers were fearful and felt a need to stockpile and because everyone was eating at home.
We know that some things will return to normal… say, people going on vacation. We don’t know how quickly, if ever, other things will “return” to the way they were — say businesspeople working out of offices on a full time basis.
The food industry will vary depending on how all these things play out. We are fortunate to have people like Gina Garven and companies investing in research, such as CH Robinson and Robinson Fresh, to help us navigate a brave new world.