Pundit’s Mailbag — New Thinking On Small Formats And Produce Distribution

We received a most interesting letter from France, filled with interesting ideas for increasing produce consumption and a twist on the au courant small format store concept. Beyond its specifics the letter also pointed to a very different role that trade associations in Europe seem to have seized as opposed to that played by the North American associations:

Your article, Small Format Stores And The Ever Changing Retail Environment, was intriguing.

Besides a reduction in the footprint of the store format, wouldn’t it be a good idea for specialty fruit and vegetable retailers to offer a drastically more selective assortment, giving preference to legibility over visibility of the offering? In other words, focus on the right mix between quality and price, rather than just shopping on prices and on appearances.

So perhaps a store should have small apples, and not have 10 varieties. Let the retailer be saying to the consumer, this apple is in the store now because it’s the best choice for you. Make it much more simple. There are so many apples on display at the big supermarkets… how can one even remember the names and varieties? For consumers, too many choices can become overwhelming.

This new strategy would differentiate specialty stores from (non-specialized) supermarkets, supercenters and hypermarkets. Consumers would delegate choosing to the retailer, letting [the retailer] make the selections in a universe characterized by gustatory uncertainty and cruelly lacking reliable means of reference. And thus the retailer would commit himself.

A meaningful assortment could be built up as follows:

• Offer different varieties of the same fruit to enable consumers to compare the taste and to improve knowledge of different varieties (e.g., Only yellow apples for a two-week period: Belchard, Golden Delicious, Tentation, and then a limited assortment of bicolored apples for two weeks, a selected choice instead of simultaneously offering 12 varieties, which few consumers have ever heard of and even fewer are able to recognize).

   

• Offer off-season fruits and vegetables as a helping hand to developing countries; this would be our “fair trade” reference and could feature, for example, green beans from Kenya.

   

• Not offer products for which production volumes are below average in a given year, because they will inevitably be expensive (this year, stone fruit in France suffered from Spring frost, so no apricots would be offered by our “new” retailers).

   

• On the other hand, fruit and vegetables in overproduction (such as lettuce and melon this year in France) would be highlighted with special offers of the day, or of the week, explaining why this is profitable for both the consumer and domestic growers (provided of course that product quality is good).

   

• Focus on a few vegetables and explain how to eat them, and with what other dishes they go well — instead of proposing 10 different vegetables that are all equally mysterious to young adults.

   

• Promote category II products, but of excellent gustatory quality.

   

• Have one “521” offer, i.e., 5 fruits and vegetables, for a price of 2 Euros. In a volume of 1 kilo.

   

• Offer packages based on season, proximity, Vitamin C content, “detox”, carotene content (to enhance tanning), etc.

   

Such a selected offer would make sense for consumers.

The specialty retailer could use the gained space to invest in a fresh-cut processing area, in order to recycle truly ripe-to-eat fruits, create nice smells of fresh soup, fruit sauce or compotes, recruit customers who are looking for service, and increase buying frequency: for lunch plus an extra ingredient for dinner. In France, the decline of fresh fruit and vegetable purchases is a generational problem, and the whole industry is trying to find solutions.

This project is currently under study at UNFD, the French Specialty Retailers’ Association.

We’re still in the preparation phase. Our Second Life stand in 3D is not ready yet. As soon as we have some results available, I’ll let you know. We will relate our experience at a conference in Dubai soon. With luck we hope to go to Monaco for the Imagina awards.

I hope I will be able to send you our project in 3D soon.

Last April, you were kind enough to analyze our vending machine venture for fresh fruits and vegetables in a piece you entitled, French Vending Machine Pilot Project. We see all efforts to have produce more conveniently available, via vending machines or new retail store formats, as part of an attempt by the industry to wrestle with this real generational problem.

When we look at the data that indicates that each successive generation is consuming, on a per capita basis, less produce, we have a real dilemma to face: Is there really a future for fresh fruits and vegetables?

In France, fresh produce, as opposed to canned, dried or frozen, still presents the majority of weekly fruit and vegetable purchases. Unfortunately, over the last decade, the frequency of shopping trips has declined.

How often do you purchase fresh fruits and vegetables

L1- Tous les combien achetez-vous des fr uits et légumes ? Diriez-vous

In a 2007 study of shopping behaviors, 42.5 percent of buyers are trending away from regular trips to the supermarket a few times a week to only shopping once a week. They drive to a big store in the suburbs and load up their cars with a week’s worth of food all at once.

This trend is ominous for consumption of fresh fruits and vegetables.

To really enjoy fresh produce, it needs to be purchased more than once a week. The general problem is that fresh produce, especially if purchased ripe at the peak of flavor, is not easily storable, so consumers buying it only once a week eat it in a day or two or three and wait until the next week to buy more; in the meantime preferring to use canned or frozen products, products with preservatives or prepared salads with longer shelf-lives.

So how would it be possible to address this problem and turn the fresh factor into a real product benefit?

Our goal, as an association and as an industry, is to make it easier for these consumers to find fresh fruits and vegetables near the places where they live or work, providing more access to convenient, easy-to-eat and take away products. This is a good way to increase consumption, especially for young people who consume less produce.

In France we still eat for pleasure, but there are generational differences with fresh produce consumption. In France now, the elderly, such as my mother at 82, eat more fruits and vegetables. But I buy fewer fruits and vegetables than my mother did when she was my age. And my niece buys still fewer fruits and vegetables than I did when I was her age. The young don’t want to bother with shopping, but they would like to eat healthy.

A lot of people work in the Paris area and in other large cities in France and are using public transportation. They live outside Paris but work in Paris, so if people pass by small shops and just buy what they need for the evening, that might be incentive to buy more fresh fruits and vegetables more frequently. They could buy some for lunch and then some for dinner, and it wouldn’t be that heavy to carry. This concept would work well for young people and couples, perhaps not as easily for big families.

People in the suburbs have less choice than they had before. The traditional small shops of France are disappearing outside the cities. In France, people only work 35 hours a week. We have more time, so people could shop more frequently.

Unfortunately, people do not enjoy this type of shopping at big supermarkets; there is no pleasure, no romance, in buying food. They do it once a week, as a chore, and are done.

One could assert that with the big increase in fuel costs, people will go back to proximity, so the future is not that clear. I think it is clear, however, that people don’t want to waste time in food purchases.

Our project idea early on was to have these small shops on the streets where you walk, like newsstands, where you buy your newspaper and also buy your fruit or your salad, all ready-to-eat. The aim is to make it very easy and very quick.

I thought about delicate fresh fruits like strawberries. If you buy strawberries on Saturday, you eat them on Sunday or at latest by Monday. People might buy strawberries more often if they could find small shops on their commute to take with them conveniently on the train to go home.

The idea would be to offer real ripe fruit so they could eat it on the same day. We could get them to come to our shop at lunch time, and then we could have a second offer for dinner, like fresh soup, or ready-to-eat salads, or fruits. We could make fresh fruits and vegetables have real meaning. If we have these sort of shops, we have to make money on the services and not on the quantity, because the shopper can’t carry a lot of things to bring home. The key is to offer fresh foods that create value.

The French fruit retailers’ association is trying to find a solution based on one of their strengths, namely proximity. At their request, Ctifl is currently studying the feasibility of copying the dense network of newsstands in urban zones and the use of these stands as outlets for fresh fruit and vegetables. What would be the ideal assortment for the small booths, how would they be fitted out, how would they be restocked, etc.?

We are planning to: 1) carry out a semiological study of the different outlets selling fruits and vegetables (not only fresh), in order to get a better understanding of the values conveyed by the different points of sale, and 2) “install” on Second Life (using 3D) such a stand, as well as a “corner” in a conventional outlet. Depending on the results, a real-life prototype will be tested. You can see a prototype video here:

As for specialty retailers in France, they represent 10 percent of fresh fruit and vegetable sales. They would be the obvious type of retail stores to implement the concept, but small format supermarket outlets such as “Carrefour Market” or Monoprix might also show some interest.

Small stores, vending machines and newsstand clones are all attempts at dealing with the same problem: Only by developing a viable supply chain for small, omnipresent outlets can we encourage the frequency of consumption that is crucial to offering fruits and vegetables, both whole and fresh-cut, at the peak of their flavor. And only by offering fruits and vegetables at the peak of their flavor can we hope to build consumption.

I am once again indebted to my colleague Nelly Ottens for help in translating this letter.

— Catherine Roty
Chargée d’études
Ctifl
Paris, France

We are indebted to both Catherine Roty and Nelly Ottens for sharing so generously of their insight with the industry at large.

We think Ctifl deserves much praise for being willing to look to issues of product quality and structural impediments to purchase.

Going back to the old 5-a-Day program, we have long felt that simply looking to promotion was insufficient. As long ago as this column and even before, we said that the industry promotion would be more successful if we resolved structural issues that kept gas station mini-marts stocked with cookies and chips but no fresh produce or, half-rotten fresh produce.

Ms. Roty implies the best explanation we have heard for why per capita European consumption of fresh produce is higher than US consumption: because patterns of frequent shopping — cultural patterns growing out of physical realities such as small refrigerators and urban living without cars — allow for higher fresh produce consumption, because one need not worry about the produce going rotten before the next trip, and literally allows for better produce as it can be sold closer to the peak of ripeness.

Now they have had hypermarts for some time in France and there have been quite a number of cars and a move to more suburban living for decades — but habits change slowly; perhaps, as Ms. Roty implies, they change generationally.

In addition, Ms. Roty is really proposing that retail should be more like foodservice. Retailers, in general, will carry a multitude of items and see what sells. Foodservice, by its very nature, involves a Chef or menu-planner making a selection for the consumer. This is the vegetable of the day; these are the fish we choose to sell.

So in proposing that, as she wrote: “Consumers would delegate choosing to the retailer, letting [the retailer] make the selections in a universe characterized by gustatory uncertainty and cruelly lacking reliable means of reference. And thus the retailer would commit himself.” Ms. Roty is suggesting little short of a revolution in retail thinking.

And there are real reasons to think that she may be on to something. Many years ago, when Internet shopping was in its infancy, the common perception was that it wouldn’t work for fresh produce as consumers would want to make sure they picked out a melon of the proper ripeness or that the consumer would want to see the quality.

Yet a young Cornell University professor by the name of Ed McLaughlin did some research that turned this point on its head. It turned out that consumers were thrilled to order fresh produce on the Internet precisely because it was so difficult to select a ripe melon or to know that a particular pineapple was of quality; they were happy to delegate these chores to an expert. Of course, not too many Internet shopping services actually had experts on these matters, but that is a story for another day. For now, the point is that the research seems to indicate an opening for a retailer who offers to exert expertise on behalf of the consumer.

In critiquing small store formats, including Tesco’s Fresh and Easy, Safeway’s ‘the market by Vons’ concept — as we did here and here — or Wal-Mart’s Marketside concept — which we discussed here, here, here and here — we have questioned whether American consumers would accept an abridged assortment. Yet, Ms. Roty raises an intriguing question: Might people be more inclined to accept such an abridged assortment if small format stores stated that the selection was not just smaller but better? In other words, right now one looks at these small format stores and one thinks they didn’t have room for all the options. Suppose instead there were signs posted indicating that the buyers had made choices and selected particular items for display based on that day’s quality and value — might it turn a negative to a positive?

We are enthused by the idea of these newsstand-like kiosks. When they open the first one, we hope Ms. Roty will let us know as we shall go to Paris to see such a thing.

Yet, as hopeful as we are, we must acknowledge a degree of skepticism.

On the logistics side, nobody has been able to develop a system that allows for frequent distribution of fresh fruits and vegetables to low-volume locations at a price that is not prohibitive. And it strikes us that many high-volume locations already have an array of available fresh produce. In most of Manhattan, for example, you have many small fruit shops and quite a number of fresh fruit carts on the street.

We have some doubts about the willingness of people to carry things. We remember when Eatzi’s opened in the Cellar at Macy’s on Herald Square. They had the theory that many commuters at nearby Penn Station would stop and pick up dinner before boarding commuter trains out to Long Island. It didn’t work, and we fear that it will be too much of a bother to carry such things. Although, perhaps, technology could be used. At the new Jetblue Terminal 5 at JFK airport, you can order a sandwich with a machine by the gate and they deliver it to you. Maybe we could have people order fresh produce upon departure or via mobile devices and have it waiting upon arrival?

We have long been troubled by the amount of good eating product that is difficult to sell because it is the wrong size or variety. However Ms. Roty speaks to the heart of the value proposition that retailers such as Aldi, Liddle and Netto offer in fresh produce. These retailers vehemently object to the notion that what they sell is of lower quality than the product a supermarket might sell, they explain that they might, though, buy a size or variety that is unpopular and thus get a better deal. We have doubts though, that, cosmetically unappealing produce has a bright future as looking is apart of enjoying as much as eating.

Mostly though, we are a bit skeptical because the barriers to opening small stores are not high. However, as they say, the devil is in the details. If there was money to be made executing the concept, surely somewhere, someone would be doing it. Perhaps beyond the upscale neighborhoods where such retail concepts exist, the consumer needs low prices more than service or expertise.

Skepticism over new business concepts is always warranted, because most fail. But some succeed; we most ardently hope that this is one of the exceptional few.

Many thanks to Catherine Roty and Ctifl. Your work is an inspiration to the industry.