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Foodservice Closures - Where Does The Produce Go?

By Guest Writer,
Craig Stauffer, CEO Vanguard International

May 28,2020
The closures of restaurants, hotels, and schools have left growers with heaps of fresh produce without a destination.
 
With crops often grown exclusively for the foodservice industry, growers who produce crops with a large percentage of production destined for this vital market segment are faced with incredible challenges amidst COVID-19 closures. 
 
Potato growers have been hit hard with French-fry sales plummeting. The best potatoes for French-fries in foodservice are variety specific, which does not always translate at retail into consumer expectations of what a fresh potato should look like. Add to the list, growers of leafy greens, tomatoes, and more fresh produce whose foodservice orders have all but disappeared which sadly for many means a “lost crop.” When fresh produce is in search of new destinations for sale, perishability often means the solution might take longer than the shelf-life of the produce.
 
Although they are consistent masters of pivoting, growers and farmers are now faced with the questions of, “where and how do I sell my crop?” There have been
expected increases in retail sales since cooking at home has risen dramatically and restaurants are offering dine-out options. But consumers eat differently at home. They eat in smaller portions so this does not replace the sheer quantities of product that would be consumed at foodservice establishments with those doors open and orders in full swing.

As an industry, fresh produce has historically weathered economic storms well.  Demand for food typically has an income elasticity near zero, meaning little or no reduction in overall food consumption during a recession.  However, removing foodservice from the equation stresses this reality; an enormous market has dried up overnight. To frame this in dollars, in 2018 the USA foodservice industry represented $678 billion in food sales, compared to $627 billion that was spent at grocery stores. 
 
Furthermore, consumers are limiting their shopping trips and changing the nature in which they shop. Fresh fruits and veggies have always been that bright colorful and inviting section of the store that drives impulse sales. Now, there is an increased demand for packaged produce as consumers’ perception is that produce has been handled less often...
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by Ron Pelger
Resetting the produce department
 

The resetting of the produce department is a normal procedure and occurs regularly. The proper placement of specific produce items plays a vital role in relation to consumer preferences. Adjustments are made as trends and shopping habits evolve.
 
There are three types of resets in the produce department: seasonal, sectional, and major.
 
The seasonal reset is simply switching from spring/summer to a fall/winter set and vice-versa when the seasons change. Primarily, specific seasonal categories are relocated and provided with expanded space allocation.
 
Sectional resets cover only specific categories such as a mushroom, tomato or apple section. One reason to reset a section would be adding new items, removal of slow movers, or even adjustment of space allocation.
 
A major reset is apt to be more of a complicated venture. This project involves the rearrangement of all the categories in the entire produce department into a specific merchandising pattern that fits consumer demands.
 
Produce managers are often overwhelmed by major department resets due to the complications they can cause. It takes a series of calculated steps in order to achieve the end results. In some cases, there are even equipment changes that are involved in these projects.
 
The biggest concern over major produce department resets by management is the shopper. It puts a heavy burden on them by creating a huge disruption and confusion while trying to make their specific selections. Some customers will even avoid the produce department altogether under major reset conditions
 
Consumers are the real reason behind a reset. The scanning data furnishes valuable information. In other words, items they purchased, amounts purchased, how often specific items were bought, the retail value a customer was willing to pay, and even vital information about the demographics of the customer.
 
Category management is vital in use to study and analyze items that sell the most and then are considered for display expansion. Not only does the scanning data furnish a report of items and numbers, it is also helpful in revealing where and how certain produce items sell best in the department.   
 
Produce department resets on the whole have also been driven by fierce competition. Conventional supermarket operators are using every means possible to survive. The lower net profit of supermarkets today has intensified the need for better merchandising strategies. Resetting shelves and floor displays to fit those needs is absolutely essential in order to remain a competitive player in the supermarket industry.
 
Other factors that play big roles in forcing resets are the year-round availability of items, increased ethnic population, organics, and increased health and nutrition awareness.
 
Mass-marketers such as Wal-Mart Supercenter, Sam’s Club, Costco, Target and others are very influential as well. In fact, this rapidly growing competition to conventional supermarket chains has forced top management to change their store merchandising strategies almost daily. 
 
 Some shoppers dislike resets and do not understand why we need to perform such projects. On the other hand, there are many customers who like the new and better presentation. Eventually, it all comes together, and people get used to it.
 
From the day a new store opens and many years after, produce department resets will always take place. Consumer shopping habits and trends dictate that. The end results of a produce department reset will always show up in the sales and profit. The numbers will affirm whether a reset was successful or not. More often, it has been proven that there is a substantial increase in the sales.
 
Resets are a necessary part of the supermarket business.

In Season: Market Memo

June 23, 2020
Produce Markets and Promotion Activity:
Markets have strengthened as we see the 4th of July pull for 2020 start.  Foodservice sales are still off but we expect a strong retail pull this year.  The Holiday falls on a Saturday this year so look for the strongest markets at the end of June.  Local produce has started in the regions so some demand on the west coast has weakened slightly.  We expect that to strengthen up next week.  All the traditional seasonal fruits are in full swing.  Start promoting grapes, peaches, plums, and nectarines.  Also, seedless watermelons are a good item to feature for the Fourth of July.  We expect markets to increase next week and then start to taper off in mid-July.  Quality is good on all commodities.  If you need any help with a holiday ad, please contact FreshXperts.


Transportation Update:
We saw a stronger freight market in June as the Memorial Day demand lead to fewer available trucks.  We expect current rates through the 4th of July pull.  After the Holiday, rates may get a little lower, but we will have to wait and see.  Currently, we expect current rates to continue for three weeks. Once we get through the Holiday, we should start to see rates come down slightly.  If you need any logistics support for the Holiday pull, please contact your FreshXpert. 

~Paul Grothe

From the Xpert

The occurrence of online meetings has skyrocketed in recent months and for the next few months, in-person meetings will be limited. Many thrive on face-to-face meetings and are not as confident with cameras and technology. FreshXpert Jennifer Lawson has created an infographic with tips to help make your next virtual presentation a success. Click to view the infographic.
Suggested Reading

FreshXperts, Press Release, FreshXperts team expands adding a big Industry Personality, June 2020.
United Fresh, FreshFacts on Retail Q1
Produce Blue Book, General News, Dan 'The Produce Man' Avakian joins FreshXperts, June 2020.
 

FreshXperts is a consortium of consultants in the fresh industry. 
Experts in all aspects of the fresh industry–from Farm to Fork
Growers - Retailers - Distributors
Logistics - Foodservice -
Start Ups & New Ventures

For more information about our member FreshXperts, visit our team page
http://freshxperts.com/overview/the-freshxperts/
Anthony Totta: CEO; Business and Brand Development Specialist
Tim Vaux: Executive Leadership Specialist
Eric Bosveld: M&A; Agro-Economics Specialist
Dan Avakian: Media, Food Safety
Ron Pelger: Retail Operations Specialist
Jennifer Lawson: Administration, Information Design
Paul Grothe: Foodservice Procurement Specialist
Nick Pasculli: PR & Marketing
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