Fresh Fruit Marketing Trends

Transcription

1 Fresh Fruit Marketing Trends DR. ROBERTA COOK Dept. of Ag and Resource Economics University of California Davis UC Davis Postharvest Technology Fruit Ripening Short Course March 27, 2012

2 Top Food Industry Trends Shoppers have migrated towards retailers with strong value for money credentials; on-going channel-blurring trend Many retailers have lowered prices to close the gap with discount competitors but with difficulty Retail strategies include new pricing initiatives, format development, e.g., smaller, price impact, and fresh food formats by non-traditional grocery retailers (Walgreen s, Target P-Fresh) Cost-cutting to maintain margins, seeking efficiency gains Lowering inventory levels, SKU RAT, painful lessons already Retail corporate restructuring to eliminate duplication and generate cost savings and reorganization of produce procurement Store brand/private label growth

3 USA retail environment challenging but improving Retailer Comparable Sales Growth, 2010 Comparable Store Sales Growth, 2009 Costco 7.0% +3.0% Kroger 2.8% +2.1% Publix 2.3% -4.7% Safeway -1.8% -2.5% Supervalu -5.1% -6.5% Target 2.1% -1.6% Walmart US -0.8% -0.5% Whole Foods Market 7.1% -0.9% Sources: company annual reports and investor relations announcements compiled by Roberta Cook.

4 US Supermarket* Fresh Produce Dept. Performance During the Economic Downturn, % Change vs. Prior Year *Excludes club stores, supercenters, part of conventional grocery and other alternative formats $Sales Quantity Source: Perishables Group FreshFacts powered by Nielsen

5 US Supermarket* Fresh Produce Dept. Performance, % Change from Q to Q *Excludes club stores, supercenters and other alternative formats. Weekly $ sales/store Weekly quantity sold/store Veg All Produce Fruit Other Organic Fruit Organic Veg Source: FreshFacts on Retail, Q4 2011, Perishables Group/United Fresh Foundation.

6 US Supermarket* Fresh-Cut Produce: Dollar Sales and Quantity, % Change Q vs Q *Excludes club stores and supercenters Value-added Fruit 1.1 Packaged Salads Value-added Vegetables % Change Sales % Change Quantity Source: FreshFacts on Retail, Q4 2011, Perishables Group/United Fresh Foundation.

7 Fruit % of Dollar Sales in Select Supermarkets Peaches 2.4% Tangerines 3.3% Cherries 3.7% All Other 14.7% Oranges 4.3% Avocados 5.0% Melons 8.8% Berries 18.9% Grapes 11.7% Apples 14.2% Bananas 13.0% Total US - FRUIT The Berries category accounts for 18.9% of Total Fruit dollar sales: And Berries saw a +5.1% increase in dollars vs. the previous year: 5.1% 0.8% 0.9% -3.8% -5.2% 5.5% -5.4% 0.9% 8.3% 1.6% Berries Apples Bananas Grapes Melons Avocados Oranges Cherries Tangerines Peaches Dollars Current 52wks % Change Berries $3,591,426, % Apples $2,695,722, % Bananas $2,467,555, % Grapes $2,214,584, % Melons $1,659,234, % Avocados $952,384, % Oranges $824,087, % Cherries $693,156, % Tangerines $621,313, % Peaches $448,144, % Total Fruit $18,954,757, % 52 Weeks ending 3/25/2012 FreshLook Marketing (FLM) Top 10 Fruit Categories - Dollars

8 Avocados 2.3% Pineapple 2.3% Tangerines 3.1% Fruit % of Quantity Sold in Select Supermarkets Peaches 1.9% Oranges 5.5% Berries 7.5% All Other 11.4% Grapes 7.6% Apples 11.8% Bananas 26.8% Melons 19.9% Total US - FRUIT Bananas account for 26.8% of Total Fruit pound sales: And Bananas saw a -4.3% decrease in pound sales vs. YAGO: -4.3% -8.7% -4.0% -11.0% 2.2% -7.7% 5.1% 3.0% -8.6% -5.2% Bananas Melons Apples Grapes Berries Oranges Tangerines Pineapple Avocados Peaches Pounds Current 52wks % Change Bananas 4,009,233, % Melons 2,975,431, % Apples 1,761,115, % Grapes 1,138,462, % Berries 1,123,163, % Oranges 821,984, % Tangerines 470,373, % Pineapple 345,430, % Avocados 341,169, % Peaches 290,405, % Total Fruit 14,982,229, % 52 Weeks ending 3/25/2012 FreshLook Marketing (FLM) Top 10 Fruit Categories - Pounds

9 Top 10 Fruits in Q vs. Q4 2011, Sales in US Supermarkets Product Weekly $ Sales per Store Percent Change vs. Q Weekly Vol. per Store Percent Change vs. Q Avg Retail Price Percent Change vs. Q Apples $3, % 2,087.9% $ % Citrus $2, % 2, % $ % Bananas $2, % 3, % $ % Grapes $2, % 1, % $ % Berries $2, % % $ % Avocados $ % % $ % Pears $ % % $ % Specialty Fruits $ % % $ % Melons $ % % $ % Stone Fruits $ % % $ % Source: FreshFacts on Retail, Q4 2011, Perishables Group/United Fresh Foundation.

10 Information Technology Information technology, business intelligence will play a vital role at all levels of the value chain going forward. Firms embracing this may gain competitive advantages. This includes a better understanding of consumers and the tactics that increase consumption without sacrificing return for the commercial buyer or seller, e.g., promotional efficiency. SKU rationalization and store clustering are keys to better coordination of supply and demand, lower shrink and greater value chain efficiency opportunities to achieve via retailer-vendor partnerships but must be done leveraging best shopper data. Lower retail profits are an obstacle to greater investments in technology.

11 Supply Chain Imperatives Streamlining the supply chain, improving vertical coordination, involves identifying mutually beneficial strategies and tactics, e.g., promotions, packaging, logistics Identifying which activities add more value than cost Eliminating non-value-adding activities Decreasing internal operational inefficiencies due to lack of ERP s and underutilization of BI they are often hidden or not considered important enough to attract attention in more favorable markets but with margin squeeze they count Sustainability/social responsibility goals, metrics and verification will become more important and firms will seek competitive advantages The same goes for traceability and food safety expectations and requirements; foodservice has led in food safety; and there is a growing and more active government role

12 U.S. Fresh Fruit and Vegetable 1 Value Chain, Estimated Dollar Sales, Billions, 2010 $12.3 imports institutional wholesalers produce and generalline wholesalers $ food service establishments farms shippers integrated $ Excludes nuts and pulses $6.1 exports wholesaleretailers $ supermarkets and other retail outlets farm & public markets $1.800 $ consumers Sources: Compilations by Kristen Park, Roberta Cook, and Edward McLaughlin based on U.S. Retail Census, ERS/USDA, NASS/USDA, U.S. Department of Commerce, and other data. 2 This value is larger than the value reported in table 1 since it includes an estimated value for production not captured by NASS/USDA.

13 Market Shares of Leading USA Fresh Fruit Producing States and Value of Fresh Fruit Production,* 2009 Percent State Value ($1,000) U.S. Total California 4,330,397 53% Washington 1,703,876 21% Florida 616,454 8% Oregon 156,191 2% Michigan 179,578 2% New York 170,486 2% 6 State Subtotal 7,156,982 88% Rest of States 1,012,665 12% All U.S. fresh fruit 8,169, % *Excludes tree nuts. Source: USDA/ERS, Gary Lucier.

14 Store formats used by US shoppers in the preceding 30 days (% having shopped the format) Percent of Shoppers Supermarket/full service Supercenter Club/warehouse store Discount store/mass Limited-assortment store Organic/specialty store 9 15 Dollar store 1 2 Source: US Grocery Shopper Trends 2011, FMI. Survey of 2,048 shoppers.

15 US Consumers: Annual Trips/Household to Grocery Store Formats Only (excluding other types of food stores), 1995, 2001 v Source: Food Industry Review 2011 Edition. Note: Only 167 total trips to all food retail stores in 2001 v. 147 in 2011! (including club stores, supercenters, grocery stores and all other formats).

16 Top Factors in U.S. Consumer Selection of Primary Supermarkets 2011 *Was 64% in 2007 **Was 55% in 2007 Source: FMI Grocery Shopper Trends 2011 Low prices* High-quality produce High-quality meat Accurate shelf tags Great product variety Special prices** Clean neat store Use-before/sell-by date Convenient location Personal safety at store Easy to shop layout Courteous employees Fast checkout Fresh-food deli Informed employees 74% 69% 66% 63% 62% 60% 57% 56% 46% 46% 45% 44% 44% 36% 33%

17 Select Fresh Fruit Consumption Trends

18 Why not buy more fresh fruit? Reasons vary depending on whether you are a consumer reporting that they are buying more or not buying more fresh fruit, 2010 Location where grown Possible contamination outbreak Time necessary to prepare Appearance Use of pesticides Seasonality Cost 4% 15% 12% 13% 12% 15% 21% 21% 32% 27% Buying more Not buying more 46% 47% 42% 51% Source: Consumer Trends in the Produce Category, 2010, PMA and The Hartman Group, Oct

19 Buying more fresh fruit is a reflection of general health-conscious eating, 2010 People who are purchasing more fresh fruit cite: 1) eating healthier; 2) source of vitamins and minerals; 3) freshness; 4) eating less processed foods; and 5) tastes good as the main reasons. Eating healthier is over 3 times as important as taste. People who are purchasing the same/less fresh fruit cite: 1) eating healthier; 2) source of vitamins and minerals; 3) tastes good; 4) freshness; and 5) eating less processed foods as the main reasons. For those with no increase in their consumption taste is twice as important (over 40%) as for those purchasing more. Source: Consumer Trends in the Produce Category, 2010, PMA and The Hartman Group, Oct

20 Percent Change in Trips per Buyer Fruits are losing buyers and trip frequency Consumer Loyalty by Category, Percent Change in Households Purchasing 5.5% 3.5% 1.5% -0.5% -2.5% -4.5% -6.5% Losing Buyers but Gaining Frequency Berries Apples Losing Buyers & Frequency Grapes Pkg Salads Cooking Veg. Potatoes Citrus Bananas Onions Lettuce The number of households buying berries declined 2.1% in 2010 Gaining Buyers & Frequency -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% Percent Change in Households Purchasing Gaining Buyers but Losing Frequency Source: Perishables Group FreshFacts Powered by Nielsen.

21 US Banana Consumption Frequency: Eatings per Individual, Average in 2-Week Period, Source: NPD Group / National Eating Trends data ending in Feb. for 2010.

22 US Banana Consumption Penetration, : Percent of all individuals consuming bananas at home at least once in typical 2-week period Percent Source: NPD Group / National Eating Trends data ending in Feb. for 2010.

23 Age Profile of US Banana Consumers: Eatings Index, 2010 > 120 = Overindex > = Average < 80 = Underindex *Indices 120+ are above average Source: NPD Group / National Eating Trends data ending in Feb. for 2010.

24 Promotional Measures in Action for Packaged Salads The garden premium subcategory sold 67.9% volume on promotion. At 76% promotional efficiency, this subcategory demonstrated the highest promotional efficiency. The coleslaw subcategory demonstrated the lowest promotional efficiency, 30.8%. Percent subsidized volume in coleslaw was 69.2%. 38.1% 61.9% % Subsidized % Promo Efficiency % on Promotion 40.8% 43.8% 56.2% 37.5% 36.3% 63.7% 36.6% 35.4% 64.6% 19.4% 76.0% 24.0% 47.0% 53.0% 67.9% 34.6% 60.1% 39.9% 41.6% 30.8% 69.2% 17.5% Only about 30% of the volume sold on promoted weeks was unexpected. Source: Perishables Group FreshFacts powered by Nielsen Promotional Efficiency Volume. Packaged salads, Retailer X, 52 wks ending 03/28/09.

25 Pounds per capita US Per Capita Fruit Disappearance/Consumption, Including Melons, Pounds Process Citrus Process Noncitrus Fresh Citrus Fresh Noncitrus, Incl Melon Source: Fruit and Tree Nuts Yearbook, ERS/USDA, , adjusted to include melons from Vegetables and Melons Situation and Outlook Yearbook, ERS/USDA, May 2011.

26 U.S. Per Capita Consumption of Selected Fresh Fruit , and 2011 for strawberries (all have positive health messages, and all but kiwis have generic promotion*) Pounds per capita Blueberries Strawberries Kiwifruit Avocados Source: Fruit and Tree Nuts Yearbook, ERS/USDA, *But kiwis slashed generic promotion in the late 90 s and were unable to sustain growth and capitalize on a positive health message.

27 U.S. Per Capita Consumption/Utilization of Selected Fresh Fruit pounds per capita Melon Orange Grape Banana Apple Source: Fruit and Tree Nuts Yearbook, ERS/USDA,

28 U.S. Per Capita Disappearance/Consumption of Top 3 Melons, (watermelons have generic promotion) Pounds per capita Total Honeydew Cantalope Watermelon Source: Fruit and Tree Nuts Situation and Outlook Report, ERS/USDA,

29 U.S. Per Capita Consumption/Disappearance of Selected Fresh Fruit pounds per capita Mango Papaya Pear Pineapple Peach/Nect. Source: Fruit and Tree Nuts Yearbook, ERS/USDA,

30 US Per Capita Utilization/Consumption of Fresh Tomatoes ( P ) Pounds per capita 25 P=Preliminary P Source: USDA/ERS, Vegetables and Melons Situation and Outlook Yearbook, May 2011

31 Fresh Tomato Sales in U.S. Supermarkets: Share of Total Tomato Category Sales by Tomato Type in Quantity and Value, 2010 vs vs Percent Share of Value Percent Share of Quantity Type Greenhouse: Round/beef TOV/Cluster Round field Roma Snacking Sources: CTC, IRI, and The Perishables Group *May not sum to 100 due to rounding and retailer-assigned PLU codes.

32 Some Berry Trends

33 Why Retailers Love Berry Consumers? They Spend Money Very High 150+ High Low 1-50 Affluent LIFESTYLE Modest Cosmopolitan Suburban Comfortable Struggling Working Plain Rural % HHs Behavior / Stage Centers Spreads Country Urban Cores Towns Living Total Top Stores Start-up Families % HHs with young children only <6 Small Scale Families % Small HHs with older children 6+ Younger Bustling Families % Large HHs w/ children (6+), HOH <40 Older Bustling Families % Larger HHs w/ children (6+), HOH 40+ Young Transitionals % Any size HHs, no children, <35 Independent Singles % 1 person HHs, no children, Senior Singles % 1 person HHs, no children, 65+ Established Couples % 2+ person HHs, no children, Empty Nest Couples % 2+ person HHs, no children, Senior Couples % 2+ person HHs, no children, 65+ Total Percent Households Top Stores 20.8% 49.6% 17.2% 3.1% 8.0% 1.2% Source: Perishables Group FreshFacts Powered by Nielsen.

34 Naturipe Farms Blueberry MAP New Product Launch

35 Consumer Attitudes on Stage of Ripeness at Point of Purchase for Select Fruits

36 Fresh Peaches: Preferred State of Ripeness at Time of Purchase, 2011, (of the 51.5% of US consumers purchasing peaches) 18% 8% 2% 36% Always buy ripe Prefer ripe but occasionaly buy unripe No preference Prefer to buy unripe 36% Always buy unripe Source: Fresh Trends 2011, Vance Publishing

37 Fresh Nectarines: Preferred State of Ripeness at Time of Purchase, 2011, (of the 30.4% of US consumers purchasing nectarines) 27% 7% 3% 33% Always buy ripe Prefer ripe but occasionaly buy unripe No preference Prefer to buy unripe 31% Always buy unripe Source: Fresh Trends 2011, Vance Publishing

38 Fresh Pears: Preferred State of Ripeness at Time of Purchase, 2011, (of the 36.3% of US consumers purchasing pears) 23% 7% 4% 29% Always buy ripe Prefer ripe but occasionally buy unripe No preference Prefer to buy unripe 38% Always buy unripe Source: Fresh Trends 2011, Vance Publishing

39 Fresh Mangoes: Preferred State of Ripeness at Time of Purchase, 2011, (of the 19.7% of US consumers purchasing mangoes) 4% 2% 28% Always buy ripe Prefer ripe but occasionaly buy unripe No preference 45% Prefer to buy unripe 22% Always buy unripe Source: Fresh Trends 2011, Vance Publishing

40 Fresh Cantaloupe: Preferred State of Ripeness at Time of Purchase, 2011, (of the 57.8% of US consumers purchasing cantaloupe) 15% 4% 2% Always buy ripe Prefer ripe but occasionaly buy unripe No preference 48% Prefer to buy unripe 32% Always buy unripe Source: Fresh Trends 2011, Vance Publishing

41 Branded vs. Private Label

42 Private Label Share of CPG Spending in U.S. Grocery Channels, Note: Symphony/IRI estimates 25.9% unit share and 20.6% dollar share for Source: Various Private Label Magazines Dollar Share Unit Share

43 Private Label Sales in US Supermarkets, 2010: Top Private Label Categories by Dollar Volume: Fresh Produce Becoming Important Milk Bread & Baked Goods Cheese Fresh Produce Paper Products Fresh Eggs Deli Dress., Salads, Prep'd Foods Pkg'd Meat Unprep'd Froz. Meats, Seafood Canned Vegetables $2.2 $2.1 $1.7 $1.6 $1.5 $1.3 $3.1 $4.1 $3.9 Billion $6.6 Source: Food Institute Report, June 24, 2011

44 Private Label Sales of Key Fresh Produce Categories in US Supermarkets: Private Label Share of Total Category Sales, (52 week year-ending Sept. 25, 2010) Prepared Fruit Citrus Potatoes Pack. Salads Carrots Apples Lettuce Mushrooms Prepared Veg 9.8% 7.6% 7.5% 6.2% 20.5% 19.5% 16.3% 34.2% Source: United Fresh Foundation Fresh Facts, % Millions Note: Private label fresh produce sales are 10.4% of total fresh produce sales vs. 6.8% in In 2010 private label produce sales were $3.1B in stores tracked by Nielsen.

45 Frequency of Purchasing Private Brand Items at the Primary Store, 2011 Never 4% Always 41% Source: U.S. Grocery Shopper Trends 2011, FMI. Occasionally 55%

46 Rating Private Brand Products at the Primary Store, 2011 Excellent 1% 36% Good 7% 56% Fair Poor Source: U.S. Grocery Shopper Trends 2011, FMI.

47 Reasons US Consumers Purchase Branded Fresh Produce, 2011 Consistency 57% Promotions Coupons 46% 44% Trust 31% Other Packaging 6% 8% Source: Fresh Trends 2011, Vance Publishing

48 Threats and Opportunities Private labels are becoming more important to retailers both as a differentiation tool with innovative rather than just me-too products, and as a way to offer value (price relative to quality) to consumers. Value = benefits - costs. Private labels can represent an opportunity to fresh produce suppliers by generating predictable demand for those items, on the other hand, margins are likely to be thin and supplier costs may be higher due to the need to pack multiple labels. For CPG s the marketing expenses are saved for private labels so suppliers can offer lower prices without lower net margins. In commodity produce (vs fresh-cut) marketing expenses have typically been low so it is unclear whether private labels will work for the supplier.

49 Understanding Consumers

50 Projected US Population Hispanic 16% Black 13% Asian 5% Other 2% Hispanic 23% Black 13% Asian 7% Other 2% Non- Hisp. Whites 66% Non-Hisp. Whites 57% Source: million million

51 Average Annual Household Expenditures (dollars): Fresh Produce Expenditures by Race, 2009 Fresh Fruits Fresh Vegetables All White & Other Asian Black Hispanic Source: Food Institute s Demographics of Consumer Food Spending, 2011.

52 Foodservice contributes to the evolution of food trends and ethnicity leads the way, Authentic and Fusion, benefiting fresh produce Brazilian Churrascaria Peruvian Argentine Oaxacan Fine Dining Chefs Creation Casual Theme Interpretation Szechwan Thai Vietnamese Indonesian Taiwanese Family Dining Interpretation QSR Interpretation Non-Commercial Interpretation Cambodian Incorporated into Consumer Meal Mix

53 2009 Distribution of U.S. Households by Income Level, Share of Total Food Expenditures/Income Level & Ave. Fresh Produce Expenditures/Income Level $712 31% $520 18% $70,000- $99,999 14% $100, % Share of Households <$15,000 15% $254 8% $15,000- $29,999 19% $316 12% Source: Calculations by Roberta Cook from the Food Institute s Demographics of Consumer Food Spending, $ = Average fresh produce expenditures per income group $419 15% $50,000- $69,999 15% $30,000- $49,999 20% $348 16% % = Percent of total food expenditures contributed by each income group

54 Distribution of U.S. Households by Age Group and Fresh Produce Expenditures, % 25% 20% 15% 10% 5% 0% $246 7% 4% $373 17% 14% $478 18% 20% $496 24% 21% $446 $464 17% 18% 11% 11% $346 8% 10% $600 $500 $400 $300 $200 $100 $0 Share of Households by Age Group Share of Fresh Produce Expenditures by Age Group Fresh Produce Expenditures by Age Group Source: Food Institute s Demographics of Consumer Food Spending, 2011.

55 Over the past decade, consumers have been redefining quality across virtually every food and beverage category Yesterday Today Emerging Scientific Processed Industrial Organic, natural Fresh / less processed Local, personal Engineered For personal health Real, authentic For personal wellness For community health Source: The Hartman Group and PMA, Identifying Consumer Trends in the Produce Category, 2010.

56 Sustainability Trend from the Consumer Vantage Point Hartman Research Results Most consumers have very limited understanding or usage of the concept of sustainability In general, food terms as used by the food industry are not understood: functional foods, IPM, food miles Sustainability is becoming an umbrella term for health, wellness, organics, environmental consciousness, fair trade, simple living, buying local, etc. Personal sustainability linked to environmental sustainability for some

57 The Consumer World of Sustainability Core 13% 12 88% Inside the World of Sustainability Outside the World of Sustainability Mid- Level 66% Periphery 21% Source: The Hartman Group Sustainability 2008 Survey, Sept (n=1,856)

58 Hartman Organizes the World of US Organic Consumers, % don t purchase organics 18% 46.5% Source: Beyond Organic & Natural report, The Hartman Group, Inc. February %

59 Index of US Organic Fresh Produce Consumption by Spectra Lifestyle/Behavior Stage, 2010, All Channels Very High 150+ High Affluent LIFESTYLE Modest Cosmopolitan Suburban Comfortable Struggling Working Plain Rural Behavior / Stage Centers Spreads Country Urban Cores Towns Living Total % Volume Start-up Families % HHs with young children only <6 Small Scale Families % Small HHs with older children 6+ Younger Bustling Families % Large HHs with children (6+), HOH <40 Older Bustling Families % Larger HHs with children (6+), HOH 40+ Young Transitionals % Any size HHs, no children, <35 Independent Singles % 1 person HHs, no children, Senior Singles % 1 person HHs, no children, 65+ Established Couples % 2+ person HHs, no children, Empty Nest Couples % 2+ person HHs, no children, Senior Couples % 2+ person HHs, no children, 65+ Total Percent Volume 15.3% 22.7% 17.8% 11.2% 16.0% 17.1% Source: Spectra BehaviorScape: Total Consumption/Spectra 2010 Jan./Homescan Product Library

60 US Organic Fresh Produce Sales, 2011 The organic category as a whole accounts for 4.9% of supermarket produce sales: 3.3% of veg and 1.6% of fruit. Sales have remained high since the recession began. Sales were led by packaged salads, carrots and lettuce. Sales were led by apples, berries and bananas. Source: FreshFacts on Retail, Q4 2011, Perishables Group/United Fresh Foundation.

61 Top 10 Organic Fruits in Q vs Q4 2010, Sales in US Supermarkets Organic Product Weekly $ Sales per Store Percent Change vs. Q Weekly Vol. per Store Percent Change vs. Q Avg Retail Price Percent Change vs. Q Apples $ % % $ % Berries $ % % $ % Bananas $ % % $ % Grapes $ % % $ % Citrus $ % % $ % Pears $ % % $ % Avocados $ % % $ % Specialty Fruits $ % % $ % Prepared Fruits $6 66.9% % $ % Stone Fruits $5 96.3% % $ % Source: FreshFacts on Retail, United Fresh Foundation, Feb

62 million $ in sales Value of Organic Farmgate Sales CA and US 2008, by Select Commodity Vegetables, potatoes, & melons CA US Fruit Lettuce Strawberry Raspberry Source: Klonsky, Karen A Look at California s Organic Agriculture Production. ARE Update 14(2):8-11. UC Giannini Foundation of Agricultural Economics.

63 US Consumer Reasons for Buying Organic Fresh Produce, 2011 Avoidence of chemicals 61% Personal health Better taste Environmental / Social responsibility Nutrient content 49% 48% 44% 40% Source: Fresh Trends 2011, Vance Publishing Other 15%

64 Organic Users*: Reasons for Not Using More Organics Too expensive Can't tell if really organic Only recently began purchasing organic Not readily available Don't really believe they're more nutritious Don't really believe they're safer Can't find brand(s) we like Don't want to change from products we use Don't stay fresh as long as nonorganics Often do not look appealing Certification requirements increasingly weak 11% 8% 7% 7% 6% 6% 6% 23% 20% 20% *Limited organic buyers (Primary HH shoppers who have purchased organic, but fewer than 4 product categories, in past 3 months) (n=537) 69% Source: Organics 2008 Report, Hartman Group

65 Where do you buy organic? Grocery store Farmers' market Natural food store (e.g. Whole Foods) Discount retailer (e.g. Walmart) Specialty / ethnic food store (e.g. Trader Joe's) Club store (e.g. Costco) Co-op Community supported ag / farm (CSA) Pharmacy / drug store Convenience store (e.g. 7-11) Vitamin store (e.g. GNC) Internet Direct mail / catalog Home delivery 12% 12% 6% 4% 4% 4% 4% 3% 2% 1% 25% 25% 24% Use of Farmers Markets for organic purchases has gone up from 18% in 2008 to 25% in 2010 Use of CSAs and Co-ops has doubled from 2% and 3% in 2008 to 4% and 6% respectively in 2010 Source: Beyond Organic & Natural report, The Hartman Group, Inc. February %

66 Reasons for purchasing locally grown produce, 2011 Support local producers 49% Freshness/quality 44% Price/save money 39% Taste 37% Healthier 32% Better for the environment 24% Don t buy 12% Source: Fresh Trends 2011, Vance Publishing

67 Reasons for purchasing locally grown produce, 2011 Freshness 83% Support the local economy 68% Taste 56% Like knowing source of product 40% Price 35% Nutritional value 30% Environmental impact of transporting food across great distances 27% Appearance 27% Long-term health effects 15% Source: US Grocery Shopper Trends 2011, FMI

68 Definition of Locally Grown Products according to Shoppers, 2011 Source: US Grocery Shopper Trends 2011, FMI. grown within certain mile radius 41% grown on familyowned farm 13% other 2% grown in my state 44%

69 Maximum Distance a Food Item Can Travel from Source to Store to Be Called Local Source: US Grocery Shopper Trends 2011, FMI miles 7% miles 28% miles 26% 25 miles or less 26% More than 100 miles 13%

70 US Consumer Confidence in the Safety of Fresh Produce by Source, % 90% 80% 70% 60% 50% 40% 30% 20% 10% Not confident at all Mostly not confident Neutral Mostly confident Very confident 0% Farmers' Market Supermarket Mass Retailer Source: The Hartman Group and PMA, Identifying Consumer Trends in the Produce Category, 2010.

71 2010: How comfortable are you that food grown/produced outside the U.S. is safe? Very, 5% Somewhat, 44% Not at All, 16% Not Very, 34% Source: U.S. Grocery Shopper Trends 2010, FMI.

72 Positioning for Success: Understanding Consumers and Retail-Supplier Strategic Partnerships

73 Changes in consumer use of information technology influences marketing tactics and communication vehicles The fresh produce industry needs to find creative ways to communicate with consumers via cyber channels and social networks with the aim of being relevant: Value messaging Cater to health and wellness Create convenient and quality eating experiences Celebrate cooking, preparation, social eating experiences, indulgence

74 For suppliers: How are you positioned? Customer Rationalization Who are the most profitable? Who have significant growth potential? Who don t we sell? Why? Can we get to customer specific P&L s? How are we investing time and resources? Positioned for emerging independents, ethnic markets and price impact stores?

75 Becoming Marketing-Driven Becoming customer-centric. Putting the interests of your customers first. Understanding that you will get there faster if you work together. Next level is to become consumer-centric. Consumer-centrism will increasingly be achieved via supplier-customer partnerships. Suppliers and customers must choose strategic partners align with those who will succeed in the marketplace.

76 Conclusions Suppliers and buyers (retail or foodservice) who partner together to identify mutually beneficial actions may gain a competitive advantage in their respective markets Successful partnerships are likely to be based on achieving logistical or operational efficiencies and/or consumer insights that get THE RIGHT PRODUCT TO THE RIGHT CONSUMER AT THE RIGHT TIME Firms should focus on understanding consumers in order to develop strategies that stimulate demand in a way that distributes benefits to both suppliers and buyers, e.g., at the most basic level, win-win promos, promotional efficiency, category development holds great potential

77 Supplemental Information Nutrition Attitudes and Social Media

78 Shoppers concern about nutritional content and evaluation of diet 80% 60% 40% diet could be healthier % very concerned about nutritional content 0% Source: FMI Trends in the US Consumer Attitudes and the Supermarket, various years

79 How often do shoppers use a store s nutrition label guidance to determine which item to purchase? Never 7% Always 7% Frequently 34% Rarely 20% Occasionally 32% Source: US Grocery Shopper Trends 2011, FMI

80 Age and Generation Terms Matures or 60+ = born in or pre-1945 Baby Boomers = born Gen X = born Gen Y = born Millenials = teenagers and 20s Source: Lancaster and Stillman, When Generations Collide, 2002

81 Adoption of Social Media by Gender: Percent of Shoppers Using Various Social Networks All Shoppers Men Women Facebook YouTube LinkedIn Twitter MySpace Blogs None Source: US Grocery Shopper Trends 2011, FMI

82 Adoption of Social Media by Marital Status: Percent of Shoppers Using Various Social Networks All Shoppers Married Single Facebook YouTube LinkedIn Twitter MySpace Blogs None Source: US Grocery Shopper Trends 2011, FMI

83 Adoption of Social Media by Generation: Percent of Shoppers Using Various Social Networks All Shoppers Millennials Gen X Boomers Matures Facebook YouTube LinkedIn Twitter MySpace Blogs None Source: US Grocery Shopper Trends 2011, FMI

84 Activities shoppers would undertake based on social networking recommendations Try new restaurant 77% Make new recipe 70% Purchase new food 62% Shop at new grocery store 56% Source: US Grocery Shopper Trends 2011, FMI

85 Tools to help US shoppers learn more about food must be offered in various formats All Shoppers Millennials Matures Percent of Shoppers Who Use 1. online/mobile recipes paper recipes recipes with sales specials how to videos cooking classes online wine tips in-store wine classes Source: US Grocery Shopper Trends 2011, FMI

86 When shoppers plan for dinner (percent of shoppers) All Shoppers Gen Y Gen X Boomers Matures No plan 2 hours before dinner Weekend Weekday Not sure if eating in or out 2 hours before dinner Weekend Weekday Source: US Grocery Shopper Trends 2011, FMI

87