BERRIES

04/30/2010 05:23PM

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BERRIES

By Tracy Kreuser and Kelli Beckel, The Perishables Group

Berries have long been a prominent category in the produce department, with availability of varieties rotating with harvest times. Today, a more sophisticated berry category has emerged. Advancements in shipping, growing and packaging helped berries evolve into a year-round category. Most often sold in clamshells and under an assortment of brand names, fresh and flavorful berry varieties are available regardless of season. As typical with innovation, some people fall behind the curve, and others are already looking for what’s next. In this article, we examine the berry category as it exists today.

Berries: year in review
The berry category was the largest category in the produce department in the latest 52-week period ending Jan. 30, 2010, representing 7.4% of total produce dollar sales. Comprising strawberries, blueberries, raspberries, blackberries, currants and other berries, the category sold on average $2,950 per store per week nationally, up 6.4% compared with the prior year.
Berry sales reached their lowest point in October, and then steadily increased until reaching peak sales of $4,798 per store the week of July 4. Blueberries were the only berry subcategory to post peak sales during the Fourth of July week, selling $1,591 per store that week. Besides currants and other berries, which peaked the week of Thanksgiving with $665 per store — due in large part to cranberries— all other berry subcategories peaked during the spring months. Strawberries sold $2,954 per store the first week ending in April, blackberries peaked with $407 per store the first week ending in May, and raspberries peaked with $618 per store the first week ending in June.

Strawberry sales varied the most throughout the year, with a $2,219 range in sales when comparing the lowest and the highest-selling weeks. This equates to strawberries selling 302% more during the highest sales week compared to the lowest sales week. Blueberries highest sales week was over 900% higher than the lowest sales week, with a range of $156 to $1,591. Raspberries posted the most consistent sales throughout the 52-week period, with an increase of 235.8% from its lowest peak week of $184 to its highest sales week with $618.

As a long-time favorite among berry consumers, strawberries represented the largest share of berry sales for the latest 52 weeks with 55.9% share. Blueberries were the second largest berry subcategory with 24.7% share, and together with strawberries accounted for more than 80% of dollar sales. The remaining 20% share consisted of raspberries, blackberries, currants and other berries.

Although strawberries were responsible for the bulk of berry sales in this latest 52-week period compared with the previous period, share was down 1.3 percentage points. Blueberries and other berries also lost share compared to the prior year, but at a slower rate of just 0.1 share percentage point. These share losses were absorbed by blackberries and raspberries, which increased 1 and 0.5 percentage points year-on-year.

These latest 52-week trends aligned with the trends during the 5-year period from 2004 to 2008. Strawberries share of sales declined from 63.8% in 2004 to 57.2% in 2008, before dropping to 55.9% share in the latest 52 weeks. Similarly to more recent trends, blackberries and raspberries increased share from 2004 to 2008, up 1.5 share points each. The only noticeable trend variance when comparing the latest 52 weeks with the previous five years occurred in blueberries. Historical data shows share for blueberries increased 3.8 share points from 2004 to 2008, up to 24.7%. That number remains consistent with today’s blueberry share, which was down just 0.1 point in the past year.

Returning attention to the latest 52-week period ending Jan. 30, 2010, national average berry dollar sales increased 6.4%. Despite posting share loss, average strawberry dollar sales increased compared with the previous 52-week period, up 3.9%. Blackberries and raspberries posted a faster growth rate than strawberries, allowing these smaller berry varieties to capture share from strawberries. Outside of currants, which accounted for less than 0.1% share of total berry sales, blackberries and raspberries posted the largest growth, up 25.5% and 11.4%, respectively. Like strawberries, blueberry sales increased less than the national average, with an increase of 5.8%.

When we look at the regional differences in berry sales, there’s a gap greater than $2,400 in sales between the East and South regions. The East region had the highest average dollar sales with $4,589 per store per week, $1,639 more than the national average and $2,496 more than the lowest-performing South region. The East region also posted the largest sales growth year on year, up 8.2%. The Central region was the No. 2 region for berry sales, with $3,875 per store per week, up 5.2% compared with the prior year in this region. The Central and East regions were the only regions to surpass the national average of $2,950 per store per week.

The South region posted $2,093 in berry dollar sales per store per week, up 6.2% compared with the previous year. The West region increased sales the least, up 4.7% year-on-year for $2,734 per store per week.

Berry contribution to the total produce department increased in all regions. Berries contributed the largest share of total produce sales in the Central region, with 8.7% of sales. The East posted the second highest contribution, with 8% of all produce dollars accounted for by berry sales. Like the Central and East regions, the West region also increased share 0.6 percentage points, up from 6.1% to 6.7%. The South region, with the lowest sales velocity, increased contribution by the least amount, up 0.5 share points to 7.1%.

The key to maximizing berry sales seems to be tied to managing assortment on a year-round basis. With improvements in growing, shipping and packaging methods coupled with the motivation of existing consumer demand for berries year-round, an assortment of quality products are available every month of the year. This increased distribution meets consumers’ demands and provides increased category shopping with boosted sales potential for retailers.

Fresh ideas in berries: increased production changes assortment and packaging
Thanks to advancements made across the supply chain, many of today’s berry suppliers offer year-round distribution of high-quality, high-flavor berries. Due to worldwide farming, the additional berries allow suppliers to offer more, often larger, package sizes. Usually smaller sizes coincide with off-harvest seasons, and larger sizes either replace or complement these smaller sizes during the harvest seasons. These trends are evident when examining sales of various package sizes throughout the year.

During the past two years, strawberries and raspberries have had the most consistent packaging trends based on seasonality. The vast majority of strawberries sold are in 16-ounce packages, but during the peak supply months of April through July, 32-ounce and 64-ounce packages increase their share of sales. Most raspberry sales are also from one package size, 6-ounce, but 12-ounce packages account for a larger share of sales during the peak months of May through September.
Blueberry package sizes change more frequently throughout the year. The average sized packages of 4.4-ounce and 8-ounce sizes are predominant September through December and March through June, while the larger 16-ounce package as well as the 6-ounce size represent the majority share of sales during the other months. Also, total contribution from the 4.4- and 8-ounce sizes decreased in share from 50% of sales in early 2008 to 35% share of sales at the end of 2009. Six-ounce packages picked up that lost share.

Blackberry size trends are shifting slowly from 5.6-ounce containers to 6 ounces, which account for the majority of sales.Over time, however, more package sizes have begun to account for a greater amount of sales, notably the 12-ounce size.

In the past couple of years, the economy became a forefront issue for most Americans, and purchase habits centered more on price and value. This caused most retailers to emphasize promotions to attract shoppers. Since shoppers are looking for deals and retailers were offering them, one might assume this is a winning strategy. However, promoting too frequently or for too deep of a discount can negatively affect total category sales. There is an optimal number of times a product should be promoted, as well as an optimal price point, and those numbers depend on variables such as competition and demographics. To best reduce the amount of product sold unnecessarily on promotional when it would have sold at full price, a company can track promotional data and use it to determine future promotional strategies.

Using data, you can analyze trends to determine answers regarding which promoted price points were most effective, the optimal times to run a promotion, and how much product was subsidized due to the promotion, meaning the product would have sold regardless of the promotion. There are a variety of measures to help better understand promotions, and here are some definitions to facilitate this discussion.

Fresh produce sales vary by region, and berries are no exception. Looking specifically at raspberries, there are some general trends we can see from the top and bottom promotional performance markets that can help a category manager or supplier identify the optimum price discount and promotion frequency to achieve maximum category volume movement and dollar sales lift.

In the latest 52-week period, St. Louis, Charlotte, N.C., and Raleigh-Durham, N.C., were the top three markets ranked on raspberry promotional efficiency, with an average promotional efficiency of 62.3%. Syracuse, N.Y., Memphis, and Buffalo-Rochester, N.Y., were the bottom three markets, with an average promotional efficiency of 23.2%. One noticeable difference between the top and bottom markets is the percent of sales sold while on promotion. In the top markets, the average amount of sales that occurred while on promotion was 39%, compared with the bottom markets’ average promotional share of 25%. Another difference is the gap between promoted and non-promoted prices, or the discount offered to consumers, which was an average of $1.73 for the top three markets and $1.06 in the bottom three markets.

These insights tell us that for raspberries, promotions are generally more efficient and less margin is lost for retailers, when approximately 40% of sales are sold on a promotion, with a discount of $1.73 per unit when on promotion.

Looking at blackberries, we can see that the top three promotionally efficient markets — St. Louis, Grand Rapids, Mich., and Cleveland, Ohio — had an average promotional efficiency of 64.3% and sold an average of 48.9% of all sales while on promotion. The bottom three markets — Syracuse, Buffalo-Rochester, and western Texas — had an average promotional efficiency of 29.3% and sold just 20.2% of all sales while on promotion. Similarly to raspberries, we also see a large variance in promotional price gaps between the top and bottom markets. The top markets average a promotional price discount of $1.16 per unit to consumers, whereas the bottom markets average 66 cents.

For blackberries, promotions are generally more efficient and less margin is sacrificed for retailers when almost 50% of all sales are sold on promotion, with a price discount of $1.16 per unit.

For both blackberries and raspberries, the markets with the largest share of promotional efficiency seem to contradict general promotional strategies. One might reasonably assume that if you promote a category more often or at a deeper discount, the amount of sales subsidized will likely increase. And while this may be the case for many categories, in these two particular berry varieties the markets that sold more quantity on promotion and at a deeper discount were the most efficient. This finding highlights the importance of tracking your product or store’s sales and promotions. To assess the success of your own promotional efficiency, look at your promotional data compared with your remaining market or to a nearby market’s data.

Consumer insights: organic produce purchasing habits
The Perishables Group conducted consumer research to gain insights into organic shopping habits and how they changed recently, if at all, because of economic hardships. Through this outreach, it became apparent that younger consumers today are strong organic produce consumers, with 26% of consumers 24 years old or younger indicating that they purchase organic produce weekly (read more about organic produce trends in this month’s Special Report: Defining a New Reality on page P1).

Overall, the majority of consumers questioned (57%) either rarely or never purchase organic produce. Just 16% of respondents regularly or sometimes purchase organic produce. Within this 16% of consumers, nearly 20% of shoppers purchase organics only when the price is right. This indicates that even for the consumer groups who have the additional income to invest in organics and who value the benefits enough to be loyal to organic produce, price points reign as the top concern in decision criteria.

Organic berry sales share and growth vary by berry type. Spanning the two-year period from the first quarter of 2008 through the fourth quarter of 2009, organic blackberries and blueberries lost 56% and 69.4% of dollar sales, respectively. This equated to a 1.7 and 4.1 percentage point decrease within share of total blackberry and blueberry sales. Organic raspberries and strawberries showed the inverse trend. Sales for these berries increased 85% and 49.9%, respectively. Organic raspberries share of total raspberry sales increased 1.6 points, to 8.7% share. Organic strawberries also increased share, up 3.1 percentage points from 2.2% in Q1 2008 to 5.2% in Q4 2009. All of these sales and share changes are likely driven by the different distribution trends seen across the berries. On average, fewer stores sold organic blackberries and blueberries in Q4 2009 than in Q1 2008, spurring an expected loss in total dollar sales with less product on store shelves. More stores sold organic raspberries and strawberries, which helped to boost total dollars of these organic very varieties.

CASE STUDY IN GLOBAL SOURCING:
NATURIPE FARMS
For Naturipe Farms, a successful berry program requires management on a global and retailer-specific level. Worldwide operations first started for Naturipe Farms in 2000, when the company started growing blueberries in Chile to supplement Michigan’s growing season, which allowed them to provide berries year-round. Today, the four different berry companies that joined Naturipe Farms work together with a single goal, to provide constant distribution of high-quality berries of all varieties.

In addition to managing their global growing and supply logistics, they’re working closely with retailers to provide custom success strategies. Recognizing that all stores have different consumers, Naturipe Farms works closely with each retailer to determine their optimal assortment, merchandising and point-of-sale marketing plan. They utilize industry experience and sales data for each retailer’s rest-of-market competitors to cater each category management recommendation.

While their recommendations are actionable and specific for each retailer, there is one insight that Brian Bocock, Naturipe Farms’ vice president of product management, says is applicable for anyone with a berry category: merchandise berries in the front of the produce department. “When berries are hidden in the back corner of the store with little square footage, most purchases will be from consumers with berries already on their list,” Bocock says. “If retailers instead merchandise berries in the front of the produce department, put berries in circulars, reduce margins a bit, and promote effectively, lift can be anywhere from 50-300% higher.”

Proper merchandising is important for any category, especially for categories like berries that are often impulse purchases. One thing Bocock says he hopes to see more of in the future is berries merchandised at the checkouts where shoppers usually find candy and chips. For retailers wanting to cater to their shoppers’ desire for a healthier lifestyle, this is a simple solution you can implement immediately.