Since the U.S. entered a recession, 42% of survey respondents indicated their income is either somewhat lower or significantly lower. A small portion, 12%, said their income is higher than it was at the onset of the recession.
PHOTO BY PAMELA RIEMENSCHNEIDER
There is a very clear correlation between produce purchases and level of income. Forty-four percent of respondents with significantly higher incomes said they buy fresh fruits and vegetables from their supermarket produce department multiple times per week. That number drops to just 17% for those whose incomes have not changed but rebounds slightly to 21% for those whose incomes are significantly lower than a year ago.
Though it may be counterintuitive that more consumers whose incomes are now lower than those with stable incomes bought fresh produce more than once a week, this could be largely influenced by the fact that individuals with lower incomes are more likely to bypass restaurants and cook meals at home, requiring more ingredients from the produce department. Additionally, the results imply that though consumers’ incomes are lower than they were a year ago, many still are unwilling to give up fresh produce. These are important findings, pointing out that fresh produce sales are not necessarily reliant upon income. Retailers and suppliers can market their produce depending on the demographics of their stores and different usage occasions.
To further examine the effects of income changes on produce purchases, The Perishables Group compared the responses of consumers in states that have been hardest hit by unemployment to responses of consumers in all other states.
The national unemployment average increased 3.6 percentage points, from 6.6% to 10.2%, from October 2008 to October 2009 (when most consumer surveys for this study were executed). When comparing the states hardest hit by unemployment (defined by a change of more than 3.6 percentage points) to all other states, there were surprisingly no statistically significant differences between value-seeking strategies of respondents. Consumers from all states placed about the same level of importance and purchase frequency on factors including sales, private label, organic and locally grown produce, convenience items, channel switching, lower-priced substitution and shopping with a list.
One difference to note between those in the states hardest hit by unemployment and all other states is the shift in the importance of price compared with a year ago. When asked about the importance of price in deciding which produce items to purchase, 71% of consumers in the hardest-hit states indicated price was very important, compared with 55% of the same group last year.
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Since the recession, 42% of respondents said their income is either somewhat or significantly lower. —The Perishables Group survey
But this increase was not isolated to the hardest-hit states. While 64% of consumers in all other states indicated price was extremely important in deciding which produce items to purchase, this was still a notable increase of 15% from last year, compared with a similar 16% increase for those in the hardest-hit states.
Convenience items, though typically priced higher than conventional produce, have not been affected as drastically by income as one might expect. Sales of convenience items have rebounded substantially among consumers whose incomes have significantly increased, but consumers in all other income groups generally purchased the same amount of convenience items as last year. Predictably, convenience fruit and vegetable sales were hurt the most by consumers with significantly lower incomes compared with last year.
Young Consumers Purchasing More Fresh Produce
When examining responses from all consumers regardless of income changes, younger consumers are among the fastest growing purchasers of fresh fruits and vegetables as well as organic produce.
Compared with other age groups, the largest percent of younger consumers indicated purchasing organic produce, with 26% of consumers 24 years old or younger purchasing organic produce weekly, and 13% of 25- to 34-year-olds purchasing weekly.
Younger consumers also purchase more fruits and vegetables than they did a year ago. Twenty-nine percent of respondents age 24 or younger and 25% of respondents ages 25 to 34 purchase significantly more fresh fruits and vegetables than they did a year ago, which is higher than the average of 16% for all age groups combined.
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Younger consumers are among the fastest growing purchasers of fresh produce. —The Perishables Group survey
A piece of good news across age groups: Very few consumers purchase fewer fresh fruits and vegetables than they did a year ago, the highest portion being 3% of consumers ages 55 to 64. Some are trading from frozen to fresh, with 7% of consumers age 24 or younger and 8% of those ages 45 to 54 purchasing fewer canned fruits and vegetables than they did last year.
The same trade-up behavior can be seen from canned to fresh produce. Twelve percent of respondents ages 24 or younger indicated buying significantly fewer canned fruits and vegetables than they did last year, and 9% of respondents age 55 to 64 buy significantly less canned produce.
Private Label Holding Steady
The vast majority of survey respondents said they purchase about the same or more store-brand produce than they did a year ago, with a maximum of just 5% (age 24 or younger) buying significantly less than a year ago.
Income had a predictable effect on store-brand purchases. Seventy-nine percent of consumers making less than $25,000 per year said they purchase store-brand produce regularly or sometimes, with that percentage generally decreasing as income rose.
Consumers with one to two children sought value more often than families with more or no children, with 37% purchasing more store brands than they did a year ago.
Hispanic Shoppers Seek Value
Hispanic* consumers are the strongest demographic when it comes to private-label purchases, with 72% saying they regularly or sometimes purchase store-brand items, while black consumers indicated purchasing the fewest store brand items. An impressive 64% of Hispanic consumers indicated they purchase more store-brand produce than they did a year ago; 36% said they purchase about the same amount. No Hispanic consumers indicated purchasing fewer store-brand produce items than they did a year ago.
Geographically, the South and West regions are the strongest markets for store-brand produce. This could be influenced by the heavier Hispanic populations in those areas.
Locally Grown Popular Among Households with Increased Incomes and No Children
Seventy-nine percent of respondents consider “locally grown” produce to mean that grown either within their community or state. Eleven percent of respondents indicated that they now purchase significantly more locally grown fresh produce, led by those with incomes below $50,000. The most notable increase is seen among consumers whose incomes are higher than they were a year ago.
Those with no children in the home show the most variance in their preference for locally grown fruits and vegetables. Twenty-nine percent of this group buy more locally grown produce than they did a year ago, while just 7% buy less.
Consumer Trading Behavior Continues
Many consumers continue to keep their budget in check by choosing lower-priced items. An average of 51% of all consumers surveyed said they are purchasing lower-priced fruit and vegetable items in place of higher-priced items, led by consumers age 24 or younger, Hispanic consumers and those with incomes that have declined.
At least 48% of all consumer age groups said they are buying more fruits and vegetables on sale more often than they were a year ago.
Reinforcing that Hispanic shoppers actively seek the best values, the highest percentage of Hispanic consumers—more than any other demographic group—said they buy items on sale more than last year. Asian consumers represented the ethnic group with the least number of respondents indicating they purchase more sale items.
Interestingly, there were no significant differences in the number of people buying more or less fresh produce items on sale in the past year between those with different levels of income. Yet there was a difference between those whose incomes have changed in the past year. While 43% of consumers whose incomes have remained steady since last year said they are purchasing more items on sale, 69% of respondent who have either significantly higher or significantly lower incomes are buying more fresh fruits and vegetables on sale.
Coupons also are growing in popularity as an effective way to save money. Consumers in the two highest income groups most often indicated using coupons for fresh produce more than they did a year ago. Further, 50% of consumers whose incomes have significantly increased from a year ago use more coupons than the did last year, while just 3% of those with significantly lower incomes have used coupons more over the past year. This could be explained in part by the possibility that consumers with lower incomes had been using more coupons to begin with, leaving less room for an increase in coupon usage.
Young consumers led the way in growing coupon usage, with 53% of respondents age 24 or younger reporting that they use more coupons than they did last fall. Yet a significant portion of all other age groups indicated coupon usage was not applicable to them. This could support the recent growth of mobile and online coupons that may be more accessible and appealing to younger shoppers.
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53% of consumers 24 or younger used more coupons this year than last fall. —The Perishables Group survey
Consumers Switch Stores for Better Prices
Channel switching continues to be a primary value-seeking strategy across consumer groups, with 39% saying that compared with last year, they now make more trips to retail stores thought to be lower in price.
Channel switching appears to be most prevalent among young and middle-aged adults, with 64% of consumers age 24 or younger saying they shop for produce at stores thought to be lower in price more often than they did a year ago, followed by 42% of those ages 45 to 54.
When comparing consumers in various geographic regions, a significant number of Midwest consumers—44%—shop at stores thought to be lower in price, compared with an average of 35% for all regions.
Shoppers with three or more children also have switched stores to save money, with 29% indicating they shop for produce less often at stores thought to be higher in price.
The consumer responses and trends outlined above reinforce the notion that consumer demographics drive outcomes. Significant value-seeking behavior exists, but it varies by factors beyond income—proving that value means different things to different people.
In March, we will analyze any changes in market-basket patterns gleaned from retailer loyalty card data to see how it relates to consumer survey responses and point-of-sale data. We will examine whether consumers are making fewer trips than they were a year ago, or if they are buying more or less during each store trip. We also will examine how these patterns relate to specific categories, including whole apples, cut apples, bananas, snacking vegetables, cut fruit and packaged salad.
Last month, Produce Merchandising and The Perishables Group introduced you to an in-depth research project that is defining consumer purchasing behavior in the produce department during today’s volatile economic environment.
The Perishables Group is executing extensive research and analysis to determine the new landscape of the produce department, including the relative importance of consumer purchase drivers such as value, sustainability, health, food safety and more. The project also assesses the effectiveness of various retailer strategies in this new consumer reality.
The research project—sponsored by Chiquita, Fresh Express, Crunch Pak, Dovex, Duda Farm Fresh Foods and Ready Pac—includes inputs from sales data, consumer surveys and retailer feedback to develop a comprehensive understanding of current consumer values and effective retailer strategies.
In January, we took a first look at the results of 6,000 consumer surveys and learned that price is not always the first priority. Many consumers are returning to the fresh produce department after converting to canned or frozen fruits and vegetables last year. But consumers have not given up all value-seeking behaviors. Nearly 40 percent of respondents reported shopping with a list more often than they did a year ago, and more than half said they now purchase fresh produce on sale more often than they did last year. Consumers also indicated the importance of organic produce has taken a hit in favor of quality and price, with health/nutrition ranking third in importance.
This month, we dive deeper into consumer responses and how they vary based on income and employment. In many cases, consumer priorities and changes in shopping behavior were not what we expected.
Highlights from the research will be published exclusively in a six-part series for Produce Merchandising.
About PG:
The Perishables Group (PG) is a Chicago-based independent consulting firm focused on creating innovation and value for clients in the fresh food industry. We offer a full spectrum of products and services geared toward complete market and category understanding, including research, analytics, marketing communications, category development, supply chain management and activity-based costing. We have more than 15 years of experience refining tools and strategies for maximizing success in the perishables departments. Find out more at www.perishablesgroup.com
