A recent study conducted by the Nielsen Perishables Group reveals that selling fresh product in supermarkets is, like many other aspects of the business, becoming increasingly more difficult. While fresh categories are transitioning from reliance on commodity markets and seasonal strategies to more of a packaged goods approach, one of the supermarket’s long-standing advantages over its supercenter competition is fading away.
Bruce Axtman, president of the Nielsen Perishables Group states within the new report extracted from Supermarket News;
“Fresh as a commodity market is changing and can no longer just rely on strategies that are determined by supply and commodity prices,” “Suppliers and retailers are slowly but surely transitioning to the consumer packaged goods style of category management based on the knowledge of both consumer and performance data to better understand how various consumer groups purchase fresh foods differently, at which stores, and at what price points.”
Bruce’s comments are significant. Previously sold as predominantly bulk products, pre-packaged and sealed, meat, deli, and produce items are now taking on the personalities of their sister departments like grocery, general merchandise and health & beauty care. That implies that fresh departments are now subject to category management principles, pricing models and even supply chain functions that resemble non-fresh departments, all of which can provide efficiencies for grocery retailers, both traditional and big box formats.
But with this trend, warehouse stores and supercenters are poised to gain more of the fresh business….. at the expense of traditional grocers.
Supercenters as a channel of trade, are gaining in their share of the “fresh market” at the direct expense of their traditional supermarket competitors. This same Nielsen Study predicts that warehouse stores will gain 2% share of the fresh business and supercenters will gain 1% over last year, while traditional supermarkets will lose 2% of this profitable business.
One could argue that the fresh business would be trending away from traditional supermarkets even without the aforementioned trend of “the packaging” of fresh”, but clearly the consumer acceptance of pre-package meats, produce, deli, and even seafood product plays right into the hands of the volume-oriented big boxes, who lack the expertise and the business model to support more traditional open-market type fresh presentations. Pre-packaged, case-ready product is just what the perishable doctor ordered for price formats whose business model appreciates the labor savings inherent with pre-packaged perishables.
So what does this mean for the business?
Once again, traditional grocers will need to re-invent their fresh departments and services in order to defend this very critical and profitable part of their business…..a daunting task given the current consumer trends towards the acceptance of packaged fresh product and the resources of the big box stores to provide an ever-improving alternative to bulk produce and the service meat, deli, and seafood cases!
Editor’s Note: In recent posts, I have talked to specifics that traditional retailers can employ to sustain their fresh business. More to come on this topic as it is critical for the continued wellbeing of supermarkets that they continue to dominate “fresh”.