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Natural Foods Merchandiser

Packaged produce sales soar

Packaged salads are quite possibly the biggest produce phenomenon in the past decade. Sales of fresh-cut and prepackaged fruits and vegetables remain on the upswing, as consumers who value convenience become more willing to spend a little extra for ready-to-eat food.

?We continue to see fresh-cut produce growing and growing, most notably with the recent introduction of more fresh-cut fruit,? said Kathy Means, vice president of the Produce Marketing Association in Newark, Del. PMA data show that fresh-cut produce sales increased from $2.6 billion in 1994 to $8.8 billion in 2003, and are expected to hit $10.5 billion in 2005. Just less than half that total is sold through grocery channels, with the rest going to foodservice. According to SPINS, the San Francisco-based natural products research company, packaged fresh produce sales in naturals supermarkets totaled $171.9 million in 2004, a 35.4 percent increase over the previous year.

?When buying these items, the main issues for consumers are taste, convenience and nutrition,? Means said. ?You can get good food that?s good for you and get it fast.?

In the organics market, the additional packaging that comes with bagged produce is a potential sticking point for consumers. ?If the package is not recyclable, you?ll get bombarded with questions,? said Robert Schueller, director of public relations for Melissa?s World Variety Produce, a leading supplier of organic packaged produce based in Los Angeles.

Retailers who sell both conventional and organic produce have reasons to value prepacked organic produce, Schueller said. ?If a [price lookup] label falls off [bulk produce], it doesn?t get rung through as an organic product,? he says. Label loss can end up costing retailers money, so prebagged product can be a money saver as well as a time saver for the produce department.

Convenience is clearly a factor with shoppers, not only with bagged salads and single-portion cut fruits, but also with bagged whole produce. ?Our most popular packaging is the one-pound Vexar bag made of netting,? Schueller said. ?It?s easy for the consumer to pick up and put in the cart, and the tag on top identifies the product and tells how to use it.? Though it won?t work with items requiring refrigeration, Melissa?s uses this packaging for many seasonal items, such as Meyer lemons, blood oranges and tangerines.

But there are additional reasons consumers prefer prepackaged produce, Means said. PMA research shows that consumers feel packaged items are safer and more sanitary because they are handled less at retail. Portioning is also an issue with consumers, and prepackaged items allow for less waste; for example, a bagged salad offers advantages over a full head of lettuce.

Though PMA doesn?t track separate numbers for organic fresh-cut produce, Means sees the same opportunities for organic products as for conventional ones. ?Organics in general is a very strong niche category in conventional produce departments,? she said. ?It?s no longer the purview of specialty stores; all retailers are carrying it.? Organic precut produce may especially appeal to retailers because of its expiration date marks (no one need dig through a bin to pull out product that?s gone bad) and ease of product placement.

At this point, fresh-cut produce makes up only a fraction—perhaps 5 percent to 7 percent—of the total packaged produce market, and about 10 percent of all produce sales nationwide, but the category is growing faster than produce sales in general. In addition, many naturals retailers cut and package fruit in-store, adding to the total.

In terms of overall market share, bagged salads are still the best sellers. PMA data show that bagged salads make up two-thirds of all packaged produce sales. In the naturals channel, the biggest name in salad is Earthbound Farm. In conventional stores, Dole and Fresh Express are the category leaders, though Earthbound Farm also has a solid presence in the mainstream.

?The whole packaged salad category is growing at 4.4 percent annually, but organic salads are growing at 6.8 percent,? said Tonya Antell, vice president of organic sales for San Juan Batista, Calif.-based Earthbound Farm. ?Earthbound Farm currently has a 73 percent market share in the organic category.? And while the company doesn?t dominate in the conventional channel as it does in naturals, the fact that the mainstream is a much larger market means that more than half of the company?s total sales comes through conventional channels.

Fresh-cut vegetables make up just under a third of the total sales for fresh-cut produce, but the vast majority of this total is fresh-cut bagged baby carrots. However, this number doesn?t include the wide variety of bagged and clam-shelled—but uncut—produce sold by companies such as Melissa?s. Baby potatoes and onions, elephant garlic, vine tomatoes and many more exotic fruits and vegetables are often sold in one- and two-pound packages as well.

The smallest segment of fresh-cut sales—fresh-cut fruit—is also the fastest-growing category with the biggest opportunity for new products to hit the market. ?Technology has been an issue for fresh fruit, so it?s had a more difficult time reacting to the fresh-cut trend,? Means said. ?For example, cut apples brown, whereas carrots don?t. The industry has had to find the right packaging and the right technology, such as a wash to keep apples from browning.?

Now apples and other fruits are joining the more traditional cut fruits like pineapple and melon. ?We offer cut apples for foodservice, as well as a convenient snack for retailers to stock,? said Earthbound Farm?s Antell. The company offers 2-ounce packages for retail. And with Chiquita?s pending purchase of Fresh Express, it seems safe to assume that more fresh-cut fruit will be coming to market soon—though it?s hard to imagine how anyone could improve on the banana?s own natural packaging.

The popularity of packaged produce has led Melissa?s to launch a line of shelf-stable products, designed for produce department placement, which complement bagged salads and other produce offerings. The line includes salad dressings, kits and sprinkles, as well as stir-fry sauces, wrap dressings, marinades and pasta sauces. ?Consumers will have everything they need for their salads to be a full organic experience,? Schueller said.

The combination of new technology and consumer desire for convenience will likely continue to fuel double-digit growth in the prepackaged and fresh-cut produce category. New products will continue to come to market and—because of these products? solid margins and ease of product placement—most retailers should be only too happy to stock them.

Click here to order a copy of Market Overview 2004.

Mitchell Clute is a freelance writer based in Crestone, Colo.

Natural Foods Merchandiser volume XXVI/number 6/p. 46, 48

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