Fresh starts on the perimeter

Whether in a rural area or an urban hub, grocery retailers today are leveraging their fresh departments to differentiate their overall brand and their individual private brands from the competition. Across all generations of consumers, but especially among millennials, fresh food has an aura of healthfulness and excitement that far surpasses the packaged food products in the center store.

But “fresh” today doesn’t just refer to the produce, deli, “grocerant,” meat, seafood, bakery and dairy departments, according to Nicole Peranick, Stamford, Conn.-based Daymon’s senior director for culinary thought leadership, who shared her insights during Store Brands’ “Power of Private Brands” webinar series last year. “Fresh has taken on an expanded meaning, and solving for this new interpretation is really imperative to capture and retain customers,” she says.

As the Daymon white paper “From Shopper to Advocate: The Power of Participation” makes clear, fresh has become “the gateway to shopper loyalty.” To win consumers’ trust, grocery retailers must succeed in engaging customers at multiple touchpoints on the store perimeter and even before they walk into store — delighting shoppers with delicious samples, a cornucopia of colors and fragrances, high-energy food prep and cooking demonstrations, access to community resources such as representatives from local businesses or nonprofits, opportunities for “co-creation” and “personalization,” and more.

Under this broader definition, fresh could apply to a health & beauty section that allows shoppers to sample various botanical skincare products and aromatherapy oils, a wellness department coordinated by a registered dietitian nutritionist (RDN) who can help customers navigate the store and shop for their unique dietary needs, an in-store exhibition showcasing the work of local artists and craftspeople, or even a 3-D printer that lets shoppers scan photos and create ceramic figurines of themselves and loved ones (available at several Asda stores in the United Kingdom).

As West Des Moines, Iowa-based Hy-Vee demonstrates, fresh can also be a portal to a company’s values. For example, customers who shop at the Midwestern chain’s more than 245 stores are assured that the sushi in the retailer’s Nori Sushi bars is 100 percent responsibly sourced as are the many species of fish, mollusks and crustaceans sold in the fresh seafood department, from barramundi to Alaskan king crab legs to oysters. Indeed, Greenpeace ranks Hy-Vee among the top grocery retailers for seafood sustainability. Going the extra mile to ensure quality and safety, Hy-Vee also voluntarily employs a full-time U.S. Department of Commerce seafood inspector at its wholly owned Perishable Distributors of Iowa (PDI) subsidiary in Ankeny, Iowa.

Hy-Vee’s produce department also reflects the company’s commitment to environmental sustainability, specifically food waste reduction. The retailer has earned recognition, including a 2017 award from Store Brands for “Best Store Brand Merchandising Idea,” for the way it champions The Misfits, cosmetically challenged produce supplied by Eden Prairie, Minn.-based Robinson Fresh, which brought the Misfits concept and brand to the United States. (The brand originated with Redhat Co-operative in Alberta, Canada.)

Hy-Vee, which has sold nearly 2 million pounds of the misshapen, off-size or slightly discolored but otherwise delicious fruits and vegetables, “is a good example of a company that has embraced the program holistically, from sustainability to a consistent eating experience,” says Craig Arneson, general manager of Robinson Fresh. “It is paramount to the success of the Misfits program to have collaboration at all levels of the organization.”

Approximately 20 SKUs of The Misfits are available at any time, with the specific choices depending on the season. “Much of the product was left in the field or destroyed in the past, so the Misfits program provides a sustainable outlet for a wider range of production,” Arneson explains. In addition, to reducing waste and providing customers with affordable produce, the program helps support growers financially.

Meeting consumer demand

Winning over shoppers in the fresh realm requires meeting consumer demand for both healthful products and on-the-go convenience, notes Jeff Oberman, vice president of trade relations for the Washington, D.C.-based United Fresh Produce Association. One retailer that excels in this domain is Lowes Foods in Winston-Salem, N.C. The retailer’s stores have a “Pick & Prep” station, allowing shoppers to select their own fresh fruits and vegetables and then drop them off for customized cutting.

“So if you want to purchase a mango but don’t know how to cut it, you can bring it to the Pick & Prep station, and a trained produce professional will cut it for you,” Oberman says. Many customers also use the service to save time while they continue to shop, specifying whether they want an item, be it an onion or a watermelon, diced, sliced or chopped. Consumers can even order this service for produce purchased online from Lowes via Instacart.

Besides convenience, contemporary consumers, especially millennials, are demanding transparency and, when feasible depending on the season and type of product, local sourcing, Oberman points out. “Consumers want to know how these products are produced and how they’re grown. They want to know that the people who harvest the crops are ethically treated,” he says. “And it’s not just with produce; it’s with everything in the store.”   

Consumers, moreover, increasingly expect to find organic offerings, but the demand for organic varies widely, depending on the region and shoppers’ income levels.

In southwestern Indiana, for example, where Baesler’s Market operates three stores — in Terre Haute, Linton and Sullivan — shoppers do ask for organic items but demand is not robust, says Bob Baesler, the company’s president. Nevertheless, he maintains a 12-foot section of organic produce in the less-rural Terre Haute store, which is in a small city of approximately 61,000 people.

“We don’t sell a lot of it, but there are people who want it, so we try to have it for them,” Baesler says, noting that Baesler’s Market’s commitment to delighting customers in the fresh arena is one way the retailer differentiates itself from Dollar General, which has several stores in the communities Baesler serves.

In a rural locale with many farms, consumers are more apt to prioritize local sourcing because of the positive impact on the area’s economy; it’s not simply a trendy millennial-driven preference.

Baesler’s Market carries local corn, carrots and watermelons. “We attempt to do as much local as we can, but there is a limit to what we can do,” Baesler says. Not only does Indiana have a limited growing season, but also local producers can’t meet the retailer’s need for many items during the warmer months.

“Outside of the three mentioned items, [local farms] don’t have enough quantity to where we can just depend on them all summer for tomatoes or all summer for cucumbers,” he elaborates. Still, customers appreciate the retailer’s efforts to sell local produce, and Baesler diligently works with the area’s farmers to bring more locally grown items into the three stores. For example, Baesler’s this year partnered with a Terre Haute organic farm called The Pickery, where customers normally go to pick their own vegetables. “On a regular basis, [the owner] would bring us eggplants and other items. But the supply was such that it only lasted a couple of days,” Baesler says.

Local sourcing is a challenge everywhere, and some larger supermarket chains are helping to defray farmers’ production costs to ensure a supply of fresh products that can meet rising consumer demand, Oberman adds.

Though still in the experimental phase and not a solution to the local supply challenge, an emerging trend among grocery retailers is “hyperlocal” store-grown produce. Retailers are beginning to grow their own leafy greens and herbs in rooftop greenhouses, on the sides of stores in hydroponic vertical gardens, and — as H-E-B-owned Central Market is doing — in a mobile container just outside of a store that could be moved from one location to another.

Behind one of Central Market’s Dallas stores, a 53-foot custom-built Growtainer, made from a recycled shipping container, provides 480 square feet of climate-controlled vertical production space. The miniature farm features proprietary technology for ebb-and-flow irrigation, a water-monitoring system, and energy-efficient light-emitting diode (LED) production modules specifically designed for multilayer cultivation, according to Glenn Behrman, president of Dallas-based Controlled Environment Agriculture (CEA) Advisors, which developed the Growtainer specifically for Central Market.

Behrman points out that the Growtainer has been a highly successful “innovation project” for the retailer. “They can’t keep up with the demand,” he says.

The hydroponically grown leafy greens are merchandised in the store’s produce department on an attractive mobile “Store Grown Produce” display made of wood. The greens are wrapped in plastic with a label branding the product as “Central Market Store Grown Lettuces,” with 10 varieties of lettuce listed and the specific type of lettuce in the package indicated with a checkmark.

For the Growtainer to work, “you need a fast-turnover, shallow-root kind of crop” and substantial commitment from the retailer, Berhman says.

Foraying into fresh-prepared

Addressing customers’ need for convenience and their growing enthusiasm for ethnic foods, grocery retailers across the country are expanding their deli departments into “grocerants,” establishing hot bars, salad bars, signature dishes, made-to-order stations and even fast-casual and full-service restaurants.

Hy-Vee has significantly ramped up its foodservice options at its new Minnesota stores. But smaller chains are also favorably impressing customers with expanded fresh-prepared offerings. For example, since KFC left the area, Baesler’s Market has developed a big fan base for its signature fried chicken, Baesler says.

The Indiana retailer also emphasizes quality and consistency in its deli meats and salads. “Some retailers will switch suppliers, but customers get tired of things not tasting the same,” Baesler notes. “We’ve been selling the same slaw for 20-some years and the same potato salad.”

The company does take risks, though it may tread more cautiously than urban and college town grocers with a younger population base. For example, when the retailer first added a hot bar in 2015, a number of customers complained because they didn’t like the change. But the hot bar has done “exceptionally well in sales,” according to Baesler, who notes that he has expanded the number of soup wells from three to six because soup is so popular with his customers, even during the summer. The hot bar offerings at Baesler’s include Mexican, Italian and Chinese dishes as well as American comfort food such as meatloaf.

Customized convenience seems to be the watchword of another supermarket chain, Skogen’s Festival Foods, which owns 31 stores in Wisconsin. In addition to a rotating hot bar menu featuring BBQ Monday, Taco Tuesday, Stir Fry Wednesday, Italian Thursday and Supper Club Friday, the De Pere, Wis.-based chain offers a “Daily Deli Deal.”

“For instance, on Mondays we offer four large pieces of lasagna and a loaf of Italian bread for $10,” says Lars Batzel, fresh department senior director at Festival Foods. “On Tuesday, we have $6 rotisserie chickens. On Wednesday, we have $5 sushi.”

Festival Foods also provides heat-and-eat prepared meals. Shoppers can choose a protein-based entrée and one or two side dishes at different price points. “These have done very well for us,” Batzel says.

Additionally, the retailer is venturing into own-brand meal kits, which are being rolled out to more than 75 percent of the retailer’s stores. What’s more, Festival Foods is considering adding made-to-order stations at some locations, beyond the well-equipped deli service counters. “There are a lot of logistical and equipment challenges that go into this, so we’re trying to figure out the right approach for us,” Batzel says.

Find a niche

In highly competitive markets, retailers need to find a niche in fresh where they can outshine rivals. This could be a bakery department that is the go-to place for birthday cakes, holiday pastries and even wedding cakes. Or perhaps the bakery is situated near the front of the store so shoppers can enjoy the aroma of fresh-baked bread as they walk in.

The often unsung dairy department also provides opportunities for differentiation, notes Julie Quick, Plano, Texas-based Shoptology’s senior vice president for insights and strategy. Retailers can use sampling to drive trial of flavored milks, newfangled non-dairy milks, new cheeses and yogurts. Supermarkets should also tell the stories of the farms that supply the store brand milk and other products in the dairy case, she suggests.

“Dairy has to actively managed and credentialed as a fresh department,” Quick emphasizes. “Retailers need to work harder to ensure freshness and share the origins of the product. The wholesomeness and goodness of the product needs to be merchandised.”

Consumers are looking for products with protein, so buzz can be built around milk’s naturally high protein content, adds Susan Stege, senior director of category and shopper insights for Dallas-based Dean Foods. Milk is also a natural product, ideal for modern consumers who are gravitating toward less-processed foods, she says, noting that positive dairy messaging can be established through the retailer’s website and social media channels.

As Stege puts it, “You can’t get any more ‘clean label’ than milk.”

Schierhorn, the managing editor of Store Brands, can be reached at [email protected].