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Fresh-Cuts Rebounding

Latest figures show convenience items regaining sales

The U.S. economy is slowly turning the corner, according to recent data from the U.S. Department of Commerce Bureau of Economic Analysis (BEA). The Gross Domestic Product grew by 2.5 percent in the second quarter of 2010, and real growth of 1.7 percent GDP through the year, the Nov. 23 report from BEA reads. Although unemployment remains high - just under 10 percent through November - if the GDP continues to grow then a fall in the unemployment rate should follow.

Economic indicators provide a glimpse into the consumer mindset, and all signs point to consumers that are wary of high-priced purchases and seeking low price points. But the convenience sector is ahead of the curve, and consumers are looking for value, not just price, and their priorities include quality, convenience, sustainability and health benefits, according to 2010 research from The Perishables Group.

The Perishables Group Consumer Research Project found that a majority of consumers purchased more or the same amount of convenience produce items in the previous year. Some of that growth can be attributed to the increased availability of fresh-cut produce, said Beth Padera, director of analytical services for The Perishables Group. Convenience stores, drug stores, fast food and vending machines are offering more fresh produce, and retail stores and chain stores are using value-added and fresh produce to improve customer perceptions.

And fresh-cuts sales are improving, and through mid-2010 were expected to not only surpass the figure for 2009, but set records for both fresh-cut fruit and vegetable segments. Fresh-cut sales have seen steady growth - at times even phenomenal growth - since their introduction into the market, but 2009 was the first year for a decline in sales. Since 2005, prepared vegetables sales are up 35 percent, according to The Perishables Group FreshFacts report. Average weekly sales for retail stores are expected to be about $1,587 for fresh-cut vegetables, a 12 percent increase over 2009. Fresh-cut fruit sales are also expected to set a record in 2010, with average weekly retail sales surpassing $800, a 23 percent increase since 2005 and a 5 percent increase over 2009.

Fresh-cut sales are important to retailers, Padera said. In a loyalty card analysis of 200,000 customers, the average sales receipt for customers with no prepared produce was $40.64. For loyalty card customers that purchased prepared fruit items, the total sales receipt more than doubled to $98.73. Those that included prepared vegetables were even higher, for an average total receipt of $103.56.

Those loyalty card customers that bought fresh-cut items also bought other convenience items and prepared foods, as well as whole produce and "celebration items" like ice cream or bakery goods.

But what fresh-cut items are retail customers buying, and in what form? According to the research from The Perishables Group, packaging makes a difference in sales, with fruit clamshells and bagged vegetables gaining dollar share in 2010. Fresh-cut fruit dollar sales primarily went to clamshell-packed items (68 percent), with other packing methods (shrinkwrap, jars, Styrofoam, tubs, etc.) receiving 29 percent and bags less than 4 percent. Clamshell packaging increased almost 3 percent over the previous year.

The fresh-cut fruit segment is made up of cut fruit (74 percent of dollar share), overwrap items (15 percent of dollar share) and jars and cups (11 percent). The fresh-cut fruit portion grew 7 percent in 2010, led by watermelon, which was up 11 percent; pineapple, up 10 percent; cantaloupe, up 6 percent; mixed fruit up 4 percent; and apples, up 3 percent.

Prepared vegetable dollar share, on the other hand, was more evenly split. Bagged products received 45 percent of dollar share (up 1.5 percentage points) and clamshell-packaged items (trays, tubs, peel-top cups) received 40 percent. The remaining 15 percent went to Styrofoam, shrink-wrapped vegetables, tubs, jars and aquapacks.

The fresh-cut vegetable segment is predominantly side dishes (57 percent of dollar share), but the biggest growth in 2010 was in meal preparation, which was up more than 7 percent to 14 percent of total dollar share in the segment. Trays (21 percent) and snacking (9 percent) make up the rest of the category. Growth in the vegetable segment was driven by vegetable medley products, which increased 16 percent; onions and peppers, both up 6 percent; and carrots, up a little more than 2 percent.

Bagged salads are a category of their own and make up the largest vegetable sales at retail. Through September, bagged salads averaged $2,753 weekly per store, a drop of just less than 2 percent, and volume was down almost 3 percent from the same quarter last year.

Through the end of September, total fruit sales (including fresh and prepared) were $19.3 billion, and increase of 2 percent from the previous year. Total vegetable sales at retail were $19.9 billion, a 1.2 percent increase, according to The Perishables Group. These figures do not account for sales at club stores, Wal-Mart, small independent chains or alternative retailers like Whole Foods Market or Trader Joe's.

Originally posted Jan. 20, 2011

Originally posted Thursday, Jan. 20, 2011

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