Research by Debra Chanil
Analysis by Meg Major

With consumer interest in better dietary choices continually on the rise, the produce department has become a must-stop during most shoppers' visits to the supermarket — a trend that bodes well for most retailers, which remain immersed in a battle to elevate sales amid higher wholesale and retail prices, fluctuating energy prices, and lingering inflationary pressures.

Yet while more Americans were heeding the call to increase their intake of fresh fruits and vegetables, with the bulk of related purchases primarily generated in traditional supermarkets, the pesky economic backdrop again played a significant hand in curtailing the full potential of the dynamic gains generated in the average retail produce department during the past 12 months, according to information revealed in Progressive Grocer's 2011 Produce Operations Review.

Providing a snapshot of the foremost issues the average U.S. retail produce director contends with on a daily basis, PG's annual "state of the retail produce department" study is based on the collective input of a cross-section of retail executives with authority for the produce category who were polled in August 2011. In addition to tapping the input of retail produce category officials from around the country regarding comparable 2010-11 estimates for a variety of operational areas affecting the department, the annual produce department benchmarking study also solicits projections of what's excepted to unfold in retail food stores' produce departments for the balance of 2012.

This year's annual retail produce survey is again enhanced with supplementary category insights from The Perishables Group, a Chicago-based consultancy specializing in fresh food category management and marketing. Data is for the traditional supermarket channel only, representing 63 percent all commodity volume (ACV) and approximately 13,000 stores. It does not include Walmart, club stores, small independent chains and alternate retailers such as Whole Foods and Trader Joe's.

Among the key highlights of this year's produce survey, year-to-year total produce department sales, which maintained their average 12 percent of the total store pie, rang up $50.2 billion vs. $49 billion a year ago — good for a 2.4 percent gain from 2010 to 2011, driven in part by a 1.5 percent increase in store count.

When asked to estimate the directional change of their produce sales during the past year composite, 66.7 percent respondents expressed a favorable sentiment, versus 64.3 percent a year ago, which is a small, yet nonetheless positive, gain. More encouraging, fewer survey respondents — 20.8 percent — reported downward comparable sales during the 12-month measuring period versus last year's study, while the remaining 12.5 percent reported no major losses or gains versus the prior year.

When asked to forecast their anticipated outlook on expected produce sales changes for the entire 2011 timeframe, well over two-thirds, or 70.8 percent of this year's retailer respondents, seem especially hopeful heading into the last quarter of the year, while 16.7 percent anticipate overall produce sales decreases. Also encouraging is that only 12.5 percent of retail survey panelists expect to see no change in either direction for the year.

Indeed, while the produce department represents the single greatest opportunity for retailers to help consumers meet their elevated nutritional goals by delivering healthy food choices, value-seeking, waste-resistant shoppers continue to cautiously protect their wallets and refrain from making indiscriminate purchases of products, as compared with a decade ago, that might potentially spoil before they can be used or consumed. However, as revealed elsewhere in the study, more consumers are routinely turning to value-added, convenience-oriented products that lend splendidly to immediate consumption and quick preparation. In addition, more shoppers are returning to, or migrating toward, organic produce, which is also helping to blunt declines of other longtime category leaders that are falling out of favor.

Estimated weekly produce department sales, meanwhile, were pegged at $26,871 versus $26,623, up 0.9 percent on a per-store basis for the average supermarket. In the realm of overall produce department performance in the past year, gross margins, at 34 percent, remained on par with last year's sum, although net profits dipped slightly to 17.7 percent. The size of the average produce department in this year's survey also declined among panelists to roughly 2,831 square feet, while the average produce department's weekly sales-per-square-foot sum rose to $9.49.

Random-weight fruits and vegetables continue to generate the majority of fresh produce sales and account for almost two-thirds of total department sales. And while value-added salads slipped a bit last year, the category seems to be on the uptick again, as does organic produce. However, while specialty produce dipped slightly, fresh-cut fruit showed the biggest comparative gain in share in this year's study.

Floral sales wilted during the past year among 40 percent of this year's 65 percent of respondents who sell floral in the produce department, although 26.7 percent reported increased floral sales, while one-third reported little to no change with floral sales through August 2011. Overall, sales for the segment were down 1.9 percent from last year's tally.

Fruit Bulk vs. Packaged Sales and Volume FRUIT % Category Dollars % Change % Category Volume % Change Apples         Bulk 78.1% 79.0% 72.7% 72.8% Packaged 21.9% 21.0% 27.3% 27.2% Avocados         Bulk 94.9% 95.9% 93.3% 95.2% Packaged 5.1% 4.1% 6.7% 4.8% Bananas         Bulk 98.7% 99.0% 98.6% 99.0% Packaged 1.3% 1.0% 1.4% 1.0% Berries         Bulk 1.4% 1.4% 1.1% 1.1% Packaged 98.6% 98.6% 98.9% 98.9% Cherries         Bulk 95.3% 96.3% 94.9% 96.4% Packaged 4.7% 3.7% 5.1% 3.6% Citrus         Bulk 51.0% 52.9% 87.5% 88.5% Packaged 49.0% 47.1% 12.5% 11.5% Grapes         Bulk 96.1% 96.7% 94.0% 96.8% Packaged 3.9% 3.3% 6.0% 3.2% Melons         Bulk 89.9% 89.6% 88.6% 88.2% Packaged 10.1% 10.4% 11.4% 11.8% Other Fresh Fruits         Bulk 6.2% 6.6% 7.4% 10.0% Packaged 93.8% 93.4% 92.6% 90.0% Pears         Bulk 98.4% 98.5% 98.1% 98.4% Packaged 1.6% 1.5% 1.9% 1.6% Pineapples         Bulk 39.5% 41.6% 43.1% 44.3% Packaged 60.5% 58.4% 56.9% 55.7% Specialty Fruits         Bulk 90.6% 91.3% 94.2% 95.5% Packaged 9.4% 8.7% 5.8% 4.5% Stone Fruits         Bulk 98.3% 98.8% 97.9% 98.4% Packaged 1.7% 1.2% 2.1% 1.6% Value-added Fruit         Bulk 58.0% 55.7% 64.5% 64.7% Packaged 42.0% 44.3% 35.5% 35.3%

Vegetable Bulk vs. Packaged Sales and Volume Vegetable % Category Dollars % Change % Category Volume % Change Beans         Bulk 99.4% 98.6% 98.7% 98.0% Packaged 0.6% 1.4% 1.3% 2.0% Carrots Bulk 9.1% 9.0% 5.5% 5.5% Packaged 90.9% 91.0% 94.5% 94.5%

Vegetable Bulk vs. Packaged Sales and Volume Vegetable % Category Dollars % Change % Category Volume % Change Beans         Bulk 99.4% 98.6% 98.7% 98.0% Packaged 0.6% 1.4% 1.3% 2.0% Carrots         Bulk 9.1% 9.0% 5.5% 5.5% Packaged 90.9% 91.0% 94.5% 94.5% Celery         Bulk 48.2% 49.2% 39.6% 40.6% Packaged 51.8% 50.8% 60.4% 59.4% Cooking Greens         Bulk 60.8% 62.8% 45.9% 47.5% Packaged 39.2% 37.2% 54.1% 52.5% Cooking Vegetables         Bulk 92.5% 92.8% 88.9% 88.8% Packaged 7.5% 7.2% 11.1% 11.2% Corn         Bulk 98.4% 98.5% 87.6% 87.2% Packaged 1.6% 1.5% 12.4% 12.8% Cucumbers         Bulk 92.5% 92.3% 83.1% 83.3% Packaged 7.5% 7.7% 16.9% 16.7% Lettuce         Bulk 46.5% 46.8% 40.0% 40.2% Packaged 53.5% 53.2% 60.0% 59.8% Mushrooms         Bulk 5.2% 5.2% 8.6% 8.8% Packaged 94.8% 94.8% 91.4% 91.2% Onions         Bulk 66.4% 66.7% 70.6% 71.6% Packaged 33.6% 33.3% 29.4% 28.4% Packaged Salad         Bulk 0.0% 0.0% 0.0% 0.0% Packaged 100.0% 100.0% 100.0% 100.0% Peppers         Bulk 90.3% 91.8% 84.1% 86.4% Packaged 9.7% 8.2% 15.9% 13.6% Potatoes         Bulk 22.9% 22.1% 34.3% 34.4% Packaged 77.1% 77.9% 65.7% 65.6% Radishes         Bulk 72.6% 72.3% 64.4% 64.4% Packaged 27.4% 27.7% 35.6% 35.6% Specialty Vegetables         Bulk 95.4% 94.7% 92.3% 90.4% Packaged 4.6% 5.3% 7.7% 9.6% Sprouts         Bulk 4.4% 5.7% 3.6% 4.3% Packaged 95.6% 94.3% 96.4% 95.7% Squash/Pumpkins         Bulk 99.1% 99.2% 97.7% 97.6% Packaged 0.9% 0.8% 2.3% 2.4% Tomatoes         Bulk 75.9% 76.7% 66.5% 67.7% Packaged 24.1% 23.3% 33.5% 32.3% Value-Added Vegetables         Bulk 11.6% 12.4% 12.1% 12.5% Packaged 88.4% 87.6% 87.9% 87.5%

Total U.S. sales for 52 weeks ending July 30, 2011 *Packaged items determined by use of UPC code Source: Perishables Group FreshFact® Powered by Nielsen