Retailing Produce Part 2
Retailing Produce Part 2. I’m Greg Martin with today’s Line On Agriculture.
The retail produce sector is having a difficult time. It seems the economy has not been kind and according to Paul Kennedy formerly with Winn Dixie grocery stores a lot of consumers are trading down.
KENNEDY: Well what does that mean? Well they are trading down to be able to put food on the table for their family but to us at retail we have to watch what they’re doing and understand why they’re doing it to be able to make money on those things that they are trading down to.
Consumers will look for cheaper alternatives to some products in some cases or just quit buying others.
KENNEDY: So as an example I think we all like to garnish our tables and have bright colors and so you deal with just a small category like peppers you have red and orange and yellows and purples and white peppers that typically retail if you are a shopper they retail for $3.99 when the old standard green peppers, you see the difference there. There’s one at $3.99 the other at $1.49.
It’s one of those cases where the colorful peppers are nice to have but not necessary when the less expensive variety will do the same thing. Flowers are another example according to Kennedy of a product that has been depressed for a long time since it is not a necessity.
KENNEDY: Another way they trade down is in the foods that they buy. If you just think of buying meat in the deli for sandwich meat, a lot of people like roast beef – love to have it but at an average of about $8.99 per pound that’s pretty expensive when I can buy ham at $2.99. Well the issue there is that if they are trading down from the 8.99 to the 2.99 we might make the same gross profit say 50% on the 8.99 versus 50% on the 2.99 you can see that there is a significant difference.
For the grocer there is no savings, the same lights are on and the same employee had to slice the meat or set out the produce. Finally Kennedy says there is another issue.
KENNEDY: Trading down causes shrink and I mentioned that the 3.99 peppers well if people stopped buying the 3.99 peppers and buy only the one 1.49 then I have to figure out what to do with the 3.99 peppers. Do I stop carrying them? That’s an option or do I cut down the display and one you make those types of decisions, those types of things take time and they trickle down very slowly to retail.
That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.
