19 Dec Inflation is Impacting Sales of Fresh Produce: A new report breaks it all down for grocers
Historically, the produce department has been a major source of sales and revenue for grocers. Consumers typically make their buying choices based on freshness, quality, and appearance. But the Food Industry Association (FMI) recently issued its insightful Power of Produce report, which highlights the fact that those criteria have shifted in significant ways.
Inflation in the Produce Aisle
Today, due to record-high levels of inflation, a fourth of all consumers surveyed for the report revealed that the price of fresh produce is now their top concern. How much they are willing to pay, in other words, is now more of a priority than factors such as how fresh produce looks, its health benefits, and its overall quality. Research cited in the report supports this conclusion. Data shows that inflation has had a substantial negative impact on sales of produce in 2022, compared to 2021 – when produce sales made significant gains. FMI’s report included other insightful data from the leading retail research firm IRI. Those numbers show that there was, indeed, a solid 3.3% increase in the dollar amount of produce sales in 2021, to $71 billion.
Inflation Skewing the Dollar Amount of Sales
Unfortunately for the grocery industry, that impressive rise appears to be attributable to price inflation. The volume of sales during that timeframe actually decreased by 2%, and so did consumer engagement with fresh produce. Although growth in sales for vegetables only grew by a half of a percentage point, fruit – which had fallen behind vegetables in sales growth for several years – made a comeback. Fruit sales jumped more than 6%. However, the FMI report explained that part of the reason for that was also due to inflationary numbers and how those affected the dollar amount of sales. Inflation within sales of fruit was up a whopping 7%, whereas price inflation for vegetables was nearly half that much, at only 4%.
The Shift to Canned and Frozen
The FMI report also shows that more than 90% of grocery shoppers have adjusted their buying habits due to inflation. Over 30% of them are simply belt-tightening by making fewer fresh produce purchases. Thirty-three percent are focused on produce shelf life, and 40% are bargain-shopping for discounted items on sale. To fill the gap created by buying less fresh produce, they are instead increasing their purchases of canned fruits and frozen vegetables. That’s because those categories generally cost less.
Despite the shift in consumer buying decisions, the FMI also pointed out that appearance, ripeness, and the health benefits of produce still play a big role in those decisions. For example, while shoppers may rank price at the top, they often consider the price within the context of how the produce looks. Many for whom health benefits are an important part of their decision-making, also emphasize production claims.
Produce Consumption and Value-Shopping
Meanwhile, although overall produce consumption has fallen, the majority of those surveyed acknowledged that they still eat fresh produce at least four days a week. The report also concluded that when people shop more often, they tend to also consume fresh produce more frequently. Regarding sales promotions for fresh fruits and vegetables, 28,4% percent of fresh produce was sold through promotions in 2021, down considerably from 42.8% in 2019. But the FMI report nevertheless showed that 40% of consumers are definitely influenced by sales promotions, so that remains a very effective tool for grocers.