Today’sToday’s ConsumerConsumer

Tomorrow’s Catalysts Tomorrow’s Catalysts

for Industry Changefor Industry Change

The Changing ConsumerThe Changing Consumer

Excerpt from 1950’s Home Economics Excerpt from 1950’s Home Economics

HandbookHandbook:: ““Have dinner ready:Have dinner ready: Plan ahead even Plan ahead even

the night before to have a delicious meal the night before to have a delicious meal on time. This is a way of letting him on time. This is a way of letting him know that you have been thinking about know that you have been thinking about him and are concerned about his him and are concerned about his needs…”needs…”

--Leslie Blankenship, Columbus, OH--Leslie Blankenship, Columbus, OH

The Changing ConsumerThe Changing Consumer

Working womenWorking women Wealthier HH’sWealthier HH’s Family redefinedFamily redefined Growth of ethnicGrowth of ethnic Aging populationAging population

Who is the consumer?Who is the consumer?

Depends on market strategyDepends on market strategy RetailersRetailers WholesalersWholesalers FoodserviceFoodservice Primary ShopperPrimary Shopper

Today’s IssuesToday’s Issues

Dynamic ConsumersDynamic Consumers Global MarketplaceGlobal Marketplace ConvenienceConvenience ConsolidationConsolidation Food Safety ConcernsFood Safety Concerns Health & Wellness AttitudeHealth & Wellness Attitude Technology & ScienceTechnology & Science

The Dynamic ConsumerThe Dynamic Consumer

Age of Age of Household UnitHousehold Unit

Population of Population of Age GroupAge Group

(thousands)(thousands)

Forecasted % Forecasted % Change in Change in

Population of Population of Age Group Age Group

2000-20052000-2005

Under 25Under 25 96,96996,969 3%3%

25-2925-29 17,86117,861 4.1%4.1%

30-3930-39 41,85641,856 -7.1%-7.1%

40-4940-49 42,51942,519 4.8%4.8%

50-5950-59 30,58930,589 15.1%15.1%

60-6460-64 10,75710,757 19.8%19.8%

65+65+ 34,98734,987 4.1%4.1%

Dynamic Consumer ImplicationsDynamic Consumer Implications

Generation X – wants more Generation X – wants more specialty produce w/ bold and specialty produce w/ bold and varied flavors in their varied flavors in their foodservice meals.foodservice meals.

Baby Boomers - are aging and Baby Boomers - are aging and their food choices will be their food choices will be influenced by health, travel and influenced by health, travel and new experiences.new experiences.

Dynamic Consumer ImplicationsDynamic Consumer Implications Population SegmentationPopulation Segmentation

Hispanics are the major produce Hispanics are the major produce consumer by race and this population consumer by race and this population segment is growing nine times faster segment is growing nine times faster than other races.than other races.

Ethnic Foods – will account for about Ethnic Foods – will account for about 15% of growth in food sales in the 15% of growth in food sales in the next 10 yearsnext 10 years 75% of ethnic food sales are to 75% of ethnic food sales are to

mainstream consumers.mainstream consumers. The largest ethnic categories are The largest ethnic categories are

Mexican, Chinese and Italian.Mexican, Chinese and Italian.

The Global MarketplaceThe Global Marketplace

New varietiesNew varieties Year-round availabilityYear-round availability Fewer limitations on shipmentsFewer limitations on shipments NAFTA/WTO/GATTNAFTA/WTO/GATT Increased travelIncreased travel Higher disposable incomesHigher disposable incomes

Fruit Per Capita ConsumptionFruit Per Capita Consumption (lbs)(lbs)

FruitFruit 19901990 19951995 19991999ApplesApples 19.619.6 19.019.0 18.818.8

AvocadoesAvocadoes 1.11.1 1.41.4 1.71.7

BananasBananas 24.424.4 27.427.4 31.431.4

CantaloupeCantaloupe 9.29.2 9.29.2 11.911.9

GrapefruitGrapefruit 5.95.9 5.95.9 5.95.9

HoneydewHoneydew 2.12.1 1.91.9 2.82.8

OrangesOranges 8.58.5 12.812.8 8.68.6

PineapplesPineapples 2.12.1 1.91.9 3.13.1

WatermelonWatermelon 13.313.3 15.715.7 15.915.9

Vegetable Per Capita Vegetable Per Capita ConsumptionConsumption (lbs)(lbs)

VegetableVegetable 19901990 19951995 20002000Bell PeppersBell Peppers 4.54.5 6.36.3 6.96.9

BroccoliBroccoli 3.43.4 4.44.4 5.75.7

CarrotsCarrots 8.38.3 11.311.3 13.513.5

CornCorn 6.76.7 7.87.8 9.59.5

GarlicGarlic 1.31.3 1.91.9 2.52.5

Head LettuceHead Lettuce 27.827.8 22.522.5 24.424.4

MushroomsMushrooms 2.02.0 2.12.1 4.34.3

OnionsOnions 15.115.1 18.018.0 19.419.4

PotatoesPotatoes 46.846.8 49.249.2 47.447.4

TomatoesTomatoes 15.515.5 17.117.1 17.517.5

Top Growth CategoriesTop Growth Categories(Fresh Trends-% growth store sales(Fresh Trends-% growth store sales--99-200099-2000))

0

2

4

6

8

10

12

Melons Lettuce Bananas Tomatoes Apples

Top Sales Contribution to ChainTop Sales Contribution to Chain (Fresh Trends 99-2000)(Fresh Trends 99-2000)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Bananas Apples Tomatoes Salads Grapes Potatoes

Convenience TrendsConvenience Trends

Aging, dual-income, busy families Aging, dual-income, busy families want and will pay for conveniencewant and will pay for convenience NOTE: The fresh-cut industry has NOTE: The fresh-cut industry has

grown by 20+% and the Home Meal grown by 20+% and the Home Meal Replacement (HMR) industry has grown Replacement (HMR) industry has grown by 10%. by 10%.

Common Convenience ItemsCommon Convenience Items Bagged Salads, Peeled Carrots, Cut Bagged Salads, Peeled Carrots, Cut

MelonsMelons Growing Convenience CategoriesGrowing Convenience Categories

Apples, Potatoes, Vegetable MedleysApples, Potatoes, Vegetable Medleys

Consolidation TrendsConsolidation Trends

The Retail Industry experienced The Retail Industry experienced nearly 40 mergers in 1999nearly 40 mergers in 1999

The Foodservice Industry The Foodservice Industry experienced over 100experienced over 100

Top eight chains are responsible Top eight chains are responsible for over 50% of produce salesfor over 50% of produce sales

50

3834

2320

0

10

20

30

40

50

Kroger Albertsons Safeway Ahold Wal-Mart

1995 2001

Top Five PlayersTop Five Players($ Billion Grocery Sales)($ Billion Grocery Sales)

Why Consolidation?Why Consolidation?

Take advantage of economies Take advantage of economies of scaleof scale

Survive global competitionSurvive global competition Take advantage of all available Take advantage of all available

food dollarsfood dollars Establish private label programsEstablish private label programs

Food Safety ConcernsFood Safety Concerns

Consumers fear unknowns such Consumers fear unknowns such as… as… cross contamination, pesticide residues, cross contamination, pesticide residues,

biotechnology and terrorismbiotechnology and terrorism 76% of all consumers believe their 76% of all consumers believe their

produce is safe, yet 65% still have produce is safe, yet 65% still have concerns about harmful chemical concerns about harmful chemical residuesresidues

Apples, grapes, strawberries, lettuce Apples, grapes, strawberries, lettuce and tomatoes rank highest among and tomatoes rank highest among consumers of at risk produceconsumers of at risk produce

Food Safety TrendsFood Safety Trends Move towards increased demand for Move towards increased demand for

Organic FoodsOrganic Foods Produce represents over 50% of Produce represents over 50% of

organic food salesorganic food sales Organic produce sales account for 3% Organic produce sales account for 3%

of total produce salesof total produce sales Tomatoes and apples are the most Tomatoes and apples are the most

often purchased organic produceoften purchased organic produce Ages 45-54 and 18-34 are the prime Ages 45-54 and 18-34 are the prime

consumerconsumer The West Coast is the strongest The West Coast is the strongest

organic marketorganic market

Improving Food SafetyImproving Food Safety

Research to improve breeding Research to improve breeding and reduce pesticide useand reduce pesticide use

Increased tracking of product Increased tracking of product from field to forkfrom field to fork

Third party safety and sanitation Third party safety and sanitation auditsaudits

Increased education for Increased education for handlers and consumershandlers and consumers

Health & Wellness AttitudesHealth & Wellness Attitudes

Today’s consumer is better educated Today’s consumer is better educated and more awareand more aware

Media influences perception of selfMedia influences perception of self Consumers want miracle cures for Consumers want miracle cures for

anti-aging, cancer prevention, etc.anti-aging, cancer prevention, etc. Lycopene: watermelon, tomatoes, Lycopene: watermelon, tomatoes,

grapefruitgrapefruit Anti-Oxidants - blueberriesAnti-Oxidants - blueberries

Diets are still popular and 68% of Diets are still popular and 68% of consumers choose fruit and consumers choose fruit and vegetables as the key componentvegetables as the key component

Total US Fresh Produce Total US Fresh Produce Consumption (lbs)Consumption (lbs)

260

270

280

290

300

310

320

330

1990 1992 1995 1996 1997 1998 1999

Technology & ScienceTechnology & Science

BiotechnologyBiotechnology Category ManagementCategory Management Returnable Plastic Containers Returnable Plastic Containers

(RPC’s)(RPC’s) Online ShoppingOnline Shopping Electronic Data Interchange (EDI)Electronic Data Interchange (EDI) PLU codes replaced by scan dataPLU codes replaced by scan data

Additional Consumer Additional Consumer Trends & CommentsTrends & Comments Apples, bananas, oranges and Apples, bananas, oranges and

watermelons account for over 60% watermelons account for over 60% of fresh fruit consumedof fresh fruit consumed

Consumers buy more fruit than Consumers buy more fruit than vegetables vegetables

Average produce purchase is about Average produce purchase is about $3.76$3.76

Produce snacking is upProduce snacking is up In 1999, 14% of consumers used produce In 1999, 14% of consumers used produce

as a snack compared to 31% in 2000as a snack compared to 31% in 2000 Vegetables account for over 64% of Vegetables account for over 64% of

produce salesproduce sales

Reasons for Produce Reasons for Produce GrowthGrowth Increasing ethnic populationsIncreasing ethnic populations Health Conscious ConsumersHealth Conscious Consumers Rising interest in ethnic specialtiesRising interest in ethnic specialties Exposure to new varieties and exotic Exposure to new varieties and exotic

produceproduce Growing proliferation of fresh cut and Growing proliferation of fresh cut and

convenience productsconvenience products Use of produce in foodserviceUse of produce in foodservice

Additional Retail Trends & Additional Retail Trends & CommentsComments Bulk produce accounts for about 74% of Bulk produce accounts for about 74% of

salessales Produce contribution to store profits Produce contribution to store profits

exceeds 20%exceeds 20% Gross margin has remained flat at about Gross margin has remained flat at about

35% (difference between cost of produce 35% (difference between cost of produce and selling price)and selling price)

Size of produce department increased Size of produce department increased from 2600 sq ft to 3600 sq ftfrom 2600 sq ft to 3600 sq ft

Number or stock keeping units (SKU’s) Number or stock keeping units (SKU’s) increased from 200 to 600increased from 200 to 600

Today more consumers pick their Today more consumers pick their supermarket based on produce selectionssupermarket based on produce selections

Retail Share of Produce Retail Share of Produce SalesSales

88%

10% 2%

Supermarket

Supercenter

Other

What Can We ExpectWhat Can We Expect

An Always Changing ConsumerAn Always Changing Consumer A Smaller Global MarketplaceA Smaller Global Marketplace More Convenience ItemsMore Convenience Items Increased ConsolidationIncreased Consolidation Heightened Food Safety ConcernsHeightened Food Safety Concerns Growing Health & Wellness AttitudesGrowing Health & Wellness Attitudes Better Technology & Sound ScienceBetter Technology & Sound Science

Opportunity FactorOpportunity Factor

Ability to Adapt to Change + Vision for Ability to Adapt to Change + Vision for the Future + Sound Planning – Fear = the Future + Sound Planning – Fear =

OpportunityOpportunity