Category Spotlights

Stone fruit is an important category, but it is highly seasonal.  

The bulk of the category is supplied by domestic growers during an 18-week season spanning early summer to early fall. Providing quality during this short season is critical to the category’s success. As a result, stone fruit is evolving on many fronts, including the development of niche varieties and the shift toward tree-ripened fruit.    

The future presents a wealth of opportunity for innovators in the stone fruit category. By examining sales trends and influential factors in the category, those opportunities are uncovered and may be leveraged to grow the category in the future.  

Stone fruit:  year in review  

The stone fruit category struggled over the last 52-week period ending February 27, 2010. Comprised of peaches, nectarines, plums and apricots, the category sold on average of $923 per store per week nationally, down 11.1% compared to the prior year. Stone fruit accounted for 2.3% of overall produce department sales.  

Stone fruit sales begin climbing during late spring when domestic stone fruit season starts, and continue through summer when supply is at peak season. Peak sales were reached during the first week of August when dollars per store/week registered $2,686.   

Peaches were the top-selling stone fruit in the latest 52 weeks. Peak stone fruit category sales the week of August 1, 2009, were driven by an increase in the peach subcategory with per-store sales of $1,305. Nectarines, the second-largest subcategory, peaked two weeks earlier in mid-July with $867 per store per week. All stone fruit subcategories spiked during summer months, declined throughout the fall, and reached their lowest points in November. The one exception was apricots, which had peak sales in early June and tapered off by late August.  

As one of the most familiar varieties of stone fruit, peaches represented the largest share of category sales for the latest 52 weeks with 47.1% share. Peaches’ share of stone fruit sales increased 2.6 percentage points compared to previous year. The gain occurred at the expense of nectarines and plums, losing 1.8 and 1.1 percentage points of dollar share, respectively. Nectarines were the second-largest stone fruit subcategory with 31.5% share, and together with peaches accounted for 79% of the category’s total sales. The remaining 21% share was made up of plums and apricots. Plums’ share of category sales dropped 1.1 percentage points, while apricots gained 0.3 percentage points.

Peach sales trends throughout the latest 52 weeks aligned with the trends during the 5-year period from 2005 to 2009. Peaches’ share of sales increased from 43.7% in 2005 to 46.5% in 2009, before rising to 47.1% share in the latest 52 weeks ending Feb 27. Nectarines and apricots also gained share since 2005. The gains in peaches, nectarines and apricots were at the expense of plums, which lost 4.2 share points since 2005.  

Returning attention to the latest 52-week period ending February 27, national average stone fruit dollar sales decreased 11.1%, fueled by sales declines in all subcategories. Average peach dollar sales declined 5.9% compared to the previous 52-week period. The smaller subcategories of nectarines and plums experienced greater declines, down 15.9% and 16% in per store per week sales respectively.

When examining regional differences in per-week-per-store stone fruit sales, there’s a span of $719 between the top-selling East region and the bottom-selling South region. The East region had the highest average dollar sales with $1,391 per store per week, which is $468 more than the national average.

The South region, with $732 in average weekly per-store stone fruit dollar sales, sustained the smallest losses of any region, down 8.2% year-on-year.  

The West region was the second highest performing region for stone fruit sales, with $1,031 per store per week. Although sales declines occurred across all regions, the West recorded the largest losses, down 13% compared to the previous year. Although sales in the Central region were not as high at $1,019 per store per week, there was a decline of 12.8% over the past 52-week period.  

As expected with declining sales, stone fruit contribution to the total produce department decreased in all regions, down either 0.2 or 0.3 share percentage point in each region. Stone fruit contributed the largest share of total produce sales in the East and West, with 2.4% and 2.5% of department sales, respectively. The South region posted the next highest contribution, with 2.3% of all produce dollars accounted for by stone fruit sales. The Central region had the lowest contribution at 2.0%.
 
Fresh ideas in stone fruit: the demand for consistent quality and flavor  

A stone fruit’s level of flavor is dependent on several factors including acidity, sugar levels, structural pressure and hydration; the perfect taste requires a balance of all these factors. Unlike apples, and other durable commodity fruits, ideal stone fruit flavor profiles exist in a rather short and volatile state. Adding to the complexity of the situation, each piece of fruit has its own unique maturing process, meaning it’s expected that not every peach in a shipment will be ready to eat when it is put out on the shelf, and some may even be past the point of peak flavor.

These challenges make it difficult for stone fruit to compete with other fruit varieties that are available to consumers for increasingly long seasons thanks to global supply and innovations in shipment and packaging.  
One method to overcome this challenge was the introduction of a natural ripening concept. Conventional mainline peaches, for example, are harvested before fully ripened, with the intention that the supply will ripen by the time it reaches store shelves. Since each piece of fruit is at a different state of maturity when picked, the result is inconsistent quality at the store level.   

The tree-ripened method was developed to reduce this inconsistency. Tree-ripened suppliers allowed a longer time for the product to ripen prior to picking from the tree. The goal was to let nature do all of the ripening work and thus guarantee a higher quality of fruit for the consumer at a price point approximately $0.30 higher on a per-pound average. Sales trends indicate success for tree-ripened varieties in the past three years.  

Studying five year volume trends reveals how sales of tree-ripened stone fruit have outpaced mainline sales and, unlike dollar trends, removes the effect of price differential between the two products. In 2005, mainline and tree-ripened peaches were selling at nearly equal rates, about 350 pounds per store per week during the annual third-quarter peak season. By 2007, however, tree ripened fruit sold 384 pounds per store per week in the third quarter, and increase of 7.7% since the third quarter of 2005, while mainline peach sales declined by 30% to 245 pounds per store per week.

Similar volume trends occurred for mainline and tree-ripened nectarines.  

During the most recent peak season, tree-ripened volume sales were 32% higher than mainline sales despite a 26% price difference.

While sales of tree-ripened fruit have grown, the stone fruit industry still has work to do when considering the category’s 11.1% sales decline in the latest 52 weeks ending February 27, 2010. Future success in the category is dependent on the development of new growing techniques, shipping innovations and introductions of new varieties that will renew consumer interest and guarantee a great eating experience every time.
            
Introducing new products, such as specialty or niche items, is an important part of a category management program. Broadening assortment with new product types offers the shopper more choices and taste profiles, permits tiered pricing strategies and serves to renew consumer interest and draw attention to the category. One of the most important factors in designing a marketing strategy for less familiar products is understanding what target consumer base will best respond to the initial go-to-market strategy.   

One solution to providing greater insight into perishable category performance is to include consumer demographics as part of the evaluation process. Perishables Consumer Profiles, offered through an alliance between the Perishables Group and The Nielsen Company, creates consumer profiles from point-of-sale data by weighing sales against the demographics of store shoppers to determine what household and demographic factors are impacting purchase behavior for the product.

Knowing the target consumer helps refine marketing strategies to optimize their effectiveness and maximize resources.  

When considering the case of specialty stone fruit, one could imagine the advantages derived from knowing exactly which consumer groups offer the highest potential to purchase these niche varieties. By crossing the consumer demographic profiles with top performing stores for a particular product group against the consumer demographic for the total store set, the Perishables Consumer Profiles tool offers a category-specific Consumer Profile index based on several layers of demographic information. By analyzing the profiles on white flesh peaches, a specialty product that has been in distribution for several years, category managers can detect which consumer bases are already comfortable with purchasing specialty stone fruit products.  
 
A study of the Perishables Consumer Profiles for white flesh peaches reveals key demographic information across several variables in regards to the white flesh peach consumer:  
For white flesh peaches, BehaviorStage profiling reveals that older bustling families are the heaviest consumers of this specialty variety. Senior singles and young bustling families, on the other hand, index far below the average rate of purchase and would not be considered target consumer bases for this segment of the category.  

Lifestyle Profiles, another demographic dimension offered through Perishables Consumer Profiles, shed light on the economic and geographic situation of the target consumer. For white flesh peaches, 43% of the top-performing stores were located in affluent suburban spreads and 28% in cosmopolitan centers.  

The brief snapshot paints a clearer picture of the primary white flesh peach consumer. Besides what is detailed above, Perishables Consumer Profiles offer demographic variables such as consumer income, age, ethnic background, presence of children, and number of persons in the household and education level. Viewed and indexed together, this demographic information helps identify the target consumer base for an item, category or brand.  
 
Consumer insights: quality is key
 
Consumers of the stone fruit category and across the produce department are willing to pay more for a higher-quality product.   

In a recent online study that surveyed 1,000 consumers nationwide, the Perishables Group asked participants to rank various factors for their importance in making purchase decisions in the produce department. Quality was at the top of the list. Price, health/nutrition, and food safety were all highly ranked, with average importance rating above 4 on a 5 point scale.   

Brand received a lower ranking compared to other purchase drivers, but that’s not to say brand doesn’t matter in fresh. Some niche branded products are exceptions to the rule, performing better than the remainder of their category.
 
Other fresh Insights: linking branding and quality in the seafood department  

The stone fruit category and even the larger produce department are not alone in their low ratio of branded items compared to many center-store categories; it is characteristic to the fresh departments in general. However, paired with products of consistent quality and a definitive value proposition, branding in fresh shows greater potential and can become an important differentiator. At least a few innovative fresh seafood companies are counting on that, in Kona Blue Water Farms and CleanFish. Both companies employ sustainable aquaculture practices, a point of differentiation in the seafood departmentparticularly, but also throughout fresh. Kona Blue’s sole offering, Kona Kampachi, and CleanFish’s new shrimp product, Laughing Bird Shrimp, provide examples of successfully launching branded items in the largely private label or unbranded fresh space.  

A strong brand is built upon high quality product. Both companies’ aquaculture operations employ a highly controlled process that is meant to be as clean and healthy as possible for both the fish and the end consumer. Kona Blue, for example, utilizes a multi-stage process that starts on land and ends in large ocean pens more than a half mile offshore of Hawaii in ocean currents 220 feet deep. Kona Kampachi, a variant of Japanese hamachi or Pacific yellowtail, are all raised from a broodstock of 200 fish.

Kona Blue grows algae at the hatchery to feed specifically selected zooplankton that act as the food source for the newly hatched fish. Once they reach a certain size, they are moved to large offshore pens anchored in deep currents. The fish are monitored closely as they grow, and harvested only as orders come in to ensure freshness.   

It might sound like a lot of work on the front-end, but the pay-off is impressive: a name synonymous with high-quality and a product that garners $17 to $20 per pound at retail. While even the most premium stone fruit won’t command the kind of price that sushi-grade Kampachi does, a well-postioned stone fruit brand could command a higher price than the category average.

The opportunity is there; unbranded stone fruit retailed for $0.13 more per pound than the average branded item for the 52 weeks ending February 27, 2010. On top of providing a good piece of fruit, a key to success for any branded entrant trying to command a high price is to sell the story of the brand much as Kona Blue sells theirs.
 
With praise from the likes of the World Wildlife Fund, and a growing presence on restaurant menus nationwide, Laughing Bird is becoming the small shrimp with a big name.

CleanFish offers an extensive list of fresh seafood sourced from sustainable farms, and many of their products carry branding that can help the products stand out in a seafood case or on a restaurant’s menu.

Another CleanFish offering, St. Brandon’s Irish organic salmon, uses its name to separate itself from some of the Scottish salmon farms that have come under recent scrutiny. Again, it comes down to the salmon (or stone fruit) first having desirable qualities that consumers want, with the branding acting as a tool to communicate this. If a product can exhibit consistency and quality, the brand name on its own can become a selling point. As Kona Blue or CleanFish could share, that kind of name fetches desirable recognition and an even more desirable price.