It seems like everybody is getting into the fresh produce business.
Besides your typical grocery retailers, a growing number of dollar stores, convenience stores and, in some cases, neighborhood drugstores now offer at least a minimal selection of fresh fruits and vegetables.
Consumers are making produce purchases at alternative stores to save time, snap up a good value or just because they’re convenient.
“Time matters,” says Dick Meyer, president of Mesa, Ariz.-based Meyer & Associates, a consulting firm that specializes in the convenience store industry.
That’s why consumers pop into convenience stores to pick up a banana, apple or other fresh produce item when they stop for gas, a cup of coffee or to use an ATM.
“They can be in and out in less than five minutes,” he says.
Core-Mark International, South San Francisco, Calif., specializes in marketing fresh foods and other products to convenience stores, drugstores and other small-format locations, says Rob Hoeff, director of fresh foods.
About 5,000 of the company’s more than 30,000 customers buy whole fresh fruit, he says. Five years ago, the number was zero.
Hoeff was hired from Safeway Inc., a Pleasanton, Calif.-based supermarket chain, to put together a fresh food program for Core-Mark.
“Produce is definitely a key component in that,” he says, including whole items such as bananas, apples, oranges, lemons and limes.
Value-added items include salads, such as Ready Pac Bistro Bowls, along with Ready Pac cut fruit, snacking trays and Crunch Pak brand snack items.
Convenience stores are geared for the person on the run and for immediate consumption, he says, since their customers consume 70% of what they buy before they reach their destinations.
“It’s definitely not where they’re stocking up to take things home for the kids’ lunch,” he says.
Convenience store customers traditionally have been men, he says. But the addition of fresh produce could alter that demographic.
“The fresh food program offers a way to bring the soccer mom or the female who is stopping to put fuel in her car into the store,” Hoeff says. “It brings new foot traffic into a store as well.”
7-Eleven gets fresher
Dallas-based 7-Eleven Inc., a subsidiary of Japanese firm Seven & i Holdings, operates about 9,500 convenience stores in North America and recently discussed plans to double the amount of fresh items in its stores to 20% of their volume.
In the fresh produce category, 7-Eleven stores already offer such items as loose bananas, apples and oranges, as well as several kinds of fruit cups.
La Crosse, Wis.-based Kwik Trip Inc. has offered fresh produce in its 400 convenience stores for about 12 years, says spokesman John McHugh.
“We’re known as a destination for commodities in produce because of the value pricing that we have,” he says.
The stores sell bananas, potatoes and onions for 38 cents a pound, along with other fresh produce — even salads prepared in-house.
The company, which operates in Minnesota, Wisconsin and Iowa, sells 18 loads of bananas a week and has its own ripening facility, McHugh says.
Chief executive officer Don Zietlow and several other company executives have wholesale grocery backgrounds, McHugh says. The chain has found a niche filling the needs of families who run out of perishables and other items between regular shopping trips. Fresh food items are prominently on display.
“That’s our business model,” he says.
Kwik Trip sources locally when possible and makes daily deliveries to ensure freshness.
Tempe, Ariz.-based Circle K Stores Inc., a chain of 4,000 convenience stores worldwide, has carried fresh fruit, such as bananas, apples and oranges for several years, says Deborah Katkus, category manager, foodservice and beverage, for the Circle K West division.
“Consumers like the quick, easy, portable solutions,” she says.
“We have worked closely with Del Monte and Core-Mark on the delivery system, which has been a bit challenging,” Katkus says. “Short-coded product is always difficult to manage.”
Whether a fresh produce program works for a convenience store chain depends on the company’s reputation for quality, which is largely determined by effective execution and ensuring freshness, Meyer says.
“It can’t be a stepchild.”
The increasingly popular dollar stores have become sources of fresh produce for value-minded consumers.
Commerce, Calif.-based 99 Cents Only Stores started out offering about 20 kinds of fresh fruits and vegetables and now has about 40 kinds, says Dick Spezzano, president of Spezzano Consulting Services, Monrovia, Calif.
“It’s surprising how much produce they move,” he says.
The chain of just over 300 stores operates in California, Arizona, Nevada and Texas.
The company has contracts with some major suppliers, “but they’ll buy from anybody,” Spezzano says, as long as they meet the company’s needs.
Spezzano says he recently saw “beautiful” Campari tomatoes from Eurofresh Farms at a 99 Cents Only Stores location.
The chain’s shoppers more likely are looking for value rather than quality, though, since some of its produce “might be on its last leg and highly mature,” he says.
“These are customers that are looking for bargains.”
Spezzano estimates that 99 Cents Only Stores typically pays about 60 cents a pound for items that sell for 99 cents a pound.
The chain usually features about a half-dozen produce items in its ads and has found that consumers who come in for produce often buy other items as well, Spezzano says.
Goodlettsville, Tenn.-based Dollar General Corp. offers produce in about 100 of its larger-format Dollar General Market locations, which account for only a fraction of the chain’s 10,370 stores, says Dan McDonald, senior director of corporate communications.
The market locations offer core produce items at value prices, such as navel oranges at 3 pounds for $1 or fuji apples for 75 cents a pound, according to a December ad.
“We want to offer our customers the same value and convenience they’ll get at a Dollar General store,” he says, adding, “We tend to be somewhat seasonal in the produce we put in the stores.”
The company added produce to locations in communities where consumer needs were not being met, he says.
The chain has stores in 40 states and has “aggressive growth plans,” McDonald says. But he could not comment on whether the company plans to add produce to its standard dollar stores.
California’s dollar store landscape could experience an immediate impact if a company like Dollar General or Charlotte, N.C.-based Family Dollar takes over El Segundo, Calif.-based Fresh & Easy Neighborhood Market locations and distribution center, Spezzano says. The 5-year-old, 200-store chain, owned by United Kingdom-based Tesco PLC, failed to catch on in the U.S.
Prescription for produce
The growing number of health-minded baby boomers who visit drugstores to pick up prescriptions has prompted some locations to add fresh produce, says Denise Donohue, founder of Donohue Associates, DeWitt, Mich., a marketing and public relations firm that specializes in agriculture.
Drugstores might become their one-stop shop where they also pick up a little food, gift items, reading materials.
“To me, it’s perfectly ripe for drug stores to say they’re bearing a healthy message — ‘We have healthy produce,’” she says. “It’s a natural marriage.”
Increased competition from online prescription providers has prompted others to do the same as they seek additional profit centers, Hoeff says.
The nation’s three major drugstore chains, Walgreen Co., Deerfield, Ill.; Rite Aid Corp., Camp Hill, Pa.; and CVS Caremark Corp,. Woonsocket, R.I., all offer a certain amount of fresh produce, Hoeff says.
“Today’s consumers are looking for more healthy food alternatives,” said Robert Elfinger, spokesman for Walgreens, a chain of 8,057 drugstores.
To address that trend, the company launched a pilot program in 2010 offering fresh produce and prepared meals in select Chicago and New York area stores.
“Since then we’ve expanded to more than 180 stores across the nation,” Elfinger says.
The selection at each store varies, but it can include fruits, vegetables and prepared salads as well as wraps, sandwiches, meats, soups and other on-the-go meal options, as well as “convenient alternatives for tonight’s meal,” he says.
Adding fresh items required investments in developing a cold supply chain, reconfiguring stores and training employees, Elfinger says.
Despite the growing number of drugstores that offer fresh fruits and vegetables, the percentage of stores offering produce still is very low, Hoeff says. “The growth potential is quite large in the drug channel,” he says.
It may take a nudge from suppliers to get some alternative stores to dive into or even dip their toe in the water when it comes to fresh produce, Donohue says.
These stores aren’t likely to invest in misters or refrigerated tables, she says, so suppliers may have to develop hanging packages or other ways to merchandise produce.
They’ll need to offer smaller packages as well. A convenience store won’t need a 42-pound box of apples, she says. “That’s way too much for these stores to go through.”
“It’s going to take an entrepreneur to decide that they’re going to go after that kind of market,” she says.
Vending machines could be one way for alternative stores to offer fresh produce.
“Innovative companies have vending machines for produce that are looking for partners,” she says. “We have got to be pricing at price points that work for vending machines and packaging so product doesn’t bruise going down the chute.”
Even though sales to these stores are paltry compared to major supermarket chains, they add up.
“It could be a pretty good-sized niche, and probably a fairly profitable niche,” she says.
She says she doesn’t see a “rampant escalation” into the produce business on the part of these stores.
“It’s a chipping away effect, and it does have grocery stores overall concerned,” she says. “They have the ability to move the needle.”