Retail produce sales increased 2.3% and volume climbed 2.5% in the first quarter of 2010

Better times are here again in the retail produce department.

Retail produce sales increased 2.3% and volume climbed 2.5% in the first quarter of 2010 compared with 2009, according to figures from the West Dundee, Ill.-based Perishables Group.

Citrus sales increased 10.6% in the first quarter while peppers, prepared food and cooking greens also registered double digit sales gains.

Avocados, pineapples tomatoes, mushrooms, prepared vegetables, pears and celery registered sales gains between 5% and 10%. Apples, grapes, cooking vegetables, onions, lettuce, blueberries, cucumbers and squash/pumpkins had sales gains between 0.6% and 4.3%.

On the other hand, sales declines were noted for packaged salad (-1%), bananas (-4.3%), potatoes (-13%), strawberries (-8.9%) carrots (-0.9%) and melons (-3.6%)

Generally speaking, improved results are expected through the year, said Steve Lutz, executive vice president of the Perishables Group.

“It feels like it is a lot different and a lot better than 2009, when so much price deflation was occurring,” he said.

“This year has been a nice turnaround for retailers” said Dick Spezzano, an independent retail analyst and president of Spezzano Consulting Services in Monrovia, Calif.

Deflation in 2009 made it tougher for retailers to adjust and keep their profits where they wanted them to be.

“Some guys told me they were as high as 10% deflation in their department on key months,” Spezzano said. “When you are down that much, you can’t sell enough to make up for deflation.”

In the third quarter of 2009, Lutz said all top 25 produce items had lower average retail prices than year-ago numbers. For the first quarter of 2010, he said just a little over half of the commodities had lower average retail prices compared with a year ago.

“That’s definitely an improvement,” he said.

Lutz said strawberry volumes were down 19.3% compared with a year ago. Poor weather in growing areas contributed to the lighter supply. Likewise, blueberry volume was down 14.5% and grape volume was off 27% in the first quarter. That reduction is linked to the Feb. 27 earthquake in Chile, Lutz said.

The shorter crops helped other fruit items thrive, he said.

“Certainly it is likely that apples, bananas and pears benefited from the limited availability of grapes and possibly limited availability of blueberries and strawberries,” Lutz said.

Packaged salad average prices were off 2.3% compared to a year ago, resulting in a 1.3% rise in volume but a 1% decline in sales.

Lutz said a number of consumers have apparently bailed out of the more expensive salad kits in favor of the bargain bagged salad packs.

“The blends and the salad kits are the ones that have been hurt the most in the last year and a half,” Spezzano said.

Lutz said organic produce sales slowed from prerecession double-digit levels but still showing growth.
“That’s not bad, considering everything else was going south,” he said. “Overall, I think organic came through this pretty well.”

Outlook for 2010

Spezzano said this year’s slow start to the summer fruit season, caused by cool weather in California and Arizona, may hurt retail performance in the second quarter for cherries, tree fruit, grapes and melons.
While there may be no big breakthrough in the size of crops that will result in a 10% to 15% increase in tonnage, he said 2010 should provide improved returns compared with 2009.

While deflation has eased, Lutz said many produce shoppers are keen to find bargains.

“Consumers are shopping for what they perceive to be the best value they can find and if your price is not considered to be right or a pretty good value, then consumers are penalizing you for it,” he said.

Spezzano said “hot specials” continue to be a dominant influence for consumers in all food categories.

The average for dollars of fruits and vegetables sold on promotion relative to all sales is about 24%, Lutz said.
Except for bananas, the percentage of fruit on promotion is generally higher than vegetables.

Last year, some retailers reported the percentage for produce sold on promotion rose from the low 20% range to as high as 30%, Spezzano said.