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RETAIL intelligence: FRESH CUT CATEGORY

Anonymous. Canadian Grocer122. 3 (Apr 2008): A1,A3-A5,A7.
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A closer look at the numbers, however, reveals that Western Canada devours the lion's share of those sales. "Even with only one-third of the population in the West, 85% of the total branded category are in the West," says Carl Clark, director of sales for Apio Inc., which has been selling the Eat Smart brand of fresh-cut meal solutions, including bagged vegetables, party trays and salad kits, in this country since 1999. Retailers in Western Canada also account for 89% of the party-tray sales, and 71% of the sales of branded retail bags, notes Clark. "We sell more in the U.S. west as well-it's about a 55 to 45 skew. If the retailers in Eastern Canada sold at the level of retailers in the West, it would probably be a $75-million category," he adds. Much of the packaged vegetable sales in Eastern Canada are store-made or from local processors with unbranded delivery, which results in a largely undeveloped market for national brands, he explains.

The company also has a bulk-bin program that Clark says is doing "extremely well" in Western Canada. With this program Apio provides the merchandising, which consists of a plastic bin with clear, removable front windows and built-in dividers that sits on the produce rack. The retailer buys the Apio products, in either three- or five-pound bags, opens them up, and sells them bulk. "In addition to the bins and the tongs, we provide the care and maintenance information for the produce clerks," says Clark. "That's another item that, like in Canada, does extremely well in the Western U.S. It's a big item."

[Karen Boughton-Popiel] says the trays "do very well," and are "excellent quality." Again, credit it to BreatheWay technology, and a unique patented "flip and serve" design. "The tray allows for airflow under the lid and through the membrane for optimal quality of product and presentation," explains Clark. "Therefore, the tray can be filled to the very top of the tray with vegetables for maximum space utilization and value, unlike most trays that require more head space." It is actually the top of the lid that is filled in the manufacturing process. The bottom is then snapped on and the tray is flipped over. In addition, the rigid tray base serves as an attractive and convenient fresh cut vegetable display suitable for any occasion.

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Headnote

GROCERS-ESPECIALLY ON THE WEST COAST-are enjoying healthy sales of branded fresh cut vegetables as more and more consumers opt for snacks and meal solutions that are both convenient and healthy.

After all, a diet rich in vegetables and fruit may help reduce the risk of certain cancers and lower the risk of heart disease. Canada's Food Guide recommends that adults eat seven to 10 servings of vegetables and fruits each day, depending on age and gender. For grocers, this adds up to a major opportunity.

Although sales in the emerging fresh cut vegetable category are still relatively low, they are on a strong growth curve. For the year ending December 2007, sales for branded cut vegetables were $42 million, according to Nielsen Canada statistics.

Within that category, bagged branded fresh cut vegetables climbed from $16.8 million to $18.2 million for the same period, while total branded trays increased from $3.9 million all the way to $5.2 million.

A closer look at the numbers, however, reveals that Western Canada devours the lion's share of those sales. "Even with only one-third of the population in the West, 85% of the total branded category are in the West," says Carl Clark, director of sales for Apio Inc., which has been selling the Eat Smart brand of fresh-cut meal solutions, including bagged vegetables, party trays and salad kits, in this country since 1999. Retailers in Western Canada also account for 89% of the party-tray sales, and 71% of the sales of branded retail bags, notes Clark. "We sell more in the U.S. west as well-it's about a 55 to 45 skew. If the retailers in Eastern Canada sold at the level of retailers in the West, it would probably be a $75-million category," he adds. Much of the packaged vegetable sales in Eastern Canada are store-made or from local processors with unbranded delivery, which results in a largely undeveloped market for national brands, he explains.

Clearly, there's plenty of room to grow.

A breath of fresh air

If cut vegetables are to stay fresh, they need to be able to breathe. And when it comes to keeping produce fresh, the Eat Smart line has an edge over other branded competitors, thanks to its patented BreatheWay technology.

Quite simply, BreatheWay is a multi-layer membrane technology that is placed over a hole in the plastic packaging. The membrane adjusts permeability for virtually any produce item in virtually any container as temperature conditions change, thus preserving product quality and extending shelf life naturally. "The easiest way to describe it is like a valve that allows a specific ratio of oxygen in and carbon dioxide out," notes Clark.

The amount of breathing-or respiration-varies by the type of vegetable. Carrots, for example, are a low respirer, while broccoli is a very heavy respirer. "So the more broccoli you have in the package, the more permeability you need," explains Clark. And because the membrane is customized and can adjust automatically in response to fluctuations in the cold chain, produce quality is maintained from processing to store delivery resulting in reduced incidences of "off odours" at the end of shelf life and a better overall eating experience.

While there are other packaging technologies on the market, Apio's is unique in that it can shift from more permeable to less permeable within a given temperature range an infinite number of times, as necessary, in order to adjust for the increase and decrease in produce respiration over temperature changes; other packaging technologies can not. BreatheWay not only provides a benefit to retailers, but makes it more convenient for the consumer, since the product stays freshest when stored in the original package.

Variety of veggies

Today's consumers are looking for variety and convenience in all areas of the grocery store. For produce shoppers particularly, they are looking for solutions that accommodate their healthy and active lifestyle and they have become more aware of foods that support the health and wellness of themselves and their families.

To meet this consumer need Apio offers a range of cutvegetable solutions. Bagged fresh cut vegetables include broccoli florets, broccoli slaw, broccoli and carrots, broccoli and cauliflower, cauliflower florets, vegetable medley, and vegetable stir-fry, in a variety of sizes. Apio's Eat Smart line boasts a whopping 71% share in branded two- to three-pound bags and a 30% share of branded 12- to 16-ounce bags, 42% in Western Canada. It's no wonder that sales of Eat Smart products are growing at 15% nationally, driven by growth in British Columbia of 20%.

The company also has a bulk-bin program that Clark says is doing "extremely well" in Western Canada. With this program Apio provides the merchandising, which consists of a plastic bin with clear, removable front windows and built-in dividers that sits on the produce rack. The retailer buys the Apio products, in either three- or five-pound bags, opens them up, and sells them bulk. "In addition to the bins and the tongs, we provide the care and maintenance information for the produce clerks," says Clark. "That's another item that, like in Canada, does extremely well in the Western U.S. It's a big item."

Apio's newest introduction to its product lineup is its Eat Smart salad kits, which launched successfully in Canada last spring. A majority of salad kits are lettuce-based versus nutrient-rich vegetables such as broccoli, cauliflower and carrots. Apio's Fresh Salads offer a healthier solution for any occasion. "Canada is just a great market for our salads," says Clark. "They are already double the sales of stores in the U.S."

The salads are the first in a line of products called Eat Smart Solutions. This category includes fresh-cut vegetables and complementary ingredients for ready-to-make meals and meal components.

Each salad kit includes a single serving of vegetables, toppings, and dressing. To suit a range of palates, these value added salads are available in five blends: Santa-Maria style broccoli salad, Asian Affair, Broccoli Delight, Veggie Waldorf, and Carrot Crunch.

Trays are tops

In branded trays, Eat Smart boasts a whopping 66% market share. Party trays are becoming increasingly popular as consumers look to serve their guests healthier fare than the traditional chips and dip. Eat Smart trays include a 22-ounce Petite Veggie Tray, 36-ounce Vegetable Tray, and 40-ounce Veggie Tray.

The patented "flip and serve" tray is designed to maximize airflow and product presentation. For the consumer, the tray is turned over, the black tray snaps off and the film and black dividers are removed before the tray is reapplied. The consumer then simply "flips" the tray right side up and removes the clear lid to reveal a presentation-ready fresh cut display.

For retail, the design provides merchandising efficiencies and display attractiveness combined with modified atmosphere packaging that maintains quality and reduces shrink.

Thrifty Foods has been selling Eat Smart party trays for about five years, says Karen Boughton-Popiel, the retailer's director of deli and home meal replacement operations. The stores carry them in their HMR sections "for convenience," she explains. "A lot of times you're going somewhere and you haven't prepared anything. The customer really appreciates the convenience of just being able to grab them and go." Thrifty Foods carries four sizes of party trays, with dips included.

Boughton-Popiel says the trays "do very well," and are "excellent quality." Again, credit it to BreatheWay technology, and a unique patented "flip and serve" design. "The tray allows for airflow under the lid and through the membrane for optimal quality of product and presentation," explains Clark. "Therefore, the tray can be filled to the very top of the tray with vegetables for maximum space utilization and value, unlike most trays that require more head space." It is actually the top of the lid that is filled in the manufacturing process. The bottom is then snapped on and the tray is flipped over. In addition, the rigid tray base serves as an attractive and convenient fresh cut vegetable display suitable for any occasion.

Carry complete category

When it comes to merchandising fresh veggies, Clark recommends that grocers have both a cut-vegetable category schematic with all aspects of the category, as well as a "grab and go" section for items such as single-serve salads and small trays.

"If the grocer is carrying anything in the cut-vegetable category, I recommend that the retailer have a category, whether it's a four-foot vertical, a four-foot with half, maybe two or three shelves-whatever the quantity of products they sell best-separate from the salad category," says Clark. "Our experience has shown that consumers looking to purchase fresh cut vegetables don't look in the same area where bagged salads are kept. The best place to merchandise prepackaged cut vegetables is alongside the same commodities sold in bulk."

As party trays are such big sellers in the West, Clark also encourages retailers to have a party-tray set. He says this can be positioned under the bagged vegetables or incorporated into the bottom of the salad case. "Other retailers will include the bulk bins on the wet racks," he says, "Some of the wet racks have one or two shelves above, so they [retailers] will put the bulk bins on the bottom, and then one or two shelves of 12-ounce vegetables, and then sometimes the dips on the top shelf-as long as you have a category, so you have all the lines represented."

After all, the more visibility the category enjoys, the more inclined customers will be to buy the products on a regular basis. As Boughton-Popiel says: "We've had [the party trays] for five years, so it's kind of a mainstream product for our customer base now."
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"IN ADDITION TO THE BINS AND TH E TONGS, we provide the care and maintenance information for the produce clerks."
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A private label success story

A national retailer asked Apio for new-product suggestions to energize its fresh cut vegetable private-label brand.

Apio created two new products in 18-ounce bags that had the right mix of vegetables and the right technology to keep the product fresh and appealing. The products were a success with shoppers, and helped the retailer recapture sales and grow the fresh cut vegetable category overall.

One of the first to incorporate salad bars in-store, the retailer saw the value of offering cleaned, cut and pre-packaged vegetables. It first adopted a storemade fresh cut vegetable program, and its vegetable medleys, packaged in cylindrical plastic bags, became the top-selling item in all stores.

As the program expanded, however, the retailer had to outsource to local and regional processors to meet demand. But during the distribution process, quality suffered. As shoppers began to notice a difference, volume and sales declined.

To regain sales, the retailer knew it needed interesting new products with extended shelf life. The retailer challenged Apio to provide a solution.

Apio collaborated with the retailer to develop two new products, both 18-ounce bags, specifically for the retailer's private-label brand. Following a successful test, the retailer expanded distribution to all divisions.

Since their introduction in 2005, the two private-label items have posted strong sales. During the 52 weeks ending October 5, 2007, sales grew from $5 to $79 in average sales per million volume in the divisions that carried the products when first introduced.

"THE TRAY ALLOWS FOR AIRFLOW UNDER THE LID AND THROUGH THE MEMBRANE for optimal quality of product and presentation, therefore, the tray can be filled to the very top to the tray will vegetables for maximum space utilization and value."
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A perfect fit bagged vegetable success story

A Southeastern U.S. retailer partnered with Apio to develop and grow its fresh cut bagged-vegetable program. It wanted to offer a brand that would complement its image as a retailer of high-quality "good-for-you" products at an affordable price.

Apio's Eat Smart proved to be the perfect fit.

An aggressive and consistent promotion plan, coupled with effective merchandising, led to the retailer's Eat Smart program becoming one of the most successful fresh cut bagged vegetable programs in the country; it continues to realize double-digit growth year over year.

The retailer reinforced the Eat Smart brand through additional merchandising vehicles, including secondary refrigerated displays and channel strips in all cases.

While establishing brand equity was key to winning over shoppers, the retailer also developed a pricing and promotion strategy to encourage incremental sales and drive growth. Apio worked with the retailer to select 12 to 15 key promotional events to highlight Eat Smart.

The investment paid off. For example, periodic Eat Smart four-packs-for-$5 events generated a 97% sales lift during the 52 weeks ending November 5, 2006. This strategy helped B drive volume across the entire Eat Smart assortment by encouraging shoppers to try different items.

During the same 52-week period, the retailer saw 13.7% dollar growth and 12.8% volume growth for the fresh cut vegetable category compared to the previous year. Furthermore, the category outpaced total store growth for the retailer.
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Profitable promotional program

A regional retailer in the Western United States, in search of a solution to increase sales of its fresh cut vegetable category, turned to Apio for a party tray program. Apio responded with Eat Smart branded vegetable trays and a plan to grow sales that included pricing, promotion and merchandising best practices

The retailer realized that Eat Smart vegetable trays offered a merchandising advantage because of their size. The rectangular shape minimized "gaps" and the appearance was superior to the round trays supplied by a local processor.

When the retailer added the first two Eat Smart tray items (a 40-ounce and a 22-ounce vegetable tray) to the category and found they outsold all other trays, the retailer added two more items.

Enthused by the strong sales of Eat Smart vegetable trays, the retailer partnered with Apio to implement a category management plan. The plan included carrying more Eat Smart vegetable-tray items, expanding display space to include an island and increased wall space and using signage to gain shopper attention.

The retailer also worked with Apio to develop a promotion schedule focused on key holidays to boost incremental sales. During promotions, the retailer increased display space and signage to attract more shoppers to the category.

The retailer recognized the opportunity to expand an emerging category by creating a destination for consumers looking for party trays throughout the year. Through consistent promotion, attractive merchandising and a co-operative partnership, the retailer was able to implement a successful party tray program that continues to thrive.

During the program's first year, sales of the tray sub-category increased by 200% compared to the previous year. In 2007, the retailer continued to reap the benefits of the Eat Smart vegetable-tray program with sales increases in the double digits for all items. Now moving into its third year, sales are expected to increase by a further 25%.
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Copyright Rogers Publishing Limited Apr 2008