This article was published in the April/May 2024 issue of Vision Magazine North America.
Significant consumer behavior shifts have emerged amid economic uncertainties and a landscape marked by financial stability concerns, particularly within lower and middle-income households. As inflation casts its shadow, individuals reevaluate their spending patterns, emphasizing budget-conscious decisions. Despite signs of easing inflation rates and the resurgence of promotional offers, a staggering 94% of households remain apprehensive about food cost inflation as of January 2024, with Gen Z and young millennials the least optimistic about their future and the most likely to change their shopping habits because of perceived food cost inflation. For produce suppliers, brands, and retailers, grasping these evolving consumer dynamics is critical to adapting to changing market demands and achieving volume growth in the coming years.
Understanding Consumer Behavior
In 2023, despite inflationary pressures, consumer spending on food and beverages notably increased, reflecting the essential nature of sustenance. This resilience in spending underscores a shift in consumer behavior, particularly evident in preferences for fresh, high-quality items more than processed alternatives. Despite a 4.4% increase in overall food prices, the fresh departments showed moderation in growth trends, indicating consumers’ resilience and adaptability to navigate price hikes while prioritizing quality.
However, overall, after five years of upticks in price per unit and pound at the shelf, produce has seen the lowest increase compared to other areas of food and beverages — but has also not seen as much growth as might be expected given moderate inflation and on-trend benefits such as health, convenience, affordability and experience. Produce is likely being out-marketed by other aisles in the fight for mindshare and incremental purchases.
Produce Trends: Insights and Analysis
Given it is purchased by 99% of U.S. households and more often than any other fresh foods department, performance of the produce department serves as a vital barometer for understanding inflation trends and evolving consumer preferences at retail. Amidst the backdrop of inflationary pressures, analyzing changes in volume and dollar sales within the fresh fruit and vegetable categories offers nuanced insights into shifting consumer behaviors.
While the overall amount spent on produce remains resilient, some items, such as bananas and onions, experienced slight declines in pound sales, while potatoes, berries and tomatoes saw modest gains. Conversely, avocados witnessed a significant decrease in sales movement — albeit avocados also saw a price increase disproportionate compared to other fresh fruits and vegetables.
These insights into consumer behavior highlight the importance of businesses adapting to evolving preferences in the food industry landscape. As consumers increasingly prioritize lower-maintenance dinners, each in-home dinner format represents a strategic combination of trade-offs to streamline meal preparation. Notably, salads stand out among the top sellers in the value-added vegetable category, illustrating consumers’ inclination toward convenient and healthy meal options.
In the case of avocados, while they are very popular with consumers’ wants and needs and tastes — they are not essential to many recipes and therefore, may be skipped or reduced if the price gets too high. How we use the foods, and whether we are willing to go without them, is a major driver of demand. The more we can use in creative ways, and consumers instantly think of those myriad uses, the less likely we are to waste the food — which was the No. 1 most popular consideration when purchasing in 2023.
The Rise of the Conscious Consumer
In recent years, the rise of the conscious consumer, a segment characterized by their proactive approach to health, nutrition and sustainability, has also been top of mind — changing the way we think about demand drivers of fresh produce and foods and beverages overall. These shoppers, about 16% of the overall U.S. shopper base, although larger or smaller depending on the region or retailer, prioritize making informed choices about the products they purchase, considering their impact on personal well-being and the environment. Delving into the demographics and buying behaviors of the conscious consumer reveals a distinct affinity for fresh produce, specifically sustainable and organic products that resonate with their values of environmental stewardship and ethical sourcing. This preference stems from their focus on consuming nutritious foods aligned with their health goals. The conscious consumer group is also growing since 2021 with a 2% increase in heads of households who prioritize these needs as their influence on market trends and consumer preferences continues to grow.
Implications for Retailers and Producers
Retailers and suppliers face the challenge of adapting to these evolving preferences, particularly concerning sustainability and ethical consumption. Failure to align offerings with these values risks missing out on growth opportunities and hampers the ability to differentiate products in the market, especially if the produce department’s offerings or retailer has a higher proportion of these shoppers in its target market.
Statistically, this segment is 39% more likely to purchase fresh produce than other consumer groups, indicating a clear opportunity for retailers and producers to capitalize on the growing demand for fresh, sustainable options. Furthermore, generational dynamics play a crucial role in shaping consumer preferences, with Gen Z and millennials leading the charge in driving demand for sustainable products and practices. Compared to older demographics, these younger consumers strongly associate the term “sustainability” with environmental factors, signaling a glaring shift in consumer consciousness.
As we delve deeper into the discussion of consumer behavior and the rise of conscious consumers, it becomes evident that the rapid growth of sustainable products in recent years accentuates the urgency for retailers and producers to integrate sustainability into their retail and production strategies. Since 2017, products marketed with sustainability in mind have experienced twice the growth rate compared to conventionally marketed products, registering a robust 9.43% growth rate over the past five years.
While these trends feel tailor-made for fresh produce, other aisles are very vocal at offering more sustainable or health-oriented choices. Retailers cannot just assume a conscious consumer thinks of produce first when so much noise in and out of the store is being directed to their desires and needs. We are still in an inflationary environment where wages are not keeping pace with the cost of living. Produce needs to be sure what resonates with the conscious consumer is marketed well and discussed both at shelf and beyond.
Future Outlook
Fresh food departments, particularly produce sections, are expected to maintain their significance in grocery shopping, as we make more trips to U.S. retail stores for food and beverages than ever before. Also, in the new, just-in-time shopping patterns, produce is one of the most frequently shopped departments. In 2023, 29% of shopping trips included the purchase of produce, contributing to 12% of total basket spending, despite the fact that the average spend of a produce item is far less than meat, deli or center-store. These statistics highlight the continued significance of fresh produce in consumer shopping habits.
To capitalize on these trends, retailers, brands and suppliers should strategize the placement of fresh produce within stores to maximize visibility to spur impulse purchases. While we see strong department frequency, rarely are more than two categories purchased on the same shopping trip — a criminally low rate given the wide variety of meals and snacks that come from different fruits and vegetables.
Additionally, offering pre-packaged options, such as cut fruits and vegetables, addresses the need for convenience among time-conscious shoppers seeking ready-to-eat or easy-to-prepare solutions. Brands should also highlight eco-friendly packaging materials and communicate sustainability initiatives to resonate with conscious consumers, aligning with their values and setting products apart in a competitive market landscape — especially in stores and commodities that disproportionately are shopped by conscious consumers.
As inflationary pressures persist and convenience becomes increasingly valued, retailers and producers must balance affordability, and consumer-centric approaches to ensure long-term success in produce, especially to generate demand from younger shoppers who may not inherently know everything about the health benefits or best cooking practices that older generations know.
Prioritizing these factors addresses current demands and ensures that operations are resilient against the ever-changing market dynamics in the future. Embracing the conscious consumer’s values of health, sustainability and affordability is a guiding principle for businesses seeking to thrive in the competitive market, fostering loyalty and resilience in uncertain times.
- Jonna Parker is the Fresh Foods Team Lead at Chicago-based market intelligence firm Circana (formerly IRI and NPD), where she also leads the Fresh Center of Excellence.
