Forecasting consumer purchasing behavior and the best ways to generate food revenues is an inexact science.

Such issues as rising prices, an uncertain economy and evolving shopper interests are contributing to make perishables merchandising in 2012 an increasingly complicated and challenging endeavor.

Yet, industry analysts see some of 2011’s core consumer and market trends continuing into the new year—and they note that it is up to retailers and manufacturers to respond accordingly if the perishables sector is to achieve it growth potential.

“Consumers want value, quality, convenience, and health and wellness,” says H.V. “Skip” Shaw Jr., president and chief executive officer of the Harrisburg, Pa.-based National Frozen and Refrigerated Foods Association (NFRA). “And they are looking for retailers and manufacturers to make life easier for their busy households.”

Todd Hale, senior vice president of consumer and shopper insights for The Nielson Co., a New York-based market research firm, notes that frozen and refrigerated food growth will be dictated by innovation and the ways that merchandisers connect with shoppers in creating demand across diverse population segments.

Frozen and refrigerated items already are being sold at an increasing amount of unconventional food outlets.

Nielsen notes, for instance, that the top-10 fastest-growing drug store categories are all edible, and six are frozen or refrigerated: frozen prepared foods, frozen novelties, refrigerated juices and drinks, frozen pizza, frozen snacks, and milk.

Yet, while overall category revenues are growing, much of the increases are due to rising product prices—which also are helping to hold down unit sales.

Refrigerated and frozen revenues totaled $100.4 billion for the year-ending Sept. 3, 2011, up 3 percent from the year-earlier period, Nielsen reports. Unit volume was 38.8 billion, down 2 percent. The average unit price was up 5 percent. Figures are for UPC-coded products for food, drug and mass-merchandise outlets, including Walmart.

Nielsen states that retail prices are rising in many supermarket departments, and large increases are occurring within the dairy and meat categories.

Indeed, dairy prices rose about 4 percent in the 26-week period ending Sept. 3, 2011, while fresh meat prices were up about 3 percent, Nielsen notes.

And the largest revenue growth is in categories where prices have risen to cover increased input costs, Nielsen states.

Dairy, packaged meat and fresh produce sales, for instance, have risen 6 percent, 5 percent and 4 percent, respectively, for the 52 weeks ending Sept. 3, 2011 compared to the year-earlier period.

Yet, unit volume sales fell over the last year for dairy (down 2 percent), frozen foods (a 2-percent decrease), packaged meat (down 3 percent), and fresh meat (a 6-percent decline).

Such trends could continue in 2012 unless there is job growth to boost consumer confidence, Hale notes.

He adds that shoppers will continue to look for value, but good prices and promotions will not guarantee success.

“Manufacturers and retailers need to innovate and work harder than ever to differentiate and give consumers a reason to buy,” Hale reports.

The NFRA in 2012, meanwhile, will focus on communicating to consumers how the quality of refrigerated and frozen foods is improving, Shaw says.

Its March National Frozen Food Month promotion will carry the tag line, “Take a Quick Look at Frozen.”

“Frozen foods in some instances are fresher than fresh foods,” Shaw states. “Our challenge is to get consumers to understand how frozen foods have changed over the years and the ways they can be part of a daily lifestyle. Consumers are willing to pay for quality.”

He adds that it is important to spotlight how the foods are developed.

That includes noting, for instance, that vegetables are packaged frozen minutes after being harvested on the farm.

“One of the great opportunities is for frozen and refrigerated manufacturers and retailers to work as a team to keep track of consumer trends and then focus on solutions,” Shaw states. “Areas such as health and wellness and portion control are becoming more prominent.”

Nutrition also should be a key focus for produce merchandisers, says Lorna Christie, executive vice president and chief operating officer of the Newark, Del.-based Produce Marketing Association (PMA).

That includes promoting how produce can serve as a healthy and tasty snack for kids in the fight against childhood obesity.

“Snacking is a great opportunity, particularly as there have been packaging innovations that makes it easier to market berries and other delicate foods as an easy-to-grab snack,” she states.

Merchandisers also can benefit by leveraging the increasingly stronger shopper interest in locally grown foods, Christie notes.

“There is a tendency to define value based on price, but our consumer research shows that shoppers are going beyond price when looking for value,” she says. “For many it means buying local. Consumers want to be connected to the people that grow the foods. That gives them more confidence in the fresh foods and vegetables.” (For more on the trend toward buying local produce, see story, page 8.)

She recommends that retailers use in-store promotions to highlight the individuals and companies that supply locally developed produce.

Quick Response (QR) codes—matrix barcodes that contain data which shoppers can access with mobile devices—also are effective vehicles for communicating product information, Christie notes.

In addition, retailers can spotlight products via in-store samplings, which also enable associates to tell consumers how the food is produced.

“The perception of many retailers is that consumers are just focused on price,” Christie says. “But there are a large group of shoppers that want to be connected to the food. Value is determined based on price and the story of the people who grow the food.”

Social media also will be an increasingly crucial avenue for marketing produce and other perishables.

Merchandisers, for instance, can use the Internet to make kids aware of the different produce flavors, Christie states.

Indeed, Bruce Axtman, president of the Perishables Group, a Chicago-based fresh food consulting firm, says astute merchandisers can reach customers via blogs, through Facebook, and with online promotions.

Such promotions can include private label perishables, which Axtman says will remain a strong growth area in 2012. Store brands accounted for a record 19.1 percent of supermarket dollar sales for the year-ending 5/14/11, the Perishables Group reports.

“Retailers are continuing to put more emphasis on store brands in order to become unique and offer better value to consumers,” he states. “It also helps them to better manage profit margins.”

That focus on profitability also will result in fewer perishables promotions, Axtman predicts.

Shoppers have been cutting their grocery bills by buying less, using coupons and searching for sales, Axtman notes.

He also agrees that the appeal of locally produced items will continue to grow in 2012.

The Perishables Group reports that Grand Rapids, Mich.-based Meijer Inc., which operates about 200 supercenter-type outlets in Michigan, Illinois, Indiana, Ohio and Kentucky, increased the amount of fruit and vegetables it sourced from Midwest farms by 5 percent in 2011.

Wal-Mart Stores Inc., the world’s largest retailer, also is adding more locally grown produce, the Perishables Group states.

“Locally grown products, which apply more to produce than any other area, is very big and important,” Axtman says. “Retailers want it and consumers buy it hook, line and sinker.”

Indeed, such items have the halo of being fresher and better for the environment.

“The local farmer is seen by many consumers as good and the big corporate farms as not, even if that is not fact based,” Axtman says.

The meat sector, meanwhile, will face some of the biggest perishables merchandising challenges in 2012.

Supply issues, for instance, are likely to increase the retail cost of proteins, says Michael Uetz, principal of Midan Marketing LLC, a Chicago-based marketing, communications and market research firm.

“Retailers have struggled over the last few years to maintain prices and not pass [increases] on to shoppers, but the input costs will not go down,” he states.

Patrick Fleming, director of retail marketing for the Des Moines-based National Pork Board, notes, for instance, that the price of corn and soybean meal have doubled over the last two years.

Drought and increased protein exports also are contributing to higher domestic prices for pork and beef.

Uetz says the merchandising of convenience-oriented meats for time-conscious consumers, such as pre-marinated proteins, provides the strongest growth opportunity for retailers.
“We need to think about the consumer mindset—the factors that are driving their purchasing habits,” he states. “Consumers are being more selective on how they spend their dollars. So there must be new merchandising platforms that make the products more interesting.

Fleming agrees: “It is a never-ending cycle of engaging and educating shoppers and meeting their changing needs. There is a new form of retailing in which shoppers are becoming more engaged with who they buy from.”

Such changing shopper attitudes will have a major impact on perishables merchandising in 2012. Those retailers that rapidly respond to consumer expectations will be in the best position to thrive in the New Year.