Not all consumers motivated by low food prices

Americans are looking at more than dollar savings when it comes to feeding their families. A recent food trends report by Cone Communications indicates families are reaching for healthier, more sustainable foods which is forcing changes within the grocery industry.

Although family satisfaction reigns supreme in the study findings, 93% of shoppers surveyed consider health and nutrition important, and 77% said sustainability is key in their decision to purchase. A majority of consumers named specific sustainability initiatives that influence their buying decisions:
• 74% locally produced
• 69% sustainable packaging
• 69% animal welfare
• 67% non-GMO
• 65% protects and renews natural resources

Nearly nine out of 10 survey respondents consider where a product is made when making food purchasing decisions, and two-thirds said they would pay more for food that is produced close to home.

Local food sourcing is linked to environmental and economic benefits which are the two biggest reasons cited by the survey respondents. Americans' convictions are so strong in their commitment to purchase locally produced foods that nearly half (46%) would sacrifice variety to do so, the findings show.

"As the local food movement goes mainstream, it's not just about the 'mom and pop shop' or farm stand. Even large companies have a role to talk about where they source food and the respective impacts on local communities," Alison DaSilva, executive vice president of Cone Communications, said in a statement with the report. "Using local as a broader value proposition helps companies of all sizes talk about the social and environmental benefits of responsible sourcing."

Wal-Mart Stores Inc. has been at the center of the sustainability sourcing movement for a decade now and it continues to tweak its operations and requirements of is suppliers to provide more fresh and more localized products without higher costs to consumers.

‘FOOD UPSTREAMING’
One way Wal-Mart hopes to provide fresher food and beverages is with a program Duncan Mac Naughton recently referred to as “Food Upstreaming.” Mac Naughton, chief merchandising officer with Walmart U.S., shared during a March 19 speech at the IRI Retail Conference that his merchandising team is now focused on food upstreaming work and making some great progress.

“This is really about how we can decrease product cost while we increase product quality. It is that simple, simple in concept, but it takes some work to do. We now have three wine warehouses across the United States in California, in Florida and in Arizona. We are able to take cost out of the distribution center and then reflect that cost back to the customer, MacNaughton said.

Continuing, he explained: “In produce which I am very excited about, we are able to use regional facilities to start to centralize some of the produce supply chain activities, things like culling and things like quality assurance ripening, cutting, packaging and even sorting across an entire crop to say which stores should get which products. We opened our first facility in South Texas in the third quarter of last year and we plan to open five more of these facilities in the coming years.”

Wal-Mart has followed Kroger, Safeway and Texas-based H-E-B in the push to win share in the competitive “fresh war” throughout the grocery industry.

FRESH GUARANTEE
It’s been nearly a year since Wal-Mart unveiled its “fresh guarantee” to consumers promising money back for produce that doesn’t meet expectations.

"We're listening to our customers and delivering on our promise to offer great produce at the most affordable price," said Jack Sinclair, executive vice president of the food business for Walmart U.S. "We are so sure our customers will be pleased with the fruits and vegetables they buy in our stores, they can receive a full refund if they aren't completely happy."

Grocery accounts for 55% of the net sales revenue at Walmart U.S., which amounted to $151 billion last year. 

Retail experts like Carol Spiekerman, CEO of NewMarketBuilders, have said that fresh is everywhere because it is often a reason people will travel to a particular grocery store. She adds that playing the fresh game raises the bar for grocers because consumers expecting fresh are unforgiving when they don’t find it as advertised.

Sinclair said consistency would be key to the fresh program’s success, which is why it mandated training for 70,000 of its employees who are responsible for stocking and restocking fresh produce in stores across the country. To improve freshness, Wal-Mart hired produce experts to work directly with farmers in the key growing regions where they have produce-buying offices. They also employ third-party produce auditors at the store level.

Wal-Mart said it has been focused on local farm sourcing since 2010 and ongoing efforts to streamline the supply chain have reduced the number of days produce is in transit to ensue the freshest fruits and vegetables get to the customers.

In the recent quarter, Wal-Mart reported its overall food and consumable grocery marketshare grew by 0.24% despite negative comparable sales attributable in part to SNAP (federal food stamp) benefit reductions. That said, Wal-Mart had mid-single digit positive comp sales in produce, with positive results in other fresh departments including meat, deli and bakery.

Sinclair told analysts in the October meeting in Bentonville that Wal-Mart’s efforts were starting to pay dividends toward Wal-Mart’s goal of $25 billion in “fresh” sales annually. He said the plan involves using a 33% share in consumables as the benchmark. 

To date, Wal-Mart has a 21% share in bananas, which Sinclair said was linked to better sourcing. With just a 9% share in strawberries, he said, Wal-Mart knows there’s work to do.

CONSUMER EDUCATION
"Grocery shopping decisions no longer hinge on price and taste alone. Consumers worry about where their food is made, what's in it and how it affects the environment," DaSilva said. "The stakes are higher for companies to not only provide food options that meet consumers' modern needs but communicate attributes in a clear and transparent way."

Consumers look to companies to help them understand the broader implications of their food purchasing decisions, with nearly three-quarters (74%) stating they want companies to do a better job explaining how their purchases impact the environment, according to the Cone report.

"Although consumers are shopping with an eye toward sustainability, they are equally motivated by personal needs and a desire to improve society," said Liz Gorman, senior vice president at Cone Communications. "Messaging must be two-fold. Companies must clearly demonstrate the impact consumers' purchases are having on the environment, while reinforcing health, taste and quality attributes."

One area of growing concern among consumers is the GMO (genetically modified organisms) debate. Cone’ research found that 84% of the consumers surveyed want companies to disclose information and educate them about GMOs in products because half said they don’t fully understand whether GMOs are good or bad.

Despite this confusion, three-in-five Americans are on the lookout for non GMO-labeled foods when shopping giving the following reasons:  
• 39% believes non-GMO foods are healthier
• 32% worries about the effects on the environment
• 24% questions the ethics behind the use of GMOs

Wal-Mart has stayed virtually silent on the GMO labeling debate after it leaned toward labeling support efforts in March 2013. An industry trade group and grocery competitor have each more recently spoken up.

"The Food and Drug Administration up to now has said that GMOs are safe, but we also recognize that some consumers want more information and companies might want to include GMO information, so we are asking the FDA to outline labeling standards companies can use voluntarily," Pamela Bailey, CEO of the Grocery Manufacturers Association, said in a statement.

Grocery retailer Wegmans also weighed in on the controversial topic of GMOs this week encouraging The FDA to implement a mandatory approval process for new GMO foods and label non-GMO foods.

Wegmans nutritionist Jane Andrews said in a NPR interview on Monday (April 21) it’s a complex issue and the store is trying to better educate its customers.

"Many people assume GMOs are in the produce department," she said. "They’re not, with a couple of exceptions. GMOs are fed to animals that produce our meats, eggs, poultry, seafood. Or it’s commodity crops that go into processed foods."

She said there's no way to tell if even minor ingredients are genetically modified and labeling would involve a paper trail of documentation.

“We think that official approval is important for consumers to know that the FDA has signed on and said this is a safe product,” Andrews said.

When it comes to genetically modified foods, Andrews said the store’s stance on the products is clear — GMOs are safe. However, not everyone is buying it. 

Last month Kroger and Safeway vowed not to sell genetically engineered salmon, joining Trader Joe’s, H-E-B, Aldi and Target.