DAVIS, CA - It may be platitudinous to point out: price competition in fresh produce can be—and frequently is—intense. But after a year of tumult in grocery retail that saw Lidl enter the United States, Amazon acquire Whole Foods, Aldi and Target invest in comprehensive expansion and remodel programs, and Walmart rush headlong into e-commerce, it bears repeating. Perhaps now more than ever, insights into pricing strategy are key to successfully competing in a crowded market.
I recently had the opportunity to converse with Edris Bemanian, Chief Operating Officer for Engage3. As COO of a company dedicated to helping retailers and brands improve pricing performance and compete more profitably through data science and analytics, Edris had a number of shrewd observations to share with me on pricing pressures, strategy, and the state of the market.
Q: We’ve seen some reports of Wegman’s lowering prices for the first time in well over a year. What can you tell me about Wegman’s recent bout of cuts? Can you speculate on what prompted those cuts?
Edris Bemanian: Historically, most retailers changed prices when they received a cost increase to manage against a margin target. These margin targets would be managed down to an item-level. Now that retailers are under attack from all directions and by all formats (club, specialty, ethnic, e-commerce pure players, deep discounters, etc.), retailers are increasingly paying attention to their local competition in each of their markets. They are beginning to take a total category, total department, and total store perspective on profitability and sales versus managing down to an item-level. Wegmans is a widely-respected and highly-regarded operator so their pricing actions will always draw attention. Wegmans is slowly expanding into new markets like Washington D.C. to capture additional market share. At the same time, as with all other grocers, it needs to focus on protecting their market share from both conventional and existential threats while continuing to gain share from their loyal customers’ wallets.
Q: What do retailers like Wegmans stand to gain/lose from cutting prices?
EB: There’s a delicate balance retailers need to strike. These are some steps any retailer can take to gain when setting prices:
- Make sure that you’re priced “right" on an item. This means that you’re pricing consistently with your strategy while taking local competition into consideration.
- Manage the activity cost associated with changing too many prices.
- Make sure that you aren’t missing out on any margin opportunities.
- Ensure that your customers don’t feel taken advantage of, which can happen if the cadence of the price changes and their price changes are not aligned to how they communicate their value proposition to their customers.
Q: Are there ways in which a retailer who is unable to compete with the likes of Amazon or Lidl in terms of pricing can work to alleviate pricing pressure?
EB: Rather than engaging in a direct pricing war, retailers should take a step back and thoughtfully align on their strategy based on 4 things: 1) who their most loyal customers are, 2) who their local competitors are, 3) what tools they have at their disposal (e.g., loyalty programs or pricing systems), and 4) what their differentiators are. Once they’ve done this, they can develop a pricing strategy to help them find the right balance of competitiveness and profitability.
Q: What kinds of general trends in pricing are you seeing right now? What do you think are some of the biggest factors affecting pricing trends?
EB: The biggest trend is that pricing and assortments are becoming more dynamic and localized. E-commerce is now becoming a fundamental part of retailers’ strategies versus a “me too” approach (for example, Target’s acquisition of Shipt, discussions with Boxed, and Instacart’s explosive growth since). Consumers are paying much more attention to product attributes and have varying perceptions of value associated with these product attributes. In produce, these are factors like a product’s country of origin, if it’s conventional or organic, non-GMO, gluten-free, etc.
Q: Are major developments from last year like Lidl’s entry into the U.S. market and Amazon’s acquisition of Whole Foods—complete with subsequent price cuts—continuing to affect pricing?
EB: Absolutely. At a macro-level, Lidl’s entry into the U.S. market resulted in massive investments by Aldi into their own store experience. Amazon’s acquisition of Whole Foods will continue to keep retailers wary. Walmart’s doubling down on their EDLP commitment to their customers and their e-commerce ambitions will also continue to affect pricing through 2018 and beyond.
Ultimately, Edris explained well-informed retailers with a grasp of competitors pricing strategy and insights into local competition will be most apt to survive and thrive as retail continues to evolve.
“Retailers who have clean, precise, and comprehensive visibility into their competitors’ pricing and assortment strategies will be able to use an informed strategy that focuses on their local competition,” Edris noted. “Programs that identify opportunities to go on the offensive will be crucial. They can then re-invest their winnings back into their programs so that they can be well-positioned not only to weather the storm, but to gain ground as well.”
Retailers can hear more insights into pricing from Engage3’s COO at the C&S Wholesale Grocers' 10th Annual Tech Expo on April 18th at the Thunder Valley Resort in Lincoln, California. At noon in an educational session held in Pano hall, Edris will discuss how retailers may enhance pricing performance through data science and analytics.
For more insights into retail strategy and breaking news on the produce industry, keep reading AndNowUKnow.
NEW YORK, NY - Jet.com is furthering its footprint with its latest lease. The Walmart subsidiary is moving to the Bronx and will be renting Prologis’s new 200,000-square-foot warehouse at 1055 Bronx River Avenue, nestled in at the Soundview section of the NYC borough, for $22 per square foot.
While a spokesperson wouldn’t confirm if Jet.com was the new tenant to take on the space, Crain’s New York Business shared that the company has been scouting out ways to boost its Big Apple business.
"We tend to skew toward urban consumers," a Jet.com spokesperson said, according to the news source. "We're always looking for opportunities to serve that demographic and to compete and offer consumers better and more innovative last-mile delivery options."
This makes for an interesting turn of events for the online company, which was purchased by Walmart for a cool $3 billion in 2016. The new warehouse will bolster the retailer’s grip on the northeastern market, where it's looking to give Amazon's curated experience a run for its money, the news source conveys. One way to do this is by growing Jet.com's New York Shop, which provides consumers with city food options like Van Leeuwen Artisan Ice Cream, Big Gay Ice Cream, Roberta’s Frozen Pizzas, and Satur Farms Salad Greens, Crain’s explains. As of now, there is no confirmation on whether the newly-rented facility will house those perishable items, relaying into faster deliveries for consumers.
How will this next step establish Jet.com in a new market, and, if successful, could this lead to more rented space throughout the nation? AndNowUKnow will continue to report with the latest industry happenings.
WENATCHEE, WA - Stemilt’s proprietary Piñata® apple made headlines this month on popular online food media outlets, So Yummy and Serious Eats. Gracing two recipe videos, including one with an everyday apple hack, the flavorful tropical apple with culinary qualities found its way in front of more than a million food-minded consumers via these popular channels: the perfect lead up to the promotional gauntlet before the Cinco de Mayo holiday.
“We’re excited to partner with these leading food channels to amplify the retail activity on Piñata apples now and into the Cinco de Mayo holiday,” said Brianna Shales, Communications Manager. “Piñata is an heirloom cross with a balanced sweet, tart, and slightly tropical flavor profile and flesh that can handle cooking temperatures, making it a culinary standout.”
According to a press release, Stemilt’s Serious Eats partnership began in March, kicking off with an Instant Pot pulled pork taco and apple slaw recipe. Being a proud owner of an Instant Pot, I can attest to the fact that the culinary marvel is one of the most sought-after small kitchen appliances today. In fact, NPR reported that on Amazon’s 2015 Prime Day, more than 24,000 units were sold, and it jumped to 215,000 the following year, before selling out. In 2017, it was among the top five sellers on Amazon’s Black Friday list.
So Yummy is currently sharing a video of their Piñata Apple Upside Down Breakfast Cookies with its 17 million plus Facebook followers.
“So Yummy and Serious Eats each come with their own style and both provide a fun and shareable end result that will help drive shoppers to seek Piñata apples out at grocery stores,” stated Shales. “Each of these outlets reach an audience that we know will love Piñata. They both have high fan engagement, making them influential in the culinary world. This allows us to reinforce Piñata as an apple to enjoy and also tap into an audience that might not have had the chance to know what Piñata is.”
Stemilt is a frequent partner to influencers and food bloggers, tapping into their skills at highlighting brands and proprietary varietals like Lil Snappers® kid-sized fruit, Rave™ apples, and Skylar Rae® cherries.
“Intent marketing and tapping into the power of influencers has proven to be an effective way to build brand awareness,” continued Shales, “whether it’s during a seasonal push like Cinco de Mayo for Piñata apples or throughout the year for a brand like Lil Snappers.”
The Piñata brand apple was introduced to U.S. markets in 2008, when Stemilt’s founding family, the Mathison’s, purchased the North American rights to grow and market the fruit in 2004. “The flavor profile and build of Piñata will do well in any sort of heated application, making it a great apple to use for the upcoming Cinco de Mayo holiday,” states Shales. “The tropical twist is a great lead in for any retailer to promote the festive holiday on May 5.”
Piñata is now available year-round from your Stemilt representative. And as we inch closer to Cinco de Mayo, stay tuned for more hot and festive promotions.
JACKSONVILLE, FL - Despite having filed for bankruptcy reorganization only weeks ago, Southeastern Grocers LLC has not slowed remodel plans.
“Actually, it’s accelerated it,” CEO Anthony Hucker said Thursday after cutting the ribbon on the grand reopening of a renovated Winn-Dixie store in northern St. Johns County.
The Daily Record reported that the company’s repackaged reorganization plan, which has already received approval from unsecured creditors, will place Southeastern in a stronger financial position with its debt reduced by more than $500 million.
The company intends to continue operations for 580 stores in seven states after closing 94 through the reorganization efforts. Despite Winn-Dixie having invested $5.5 million in 2011 to upgrade the St. Johns' store alone, Southeastern will now further upgrade because of customer feedback, according to the news source.
“We listened to you. You said you wanted more organic,” Hucker said, alluding the renovated store featuring 1,400 new natural and organic items. “Freshness for us is a big, big deal.”
Though the repeated bankruptcy filings have rightfully raised questions concerning the company’s sustainability, Hucker wants customers to feel that they can rely on the grocer; he hopes that the company’s actions will indicate as much.
To follow retailer remodels and continued industry efforts to meet consumer demand, keep reading AndNowUKnow.
SAN ANTONIO, TX - The question of how we woo the next generation is frequently asked when it comes to the future of fresh produce industry. Though the perception is that technology is winning over the career fairs for college students, the success of the now three-year-old Aggies for Fresh program speaks to the contrary, as DMA Solutions President and CEO Dan’l Mackey Almy recently shared with me.
“We published an e-book based on the fact we had over 20 interns and apprentices at DMA Solutions, and we’ve learned a lot,” Dan’l conveyed, as we discussed that one of the biggest obstacles these would-be produce professionals encounter is the preparation of their dream produce companies to embrace them. “What we’re finding now is that being prepared both digitally and in person, I think, are the critical aspects for what make a successful hiring process—whether for an internship or a full-time position.”
DMA Solutions started the campaign for Aggies for Fresh on Texas A&M campus, partnering with the Texas International Produce Association (TIPA), to bring students to the Viva Fresh Expo to help ignite a passion for produce and create a networking situation for current companies and potential future employees.
So, now that the program has successfully risen to a coveted opportunity for A&M students, what is the next step?
“My vision is that other alumni of other schools will do the same,” Dan’l emphasizes. “I’ll give you the playbook for what we did and you can go create your own for that because I do believe that that’s the next level of recruiting we need to do.”
DMA Solutions Internship Guide for Fresh Produce Companies
That playbook, as you might have guessed, is the e-book DMA put together to help bridge the gap. Because, as Dan’l says, other industries are on college campuses and recruiting the talent of tomorrow.
To see the full interview, watch our short video above.
SALINAS, CA - With a swift move to the cooler temperatures of Oxnard, Huron, and Salinas, California, Tanimura & Antle have completed its harvest operation transition. As the Sonoran Desert Valley have soared to sizzling temperatures, I spoke with Anthony Mazzuca, Senior Director of Commodity Management at Tanimura & Antle, about the rising customer demand for new crops from the San Joaquin and Salinas Valleys, how the transition played out, and what innovative products the company will focus on next.
“Grower/shippers that remain in the Sonoran Desert are experiencing temperatures in excess of 95 degrees, resulting in a rapid decline in quality on lettuce and leafy greens,” Anthony explains. “This is pushing customer demand towards new crops in the San Joaquin and Salinas Valleys.”
Anthony shared that the initial harvest of several categories in Salinas and Huron was pushed slightly behind schedule due to cold weather in late February and early March, alongside the wet weather the region has seen in recent weeks. He warned that the mix of late harvesting and delayed plantings could result in a slight dip in produce volumes once late May and early June hits. But, remember last year’s transition where the industry felt extreme delays in harvest and prolonged volatility in supply? Anthony says that 2018 has been much more fluid, with the Salinas-transition even resulting in a lift for key markets.
“The previously depressed market conditions of this year's Sonoran Desert season have greatly improved since transitioning northward, most notably for romaine,” Anthony continues. “Despite weather related challenges, sizing is consistent and quality has been excellent. Looking further out, volatility of supply in late May resulting from March’s rains will likely result another period of strong market conditions.”
Lettuce, leafy greens, and cole crops have all made a timely exit from Yuma, but Tanimura & Antle will have one last hurrah out of the desert. Anthony says the new crop of Artisan Sweet Italian Red Onions is gearing up for first shipments out of the valley for May 1st, offering unrivaled quality and flavor during the summer months.
Those retailers who want to capitalize on merchandising opportunities for the unique sweet onion can keep an eye out for Tanimura & Antle’s Be Bold display contest, happening May 14th through July 8th at retailers all across the U.S. Display bins and other point of purchase materials are available to all participating customers at taproduce.com/be-bold.
LEAMINGTON, ON - NatureFresh™ Farms has started full production for the 2018 season at its Leamington, ON, greenhouses, and it has a few new things in store. In addition to traditional favorites like the company’s greenhouse-grown peppers, tomatoes, and cucumbers, it is now introducing organic sweet bell and mini sweet peppers to its portfolio.
“By increasing the variety of commodities grown at our farm, NatureFresh is further defining itself as a leader within the fresh produce industry,” commented Retail Account/Procurement Manager Niels Klapwijk. “This form of growth for the company is very exciting.”
Now adding organic sweet mini peppers for North American consumers to its previous options of organic sweet bell peppers, the company said in a press release that the 2018 season is especially exciting for bell pepper growing because of this recent expansion of organically-grown offerings.
Not to be forgotten as one of the largest bell pepper growers in North America, NatureFresh Farms emphasized it continues to offer red, orange, and yellow sweet bell peppers for North American consumers.
Additionally, the popular TOMZ® Snacking Tomato line will be grown in both Ontario and Ohio greenhouses using the same growing processes and methods at both facilities. This is part of the company’s commitment to providing the same exceptional flavor and great quality that consumers expect from TOMZ grown in both locations.
Sold in vibrant, convenient packaging, which will be easy to spot as products hit store shelves this season, the TOMZ Snacking Tomato line includes:
- The newly-introduced Tomberry® Tomatoes
- Red Grape
- Orange Grape
- Yellow Grape
- Cocktail
- Red Cherry
A recent expansion also boosted production of NatureFresh Farms high-quality, consistently fresh Long English and Mini Cucumbers, now available year-round.
Produce grown in NatureFresh Farms Ontario greenhouses will consistently be shipped to North American retailers starting in April, 2018. With a diverse range of commodities now being grown in Leamington, ON, NatureFresh Farms said it continues to develop its greenhouse operations to successfully serve retail partners and respond to the evolving needs of consumers.
WASHINGTON, DC - President Donald Trump may be preparing to jump back into the agreement known as the Trans-Pacific Partnership (TPP), a multilateral trade deal that could affect the U.S.’s dealings with countries such as China and Japan. Trump originally withdrew from the deal just days after assuming the presidency, citing that TPP did not represent the American people and their financial well-being.
According to a report from The New York Times, the president decided to reconsider his orignal stance after hearing complaints from Republican lawmakers who said farmers and other businesses in their states would suffer from his international trade approach.
Senator Joni Ernst, Republican of Iowa, described her meetings with the president as “productive” and said that she had urged him to re-engage in discussions with countries in the Trans-Pacific Partnership, having explained, “Iowa farmers aren’t looking for another subsidy program; rather they want new and improved market access.”
Senator Ben Sasse, Republican of Nebraska, added, according to the source, “The best thing the United States can do to push back against Chinese cheating now is to lead the other 11 Pacific nations that believe in free trade and the rule of law. It is good news that today the president directed [Director of the National Economic Council] Larry Kudlow and Ambassador Lighthizer to negotiate U.S. entry into TPP.”
However promising this may sound to American farmers, including those in the produce industry who do dealings internationally, it appears Trump has not quite made up his mind. In a Twitter post made last night, the president stated he would consider re-entering the agreement only if it were “substantially better” than the deal offered to President Barack Obama. He continued, “We already have BILATERAL deals with six of the eleven nations in TPP and are working to make a deal with the biggest of those nations, Japan, who has hit us hard on trade for years!”
As explained by The New York Times, the deal, which was negotiated by the Obama administration, was "intended as a tool to prod China" into making changes in its economic policy that would be in the best interests of the United States and other countries. Some economists argue that the best way to combat China’s rising economic stature is to create favorable trading terms through multilateral trade deals like the Trans-Pacific Partnership.
Rejoining does not look to be simple, however. Countries that remained in the deal such as Japan have already spent several months renegotiating a pact, The New York Times explained, and finally agreed to a sweeping multinational deal just earlier this year. Trump, who seems to be looking for further concessions in the deal, would likely add additional complications to the talks and delay a deal even further.
AndNowUKnow will continue to watch TPP negotiations as the move forward, so stay tuned for the latest on what American produce companies can expect going forward.
BOISE, ID AND CAMP HILL, PA - The ink is not yet dry on Albertsons’ deal with Rite Aid, and it seems some of the would-be subsidiary’s shareholders are not keen on seeing the merger come to fruition. Concerns that the approximately $24 billion deal would undervalue the chain have flared intentions to block it, according to The Wall Street Journal, with opposed investors arguing Rite Aid would be better off overhauling its pharmacies on its own.
“The deal is absurd based on fair value of Rite Aid’s existing stores and what it could do with them,” Steve Krol, a Florida investor whose shares in the drugstore chain are worth around $415,000, told WSJ.
The move comes as a surprise following the deeply intertwined plan Albertsons already released following the close of the deal, which included Rite Aid’s Chairman and Chief Executive Officer John Standley becoming Chief Executive Officer of the combined company.
A Rite Aid spokeswoman said Wednesday that its board had “engaged in a thorough review of the merger with Albertsons and believes it is in the best interests of the company’s shareholders.”
Standley affirmed that view on Thursday, commenting, “It makes sense for us strategically and financially. The merger will transform Rite Aid,” he said on a conference call with investors.
Even so, it seems that the blockade has strong favor, with one of Rite Aid’s 10 biggest shareholders, which declined to be named, telling WSJ it planned to vote against the deal because it doesn’t give shareholders a fair premium.
Under the deal, Rite Aid investors may exchange 10 of their shares for a share in the combined company, plus $1.83 in cash. Alternatively, they could exchange 10 shares for 1.079 new shares and would own about 30 percent of the new business.
Another avenue of concern are those wary of the competition in grocery and are unsure it is an area they wish to invest.
“Grocery is too difficult,” said Barry Endelson, a corporate real-estate broker from White Plains, NY, who has a roughly $18,000 stake in Rite Aid.
Executives from both Albertsons and Rite Aid, however, have said the merged business would appeal to customers who want to buy food and drugs at the same store.
Federal regulators are allowing the merger to proceed, according to a Rite Aid regulatory filing, and Standley said he expects the shareholder vote to take place in July, with the merger closing soon after.
AndNowUKnow will report further as the deal develops.
BENTONVILLE, AR - It appears that Walmart is turning over a new leaf this season. The powerhouse retail chain announced plans to relax deadlines for some supplier deliveries in the wake of prior shifts to tighten deadlines. The move is thought to be in an effort to ease pressure felt by manufacturers, who, like we previously reported, are currently dealing with transportation woes and a shortage of drivers.
Walmart’s own trucking fleet and outside transport providers currently ship many of its suppliers’ goods. The result of this change is that shipping schedules have now eased, so stocks of food, household goods, and health and beauty products that arrive one day early to the regional distribution centers will not be subject to fines now—as opposed to last year’s shipments, which were.
The reason they were fined to begin with is they worry that overstocks would be created, but this is one way the company is navigating the changes made to driving regulations, which have relayed into higher shipping costs, a recent Bloomberg article explains. The news source goes on to explain that the tighter shipment schedules originally implemented, which were put into place last August, were designed to boost sales and cut back on out-of-stock items. On the flip side of this, the company saw a risk of deliveries coming late to its 4,700 U.S.-based stores, which is why it is easing up on this plan of attack during the current delivery chaos.
“This capacity crunch is real, and it’s getting tighter,” said CaseStack Vice President of Sales and Marketing, Colby Beland. “Walmart understands that, so they’re relaxing those windows so suppliers won’t have to take price increases.”
In the same Bloomberg piece, the company relayed that the early-shipment option that it is now trying on for size is not a result of the trucker shortage and will only be made available to some distribution centers, not all; however, the capacity crunch can be seen within the decision to make this move.
How will this move reflect in overall sales for the company, and will we see more strategic shifts in trucking plans moving forward as we navigate this current driver shortage? AndNowUKnow will continue to keep you updated with the latest!